<PAGE> 1
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO
____________.
Commission file number 0-26866
SONUS PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-4343413
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
22026 20TH AVE. SE, BOTHELL, WASHINGTON 98021
(Address of Principal Executive Offices)
(425) 487-9500
(Registrant's Telephone Number, Including Area Code)
Indicate by check whether the issuer (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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Class Outstanding at July 31, 1999
----- ----------------------------
Common Stock, $.001 par value 8,984,550
Page 1 of 14 Pages
Exhibit Index appears on Page 12
================================================================================
<PAGE> 2
SONUS PHARMACEUTICALS, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Item 1. Financial Statements
Balance Sheets as of June 30, 1999 (unaudited) and December 31, 1998 ....... 3
Statements of Operations (unaudited) for the three and six months ended
June 30, 1999 and June 30, 1998........................................ 4
Statements of Cash Flows (unaudited) for the six months ended
June 30, 1999 and June 30, 1998........................................ 5
Notes to Financial Statements............................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................... 7
Item 3. Market Risk ................................................................ 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................... 12
Item 6. Exhibits and Reports on Form 8-K............................................ 12
Items 2, 3, 4 and 5 are not applicable and therefore have been omitted.
SIGNATURES................................................................................. 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SONUS PHARMACEUTICALS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and marketable securities ........... $ 13,066,667 $ 16,954,842
Other current assets ....................................... 226,297 419,018
------------ ------------
Total current assets .................................... 13,292,964 17,373,860
Equipment, furniture and leasehold improvements, net of
accumulated depreciation of $2,938,449 and $2,552,786 ...... 1,097,524 1,444,090
------------ ------------
Total assets .................................................. $ 14,390,488 $ 18,817,950
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit ........................................ $ 5,000,000 $ 5,000,000
Accounts payable and accrued expenses ...................... 3,485,146 2,954,530
Accrued clinical trial expenses ............................ 769,334 1,226,335
Capital lease obligations .................................. 41,785 93,178
------------ ------------
Total current liabilities ............................... 9,296,265 9,274,043
Long-term debt ................................................ -- 2,049,221
Commitments and contingencies
Stockholders' equity:
Preferred stock; $.001 par value;
5,000,000 authorized; no shares issued or outstanding ... -- --
Common stock; $.001 par value;
30,000,000 shares authorized; 8,984,550 and 8,632,225
shares issues and outstanding at June 30, 1999 and
December 31, 1998, respectively ......................... 37,131,042 35,009,368
Accumulated deficit ........................................ (32,036,819) (27,514,682)
------------ ------------
Total stockholders' equity .............................. 5,094,223 7,494,686
------------ ------------
Total liabilities and stockholders' equity .................... $ 14,390,488 $ 18,817,950
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
SONUS PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Collaborative agreements ............. $ 350,000 $ 700,000 $ 2,050,000 $ 2,400,000
Operating expenses:
Research and development ............. 1,701,602 2,171,261 3,191,481 5,721,317
General and administrative ........... 1,872,607 1,822,957 3,583,244 3,479,531
----------- ----------- ----------- -----------
Total operating expenses ................ 3,574,209 3,994,218 6,774,725 9,200,848
----------- ----------- ----------- -----------
Operating loss .......................... (3,224,209) (3,294,218) (4,724,725) (6,800,848)
Other income (expense):
Interest income ...................... 123,676 251,536 292,192 545,587
Interest expense ..................... (22,244) (55,456) (71,480) (109,568)
----------- ----------- ----------- -----------
Net loss ................................ $(3,122,777) $(3,098,138) $(4,504,013) $(6,364,829)
=========== =========== =========== ===========
Basic and diluted net loss per share .... $ (0.36) $ (0.36) $ (0.52) $ (0.74)
Shares used in computation of basic and
diluted net loss per share ........... 8,741,513 8,618,198 8,687,423 8,615,561
</TABLE>
See accompanying notes.
4
<PAGE> 5
SONUS PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ..................................................... $ (4,504,013) $ (6,364,829)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ............................. 385,664 420,316
Amortization of premium (discount) on marketable
securities ............................................. 104,540 (3,633)
Realized gain on marketable securities .................... (1,708) (6,533)
Changes in operating assets and liabilities:
Other current assets ................................... 192,722 251,095
Accounts payable and accrued expenses .................. 530,616 7,816
Accrued clinical trial expenses ........................ (457,001) (73,049)
------------ ------------
Net cash used in operating activities ........................ (3,749,180) (5,768,817)
INVESTING ACTIVITIES:
Purchases of equipment, furniture and leasehold improvements . (39,098) (388,681)
Purchases of marketable securities ........................... (7,682,352) (18,585,271)
Proceeds from sale of marketable securities .................. 9,618,687 16,014,903
Proceeds from maturities of marketable securities ............ 2,049,865 9,402,143
------------ ------------
Net cash provided by investing activities .................... 3,947,102 6,443,094
FINANCING ACTIVITIES:
Proceeds from bank line of credit ............................ 10,000,000 10,000,000
Repayment of bank line of credit ............................. (10,000,000) (10,000,000)
Increase in long-term debt ................................... 30,783 1,082,350
Repayment of capitalized lease obligations ................... (51,393) (94,003)
Proceeds from issuance of common stock and warrants .......... 41,668 113,558
------------ ------------
Net cash provided by (used in) financing activities .......... 21,058 1,101,905
------------ ------------
Increase in cash and cash equivalents for the period ......... 218,980 1,776,182
Cash and cash equivalents at beginning of period ............. 5,203,925 5,253,227
------------ ------------
Cash and cash equivalents at end of period ................... 5,422,905 7,029,409
Marketable securities at end of period ....................... 7,643,762 14,494,123
------------ ------------
Total cash, cash equivalents and marketable securities ....... $ 13,066,667 $ 21,523,532
============ ============
Supplemental cash flow information:
Conversion of long-term debt to common stock .............. $ 2,080,005 $ --
Interest paid ............................................. $ 16,895 $ 50,584
Income taxes paid ......................................... $ -- $ 7,500
</TABLE>
See accompanying notes.
5
<PAGE> 6
SONUS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The 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 to be presented for complete financial
statements. The accompanying financial statements reflect all adjustments
(consisting only of normal recurring items) which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods presented.
The financial statements and related disclosures have been prepared with the
assumption that users of the interim financial information have read or have
access to the audited financial statements for the preceding fiscal year.
Accordingly, these financial statements should be read in conjunction with the
audited financial statements and the related notes thereto included in the Form
10-K for the year ended December 31, 1998 and filed with the SEC on March 25,
1999.
2. LONG-TERM DEBT
Pursuant to the Company's collaborative agreement with Abbott Laboratories
("Abbott"), Abbott has agreed to fund certain clinical trials of the Company. Of
the total funding, 50% is to be paid back to Abbott within five years of the
receipt of funds, plus accrued interest in either cash or exchange for common
stock of the Company at the then fair market value. In June 1999, $2,080,005 of
long-term debt payable to Abbott, including accrued interest, was converted into
343,802 shares of common stock of the Company under the terms of the
collaborative agreements with Abbott.
3. CONTINGENCIES
In May 1993, the Company entered into a manufacturing and supply agreement
with Abbott. In the event that EchoGen(R) (perflenapent injectable emulsion) is
approved by the U.S. Food and Drug Administration ("FDA"), the Company is
obligated to purchase certain minimum quantities of materials from Abbott or
make cash payments for the shortages from the predetermined purchase level over
a five-year period.
In March 1998, the Company entered into a commercial supply agreement for
certain medical grade raw materials for the Company's initial product in the
U.S., EchoGen. In the event that EchoGen is approved by the FDA, the Company is
obligated to purchase certain minimum quantities of the material over a
five-year period.
The Company is also party to certain litigation related to its business.
The Company notes that (i) litigation in general, and intellectual property and
securities litigation in particular, can be expensive and disruptive to normal
business operations, and (ii) the results of complex legal proceedings can be
very difficult to predict with any certainty. There can be no assurance that
these litigation proceedings will be resolved in the Company's favor. See
"Part II. Other Information; Item 1. Legal Proceedings."
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In Management's Discussion and Analysis we explain the general financial
condition and the results of operations for our Company, SONUS Pharmaceuticals,
Inc., including:
o overview of our company's business
o regulatory progress
o collaborative agreements
o results of operations and why those results are different from
the prior year period
o what capital resources our company currently has and possible
sources of additional funding for future capital requirements
o the market risk of our investment portfolio; and
o our progress related to the "Year 2000" issue
OVERVIEW
Our company is engaged in the research, development and commercialization of
ultrasound contrast agents and drug delivery systems based on our proprietary
technology. Our products are being developed for use in the diagnosis and
treatment of heart disease, cancer and other debilitating conditions. We have
financed our research and development and clinical trials through payments
received under agreements with collaborative partners, private equity and debt
financings, and an initial public offering ("IPO") of common stock completed in
October 1995. Clinical trials of our initial ultrasound contrast product under
development, EchoGen(R) (perflenapent injectable emulsion), began in January
1994. In 1996, we filed a New Drug Application ("NDA") with U.S. Food and Drug
Administration ("FDA") for EchoGen as well as a Marketing Authorization
Application ("MAA") with the European Medicines Evaluation Agency ("EMEA").
REGULATORY PROGRESS
In April 1999, we received an "approvable letter" from the FDA for EchoGen.
The FDA letter gives the conditions that must be satisfied before final
approval. We are investigating the information needed to meet the conditions. As
part of the investigation process, we are having discussions with the FDA to
clarify certain aspects of the letter and the information needed to meet the
conditions. Based on information currently available, we believe we can provide
a complete response to the conditions set forth in the FDA letter. The time that
will be required to respond to the FDA is dependent upon the discussions with
the FDA and the time required to complete our investigation. We currently expect
to file a response by the end of the third quarter. No assurance can be given
that the response will be filed in a timely manner or that the filing will
adequately satisfy the conditions or that the FDA will ultimately approve the
NDA.
In March 1998, the EMEA's Committee for Proprietary Medicinal Products
("CPMP") issued a positive opinion on EchoGen for use as a transpulmonary
echocardiographic contrast agent in patients with suspected or established
cardiovascular disease who have had previous inconclusive non-contrast studies.
In July 1998, the EMEA ratified the CPMP recommendation and granted a marketing
authorization for EchoGen in the 15 countries of the European Union ("E.U."). We
along with our marketing partner, Abbott Laboratories ("Abbott"), are preparing
for the commercialization of EchoGen in the E.U. We are seeking approval of
variations to our marketing license to bring the manufacturing process and
specifications for European product in line with the process and specifications
submitted for
7
<PAGE> 8
approval with the FDA in the U.S. We cannot give assurance that the variances to
our marketing license will ultimately be approved.
COLLABORATIVE AGREEMENTS
In 1996, we formed strategic alliances with Abbott for the marketing and
selling of ultrasound contrast agents, including EchoGen, in the U.S. and
certain international territories including Europe, Latin America, Canada,
Middle East, Africa and certain Asia/Pacific countries. Under the agreements,
Abbott agreed to make certain payments to us, primarily conditioned upon the
achievement of milestones, of which $37.7 million has been paid as of June 30,
1999, including $6.7 million of milestone payments creditable against future
royalties. In addition, Abbott purchased in May 1996, for $4.0 million, warrants
to acquire 500,000 shares of our common stock. The warrants are exercisable over
five years at $16.00 per share.
Our results of operations have varied and will continue to vary
significantly from quarter to quarter and depend on, among other factors:
o timing of milestone payments made by Abbott
o timing of regulatory approvals
o entering into additional product license agreements; and
o timing and costs of the clinical trials
Abbott can terminate the strategic alliance agreements on short notice, and we
cannot give assurance that we will receive any additional funding or milestone
payments.
RESULTS OF OPERATIONS
To date, our reported revenues have been derived from payments received
under collaborative agreements with third parties. Revenue received under
collaborative agreements was $350,000 for the second quarter of 1999 compared to
$700,000 in the prior year period. Revenue received under collaborative
agreements for the six months ended June 30, 1999 were $2.1 million compared to
$2.4 million in the prior year period. All revenue during the second quarters of
1999 and 1998 and the six months ended June 30, 1999 and 1998 represented
payments under our strategic alliance agreements with Abbott.
Research and development expenses were $1.7 million for the second quarter
of 1999 compared with $2.2 million for the same period of the prior year.
Research and development expenses were $3.2 million for the six months ended
June 30, 1999 compared to $5.7 million in the prior year period. The decrease
from the prior year periods was primarily due to a reduction in clinical trial
activity on the Company's products.
General and administrative expenses were $1.9 million for the second quarter
of 1999 compared to $1.8 million in the prior year period. General and
administrative expenses were $3.6 million for the six months ended June 30, 1999
compared to $3.5 million in the prior year period. The slight increase in both
periods was primarily due to an increase in intellectual property legal costs
offset in part by decreases in marketing and medical education expenses.
We anticipate total operating expenses will increase in future quarters due
to ongoing and planned clinical trials to study additional indications for
EchoGen, initial indications, future products and higher
8
<PAGE> 9
marketing and administrative expenses as we continue to prepare for
commercialization of EchoGen. We may also incur significant expenses relating to
legal matters - see "Legal Proceedings." In addition, revenues in future
quarters will be primarily dependent upon the timing of certain regulatory and
commercialization milestones and associated payments under collaborative
agreements.
Interest income, net of interest expense, was $101,000 for the second
quarter of 1999 compared to $196,000 for the same period of the prior year and
$221,000 and $436,000 for the six months ended June 30, 1999 and 1998,
respectively. The decrease in both periods was primarily due to the lower levels
of invested cash.
LIQUIDITY AND CAPITAL RESOURCES
We have historically financed operations with payments from collaborative
agreements, proceeds from equity financings and our bank line of credit. At June
30, 1999, we had cash, cash equivalents and marketable securities of $13.1
million, compared to $17.0 million at December 31, 1998. The decrease was
primarily due to cash used in operations in the first half of 1999.
We have a bank loan agreement which provides for a $5.0 million revolving
line of credit facility and bears interest at the prime rate plus 1.0% per
annum. At June 30, 1999 we had borrowings of $5.0 million outstanding under the
line of credit. The line of credit expires August 31, 1999 and is secured by our
tangible assets. In order to borrow under the line of credit, we are required to
maintain certain minimum cash balances. We cannot give assurance that the line
of credit will be renewed upon expiration or that we will be able to maintain
the minimum balances necessary to borrow under the line.
We expect that our cash needs will increase significantly in future periods
due to pending and planned clinical trials and higher administrative and
marketing expenses as we prepare for commercialization of EchoGen, if and when
approved for marketing. Based on our current operating plan, we estimate that
existing cash and marketable securities will be sufficient to meet our cash
requirements through 1999. We intend to seek additional funding in 1999 through
available means, which may include debt and/or equity financing or the licensing
or sale of proprietary or marketing rights. We cannot give assurance that
financing will be available on acceptable terms, if at all. Our future capital
requirements depend on many factors including:
o the ability to obtain continued funding from third parties under
collaborative agreements
o the ability to maintain our bank line of credit
o the time and costs required to gain regulatory approvals
o the progress of our research and development programs and
clinical trials
o the costs of filing, prosecuting and enforcing patents, patent
applications, patent claims and trademarks
o the costs of marketing and distribution
o the status of competing products; and
o the market acceptance and third-party reimbursement of our
products, if and when approved
We cannot give assurance that regulatory approvals will be achieved in the
near-term or at all or that, in any event, additional financing will be
available on acceptable terms, if at all. Any equity financing would likely
result in substantial dilution to our existing stockholders. If we are unable to
raise additional financing, we would be required to curtail or delay the
development of our products and new product research and development, which
could seriously harm our business.
9
<PAGE> 10
MARKET RISK
The market risk inherent in our short-term investment portfolio represents
the potential loss arising from adverse changes in interest rates. If market
rates hypothetically increase immediately and uniformly by 100 basis points from
levels at June 30, 1999, the decline in the fair value of the investment
portfolio would not be material. Because we have the ability to hold our fixed
income investments until maturity, we do not expect our operating results or
cash flows to be affected to any significant degree by a sudden change in market
interest rates on our securities portfolio.
YEAR 2000 COMPLIANCE
The "Year 2000" issue is the result of computer programs being unable to
differentiate between the year 1900 and the year 2000 because computer code was
written to recognize two digits rather than four digits to define the applicable
year. This inability to recognize the correct century could result in system
failures or miscalculation with respect to current software programs.
In response to the Year 2000 issue, we have undertaken a comprehensive
review of our company's business systems. We have focused on the
following four areas:
o software systems
o hardware systems
o facility systems
o significant third party vendors and business partners
Based on our review of these four areas, we believe that the Year
2000 issue does not pose significant operational problems. A majority of our
software, computer and facilities equipment has been purchased within the last
five years from third-party vendors who have already provided upgrades intended
to bring their products into Year 2000 compliance. In addition, we have surveyed
significant vendors and business partners to determine any possible Year 2000
risks. If Year 2000 problems exist with these third parties, it could affect the
ability of vendors to satisfy their obligations to us or for us to
electronically communicate with such parties, which could have an adverse effect
on our business, financial condition and results of operations.
We intend to establish a contingency plan to address "high-risk" issues, if
any, that could affect day-to-day operations or delay our efforts to bring
products to market. We expect to complete our full review of the Year 2000 issue
by the end of the third quarter of 1999.
To date, based upon our review of the four areas noted above, we have spent
less than $10,000 on Year 2000 related issues and estimate that the full cost of
correcting the Year 2000 issue will not exceed $100,000.
10
<PAGE> 11
FORWARD-LOOKING STATEMENTS
This Report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and we intend that such
forward-looking statements be subject to the safe harbors created thereby.
Examples of these forward-looking statements include, but are not limited to:
o the submission of applications for and the timing or likelihood
of marketing approvals for one or more indications
o market acceptance of our products
o our anticipated future capital requirements and the terms of any
capital financing
o the progress and results of clinical trials
o the timing and amount of future milestone payments, product
revenues and expenses; and
o the anticipated outcome or financial impact of litigation
While these statements made by us are based on our current beliefs and
judgement, they are subject to risks and uncertainties that could cause actual
results to vary.
In evaluating such statements, stockholders and investors should
specifically consider a number of factors and assumptions, including those
discussed in the text and the financial statements and their accompanying
footnotes in this Report and the risk factors detailed from time to time in our
filings with the Securities and Exchange Commission. As discussed in our annual
report on Form 10-K for the year ended December 31, 1998, actual results could
differ materially from those projected in the forward-looking statements as a
result of the following factors, among others:
o uncertainty of governmental regulatory requirements and lengthy
approval process
o unproven safety and efficacy of products and uncertainty of
clinical trials
o history of operating losses and uncertainty of future financial
results
o future capital requirements and uncertainty of additional
funding
o dependence on third parties for funding, clinical development
and distribution
o dependence on patents and proprietary rights
o competition and risk of technological obsolescence
o limited manufacturing experience and dependence on limited
contract manufacturers and suppliers
o lack of marketing and sales experience
o limitations on third-party reimbursement
o uncertainty of market acceptance
o continued listing on the Nasdaq National Market
o dependence on key employees; and
o shares eligible for future sale
No assurance can be given that we can meet the conditions set forth by the FDA
in its "approvable letter" or any subsequent conditions in a timely manner, if
at all, or that EchoGen will ultimately receive FDA approval.
ITEM 3. RESPONSE TO THIS ITEM IS INCLUDED IN "ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - MARKET
RISK."
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In January 1998, the Company announced that it had filed a patent
infringement action in the U.S. District Court in Seattle, Washington, against
Molecular Biosystems Inc. ("MBI") and Mallinckrodt, Inc. The suit alleges that
one of MBI's ultrasound contrast agents infringes one or more of the Company's
patents. MBI has filed counterclaims alleging that the patents asserted by the
Company are invalid and not infringed, and that the Company has made false
public statements and engaged in other actions intended to damage MBI and one of
its ultrasound contrast agents. The Company does not believe there is any merit
to these counterclaims and intends to defend its position vigorously. In October
1998, the court granted the Company's motion to stay the litigation until the
PTO had completed its re-examination of the patents in this lawsuit (see below).
The stay was lifted in January 1999. A trial date has been set for this lawsuit
in February 2000.
Four separate re-examination proceedings directed to the two SONUS patents
at issue in the patent infringement lawsuit, U.S. 5,558,094 (`094) and U.S.
5,573,751 (`751) were initiated by the PTO beginning in July 1997 at the request
of MBI. In December 1998, the Company announced it received decisions from the
PTO indicating the patentability of claims in all four re-examination
proceedings. The PTO confirmed the patentability of a number of the claims
included in the original `094 and `751 patents as well as some claims that were
amended during re-examination, and has issued re-examination certificates for
each patent. Certain claims, which included reference to fluorinated chemicals
other than perfluoropropane, perfluorobutane and perfluoropentane, were
cancelled during the re-examination process.
In August and September 1998, various class action complaints were filed
in the Superior Court of Washington (the "State Action") and in the U.S.
District Court for the Western District of Washington (the "Federal Action")
against the Company and certain of its officers and directors, alleging
violations of Washington State and U.S. securities laws. In October 1998, the
Company and the individual defendants moved to dismiss and stay the State
Action. The parties have agreed to stay the State Action pending a determination
by the federal district court as to whether the state law claims may be brought
in the Federal Action. In February 1999, plaintiffs filed a consolidated and
amended complaint in the Federal Action, alleging violations of Washington State
and U.S. securities laws. In March 1999, the Company and the individual
defendants filed a motion to dismiss the consolidated amended complaint in the
Federal Action. On July 21, 1999, the Court entered an order denying in part and
granting in part the motion to dismiss the complaint in the Federal Action. The
Company does not believe there is any merit to the claims in these actions and
intends to defend its position vigorously. Although the Company does not believe
that it or any of its current or former officers or directors has engaged in any
wrongdoing, there can be no assurance that this stockholder litigation will be
resolved in the Company's favor.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Number Description
None
12
<PAGE> 13
(b) REPORTS ON FORM 8-K
We filed the following report on Form 8-K during the quarter ended June
30, 1999:
1. The Registrant filed a report on Form 8-K on April 23, 1999 in
connection with the announcement of our receipt of an "approvable
letter" from the FDA for our first ultrasound contrast agent,
EchoGen.
ITEMS 2, 3, 4 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
13
<PAGE> 14
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SONUS PHARMACEUTICALS, INC.
Date: August 5, 1999 By: /s/ Gregory Sessler
---------------------------------------
Gregory Sessler
Chief Financial Officer and Assistant
Secretary (Principal Financial and
Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 5,422,905
<SECURITIES> 7,643,762
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,292,964
<PP&E> 4,035,973
<DEPRECIATION> (2,938,449)
<TOTAL-ASSETS> 14,390,488
<CURRENT-LIABILITIES> 9,296,265
<BONDS> 0
0
0
<COMMON> 37,131,042
<OTHER-SE> (32,036,819)
<TOTAL-LIABILITY-AND-EQUITY> 14,390,488
<SALES> 0
<TOTAL-REVENUES> 350,000
<CGS> 0
<TOTAL-COSTS> 3,574,209
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,244
<INCOME-PRETAX> (3,122,777)
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<EPS-BASIC> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
