SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended March 31, 2001
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OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
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Commission file number 000-14879
Cytogen Corporation
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(Exact name of Registrant as specified in its charter)
Delaware 22-2322400
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
600 College Road East, CN 5308, Princeton, NJ 08540-5308
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(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code (609) 750-8200
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 .
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding at May 1, 2001
---------------------------- --------------------------
Common Stock, $.01 par value 77,492,855
PART I - FINANCIAL INFORMATION
-------------------------------
Item I - Consolidated Financial Statements
CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share data)
(Unaudited)
March 31, December 31,
2001 2000
---------- ------------
ASSETS:
Current Assets:
Cash and cash equivalents ....................................... $ 14,271 $ 11,993
Receivable on income tax benefit sold ........................... -- 1,625
Accounts receivable, net ........................................ 2,155 1,841
Inventories ..................................................... 997 883
Other current assets ............................................ 765 377
--------- ---------
Total current assets .......................................... 18,188 16,719
Property and Equipment, net ....................................... 1,986 2,193
Other Assets ...................................................... 1,944 1,504
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$ 22,118 $ 20,416
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Current portion of long-term debt ............................... $ 134 $ 151
Accounts payable and accrued liabilities ........................ 5,167 7,218
Deferred revenue ................................................ 859 859
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Total current liabilities ..................................... 6,160 8,228
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Long-Term Debt .................................................... 2,381 2,374
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Deferred Revenue .................................................. 2,381 2,596
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Stockholders' Equity:
Preferred stock, $.01 par value, 5,400,000 shares authorized -
Series C Junior Participating Preferred Stock, $.01 par value,
200,000 shares authorized, none issued and outstanding ..... -- --
Common stock, $.01 par value, 250,000,000 shares authorized,
76,895,000 and 75,594,000 shares issued and outstanding
at March 31, 2001 and December 31, 2000, respectively ........ 769 756
Additional paid-in capital ...................................... 342,461 335,938
Deferred compensation ........................................... (799) (895)
Accumulated deficit ............................................. (331,235) (328,581)
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Total stockholders' equity ................................... 11,196 7,218
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$ 22,118 $ 20,416
========= =========
The accompanying notes are an integral part of these statements.
2
CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands, except per share data)
(Unaudited)
Three Months Ended March 31,
----------------------------
2001 2000
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Revenues:
Product related:
ProstaScint ................................................ $ 2,222 $ 1,695
Others ..................................................... 113 177
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Total product sales ................................ 2,335 1,872
Quadramet royalties ........................................ 441 498
-------- --------
Total product related .............................. 2,776 2,370
License and contract ....................................... 215 273
-------- --------
Total revenues ..................................... 2,991 2,643
-------- --------
Operating Expenses:
Cost of product .............................................. 1,152 930
Research and development ..................................... 1,739 1,493
Selling and marketing ........................................ 1,754 1,130
General and administrative ................................... 1,172 947
-------- --------
Total operating expenses ........................... 5,817 4,500
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Operating loss ..................................... (2,826) (1,857)
Interest income ............................................... 220 168
Interest expense ............................................... (48) (57)
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Loss before cumulative effect of
accounting change ................................. (2,654) (1,746)
Cumulative effect of accounting change ......................... -- (4,314)
-------- --------
Net loss ....................................................... $ (2,654) $ (6,060)
======== ========
Net loss per share:
Basic and diluted net loss before cumulative
effect of accounting change ................................. $ (0.03) $ (0.02)
Cumulative effect of accounting change ....................... -- (0.06)
-------- --------
Basic and diluted net loss ................................... $ (0.03) $ (0.08)
======== ========
Weighted average common shares outstanding ..................... 76,244 71,630
======== ========
The accompanying notes are an integral part of these statements.
3
CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
Three Months Ended March 31,
----------------------------
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .............................................................. $ (2,654) $ (6,060)
-------- --------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization .................................. 302 221
Imputed interest ............................................... (22) (14)
Stock based compensation ....................................... 96 7
Stock option grants ............................................ -- 120
Amortization of deferred revenue ............................... (215) (215)
Cumulative effect of accounting change ......................... -- 4,314
Gain on sale of equipment ...................................... -- (149)
Changes in assets and liabilites:
Accounts receivable, net ..................................... (292) (235)
Inventories .................................................. (114) 149
Other assets ................................................. 797 (453)
Accounts payable and accrued liabilities ..................... (2,051) (1,500)
Other liabilities ............................................ 39 38
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Total adjustments ................................... (1,460) 2,283
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Net cash used in operating activities ........................ (4,114) (3,777)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of equipment ................................... -- 148
Purchases of property and equipment ................................... (95) (103)
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Net cash provided by (used in) investing activities .......... (95) 45
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock ................................ 6,536 3,535
Redemption of short-term investments .................................. -- 1,593
Payment of long-term liabilities ...................................... (49) (10)
-------- --------
Net cash provided by financing activities .................... 6,487 5,118
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Net increase in cash and cash equivalents ............................. 2,278 1,386
Cash and cash equivalents, beginning of period ........................ 11,993 10,801
-------- --------
Cash and cash equivalents, end of period .............................. $ 14,271 $ 12,187
======== ========
The accompanying notes are an integral part of these statements.
4
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company
Cytogen Corporation ("Cytogen" or the "Company") is an established
biopharmaceutical company with two principal lines of business, proteomics and
oncology. We are extending our expertise in antibodies and molecular recognition
to the development of new products and a proteomics-driven drug discovery
platform. We have established a pipeline of product candidates based upon our
proprietary antibody and our exclusively licensed prostate specific membrane
antigen, or PSMA, technologies. We are also developing a proprietary protein
pathway database as a drug discovery and development tool for the pharmaceutical
and biotechnology industries.
Our cancer management business currently is comprised of four marketed
products, each of which has been approved by the United States Food and Drug
Administration (the "FDA"): ProstaScint(R), a monoclonal antibody-based imaging
agent used to image the extent and spread of prostate cancer; BrachySeed(TM), a
second generation radioactive implant for the treatment of localized prostate
cancer; OncoScint(R) CR/OV, another monoclonal antibody-based imaging agent used
for the detection of colorectal and ovarian cancer; and Quadramet(R), a cancer
therapeutic agent marketed for the relief of cancer-related bone pain. We are
evolving our cancer pipeline by developing PSMA, which we exclusively licensed
from Memorial Sloan-Kettering Cancer Center. PSMA is a unique membrane-bound
antigen highly expressed in prostate cancer cells and in the neovasculature of a
variety of other solid tumors, including breast, lung and colon. We are
developing our PSMA technology as part of our approach to offering a full range
of prostate cancer management products and services throughout the progression
of the disease, including gene-based immunotherapy vaccines, antibody-delivered
therapeutic compounds and novel assays for detection of primary and recurrent
prostate cancer. We also plan to apply our PSMA technology, including
therapeutics and in vitro diagnostics, toward other types of cancer based upon
our experience in prostate cancer, although we cannot be certain such technology
will be commercializable in such areas. Our in vivo immunotherapeutic
development program is being conducted in collaboration with Progenics
Pharmaceuticals, Inc.
Basis of Consolidation
The consolidated financial statements include the accounts of Cytogen and
its subsidiaries. Intercompany balances and transactions have been eliminated in
consolidation.
Basis of Presentation
The consolidated financial statements and notes thereto of Cytogen are
unaudited and include all adjustments which in the opinion of management are
necessary to present fairly the financial condition and results of operations as
5
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
of and for the periods set forth in the Consolidated Balance Sheets,
Consolidated Statements of Operations and Consolidated Statements of Cash Flows.
All such accounting adjustments are of a normal, recurring nature. The
consolidated financial statements do not include all of the information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles and should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission, which includes financial statements as of and for the
year ended December 31, 2000. The results of the Company's operations for any
interim period are not necessarily indicative of the results of the Company's
operations for any other interim period or for a full year.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks and all
highly-liquid investments with a maturity of three months or less at the time of
purchase.
Net Loss Per Share
Basic net loss per share is based upon the weighted average common shares
outstanding during each period. Diluted net loss per share is the same as basic
net loss per share, as the inclusion of common stock equivalents would be
antidilutive.
Inventory
The Company's inventory is primarily related to ProstaScint and OncoScint
CR/OV. Inventory is stated at the lower of cost or market using the first-in,
first-out method and consisted of the following:
March 31, December 31,
2001 2000
------------ ------------
Raw materials................. $482,000 $718,000
Work-in process............... 428,000 59,000
Finished goods................ 87,000 106,000
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$997,000 $883,000
======== ========
Revenue Recognition
Effective January 1, 2000, the Company adopted U.S. Securities and
Exchange Commission Staff Accounting Bulletin No. 101 "Revenue Recognition in
Financial Statements" ("SAB 101") which requires up-front, non-refundable
license fees to be deferred and recognized over the performance period. The
cumulative effect of adopting SAB 101 resulted in a one-time, non-cash charge of
6
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd)
$4.3 million or $0.06 per share, which reflects the deferral of an up-front
license fee received from Berlex Laboratories, Inc., net of associated costs,
related to the licensing of Quadramet recognized in October 1998 and a license
fee for certain applications of PSMA to a joint venture formed by Cytogen and
Progenics Pharmaceuticals Inc. recognized in June 1999. Previously, the Company
had recognized up-front license fees when the Company had no obligations to
return the fees under any circumstances. Under SAB 101 these payments are
recorded as deferred revenue to be recognized over the remaining term of the
related agreements.
2. SALES OF CYTOGEN COMMON STOCK:
Under the terms of a $70 million equity financing facility entered into
between the Company and Acqua Wellington North American Equities Fund, Ltd.
("Acqua Wellington"), beginning in October 2000 and extending over a 20 month
period, Cytogen may, at its discretion, sell shares of its common stock to Acqua
Wellington at a small discount to the market price. Such sale price is to be
determined before each sale provided the Threshold Price, as defined in the
Common Stock Purchase Agreement executed by the parties, for the Company's
common stock is at least $4.00 per share. The equity financing facility is not
subject to any minimum takedown requirements, nor did the Company pay any
financing fees or other compensation in connection with this transaction.
Pursuant to this facility, in February 2001, the Company sold to Acqua
Wellington 1,276,557 shares of its common stock at an aggregate price of $6.5
million or $5.092 per share.
7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion contains historical information as well as
forward looking statements that involve a number of risks and uncertainties.
Statements contained or incorporated by reference in this Quarterly Report on
Form 10-Q that are not based on historical fact are "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Generally, forward looking statements can be identified by the use of
phrases like "believe", "expect", "anticipate", "plan", "may", "will", "could",
"estimate", "potential", "opportunity" and "project" and similar terms. The
Company's actual results could differ materially from the Company's historical
results of operations and those discussed in the forward looking statements.
Factors that could cause actual results to differ materially, include, but are
not limited to those identified in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000 under the caption "Additional Factors That May
Affect Future Results". Investors are cautioned not to put undue reliance on any
forward looking statement.
Cautionary Statement
In addition to the risks discussed under the caption referred to above,
among other factors that could cause actual results to differ materially from
expected results are the following: (i) the Company's ability to access the
capital markets in the near term and in the future for continued funding of
existing projects and for the pursuit of new projects; (ii) the ability to
attract and retain personnel needed for business operations and strategic plans;
(iii) the timing and results of clinical studies, and regulatory approvals; (iv)
market acceptance of the Company's products, including programs designed to
facilitate use of the products, such as the Partners in Excellence or PIE
Program; (v) demonstration over time of the efficacy and safety of the Company's
products; (vi) the degree of competition from existing or new products; (vii)
the decision by the majority of public and private insurance carriers on whether
to reimburse patients for the Company's products; (viii) the ability of the
Company to comply with applicable governmental regulations and changes thereto;
(ix) the profitability of its products; (x) the ability to attract, and the
ultimate success of, strategic partnering arrangements, collaborations, and
acquisition candidates; (xi) the ability of the Company and its partners to
identify new products as a result of those collaborations that are capable of
achieving FDA approval, that are cost-effective alternatives to existing
products and that are ultimately accepted by the key users of the product; (xii)
the success of the Company in obtaining marketing approvals for its products in
Canada and Europe; (xiii) the ability of the Company to protect its proprietary
technology, trade secrets or know-how under the patent and other intellectual
property laws of the United States and other countries; and (xiv) the ability of
Advanced Magnetics Inc. to satisfy the conditions specified by the FDA regarding
approval to market Combidex in the United States.
The following discussion and analysis should be read in conjunction with
the Financial Statements and related notes thereto contained elsewhere herein,
as well as the Company's Annual Report on Form 10-K for the year ended December
31, 2000 and from time to time the Company's other filings with the Securities
and Exchange Commission.
8
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont'd)
Significant Events in 2001
In the first quarter of 2001, the Company launched BrachySeed(TM), a
second generation radioactive implant for treatment of localized prostate
cancer, which was in-licensed by the Company from Draximage Inc. in December
2000. The Company is utilizing its existing oncology sales force to market
BrachySeed. There can be no assurance, however, as to the market acceptance of
the product or whether this product will significantly increase the revenues of
the Company.
AxCell Biosciences Corporation, a subsidiary of the Company, will be
selling a database product called ProChart with its marketing partner InforMax,
Inc. ProChart is a proprietary protein pathway database which measures protein
domain-ligand interactions in a high-throughput manner. ProChart will be
marketed by InforMax using its Protein-Protein Interaction module, a new
addition to GenoMax(TM) enterprise software package. AxCell expects to launch
its ProChart database product with is marketing partner, InforMax, in the second
quarter of 2001. There can be no assurance, however, as to the timing of such
launch, market acceptance of the product or whether this product will
significantly increase the revenues for the Company.
Results of Operations
Three Months Ended March 31, 2001 and 2000
Revenues. Total revenues for the first quarter of 2001 were $3.0 million
compared to $2.6 million for the same period in 2000. The increase from the
prior year period is due to higher product related revenues, partially offset by
lower license and contract revenues. Product related revenues, which included
product sales and royalties, accounted for 93% of total revenues in 2001,
compared to 90% from the comparable period of 2000. License and contract
revenues accounted for the remainder of revenues in such periods.
Product related revenues for the first quarter of 2001 were $2.8 million
compared to $2.4 million for the same period in 2000. ProstaScint accounted for
80% and 72% of product related revenues in the first quarters of 2001 and 2000,
respectively, while Quadramet royalties accounted for 16% and 21% of product
related revenues, respectively, for such periods. Sales of ProstaScint were
approximately $2.2 million in the first quarter of 2001, $527,000 higher than
the $1.7 million recorded in the first quarter of 2000. Beginning in July 2000,
the Company assumed sole responsibility for selling and marketing ProstaScint
from Bard Urological Division of the C.R. Bard Inc. ("Bard"), its former
co-marketing partner. The Company took this step because it believed that a
highly trained and dedicated internal sales force will be able to market its
products most effectively and to build a marketing capability for BrachySeed and
future products. The Company cannot be certain, however, as to the effect on
sales of ProstaScint and the BrachySeed products as a result of this action.
9
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont'd)
Quadramet royalties for the first quarter of 2001 decreased slightly to
$441,000 from $498,000 in the same period of 2000. This decrease was partially
due to a temporary, weather related disruption in the supply of Quadramet from
the manufacturer of the product during 2001, which has been resolved. Quadramet
is currently marketed by the Company's marketing partner, Berlex Laboratories
("Berlex"). Although Cytogen believes that Berlex is an advantageous partner,
there can be no assurance that Quadramet will achieve greater market acceptance
on a timely basis or result in significant revenues for Cytogen.
License and contract revenues for the first quarter of 2001 were $215,000
compared to $273,000 for the same period of 2000. As a result of the adoption of
SAB 101 (see Note 1 to the Consolidated Financial Statements), such license and
contract revenues for 2000 and 2001 include the recognition of $215,000 of
deferred revenues from certain up-front, non-refundable license fees recognized
in prior years.
Operating Expenses. Total operating expenses for the first quarter of 2001
were $5.8 million compared to $4.5 million recorded in the same quarter of 2000.
The increase from the prior year period is attributable primarily to the
additional funding for the proteomics research program at AxCell, the expansion
of Cytogen's in-house sales force to assume sole responsibility of marketing and
sales of ProstaScint and costs associated with the 2001 launch of BrachySeed.
Cost of product for the first quarter of 2001 were $1.2 million compared
to $930,000 recorded in the same period of the prior year. The increase from the
prior year period is due to increased manufacturing costs and increased product
sales.
Research and development expenses for the first quarter of 2001 were $1.7
million compared to $1.5 million recorded in the same period of 2000. The
increase from the prior year period is due to increased funding for the
proteomics program at AxCell. The Company anticipates that funding for AxCell
will continue to increase over the remainder of this year.
Selling and marketing expenses were $1.8 million for the first quarter of
2001 compared to $1.1 million in the same period of 2000. The current year
expenses reflect the Company's efforts to expand its in-house sales force and
the assumption of sole responsibility for the selling and marketing of
ProstaScint from Bard and the launch costs associated with BrachySeed.
General and administrative expenses for the first quarter 2001 were $1.2
million compared to $947,000 for the comparable period in 2000. The increase
from the prior year period is due in part to stock based compensation for a key
employee and professional fees.
Interest Income/Expense. Interest income for the first quarter of 2001 was
$220,000 compared to $168,000 recorded in the same period of 2000. The increase
from the prior year period is due to a higher average cash balance during 2001.
Interest expense for the first quarter of 2001 was $48,000 compared to $57,000
recorded in the same period of 2000. The interest expenses included finance
charges related with various equipment leases.
10
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont'd)
Net Loss. Net loss for the first quarter of 2001 was $2.7 million compared
to $6.1 million recorded in the same period of 2000. The net loss per share for
the first quarter of 2001 was $0.03 based on average common shares outstanding
of 76.2 million compared to a net loss per share of $0.08 based on average
common shares outstanding of 71.6 million for the same period in 2000. The 2000
net loss included $4.3 million or $0.06 per share for the cumulative effect of
accounting change as a result of the adoption of SAB 101 (see Note 1 to the
Consolidated Financial Statements).
Liquidity and Capital Resources
The Company's cash and cash equivalents were $14.3 million as of March 31,
2001, compared to $12.0 million as of December 31, 2000. The cash used for
operating activities for the three months ended March 31, 2001 was $4.1 million
compared to $3.8 million in the same period of 2000. The increase from the prior
year period is due primarily to the increased funding for the proteomics program
at AxCell, the Company's efforts to expand its in-house sales force, and
expenses related to the 2001 launch of BrachySeed.
Historically, the Company's primary sources of cash have been proceeds
from the issuance and sale of its stock through public offerings and private
placements, product related revenues, revenues from research services, fees
received under license agreements and interest earned on cash and short-term
investments.
In January 2001, the Company received cash of $1.6 million relating to the
December 2000 sale of New Jersey State net operating losses and research and
development credits. Under the current legislation, the Company may be able to
sell a minimum $977,000 of the remaining approved $3.7 million of tax benefits
in 2001. The actual amount of tax credits the Company may sell will depend upon
the allocation among qualifying companies of an annual pool established by the
State of New Jersey.
Under the terms of a $70 million equity financing facility entered into
between the Company and Acqua Wellington, beginning in October 2000 and
extending over a 20 month period, Cytogen may, at its discretion, sell shares of
its common stock to Acqua Wellington at a small discount to the market price.
Such sale price is to be determined before each sale provided the Threshold
Price, as defined in the Common Stock Purchase Agreement executed by the
parties, for the Company's common stock is at least $4.00 per share. The equity
financing facility is not subject to any minimum takedown requirements, nor did
the Company pay any financing fees or other compensation in connection with this
transaction. Pursuant to this facility, in February 2001, the Company sold to
Acqua Wellington 1,276,557 shares of its common stock at an aggregate price of
$6.5 million or $5.092 per share.
11
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont'd)
The Company's capital and operating requirements may change depending upon
various factors, including: (i) whether the Company and its strategic partners
achieve success in manufacturing, marketing and commercialization of its
products; (ii) the amount of resources which the Company devotes to clinical
evaluations and the expansion of marketing and sales capabilities; (iii) results
of clinical trials and research and development activities; and (iv) competitive
and technological developments, in particular the Company may expend funds for
development of its proteomics and PSMA technologies.
The Company's financial objectives are to meet its capital and operating
requirements through revenues from existing products and licensing arrangements.
To achieve its strategic objectives, the Company may enter into research and
development partnerships and acquire, in-license and develop other technologies,
products or services. Certain of these strategies may require payments by the
Company in either cash or stock in addition to the costs associated with
developing and marketing a product or technology. However, the Company believes
that, if successful, such strategies may increase long-term revenues. There can
be no assurance as to the success of such strategies or that resulting funds
will be sufficient to meet cash requirements until product revenues are
sufficient to cover operating expenses, if ever. To fund these strategic and
operating activities, the Company may sell equity or debt securities as market
conditions permit or enter into credit facilities.
The Company has incurred negative cash flows from operations since its
inception, and has expended, and expects to continue to expend in the future,
substantial funds to implement its planned product development efforts,
including acquisition of products and complementary technologies, research and
development, clinical studies and regulatory activities, and to further its
marketing and sales programs. The Company expects that its existing capital
resources together with the Acqua Wellington equity line should be adequate to
fund the Company's operations for the foreseeable future. The Company cannot be
certain that it will not consume a significant amount of its currently available
resources and reasonably expects that it will have additional requirements for
debt or equity capital, irrespective of whether and when it reaches
profitability, for further product development costs, product and technology
acquisition costs, and working capital.
The Company's future capital requirements and the adequacy of available
funds will depend on numerous factors, including the successful
commercialization of its products, the costs associated with the acquisition of
complementary products and technologies, progress in its product development
efforts, the magnitude and scope of such efforts, progress with clinical trials,
progress with regulatory affairs activities, the cost of filing, prosecuting,
defending and enforcing patent claims and other intellectual property rights,
competing technological and market developments, and the expansion of strategic
alliances for the sales, marketing, manufacturing and distribution of its
products. To the extent that the currently available funds and revenues are
insufficient to meet current or planned operating requirements, the Company will
be required to obtain additional funds through equity or debt financing,
strategic alliances with corporate partners and others, or through other
sources. Based on the Company's historical ability to raise capital and current
market conditions, the Company believes other financing alternatives are
available. There can be no assurance that the financing commitments described
above or other financial alternatives will be available when needed or at terms
12
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont'd)
commercially acceptable to the Company. If adequate funds are not available, the
Company may be required to delay, further scale back or eliminate certain
aspects of its operations or attempt to obtain funds through arrangements with
collaborative partners or others that may require the Company to relinquish
rights to certain of its technologies, product candidates, products or potential
markets. If adequate funds are not available, the Company's business, financial
condition and results of operations will be materially and adversely affected.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company does not have operations subject to risks of foreign currency
fluctuations, nor does it use derivative financial instruments in its operations
or investment portfolio. The Company does not have exposure to market risks
associated with changes in interest rates, as it has no variable interest rate
debt outstanding. The Company does not believe it has any other material
exposure to market risks associated with interest rates.
13
PART II - OTHER INFORMATION
Item 5 - Other Information
------
On January 24, 2001, the Company announced the appointment of Mr. Kevin G.
Lokay to its Board of Directors.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 First Amendment to Lease dated as of March 16, 2001 between
826 Newtown Associates, L.P. and AxCell Biosciences Corporation
(b) Reports on Form 8-K
During the three months ended March 31, 2001, the Company
filed with the Securities and Exchange Commission one report on Form
8-K. Such Form 8-K dated February 5, 2001, reported on "Item 5. Other
Events" that on February 5, 2001, the Company completed a first draw
down from its $70 million equity financing facility with Acqua
Wellington North American Equities Fund, Ltd., through the issuance of
1,276,557 shares of its Common Stock to Acqua Wellington for aggregate
proceeds of $6,500,000.
14
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.
CYTOGEN CORPORATION
Date May 14, 2001 By /s/ H. Joseph Reiser
----------------- ---------------------------------------------
H. Joseph Reiser
President and Chief Executive Officer
Date May 14, 2001 By /s/ Lawrence R. Hoffman
----------------- ---------------------------------------------
Lawrence R. Hoffman
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
15