FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 001-16043
ALTEON INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3304550
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
170 WILLIAMS DRIVE, RAMSEY, NEW JERSEY 07446
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(Address of principal executive offices)
(Zip Code)
(201) 934-5000
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(Registrant's telephone number, including area code)
Not Applicable
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(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
On November 2, 2001, 27,262,640 shares of Registrant's Common Stock were
outstanding.
Page 1 of 19 pages
The Exhibit Index is on page 19
ALTEON INC.
INDEX
Page No.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of September 30, 2001 and
December 31, 2000.................................................. 3
Statements of Operations for the three months
and nine months ended September 30, 2001 and 2000.................. 4
Statements of Cash Flows for the nine months
ended September 30, 2001 and 2000.................................. 5
Notes to Financial Statements........................................ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................ 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk........... 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................... 17
Item 6. Exhibits and Reports on Form 8-K..................................... 17
SIGNATURES ................................................................... 18
INDEX TO EXHIBITS ............................................................ 19
2
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ALTEON INC.
BALANCE SHEETS
(UNAUDITED)
ASSETS
September 30, December 31,
2001 2000
------------- -------------
Current Assets:
Cash and cash equivalents .............................. $ 4,548,792 $ 3,600,328
Short-term investments ................................. 8,552,640 6,354,479
Other current assets ................................... 474,930 1,735,660
------------- -------------
Total current assets ................................. 13,576,362 11,690,467
Property and equipment, net ............................ 1,266,493 1,696,082
Deposits and other assets .............................. 2,815 2,815
------------- -------------
Total assets .............................................. $ 14,845,670 $ 13,389,364
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ....................................... $ 399,220 $ 304,779
Accrued expenses ....................................... 1,836,585 1,631,579
------------- -------------
Total current liabilities ............................ 2,235,805 1,936,358
------------- -------------
Stockholders' Equity:
Preferred Stock, $0.01 par value,
1,993,329 shares authorized, and 971 and
912 of Series G and 2,917, and 2,739 of
Series H shares issued and outstanding,
as of September 30, 2001 and
December 31, 2000, respectively ...................... 39 37
Common Stock, $0.01 par value,
80,000,000 shares authorized, and
27,262,640 and 22,399,660 shares issued
and outstanding, as of September 30, 2001
and December 31, 2000, respectively ................... 272,626 223,997
Additional paid-in capital ............................. 157,456,401 145,241,265
Accumulated deficit .................................... (145,140,380) (134,011,423)
Accumulated other comprehensive income/(loss) .......... 21,179 (870)
------------- -------------
Total stockholders' equity ........................... 12,609,865 11,453,006
------------- -------------
Total liabilities and stockholders' equity ................ $ 14,845,670 $ 13,389,364
============= =============
The accompanying notes are an integral part of this statement.
3
ALTEON INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
----------------------------- -----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Revenues:
Investment income ........................................ $ 107,404 $ 109,771 $ 360,050 $ 418,439
Expenses:
Research and development
(which includes non-cash stock compensation
(benefit)/expense of $(52,676) and $160,276,
for the three months ended September 30, 2001
and September 30, 2000, respectively, and $83,479
and $160,276, for the nine months ended
September 30, 2001 and September 30, 2000,
respectively) ........................................... 1,824,239 1,736,549 6,025,419 4,739,352
General and administrative
(which includes non-cash stock compensation
(benefit)/expense of $(401,344) and $549,019,
for the three months ended September 30, 2001
and September 30, 2000, respectively, and
$(328,055) and $549,019, for the nine months
ended September 30, 2001 and September 30, 2000,
respectively) ........................................... 497,236 1,602,814 2,883,220 3,764,142
------------ ------------ ------------ ------------
Total expenses ....................................... 2,321,475 3,339,363 8,908,639 8,503,494
------------ ------------ ------------ ------------
Net loss ..................................................... $ (2,214,071) $ (3,229,592) $ (8,548,589) $ (8,085,055)
------------ ------------ ------------ ------------
Preferred stock dividends ................................. 815,591 747,835 2,370,841 2,181,637
Common stock warrant deemed dividends ..................... 209,528 -- 209,528 --
------------ ------------ ------------ ------------
Net loss applicable to common stockholders ................... $ (3,239,190) $ (3,977,427) $(11,128,958) $(10,266,692)
============ ============ ============ ============
Basic/diluted loss per share to
common stockholders ....................................... $ (0.13) $ (0.20) $ (0.47) $ (0.53)
============ ============ ============ ============
Weighted average common shares used
in computing basic/diluted loss per share ................. 25,791,322 19,411,826 23,639,120 19,331,308
============ ============ ============ ============
The accompanying notes are an integral part of this statement.
4
ALTEON INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months
Ended September 30,
-------------------------------------
2001 2000
------------ ------------
Cash Flows from Operating Activities:
Net loss ............................................................... $ (8,548,589) $ (8,085,055)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization .......................................... 479,185 591,937
Amortization of deferred compensation .................................. 91,038 240,404
Non-cash compensation (benefit)/expense
related to variable plan employee stock options ...................... (244,576) 709,295
Changes in operating assets and liabilities:
Other current assets ................................................... 1,260,730 (194,706)
Accounts payable and accrued expenses .................................. 299,447 (295,019)
------------ ------------
Net cash used in operating activities ................................ (6,662,765) (7,033,144)
------------ ------------
Cash Flows from Investing Activities:
Capital expenditures ................................................... (49,595) (58,383)
Purchases of marketable securities ..................................... (14,198,112) (5,184,978)
Sales and maturities of marketable securities .......................... 12,022,000 11,427,817
------------ ------------
Net cash (used in)/provided by investing activities .................. (2,225,707) 6,184,456
------------ ------------
Cash Flows from Financing Activities:
Net proceeds from issuance of common stock ............................. 9,836,936 3,318,789
------------ ------------
Net increase in cash and cash equivalents ................................. 948,464 2,470,101
Cash and cash equivalents, beginning of period ............................ 3,600,328 5,335,529
------------ ------------
Cash and cash equivalents, end of period .................................. $ 4,548,792 $ 7,805,630
============ ============
The accompanying notes are an integral part of this statement.
5
ALTEON INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - 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 and Rule 10-01 of Regulation
S-X of the Securities and Exchange Commission. 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 only normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three and
nine months ended September 30, 2001, are not necessarily indicative of the
results that may be expected for the year ending December 31, 2001. For further
information, refer to the financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2000.
NOTE 2 - CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash and cash equivalents include highly liquid investments which have
a maturity of less than three months at the time of purchase. Short-term
investments are recorded at fair market value.
NOTE 3 - NET LOSS PER SHARE
Basic loss per share is based on the average number of shares
outstanding during the year. Diluted loss per share is the same as basic loss
per share, as the inclusion of common stock equivalents would be antidilutive.
NOTE 4 - COMPREHENSIVE INCOME/(LOSS)
The following sets forth comprehensive income as required by SFAS 130
for the periods ended September 30, 2001 and 2000 (dollars in thousands):
2001 2000
------- -------
Net Loss .......................................... $(8,549) $(8,085)
Net Unrealized Gain/(Loss) on Marketable Securities 22 (2)
------- -------
Comprehensive Loss ................................ $(8,527) $(8,087)
======= =======
NOTE 5 - STOCK COMPENSATION
In March 2000, the Financial Accounting Standards Board ("FASB")
released Interpretation No. 44, "Accounting for Certain Transactions Involving
Stock Compensation, An Interpretation of APB Opinion No. 25." The interpretation
became effective on July 1, 2000, but in some circumstances applies to
transactions that occurred prior to the effective date. Under the
interpretation, stock options that are repriced must be accounted for as
variable-plan arrangements until the options are exercised, forfeited or expire.
This requirement applies to any options repriced after December 15, 1998. On
February 2, 1999, the Company repriced certain stock options. This
interpretation requires the Company to record compensation expense or benefit,
which is adjusted every quarter, for increases or decreases in the fair market
value of the repriced options based on changes in our stock price from the value
at July 1, 2000, until the repriced options are exercised, forfeited or expire.
The total non-cash stock compensation (benefit)/expense resulting from the
repricing for the three and nine months ending September 30, 2001, is $(454,020)
and $(244,576), respectively, which includes research and development charges of
$(52,676) and $83,479, respectively, and general and administrative charges of
$(401,344) and $(328,055), respectively.
6
ALTEON INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 - RECENTLY ISSUED ACCOUNTING STANDARDS
During June 2001, the FASB issued Statements of Financial Accounting
Standards No. 141, Business Combinations (SFAS No. 141) and No. 142, Goodwill
and Other Intangible Assets (SFAS No. 142). SFAS No. 141 changes the accounting
for business combinations, requiring that all business combinations be accounted
for using the purchase method and that intangible assets be recognized as assets
apart from goodwill if they arise from contractual or other legal rights, or if
they are separable or capable of being separated from the acquired entity and
sold, transferred, licensed, rented or exchanged. SFAS No. 141 is effective for
all business combinations initiated after June 30, 2001. SFAS No. 142 specifies
the financial accounting and reporting for acquired goodwill and other
intangible assets. Goodwill and intangible assets that have indefinite useful
lives will not be amortized, but rather will be tested at least annually for
impairment. SFAS No. 142 is effective for fiscal years beginning after December
15, 2001.
SFAS No. 142 requires that the useful lives of intangible assets
acquired on or before June 30, 2001, be reassessed and the remaining
amortization periods adjusted accordingly. Previously recognized intangible
assets deemed to have indefinite lives shall be tested for impairment. Goodwill
recognized on or before June 30, 2001, shall be assigned to one or more
reporting units and shall be tested for impairment as of the beginning of the
fiscal year in which SFAS No. 142 is initially applied in its entirety.
Based on the Company's current activities, the adoption of these
pronouncements will not have a material impact on the Company's results of
operations, cash flows or financial position.
NOTE 7 - STOCKHOLDERS' EQUITY
In July 2001, the Company completed a public offering of 4,500,000
shares of Common Stock, which provided net proceeds of approximately $9.4
million.
In connection with the offering, certain previously issued warrants
were repriced pursuant to antidilution provisions contained in the warrants.
This resulted in a one-time, deemed dividend in the quarter of $209,528.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Alteon is discovering and developing oral drugs that reverse or slow
down diseases of aging and diabetes. Our lead product candidates are unlike any
drugs currently prescribed, and target some of the largest pharmaceutical
markets, such as cardiovascular and kidney diseases. Three of our compounds are
in clinical development; several others are undergoing pre-clinical testing.
These potential pharmaceutical products were discovered as a result of our
research on structures called Advanced Glycosylation End-products, or A.G.E.s,
that are formed in our body and accumulate as we age, potentially resulting in
many medical disorders.
Our lead compound, ALT-711, is initially being developed for
cardiovascular disease, including isolated systolic hypertension. We completed a
Phase IIa trial to evaluate the effect of ALT-711 on cardiovascular compliance.
Based on the positive results of this trial, we have initiated two Phase IIb
efficacy trials of ALT-711.
We are pursuing development of other compounds from our library of
A.G.E. crosslink breakers and A.G.E.-formation inhibitors in additional aging-
and diabetes-related diseases.
As we continue clinical development of ALT-711, we will determine if it
is appropriate to retain development and marketing rights for one or several
indications in North America, while at the same time continuing to evaluate
potential corporate partnerships for the further development and ultimate
marketing of the compound in other territories throughout the world.
Since our inception in October 1986, we have devoted substantially all
of our resources to research, drug discovery and development programs. To date,
we have not generated any revenues from the sale of products and do not expect
to generate any such revenues for a number of years, if at all. We have incurred
an accumulated deficit of approximately $145,140,000 as of September 30, 2001,
and expect to incur operating losses, potentially greater than losses in prior
years, for a number of years.
We have financed our operations through proceeds from an initial public
offering of Common Stock in 1991, a follow-on offering of Common Stock completed
in 1995, and private placements of common and preferred equity securities,
revenue from present and former collaborative relationships, reimbursement of
certain of our research and development expenses by our collaborative partners,
investment income earned on cash balances and short-term investments and the
sale of a portion of our New Jersey State Net Operating Losses carryforwards. In
July 2001, we completed a public offering of 4,500,000 shares of Common Stock,
which provided net proceeds of approximately $9.4 million.
In March 2000, the Financial Accounting Standards Board ("FASB")
released Interpretation No. 44, "Accounting for Certain Transactions Involving
Stock Compensation, An Interpretation of APB Opinion No. 25." The interpretation
became effective on July 1, 2000, but in some circumstances applies to
transactions that occur prior to the effective date. Under the interpretation,
stock options that are repriced must be accounted for as variable-plan
arrangements until the options are exercised, forfeited or expire. This
requirement applies to any options repriced after December 15, 1998. On February
2, 1999, we repriced certain stock options. This interpretation requires us to
record compensation expense or benefit, which is adjusted every quarter, for
increases or decreases in the fair market value of the repriced options based on
changes in our stock price from the value at July 1, 2000, until the repriced
options are exercised, forfeited or expire. The total non-cash stock
compensation (benefit)/expense resulting from the repricing and included in net
loss for the three and nine months ended September 30, 2001, is $(454,000) and
$(245,000), respectively.
Our business is subject to significant risks including, but not limited
to, (i) our ability to obtain funding, (ii) the risks inherent in our research
and development efforts, including clinical trials, (iii) uncertainties
associated with obtaining and enforcing our patents and with the patent rights
of others, (iv) the lengthy, expensive and uncertain process of seeking
regulatory approvals, (v) uncertainties regarding government reforms and product
pricing and reimbursement levels, (vi) technological change and competition,
(vii) manufacturing uncertainties and (viii) dependence on collaborative
partners and other third parties. Even if our product candidates appear
promising at an early stage of development, they may not reach the market for
numerous reasons. Such reasons include the possibilities that the products will
prove ineffective or unsafe during clinical trials, will fail to receive
necessary regulatory approvals, will be difficult to manufacture on a large
scale, will be uneconomical to market or will be precluded from
commercialization by proprietary rights of third parties. These risks and others
are discussed under the heading "Forward-Looking Statements and Cautionary
Statements."
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
Total revenues for the three months ended September 30, 2001, and the
three months ended September 30, 2000, were $107,000 and $110,000, respectively.
Revenues were derived from interest earned on cash and cash equivalents and
short-term investments. The 2.7% decrease in income was attributable to the
decrease in cash, cash equivalents and short-term investment balances.
Our total expenses decreased to $2,321,000 for the three months ended
September 30, 2001, from $3,339,000 for the three months ended September 30,
2000, and includes $(454,000) and $709,000, respectively, of non-cash stock
compensation (benefit)/expense related to variable plan employee stock options
(See Note 5 to the Financial Statements).
Research and development expenses were $1,824,000 and $1,736,000 for
the three months ended September 30, 2001 and 2000, respectively, which includes
$(53,000) and $160,000, respectively, for non-cash stock compensation
(benefit)/expense. Excluding non-cash stock compensation, research and
development expenses increased by 19.1%. Research and development expenses
primarily consist of third-party expenses associated with pre-clinical and
clinical studies, manufacturing costs of clinical supplies, personnel and
personnel-related expenses and an allocation of facility expenses. Increases for
the three months ended September 30, 2001, included the cost of ongoing studies
of ALT-711, including the initiation of the Phase IIb SAPPHIRE (Systolic And
Pulse Pressure Hemodynamic Improvement by Restoring Elasticity) trial, as well
as manufacturing and personnel costs. For the three months ended September 30,
2000, expenses included costs for the Phase IIa clinical trial, which was
completed in the fourth quarter of 2000.
General and administrative expenses decreased to $497,000 for the three
months ended September 30, 2001 from $1,603,000 for the same period in 2000, and
includes non-cash stock compensation (benefit)/expense of $(401,000) and
$549,000, respectively. Excluding non-cash stock compensation, general and
administrative expenses were $899,000 and $1,054,000, respectively, a decrease
of $155,000 or 14.7% due to decreased personnel and personnel-related costs.
Our net loss applicable to common stockholders decreased to $3,239,000
for the three months ended September 30, 2001, from $3,977,000 in the same
period in 2000, a decrease of 18.6%. This decrease was primarily a result of
non-cash stock compensation (benefit) in 2001, offset by increased research and
development expenses, decreased investment income and increased preferred stock
dividends. Included in the net loss applicable to common stockholders are
preferred stock dividends of approximately $816,000 and $748,000 for the three
months ended September 30, 2001 and 2000, respectively, and common stock warrant
deemed dividends of $210,000 for the three months ended September 30, 2001 (See
Note 7 to the Financial Statements).
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
Total revenues for the nine months ended September 30, 2001, and the
nine months ended September 30, 2000, were $360,000 and $418,000, respectively.
Revenues were derived from interest earned on cash and cash equivalents and
short-term investments. The 13.9% decrease in income was attributable to the
decrease in cash, cash equivalents and short-term investment balances.
Our total expenses increased to $8,909,000 for the nine months ended
September 30, 2001, from $8,503,000 for the nine months ended September 30,
2000, and includes $(245,000) and $709,000, respectively, of non-cash stock
compensation (benefit)expense related to variable plan employee stock options
(See Note 5 to the Financial Statements).
Research and development expenses were $6,025,000 and $4,739,000 for
the nine months ended September 30, 2001 and 2000, respectively, which includes
$83,000 and $160,000 of non-cash stock compensation expense, respectively.
Excluding non-cash stock compensation, research and development expenses
increased by 29.8%. Research and development expenses primarily consist of
third-party expenses associated with pre-clinical and clinical studies,
manufacturing costs of clinical supplies, personnel and personnel-related
expenses and an allocation of facility expenses. Increases for the nine months
ended September 30, 2001, resulted from the cost of ongoing ALT-711 studies,
including the initiation of the Phase IIb SAPPHIRE trial, pre-clinical, as well
as manufacturing and personnel
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
costs. For the nine months ended September 30, 2000, expenses included costs for
the Phase IIa clinical trial, which was completed in the fourth quarter of 2000.
General and administrative expenses decreased to $2,883,000 for the
nine months ended September 30, 2001, from $3,764,000 for the same period in
2000, and includes non-cash stock compensation (benefit)/expense of $(328,000)
and $549,000, respectively (See Note 5 to the Financial Statements). Excluding
non-cash stock compensation, general and administrative expenses remained flat.
Our net loss applicable to common stockholders increased to $11,129,000
for the nine months ended September 30, 2001, from $10,267,000 in the same
period in 2000, an increase of 8.4%. This was primarily a result of increased
research and development expenses, the inclusion of non-cash stock compensation,
decreased investment income and increased preferred stock dividends. Included in
the net loss applicable to common stockholders are preferred stock dividends of
approximately $2,371,000, and $2,182,000 for the nine months ended September 30,
2001 and 2000, respectively, and common stock warrant deemed dividends of
$210,000 for the nine months ended September 30, 2001 (See Note 7 to the
Financial Statements).
LIQUIDITY AND CAPITAL RESOURCES
We had cash, cash equivalents and short-term investments at September
30, 2001, of $13,101,000 compared to $9,955,000 at December 31, 2000. This is an
increase in cash, cash equivalents and short-term investments for the nine
months ended September 30, 2001, of $3,146,000. This consisted of net proceeds
of $9,460,000 from a public offering of 4,500,000 shares of common stock, the
receipt of $1,548,000 from the sale of our NOLs and $377,000 of financing
activities related to proceeds from stock option exercises. This was offset by
$8,211,000 of cash used in operations consisting primarily of research and
development expenses, personnel and related costs, facility expenses and
approximately $50,000 of capital expenditures. As of September 30, 2001, we had
invested $7,472,000 in capital equipment and leasehold improvements.
In December 2000, we sold $14.1 million of our gross State net
operating loss carryforwards and $590,000 of our State research and development
tax credit carryforwards under the State of New Jersey's Technology Business Tax
Certificate Transfer Program (the "Program"). The Program allowed qualified
technology and biotechnology business in New Jersey to sell unused amounts of
net operating loss carryforwards and defined research and development tax
credits for cash. The proceeds from the sale in 2000 were $1,548,000 and were
recorded as a tax benefit in the statements of operations. The proceeds from the
sale of the net operating loss carryforwards and the research and development
tax credit carryforwards sold in 2000 were received on January 8, 2001.
We anticipate that our existing available cash and cash equivalents
and short-term investments will be adequate to satisfy our working capital
requirements for our current operations into the second half of 2002. While we
expect to apply a portion of the proceeds of our July 2001 sale of Common Stock
to the Phase IIb efficacy trial of ALT-711, the timing and extent of ALT-711's
clinical development will be determined by our ability to secure additional
financing. In addition, we will require substantial new funding in order to
continue the research, product development, pre-clinical testing and clinical
trials of our other product candidates, including Pimagedine. We will also
require additional funding for operating expenses, the pursuit of regulatory
approvals for our product candidates and the establishment of marketing and
sales capabilities.
The amount of our future capital requirements will depend on numerous
factors, including the progress of our research and development programs, the
conduct of pre-clinical tests and clinical trials, the development of regulatory
submissions, the costs associated with protecting patents and other proprietary
rights, the development of marketing and sales capabilities and the availability
of third-party funding.
Because of our long-term capital requirements, we may seek access to
the public or private equity markets whenever conditions are favorable. We may
also seek additional funding through corporate collaborations and other
financing vehicles, potentially including off-balance sheet financing through
limited partnerships or corporations. There can be no assurance that such
funding will be available at all or on terms acceptable to us. If adequate funds
are not available, we may be required to curtail significantly one or more of
our research or development programs. If we obtain funds through arrangements
with collaborative partners or others, we may be required to relinquish rights
to certain of our technologies or product candidates.
Our current priorities are the evaluation and continued development of
ALT-711, our lead A.G.E. Crosslink Breaker candidate, and determining the
optimal course for the continued development of Pimagedine. We are focusing our
resources on the development of ALT-711. As we continue clinical development of
ALT-711, we will
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
determine if it is appropriate to retain development and marketing rights for
one or several indications in North America, while at the same time continuing
to evaluate potential corporate partnerships for the further development and
ultimate marketing of the compound throughout the world. We have also decided to
pursue the continued development of Pimagedine and are actively seeking one or
more corporate partners. As described above, we believe that additional
development of this compound and other product candidates will require us to
find sources of funding.
FORWARD-LOOKING STATEMENTS AND CAUTIONARY STATEMENTS
Statements in this Form 10-Q that are not statements or descriptions of
historical facts are "forward-looking" statements under Section 21E of the
Securities Exchange Act of 1934, as amended, and the Private Securities
Litigation Reform Act of 1995 and are subject to numerous risks and
uncertainties. These forward-looking statements and other forward-looking
statements made by us or our representatives are based on a number of
assumptions. The words "believe," "expect," "anticipate," "intend," "estimate"
or other expressions which are predictions of or indicate future events and
trends and which do not relate to historical matters identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements as they involve risks and uncertainties, and actual
results could differ materially from those currently anticipated due to a number
of factors, including those set forth in this section and elsewhere in this Form
10-Q. These factors include, but are not limited to, the risks set forth below.
The forward-looking statements represent our judgment and expectations as of the
date of this Report. We assume no obligation to update any such forward-looking
statements.
IF WE DO NOT OBTAIN SUFFICIENT ADDITIONAL FUNDING TO MEET OUR NEEDS, WE MAY HAVE
TO CURTAIL OR DISCONTINUE THE RESEARCH, PRODUCT DEVELOPMENT, PRE-CLINICAL
TESTING AND CLINICAL TRIALS OF SOME OR ALL OF OUR PRODUCT CANDIDATES.
We anticipate that our existing available cash and cash equivalents
and short-term investments will be adequate to satisfy our working capital
requirements for our current operations into the second half of 2002. While we
expect to apply a portion of the proceeds of our July 2001 sale of Common Stock
to the Phase IIb efficacy trial of ALT-711, the timing and extent of ALT-711's
clinical development will be determined by our ability to secure additional
financing. In addition, we will require substantial new funding in order to
continue the research, product development, pre-clinical testing and clinical
trials of our other product candidates, including ALT-711 and Pimagedine. We
will also require additional funding for operating expenses, the pursuit of
regulatory approvals for our product candidates and the establishment of
marketing and sales capabilities.
Our future capital requirements will depend on many factors, including
continued scientific progress in our research and development programs, the size
and complexity of these programs, progress with pre-clinical testing and
clinical trials, the time and costs involved in obtaining regulatory approvals,
the costs involved in filing, prosecuting and enforcing patent claims, competing
technological and market developments, the establishment of additional
collaborative arrangements, the cost of manufacturing arrangements,
commercialization activities and the cost of product in-licensing and strategic
acquisitions, if any. Our cash reserves and other liquid assets may not be
adequate to satisfy our capital and operating requirements.
IF WE DO NOT SUCCESSFULLY DEVELOP ANY PRODUCTS, WE MAY NOT DERIVE ANY REVENUES.
All of our product candidates are in research or clinical development.
We may not succeed in the development and marketing of any therapeutic or
diagnostic product. To achieve profitable operations, we must, alone or with
others, successfully identify, develop, introduce and market proprietary
products. Such products will require significant additional investment,
development and pre-clinical and clinical testing prior to potential regulatory
approval and commercialization.
We have not yet requested or received regulatory approval for any
product from the FDA or any other regulatory body. Before obtaining regulatory
approvals for the commercial sale of any of our products under development, we
must demonstrate through pre-clinical studies and clinical trials that the
product is safe and effective for use in each target indication. The results
from pre-clinical studies and early clinical trials may not be predictive of
results that will be obtained in large-scale testing. In addition, some or all
of the clinical trials we undertake may not demonstrate sufficient safety and
efficacy to obtain the requisite regulatory approvals, which could prevent the
creation of marketable products.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The development of new pharmaceutical products is highly uncertain and
subject to a number of significant risks. Potential products that appear to be
promising at early stages of development may not reach the market for a number
of reasons. Potential products may be found ineffective or cause harmful side
effects during pre-clinical testing or clinical trials, fail to receive
necessary regulatory approvals, be difficult to manufacture on a large scale, be
uneconomical, fail to achieve market acceptance or be precluded from
commercialization by proprietary rights of third parties. We may not be able to
undertake additional clinical trials. In addition, our product development
efforts may not be successfully completed, we may not obtain regulatory
approvals, and our products, if introduced, may not be successfully marketed or
achieve customer acceptance. We do not expect any of our products, including
ALT-711 and Pimagedine, to be commercially available for a number of years, if
at all.
IF WE ARE UNABLE TO DERIVE REVENUES FROM PRODUCT SALES, WE MAY NEVER BE
PROFITABLE.
All of our revenues to date have been generated from collaborative
research agreements and financing activities, or interest income earned on these
funds. We have not received any revenues from product sales. We may not realize
product revenues on a timely basis, if at all.
At September 30, 2001, we had an accumulated deficit of $145,140,000.
We anticipate that we will incur substantial, potentially greater losses in the
future. Our products under development may not be successfully developed and our
products, if successfully developed, may not generate revenues sufficient to
enable us to earn a profit. We expect to incur substantial additional operating
expenses over the next several years as our research, development and clinical
trial activities increase. We do not expect to generate revenues from the sale
of products, if any, for a number of years. Our ability to achieve profitability
depends, in part, on our ability to enter into agreements for product
development, obtain regulatory approval for our products and develop the
capacity, or enter into agreements, for the manufacture, marketing and sale of
any products. We may not obtain required regulatory approvals, or successfully
develop, manufacture, commercialize and market product candidates, and we may
never achieve product revenues or profitability.
PRIOR STOCK OPTION REPRICING MAY HAVE AN ADVERSE EFFECT ON OUR FUTURE FINANCIAL
PERFORMANCE.
Based on the performance of our stock, we repriced certain employee
stock options on February 2, 1999, in order to bolster employee retention. As a
result of this repricing, options to purchase 1.06 million shares of stock were
repriced and certain vesting periods related to these options were modified or
extended. This repricing may have a material adverse impact on future financial
performance based on Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation, An Interpretation of APB Opinion No. 25." This
interpretation requires us to record compensation expense or benefit, which is
adjusted every quarter, for increases or decreases in the fair market value of
the repriced options based on changes in our stock price from the value at July
1, 2000, until the repriced options are exercised, forfeited or expire.
IF WE ARE NOT ABLE TO FORM AND MAINTAIN THE COLLABORATIVE RELATIONSHIPS THAT OUR
BUSINESS STRATEGY REQUIRES, THEN OUR PROGRAMS WILL SUFFER AND WE MAY NOT BE ABLE
TO DEVELOP PRODUCTS.
Our strategy for developing and deriving revenues from our products
depends, in large part, upon entering into arrangements with research
collaborators, corporate partners and others.
We have established collaborative arrangements with Yamanouchi
Pharmaceutical Co., Ltd., Roche Diagnostics GmbH, IDEXX laboratories, Inc. and
Gamida for Life with respect to the development of drug therapies and
diagnostics utilizing our scientific platforms. To succeed, we will have to
develop additional relationships. We are seeking to establish new collaborative
relationships to provide the funding necessary for continuation of our product
development, but such effort may not be successful. If we are unable to enter
into or manage additional collaborations, our programs may suffer and we may be
unable to develop products.
IF WE ARE UNABLE TO MAINTAIN OUR COLLABORATIVE RELATIONSHIPS, OUR PRODUCT
DEVELOPMENT MAY BE DELAYED AND DISPUTES OVER RIGHTS TO TECHNOLOGY MAY RESULT.
We will, in some cases, be dependent upon outside partners to conduct
pre-clinical testing and clinical trials and to provide adequate funding for our
development programs. Our corporate partners may have all or a significant
portion of the development and regulatory approval responsibilities. Failure of
the corporate partners to develop marketable products or to gain the appropriate
regulatory approvals on a timely basis, if at all, would have a material adverse
effect on our business, financial condition and results of operations.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In most cases, we will not be able to control the amount and timing of
resources that our corporate partners devote to our programs or potential
products. If any of our corporate partners breached or terminated its agreements
with us or otherwise failed to conduct its collaborative activities in a timely
manner, the pre-clinical or clinical development or commercialization of product
candidates or research programs could be delayed, and we would be required to
devote additional resources to product development and commercialization or
terminate certain development programs.
Disputes may arise in the future with respect to the ownership of
rights to any technology we develop with third parties. These and other possible
disagreements between us and collaborators could lead to delays in the
collaborative research, development or commercialization of product candidates
or could require or result in litigation or arbitration, which would be
time-consuming and expensive and would have a material adverse effect on our
business, financial condition and results of operations.
Any corporate partners we have may develop, either alone or with
others, products that compete with the development and marketing of our
products. Competing products, either developed by the corporate partners or to
which the corporate partners have rights, may result in their withdrawal of
support with respect to all or a portion of our technology, which would have a
material adverse effect on our business, financial condition and results of
operations.
IF WE CANNOT SUCCESSFULLY DEVELOP A MARKETING AND SALES FORCE OR MAINTAIN
SUITABLE ARRANGEMENTS WITH THIRD PARTIES TO MARKET AND SELL OUR PRODUCTS, OUR
ABILITY TO DELIVER PRODUCTS MAY BE IMPAIRED.
For certain of our products, we have licensed exclusive marketing
rights to our corporate partners or formed collaborative marketing arrangements
within specified territories in return for royalties to be received on sales, a
share of profits or beneficial transfer pricing. These agreements are terminable
at the discretion of our partners upon as little as 90 days' prior written
notice. If the licensee or marketing partner terminates an agreement or fails to
market a product successfully, our business, financial condition and results of
operations may be adversely affected.
We currently have no experience in marketing or selling pharmaceutical
products. In order to achieve commercial success for any approved product, we
must either develop a marketing and sales force or, where appropriate or
permissible, enter into arrangements with third parties to market and sell our
products. We might not develop successfully marketing and sales experience.
Further, we may not be able to enter into marketing and sales agreements with
others on acceptable terms, and any such arrangements, if entered into, may be
terminated. If we develop our own marketing and sales capability, it will
compete with other companies that currently have experienced, well funded and
larger marketing and sales operations. To the extent that we enter into
co-promotion or other sales and marketing arrangements with other companies,
revenues will depend on the efforts of others, which may not be successful.
IF WE CANNOT SUCCESSFULLY FORM AND MAINTAIN SUITABLE ARRANGEMENTS WITH THIRD
PARTIES FOR THE MANUFACTURING OF THE PRODUCTS WE MAY DEVELOP, OUR ABILITY TO
DEVELOP OR DELIVER PRODUCTS MAY BE IMPAIRED.
We have no experience in manufacturing products for commercial purposes
and do not have manufacturing facilities. Consequently, we are dependent on
contract manufacturers for the production of products for development and
commercial purposes. The manufacture of our products for clinical trials and
commercial purposes is subject to current Good Manufacturing Practice, or cGMP,
regulations promulgated by the FDA. In the event that we are unable to obtain or
retain third-party manufacturing for our products, we will not be able to
commercialize such products as planned. We may not be able to enter into
agreements for the manufacture of future products with manufacturers whose
facilities and procedures comply with cGMP and other regulatory requirements.
Our current dependence upon others for the manufacture of our products may
adversely affect our profit margin, if any, on the sale of future products and
our ability to develop and deliver such products on a timely and competitive
basis.
IF WE ARE NOT ABLE TO PROTECT THE PROPRIETARY RIGHTS THAT ARE CRITICAL TO OUR
SUCCESS, THE DEVELOPMENT AND ANY POSSIBLE SALES OF OUR PRODUCT CANDIDATES COULD
SUFFER AND COMPETITORS COULD FORCE OUR PRODUCTS COMPLETELY OUT OF THE MARKET.
Our success will depend on our ability to obtain patent protection for
our products, preserve our trade secrets, prevent third parties from infringing
upon our proprietary rights and operate without infringing upon the proprietary
rights of others, both in the United States and abroad.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Competitors may develop competitive products outside the protection
that may be afforded by the claims of our patents. We are aware that other
parties have been issued patents and have filed patent applications in the
United States and foreign countries with respect to other agents which impact
A.G.E. or the formation of A.G.E. crosslinks.
The degree of patent protection afforded to pharmaceutical inventions
is uncertain and our potential products are subject to this uncertainty.
Pimagedine is not a novel compound and is not covered by a composition-of-matter
patent. The patents covering Pimagedine are use patents containing claims
covering therapeutic indications and the use of Pimagedine to inhibit the
formation of A.G.E.s. Competitors may develop and commercialize Pimagedine or
Pimagedine-like products for indications outside of the protection provided by
the claims of our use patents. Physicians, pharmacies and wholesalers could then
substitute for our Pimagedine products. Substitution for our Pimagedine products
would have a material adverse effect on our business, financial condition and
results of operations. Use patents may afford a lesser degree of protection in
certain foreign countries due to their patent laws. In addition, although we
have several patent applications pending to protect proprietary technology and
potential products, these patents may not be issued, and the claims of any
patents, which do issue, may not provide significant protection of our
technology or products. In addition, we may not enjoy any patent protection
beyond the expiration dates of our currently issued patents.
We also rely upon unpatented trade secrets and improvements, unpatented
know-how and continuing technological innovation to maintain, develop and expand
our competitive position, which we seek to protect, in part, by confidentiality
agreements with our corporate partners, collaborators, employees and
consultants. We also have invention or patent assignment agreements with our
employees and certain, but not all, corporate partners and consultants. Relevant
inventions may be developed by a person not bound by an invention assignment
agreement. Binding agreements may be breached, and we may not have adequate
remedies for such breach. In addition, our trade secrets may become known to or
be independently discovered by competitors.
IF WE FAIL TO OBTAIN REGULATORY APPROVALS FOR OUR PRODUCTS, THE COMMERCIAL USE
OF OUR PRODUCTS WILL BE LIMITED.
Our research, pre-clinical testing and clinical trials of our product
candidates are, and the manufacturing and marketing of our products will be,
subject to extensive and rigorous regulation by numerous governmental
authorities in the United States and in other countries where we intend to test
and market our product candidates.
Prior to marketing, any product we develop must undergo an extensive
regulatory approval process. This regulatory process, which includes
pre-clinical testing and clinical trials and may include post-marketing
surveillance of each compound to establish its safety and efficacy, can take
many years and can require the expenditure of substantial resources. Data
obtained from pre-clinical and clinical activities is susceptible to varying
interpretations that could delay, limit or prevent regulatory approval. In
addition, we may encounter delays or rejections based upon changes in FDA policy
for drug approval during the period of product development and FDA regulatory
review of each submitted new drug application, or NDA. We may encounter similar
delays in foreign countries. We may not obtain regulatory approval for the drugs
we develop. Moreover, regulatory approval may entail limitations on the
indicated uses of the drug. Further, even if we obtain regulatory approval, a
marketed drug and its manufacturer are subject to continuing review and
discovery of previously unknown problems with a product or manufacturer which
may have adverse effects on our business, financial condition and results of
operations, including withdrawal of the product from the market. Violations of
regulatory requirements at any stage, including pre-clinical testing and
clinical trials, the approval process or post-approval, may result in various
adverse consequences including the FDA's delay in approving, or its refusal to
approve, a product withdrawal of an approved product from the market and the
imposition of criminal penalties against the manufacturer and NDA holder. None
of our products has been approved for commercialization in the United States or
elsewhere. We may not be able to obtain FDA approval for any products. Failure
to obtain requisite governmental approvals or failure to obtain approvals of the
scope requested will delay or preclude our licensees or marketing partners from
marketing our products or limit the commercial use of such products and will
have a material adverse effect on our business, financial condition and results
of operations.
IF WE ARE NOT ABLE TO COMPETE SUCCESSFULLY WITH OTHER COMPANIES IN THE
DEVELOPMENT AND MARKETING OF CURES AND THERAPIES FOR DIABETES, CARDIOVASCULAR
DISEASES AND THE OTHER CONDITIONS FOR WHICH WE SEEK TO DEVELOP PRODUCTS, WE MAY
NOT BE ABLE TO CONTINUE OUR OPERATIONS.
We are engaged in pharmaceutical fields characterized by extensive
research efforts and rapid technological progress. Many established
pharmaceutical and biotechnology companies with resources greater than ours are
attempting to develop products that would be competitive with our products.
Other companies may succeed in developing products that are safer, more
efficacious or less costly than any we may develop and may also be more
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
successful than us in production and marketing. Rapid technological development
by others may result in our products becoming obsolete before we recover a
significant portion of the research, development or commercialization expenses
incurred with respect to those products.
Certain technologies under development by other pharmaceutical
companies could result in a cure for diabetes or the reduction of the incidence
of diabetes and its complications. For example, a number of companies are
investigating islet cell transplantation as a possible cure for Type 1 diabetes.
Results of a study conducted by the National Institutes of Health, known as the
Diabetes Control and Complications Trial, published in 1993, showed that tight
glucose control reduced the incidence of diabetic complications. Several
pharmaceutical companies have introduced new products for glucose control for
the management of hyperglycemia in Type 2 diabetes. In addition, several large
companies have initiated or expanded research, development and licensing efforts
to build a diabetic pharmaceutical franchise focusing on diabetic nephropathy,
neuropathy, retinopathy and related conditions. An example of this is research
seeking anti-angiogenesis drugs for the potential treatment of diabetic
retinopathy. It is possible that one or more of these initiatives may reduce or
eliminate the market for some of our products.
In addition, a broad range of cardiovascular drugs is under development
by many pharmaceutical and biotechnology companies. It is possible that one or
more of these initiatives may reduce or eliminate the market for some of our
products.
IF GOVERNMENTS AND THIRD-PARTY PAYERS CONTINUE THEIR EFFORTS TO CONTAIN OR
DECREASE THE COSTS OF HEALTH CARE, WE MAY NOT BE ABLE TO COMMERCIALIZE OUR
PRODUCTS SUCCESSFULLY.
In certain foreign markets, pricing and/or profitability of
prescription pharmaceuticals are subject to government control. In the United
States, we expect that there will continue to be federal and state initiatives
to control and/or reduce pharmaceutical expenditures. In addition, increasing
emphasis on managed care in the United States will continue to put pressure on
pharmaceutical pricing. Cost control initiatives could decrease the price that
we receive for any products we may develop and sell in the future and have a
material adverse effect on our business, financial condition and results of
operations. Further, to the extent that cost control initiatives have a material
adverse effect on our corporate partners, our ability to commercialize our
products may be adversely affected.
Our ability to commercialize pharmaceutical products may depend, in
part, on the extent to which reimbursement for the products will be available
from government health administration authorities, private health insurers and
other third-party payers. Significant uncertainty exists as to the reimbursement
status of newly approved health care products, and third-party payers, including
Medicare, are increasingly challenging the prices charged for medical products
and services. Third-party insurance coverage may not be available to patients
for any products developed by us. Government and other third-party payers are
increasingly attempting to contain health care costs by limiting both coverage
and the level of reimbursement for new therapeutic products and by refusing in
some cases to provide coverage for uses of approved products for disease
indications for which the FDA has not granted labeling approval. If adequate
coverage and reimbursement levels are not provided by government and other
third-party payers for our products, the market acceptance of these products
would be adversely affected.
IF THE USERS OF THE PRODUCTS WE DEVELOP CLAIM THAT OUR PRODUCTS HAVE HARMED
THEM, WE MAY BE SUBJECT TO COSTLY AND DAMAGING PRODUCT LIABILITY LITIGATION,
WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS.
The use of any of our potential products in clinical trials and the
sale of any approved products, including the testing and commercialization of
ALT-711 or Pimagedine, exposes us to liability claims resulting from the use of
products or product candidates. A claim, which was subsequently settled, was
made by a participant in one of our clinical trials, and additional claims might
be made directly by other such participants, consumers, pharmaceutical companies
or others. We maintain product liability insurance coverage for claims arising
from the use of our products in clinical trials. However, coverage is becoming
increasingly expensive, and we may not be able to maintain or acquire insurance
at a reasonable cost or in sufficient amounts to protect us against losses due
to liability that could have a material adverse effect on our business,
financial conditions and results of operations. We may not be able to obtain
commercially reasonable product liability insurance for any product approved for
marketing in the future and insurance coverage and our resources may not be
sufficient to satisfy any liability resulting from product liability claims. A
successful product liability claim or series of claims brought against us could
have a material adverse effect on our business, financial condition and results
of operations.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
IF WE ARE UNABLE TO ATTRACT AND RETAIN THE KEY PERSONNEL ON WHOM OUR SUCCESS
DEPENDS, OUR PRODUCT DEVELOPMENT, MARKETING AND COMMERCIALIZATION PLANS COULD
SUFFER.
We are highly dependent on the principal members of our management and
scientific staff. The loss of services of any of these personnel could impede
the achievement of our development objectives. Furthermore, recruiting and
retaining qualified scientific personnel to perform research and development
work in the future will also be critical to our success. We may not be able to
attract and retain personnel on acceptable terms given the competition between
pharmaceutical and health care companies, universities and non-profit research
institutions for experienced scientists. In addition, we rely on consultants to
assist us in formulating our research and development strategy. All of our
consultants are employed outside of us and may have commitments to or consulting
or advisory contracts with other entities that may limit their availability to
us.
OUR OPERATIONS INVOLVE A RISK OF INJURY OR DAMAGE FROM HAZARDOUS MATERIALS, AND
IF AN ACCIDENT WERE TO OCCUR, WE COULD BE SUBJECT TO COSTLY AND DAMAGING
LIABILITY CLAIMS, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Our research and development activities involve the controlled use of
hazardous materials, chemicals and various radioactive compounds. Although we
believe that our safety procedures for handling and disposing of hazardous
materials comply with the standards prescribed by state and federal regulations,
the risk of accidental contamination or injury from these materials cannot be
completely eliminated. In the event of an accident, we could be held liable for
any damages or fines that result. Such liability could have a material adverse
effect on our business, financial condition and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk for changes in interest rates relates
primarily to our investment in marketable securities. We do not use derivative
financial instruments in our investments. Our investments consist primarily of
debt instruments of the U.S. government, government agencies, financial
institutions and corporations with strong credit ratings. We prepared a detailed
market risk disclosure of these investments in our 2000 annual report on Form
10-K. There have been no material changes in our market risk position since
December 31, 2000.
16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 13, 2000 and August 8, 2000, Colby S. Parks and Marion H.
Parks filed suits against us in the United States District Court for the Middle
District of North Carolina and the Superior Court of Chatham County, North
Carolina, respectively, claiming unspecified damages for injuries Mr. Parks
allegedly sustained as a result of his participation in one of our clinical
trials. These actions have been settled by our insurance carrier.
On October 20, 2000, Charles L. Grimes, one of our stockholders, and
his wife, Jane Gillespie Grimes, filed a complaint against us in the Court of
Chancery in Delaware, claiming breach of an alleged agreement with us which
would have entitled Mr. Grimes to purchase 10% of our private placement of
$6,235,000 of common stock and warrants in September 2000. We filed a motion to
dismiss stating that Mr. and Mrs. Grimes had failed to state a claim as a matter
of law. Pursuant to a decision and order of the Delaware Chancery Court, the
case was dismissed on April 12, 2001. Mr. and Mrs. Grimes have filed an appeal
to the Supreme Court of Delaware.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit
No. Description of Exhibit
------- ----------------------
3.1 Restated Certificate of Incorporation, as amended. (Incorporated
by reference to Exhibit 3.1 to the Company's Quarterly Report on
Form 10-Q filed on November 10, 1999.)
3.2 Certificate of the Voting Powers, Designations, Preference and
Relative Participating, Optional and Other Special Rights and
Qualifications, Limitations or Restrictions of Series F
Preferred Stock of the Company. (Incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K filed
for the year ended December 31, 2000.)
3.3 Certificate of Designations of Series G Preferred Stock of
Alteon Inc. (Incorporated by reference to Exhibit 3.4 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1997.)
3.4 Certificate of Amendment of Certificate of Designations of
Series G Preferred Stock of Alteon Inc. (Incorporated by
reference to Exhibit 3.4 to the Company's Report on Form 10-Q
filed on August 14, 1998.)
3.5 Certificate of Designations of Series H Preferred Stock of
Alteon Inc. (Incorporated by reference to Exhibit 3.5 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1997.)
3.6 Amended Certificate of Designations of Series H Preferred Stock
of Alteon Inc. (Incorporated by reference to Exhibit 3.6 to the
Company's Report on Form 10-Q filed on August 14, 1998.)
3.7 Certificate of Retirement dated November 20, 2000, of Alteon
Inc. (Incorporated by reference to Exhibit 3.8 to the Company's
Annual Report on Form 10-K for the year ended December 31,
2000.)
3.8 Certificate of Amendment to Restated Certificate of
Incorporation of Alteon Inc., dated June 7, 2001. (Incorporated
by reference to Exhibit 3.8 to the Company's Report on Form 10-Q
filed on August 14, 2001.)
3.9 By-laws, as amended. (Incorporated by reference to Exhibit 3.7
to the Company's Report on Form 10-Q filed on May 12, 1999.)
4.1 Stockholders' Rights Agreement dated as of July 27, 1995,
between Alteon Inc. and Registrar and Transfer Company, as
Rights Agent. (Incorporated by reference to Exhibit 4.1 to the
Company's Annual Report on Form 10-K filed for the year ended
December 31, 2000.)
17
4.2 Amendment to Stockholders' Rights Agreement dated as of April
24, 1997, between Alteon Inc. and Registrar and Transfer
Company, as Rights Agent. (Incorporated by reference to Exhibit
4.4 to the Company's Current Report on Form 8-K filed on May 9,
1997.)
4.3 Amendment to Stockholders' Rights Agreement dated as of December
1, 1997, between Alteon Inc. and Registrar and Transfer Company,
as Rights Agent. (Incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-K filed on December 10,
1997.)
b) The following reports on Form 8-K were filed during the quarter ended
September 30, 2001.
On July 18, 2001, the Company filed a Current Report on Form 8-K dated
July 9, 2001, which reported that the Company initiated a Phase IIb "Sapphire"
trial of ALT-711 in systolic hypertension.
On July 25, 2001, the Company filed a Current Report on Form 8-K dated
July 24, 2001, which reported that the Company entered into an underwriting
agreement to sell 4,200,000 shares of its common stock to U.S. Bancorp Piper
Jaffray.
On July 26, 2001, the Company filed a Current Report on Form 8-K dated
July 25, 2001, which reported that the Company entered into an underwriting
agreement to sell 300,000 shares of its common stock to U.S. Bancorp Piper
Jaffray.
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.
Date: November 13, 2001
ALTEON INC.
By: /s/Kenneth I. Moch
------------------------------------------
Kenneth I. Moch
Chairman of the Board, President
and Chief Executive Officer
(principal executive officer)
By: /s/Elizabeth A. O'Dell
------------------------------------------
Elizabeth A. O'Dell
Vice President, Finance,
Secretary and Treasurer
(principal finance and accounting officer)
18
INDEX TO EXHIBITS
Exhibit
No. Description of Exhibit
------- ----------------------
3.1 Restated Certificate of Incorporation, as amended. (Incorporated by
reference to Exhibit 3.1 to the Company's Quarterly Report on Form
10-Q filed on November 10, 1999.)
3.2 Certificate of the Voting Powers, Designations, Preference and
Relative Participating, Optional and Other Special Rights and
Qualifications, Limitations or Restrictions of Series F Preferred
Stock of the Company. (Incorporated by reference to Exhibit 3.2 to
the Company's Annual Report on Form 10-K filed for the year ended
December 31, 2000.)
3.3 Certificate of Designations of Series G Preferred Stock of Alteon
Inc. (Incorporated by reference to Exhibit 3.4 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.)
3.4 Certificate of Amendment of Certificate of Designations of Series G
Preferred Stock of Alteon Inc. (Incorporated by reference to Exhibit
3.4 to the Company's Report on Form 10-Q filed on August 14, 1998.)
3.5 Certificate of Designations of Series H Preferred Stock of Alteon
Inc. (Incorporated by reference to Exhibit 3.5 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.)
3.6 Amended Certificate of Designations of Series H Preferred Stock of
Alteon Inc. (Incorporated by reference to Exhibit 3.6 to the
Company's Report on Form 10-Q filed on August 14, 1998.)
3.7 Certificate of Retirement dated November 20, 2000, of Alteon Inc.
(Incorporated by reference to Exhibit 3.8 to the Company's Annual
Report on Form 10-K for the year ended December 31, 2000.)
3.8 Certificate of Amendment to Restated Certificate of Incorporation of
Alteon Inc., dated June 7, 2001. (Incorporated by reference to
Exhibit 3.8 to the Company's Report on Form 10-Q filed on August 14,
2001.)
3.9 By-laws, as amended. (Incorporated by reference to Exhibit 3.7 to
the Company's Report on Form 10-Q filed on May 12, 1999.)
4.1 Stockholders' Rights Agreement dated as of July 27, 1995, between
Alteon Inc. and Registrar and Transfer Company, as Rights Agent.
(Incorporated by reference to Exhibit 4.1 to the Company's Annual
Report on Form 10-K filed for the year ended December 31, 2000.)
4.2 Amendment to Stockholders' Rights Agreement dated as of April 24,
1997, between Alteon Inc. and Registrar and Transfer Company, as
Rights Agent. (Incorporated by reference to Exhibit 4.4 to the
Company's Current Report on Form 8-K filed on May 9, 1997.)
4.3 Amendment to Stockholders' Rights Agreement dated as of December 1,
1997, between Alteon Inc. and Registrar and Transfer Company, as
Rights Agent. (Incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on December 10, 1997.)
19