UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 0-19612
IMCLONE SYSTEMS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 04-2834797
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
180 VARICK STREET, NEW YORK, NY 10014
(Address of principal executive offices) (Zip Code)
(212) 645-1405
Registrant's telephone number, including area code
Not Applicable
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes__X__ No_____
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of August 12, 1997
----- ---------------------------------
Common Stock, par value $.001 24,105,055 Shares
IMCLONE SYSTEMS INCORPORATED
INDEX
Page No.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1997 (unaudited)
and December 31, 1996 1
Unaudited Statements of Operations - Three and six
months ended June 30, 1997 and 1996 2
Unaudited Statements of Cash Flows - Six
months ended June 30, 1997 and 1996 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Part 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
IMCLONE SYSTEMS INCORPORATED
Balance Sheets
(in thousands, except share data)
June 30, December 31,
Assets 1997 1996
---------- ------------
(unaudited)
Current assets:
Cash and cash equivalents ........................ $ 2,559 $ 2,734
Securities available for sale .................... 28,532 10,780
Prepaid expenses ................................. 450 122
Other current assets ............................. 1,294 479
--------- ---------
Total current assets ...................... 32,835 14,115
--------- ---------
Property and equipment:
Land ............................................ 340 340
Building and building improvements .............. 8,969 8,969
Leasehold improvements .......................... 4,832 4,832
Machinery and equipment ......................... 5,576 5,159
Furniture and fixtures .......................... 536 536
Construction in progress ........................ 627 320
--------- ---------
Total cost ................................ 20,880 20,156
Less accumulated depreciation and amortization . (10,418) (9,606)
--------- ---------
Property and equipment, net ............... 10,462 10,550
--------- ---------
Patent costs, net .................................. 1,048 977
Deferred financing costs, net ...................... 60 65
Amount due from officer and stockholder ............ 90 101
Other assets ....................................... 85 77
--------- ---------
$ 44,580 $ 25,885
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ................................. $ 1,384 $ 1,059
Accrued expenses and other ....................... 731 1,366
Interest payable ................................. 191 238
Deferred revenue ................................. 208 --
Current portion of long-term liabilities ......... 3,380 3,858
--------- ---------
Total current liabilities ................. 5,894 6,521
--------- ---------
Long-term debt ..................................... 2,200 2,200
Other long-term liabilities, less current portion .. 435 575
--------- ---------
Total liabilities ......................... 8,529 9,296
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1.00 par value;
authorized 4,000,000 shares;
none issued and outstanding .................... -- --
Common stock, $.001 par value;
authorized 45,000,000 shares;
issued 24,138,872 and 20,248,122 at
June 30, 1997 and December 31, 1996,
respectively; outstanding 24,088,055 and
20,233,699 at June 30, 1997 and
December 31, 1996, respectively ................ 24 20
Additional paid-in capital ......................... 145,912 118,760
Accumulated deficit ................................ (109,364) (101,973)
Treasury stock, at cost; 50,817 and 14,423 shares
at June 30, 1997 and December 31, 1996,
respectively ................................... (492) (169)
Unrealized loss on securities available for sale ... (29) (49)
--------- ---------
Total stockholders' equity ................ 36,051 16,589
--------- ---------
$ 44,580 $ 25,885
========= =========
See accompanying notes to financial statements.
Page 1
IMCLONE SYSTEMS INCORPORATED
Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
Revenues:
Product development milestone revenues ............ $ 2,500 $ -- $ 2,500 $ --
Research and development funding from third
parties and other ............................ 696 75 771 150
-------- -------- -------- --------
Total revenues ...................... 3,196 75 3,271 150
-------- -------- -------- --------
Operating expenses:
Research and development .......................... 3,257 2,593 8,652 4,918
General and administrative ........................ 1,272 845 2,355 1,587
-------- -------- -------- --------
Total operating expenses ............. 4,529 3,438 11,007 6,505
-------- -------- -------- --------
Operating loss ....................................... (1,333) (3,363) (7,736) (6,355)
-------- -------- -------- --------
Other (income) expense:
Interest and other income ......................... (440) (261) (685) (454)
Interest and other expense ........................ 145 200 340 547
-------- -------- -------- --------
Net interest and other (income) expense (295) (61) (345) 93
-------- -------- -------- --------
Net loss before extraordinary item ................... (1,038) (3,302) (7,391) (6,448)
Extraordinary loss on extinguishment of debt ......... -- 1,267 -- 1,267
-------- -------- -------- --------
Net loss ............................................. $ (1,038) $ (4,569) $ (7,391) $ (7,715)
======== ======== ======== ========
Net loss per common share:
Loss before extraordinary loss on
extinguishment of debt ........................ $ (0.04) $ (0.17) $ (0.33) $ (0.34)
Extraordinary loss on extinguishment of debt .... -- (0.06) -- (0.07)
-------- -------- -------- --------
Net loss per common share ............. $ (0.04) $ (0.23) $ (0.33) $ (0.41)
======== ======== ======== ========
Weighted average shares outstanding .................. 24,033 19,595 22,702 18,730
======== ======== ======== ========
See accompanying notes to financial statements.
Page 2
IMCLONE SYSTEMS INCORPORATED
Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended
June 30,
--------------------
1997 1996
-------- --------
Cash flows from operating activities:
Net loss .................................................................. $ (7,391) $ (7,715)
Adjustments to reconcile net loss to net cash used in operating activities:
Extraordinary loss on extinguishment of debt ............................ -- 1,267
Depreciation and amortization ........................................... 866 910
Discounted interest amortization ........................................ -- 156
Expense associated with issuance
of options and warrants ............................................. 2,634 --
Loss on sale of investments ............................................. 3 --
Changes in:
Prepaid expenses ..................................................... (328) (145)
Other current assets ................................................. (815) (285)
Due from officer ..................................................... 11 13
Other assets ......................................................... (8) --
Interest payable ..................................................... (47) (111)
Accounts payable ..................................................... 325 (75)
Accrued expenses and other ........................................... (635) (251)
Deferred revenue ..................................................... 208 --
-------- --------
Net cash used in operating activities ......................... (5,177) (6,236)
-------- --------
Cash flows from investing activities:
Acquisitions of property and equipment .................................. (436) (294)
Purchases of securities available for sale .............................. (54,777) (25,635)
Sales of securities available for sale .................................. 37,042 7,047
Additions to patents .................................................... (120) (44)
-------- --------
Net cash used in investing activities ......................... (18,291) (18,926)
======== ========
Cash flows from financing activities:
Net proceeds from issuance of common stock .............................. 23,162 13,560
Proceeds from exercise of stock options and warrants .................... 1,360 1,831
Purchase of treasury stock .............................................. (323) (19)
Payments of other liabilities ........................................... (906) (29)
-------- --------
Net cash provided by financing activities ..................... 23,293 15,343
-------- --------
Net decrease in cash and cash equivalents .................................. (175) (9,819)
Cash and cash equivalents at beginning of period ........................... 2,734 10,207
-------- --------
Cash and cash equivalents at end of period ................................. $ 2,559 $ 388
======== ========
See accompanying notes to financial statements.
Page 3
IMCLONE SYSTEMS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) Basis of Presentation
The financial statements of ImClone Systems Incorporated (the "Company") as
of June 30, 1997 and for the three and six months ended June 30, 1997 and 1996
are unaudited. In the opinion of management, these unaudited financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation. These financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1996, as filed with the Securities and Exchange Commission (the
"Commission").
Results for the interim periods are not necessarily indicative of results
for the full years.
(2) Related Party Transactions
As of June 30, 1997, a promissory note (the "new promissory note") in the
original principal amount of $110,000 given to the Company by its President and
CEO totaled $90,000. The new promissory note replaces an original promissory
note (the "original promissory note") which was due upon the earlier of on
demand by the Company or April 30, 1997, bore interest at the rate of 8%
compounded quarterly and covered miscellaneous cash advances made to the
President and CEO through the date of its issuance in March 1995. The new
promissory note was payable as to $15,000 no later than May 15, 1997 and as to
the remainder upon the earlier of on demand by the Company or December 31, 1997
and bears interest at the rate of 5% compounded quarterly. The new promissory
note covers the remaining balance of the original promissory note, interest
thereon and additional miscellaneous cash advances made since the date of the
original note totaling $15,000. As of August 12, 1997 the aggregate amount of
the new promissory note, including interest totaled approximately $88,000.
(3) Net Loss Per Share
Net loss per share is computed based on the weighted average number of
shares outstanding. Common stock equivalents are not included in the computation
of average shares outstanding because they are anti-dilutive.
(4) Reclassification
Certain amounts previously reported have been reclassified to conform to
current year presentation.
Page 4
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis by management is provided to identify
certain significant factors which affected the Company's financial position and
operating results during the period included in the accompanying financial
statements.
Results of Operations
Six Months Ended June 30, 1997 and 1996
Revenues
Revenues for the six-month periods ended June 30, 1997 and June 30, 1996
were $3,271,000 and $150,000, respectively. Revenues in both periods included
research and development support fees of $150,000 from the Company's corporate
partnership with the Wyeth/Lederle Vaccine division of American Home Products
Corporation ("American Home") in infectious disease vaccines. Revenues for the
six-month period ended June 30, 1997 also included milestone revenue of
$1,500,000 and contract research support of $417,000 from the Company's research
and license agreement with Merck KGaA ("Merck") in cancer vaccines.
Additionally, the six-month period ended June 30, 1997 included milestone
revenue of $1,000,000 and royalty fees of $204,000 from the Company's strategic
alliance with Abbott Laboratories ("Abbott") in diagnostics.
Operating: Research and Development
Total operating expenses for the six-month periods ended June 30, 1997 and
June 30, 1996 were $11,007,000 and $6,505,000, respectively. Research and
development expenses for the six-month periods ended June 30, 1997 and June 30,
1996 were $8,652,000 and $4,918,000, respectively. Such amounts for the
six-month periods ended June 30, 1997 and June 30, 1996 represented 79% and 76%,
respectively, of total operating expenses. The $3,734,000 increase in research
and development expenses for the six-month period ended June 30, 1997 was
primarily attributable to a one-time $2,233,000 non-cash compensation expense
recorded in connection with the extension of the term of an officer's warrant to
purchase 397,000 shares of the Company's common stock, $.001 par value (the
"Common Stock"). The increase is also attributable to costs associated with
additional staffing, contract manufacturing and testing, and expenditures in the
functional areas of product development, manufacturing and clinical and
regulatory affairs to support the manufacture of C225 for human clinical trials
as well as travel-related expenses to pursue strategic partnerships for C225
(and other product candidates). The remaining increase reflects growth in the
area of discovery research for future product candidates.
General and Administrative
General and administrative expenses include administrative personnel costs,
costs incurred in connection with pursuing arrangements with corporate partners
and technology licensors, and expenses associated with applying for patent
protection for the Company's technology and products. Such expenses for the
six-month periods ended June 30, 1997 and June 30, 1996 were $2,355,000 and
$1,587,000, respectively, an increase of $768,000 or 48%. The increase in
general and administrative expenses primarily reflects (i) $279,000 in non-cash
compensation expense recorded in connection with an option grant to an officer
and (ii) additional staffing to support the expanding research, clinical,
development and manufacturing efforts of the Company, particularly with its lead
therapeutic product candidate, C225. The Company expects general and
administrative expenses to increase in future periods to support planned
increases in research and development.
Page 5
Interest and Other Income/Expense
Interest and other income was $685,000 for the six-month period ended June
30, 1997 compared to $454,000 for the six-month period ended June 30, 1996, an
increase of $231,000 or 51%. The increase was primarily attributable to the
increased interest income earned from higher cash balances in the Company's
investment portfolio resulting from the proceeds received from a public stock
offering completed in March 1997. Interest and other expense was $340,000 and
$547,000 for the six-month periods ended June 30, 1997 and June 30, 1996,
respectively, a decrease of $207,000 or 38%. Interest and other expense for both
periods primarily included interest on two outstanding Industrial Development
Revenue Bonds with an aggregate principal amount of $4,313,000 and interest
recorded on the liability to Pharmacia and UpJohn Inc. ("Pharmacia"), for the
reacquisition of the worldwide rights to Interleukin - 6 mutein ("IL-6m") as
well as clinical material manufactured and supplied by Pharmacia to the Company.
The decrease was primarily attributable to the May 1996 exchange of debt for
Company Common Stock with the Oracle Group and a Company Director.
Net Losses
The Company had net losses of $7,391,000 or $0.33 per share for the
six-month period ended June 30, 1997, compared with $7,715,000 or $0.41 per
share for the six-month period ended June 30, 1996. The decrease in the net loss
for the six-month period ended June 30, 1997 was primarily due to the fact that
the net loss for the six-month period ended June 30, 1996 included a $1,267,000
or $0.07 per share extraordinary loss on early extinguishment of debt. This
extraordinary loss resulted from the issuance of Company Common Stock in lieu of
cash repayment of a $2,500,000 loan due the Oracle Group and a $180,000
long-term note owed to a Company Director.
Three Months Ended June 30, 1997 and 1996
Revenues
Revenues for the three-month periods ended June 30, 1997 and June 30, 1996
were $3,196,000 and $75,000, respectively. Revenues in both periods included
research and development support fees of $75,000 from the Company's corporate
partnership with American Home in infectious disease vaccines. Revenues for the
three-month period ended June 30, 1997 also included milestone revenue of
$1,500,000 and contract research support of $417,000 from the Company's research
and license agreement with Merck in cancer vaccines. Additionally, the
three-month period ended June 30, 1997 included milestone revenue of $1,000,000
and royalty fees of $204,000 from the Company's strategic alliance with Abbott
in diagnostics.
Operating: Research and Development
Total operating expenses for the three-month periods ended June 30, 1997
and June 30, 1996 were $4,529,000 and $3,438,000, respectively. Research and
development expenses for the three-month periods ended June 30, 1997 and June
30, 1996 were $3,257,000 and $2,593,000, respectively. Such amounts for the
three-month periods ended June 30, 1997 and June 30, 1996 represented 72% and
75%, respectively, of total operating expenses. The $664,000 increase in
research and development expenses for the six-month period ended June 30, 1997
was primarily attributable to costs associated with additional staffing,
contract manufacturing and testing, and expenditures in the functional areas of
product development, manufacturing and clinical and regulatory affairs to
support the manufacture of C225 for human clinical trials as well as
travel-related expenses to pursue strategic partnerships for C225 (and other
product candidates). The remaining increase reflects growth in the area of
discovery research for future product candidates.
Page 6
General and Administrative
General and administrative expenses include administrative personnel costs,
costs incurred in connection with pursuing arrangements with corporate partners
and technology licensors, and expenses associated with applying for patent
protection for the Company's technology and products. Such expenses for the
three-month periods ended June 30, 1997 and June 30, 1996 were $1,272,000 and
$845,000, respectively, an increase of $427,000 or 51%. The increase in general
and administrative expenses primarily reflects (i) $150,000 in non-cash
compensation expense recorded in connection with an option grant to an officer
and (ii) additional staffing to support the expanding research, clinical,
development and manufacturing efforts of the Company, particularly with its lead
therapeutic product candidate, C225. The Company expects general and
administrative expenses to increase in future periods to support planned
increases in research and development.
Interest and Other Income/Expense
Interest and other income was $440,000 for the three-month period ended
June 30, 1997 compared to $261,000 for the three-month period ended June 30,
1996, an increase of $179,000 or 69%. The increase was primarily attributable to
the increased interest income earned from higher cash balances in the Company's
investment portfolio resulting from the proceeds received from a public stock
offering completed in March 1997. Interest and other expense was $145,000 and
$200,000 for the three-month periods ended June 30, 1997 and June 30, 1996,
respectively, a decrease of $55,000 or 28%. Interest and other expense for both
periods primarily included interest on two outstanding Industrial Development
Revenue Bonds with an aggregate principal amount of $4,313,000 and interest
recorded on the liability to Pharmacia, for the reacquisition of the worldwide
rights to IL-6m as well as clinical material manufactured and supplied by
Pharmacia to the Company. The decrease was primarily attributable to the May
1996 exchange of debt for Company Common Stock with the Oracle Group and a
Company Director.
Net Losses
The Company had net losses of $1,038,000 or $0.04 per share for the
three-month period ended June 30, 1997, compared with $4,569,000 or $0.23 per
share for the three-month period ended June 30, 1996. The decrease in the net
loss for the three-month period ended June 30, 1997 was primarily due to the
fact that the net loss for the three-month period ended June 30, 1996 included a
$1,267,000 or $0.06 per share extraordinary loss on early extinguishment of
debt. This extraordinary loss resulted from the issuance of Company Common Stock
in lieu of cash repayment of a $2,500,000 loan due the Oracle Group and a
$180,000 long-term note owed to a Company Director.
Page 7
Liquidity and Capital Resources
The Company's cash and cash equivalents and securities available for sale
totaled $28,950,000 at August 12, 1997; on June 30, 1997 such balances totaled
$31,091,000. The current balances in the Company's cash and cash equivalents and
securities available for sale primarily reflects the proceeds received from the
March 1997 public offering of 3,000,000 shares of Common Stock .
In May 1996, the Company extended its collaboration with Merck for the
development of a therapeutic cancer vaccine, BEC-2, for use in small-cell
carcinoma and in malignant melanoma. The collaboration continues a research and
license agreement between the two companies signed in December 1990. Under the
terms of the modified agreement, the Company could receive up to $11,700,000 in
license fees, research and development support and milestone payments in
addition to moneys previously received under the original agreement. Of such
$11,700,000, as of June 30, 1997, the Company earned $1,500,000 in milestone
payments, and research and support payments of $417,000 which is the first of
eight quarterly research and support payments totalling $4,700,000. In return,
Merck will receive marketing rights to BEC-2 for all therapeutic indications
outside North America. Formerly the rights of Merck were confined to Europe,
Australia and New Zealand. Merck will also share in the development costs for
the United States and Europe and will pay all development costs in other
territories. The Company will be entitled to royalties based upon product sales
outside of North America, if any.
In December 1996, the Company signed an agreement with Finova Technology
Finance, Inc. to finance the lease of laboratory and computer-related equipment
and make certain building and leasehold improvements to facilities involving
payments aggregating approximately $2,500,000. At July 31, 1997, the Company had
$1,799,000 available under this agreement.
In December 1996, the Company and Abbott modified their 1992 diagnostic
strategic alliance to provide for an exclusive sublicensing agreement with
Chiron Diagnostics ("Chiron") for the Company's patented DNA signal
amplification technology, AMPLIPROBE. Under the terms of the agreement, all
sales of Chiron branched DNA diagnostic probe technology in countries covered by
Company patents will be subject to a royalty to Abbott to be passed through to
the Company. Royalties on all Chiron sales of AMPLIPROBE are paid on a quarterly
basis by Abbott and recognized upon receipt by the Company.
In May 1997, a European patent was issued for the Company's proprietary
Repair Chain Reaction ("RCR") DNA probe technology which was licensed to Abbott
under the 1992 strategic alliance discussed in the preceding paragraph. The
issuance of the patent entitled the Company to receive two milestone payments
totaling $1,000,000 and royalty payments on sales in covered European countries
for products using the Company's RCR technology. Abbott will be entitled to
deduct from royalties otherwise due, 25% of such royalties due for a two-year
period and 50% thereafter until a total of $500,000 has been deducted. The
$1,000,000 in milestone payments and $75,000 in royalty payments covering 1995
and 1996 were received in June 1997.
The Company has expended and will continue to expend in the future
substantial funds to continue the research and development of its products,
conduct pre-clinical and clinical trials, establish clinical-scale and
commercial-scale manufacturing in its own facilities or in the facilities of
others, and market its products. In addition, $2,113,000 and $2,200,000,
respectively, in Industrial Development Revenue Bonds issued by the New York
Industrial Development Agency ("NYIDA") on behalf of the Company in 1986 and
1990 become due in December 1997 and May 2004, respectively. The Company has
granted a security interest in substantially all facility equipment located in
its New York City facility to secure the obligations of the Company to the NYIDA
relating to the 1986 and 1990 Industrial Development Revenue Bonds.
Page 8
In July 1993, the Company entered into a termination agreement with
Erbamont, Inc., now a subsidiary of Pharmacia, to acquire the worldwide rights
to IL-6m, a blood cell growth factor, which had been licensed to Pharmacia
pursuant to a development and licensing agreement. In consideration of the
return of rights and the transfer of certain material and information, the
Company has paid $1,928,000 and has further obligations to Pharmacia. Such
obligations, including those to pay for IL-6m material manufactured and supplied
by Pharmacia, totaled $2,400,000 at March 31, 1996. In addition, the Company is
required to pay Pharmacia $2,700,000 in royalties on eventual sales of IL-6m, if
any. In March, 1996, the Company entered into a Repayment Agreement with
Pharmacia (the "Repayment Agreement") pursuant to which it agreed to pay the
$2,400,000 over 24 months commencing in March 1996, with interest only payable
during the first six months. At August 1, 1997 the remaining obligation to
Pharmacia totaled $835,000. In connection with the Repayment Agreement, the
Company signed a Confession of Judgment, which can be filed by Pharmacia with an
appropriate court in the case of default by the Company. Pursuant to a Security
Agreement entered into with Pharmacia, the Company pledged its interests in
patents related to IL-6m and to heparanase to secure its obligations under the
Repayment Agreement.
The Company's future working capital and capital requirements will depend
upon numerous factors, including the progress of the Company's research and
development programs, pre-clinical testing and clinical trials, the Company's
corporate partners fulfilling their obligations to the Company, the timing and
cost of seeking regulatory approvals, the level of resources that the Company
devotes to the development of manufacturing, marketing and sales capabilities,
technological advances, the status of competitors and the ability of the Company
to maintain existing and establish new collaborative arrangements with other
companies to provide funding to the Company to support these activities.
The Company expects to incur substantial funding requirements for the
expansion of operations, including (i) the expansion of the clinical trials of
C225 and the related manufacturing program to support these trials and (ii) in
an effort to develop new product candidates the expansion of research and
development activities including among other things, increased staffing, the
acquisition of equipment, and the consummation of new outside research
agreements. In addition, the entire $835,000 of outstanding debt to Pharmacia is
payable ratably throughout the period ending February 1998 and $2,113,000 of the
Industrial Development Revenue Bonds issued by the NYIDA becomes due in December
1997. The Company expects that its capital resources, including the ongoing
research support of its corporate partners will be sufficient to fund its
operations for approximately the next two years. However, the receipt of certain
of such ongoing research support is subject to attaining research and
development milestones, certain of which have not yet been achieved. These
milestones include, but are not limited to, receiving regulatory permission for
the filing of an Investigational New Drug ("IND") application for the initiation
of a small cell lung carcinoma clinical trial and reaching certain enrollment
levels for such trial relating to the BEC-2 cancer vaccine. No assurance can be
given that there will be no change in projected research support (including
research and development milestones) or expenses that would lead to the
Company's capital being consumed at a faster rate than currently expected. In
order to fund its capital needs beyond approximately the next two years, the
Company will require significant levels of additional capital and intends to
raise the necessary capital through additional arrangements with corporate
partners, equity or debt financings or from other sources. There is no assurance
that the Company will be successful in consummating any such arrangements with
corporate partners, financings or securing other sources.
The Company has entered into preliminary discussions with several major
pharmaceutical companies concerning the funding of research and development for
certain of its products in research. No assurance can be given that the Company
will be successful in pursuing any such alternatives. In addition, the Company
may seek to enter into a significant strategic partnership with a pharmaceutical
company for the development of its lead product candidate, C225. Such a
strategic alliance could include an up-front equity investment and technology
access fees plus milestone fees and revenue sharing. There can be no assurance
that the Company will be successful in achieving such an alliance, nor can the
Company predict the amount of funds which might be available to it if it entered
into such an alliance or the time at which such funds would be made available.
Page 9
The Company has outfitted and purchased equipment for a certain property to
create a clinical-scale production facility that complies with current Good
Manufacturing Practices regulations. To be successful, the Company's products
must be manufactured in commercial quantities in compliance with regulatory
requirements and at acceptable costs. Although the Company has developed
products in the laboratory and in some cases has produced sufficient quantities
of materials for pre-clinical animal trials and early stage clinical trials,
production in late stage clinical or commercial quantities may create technical
challenges for the Company. If it commercializes its products, the Company may
adapt this facility for use as its commercial-scale manufacturing facility.
However, the Company has limited experience in clinical-scale manufacturing and
no experience in commercial-scale manufacturing, and no assurance can be given
that the Company will be able to make the transition to late stage clinical or
commercial production. The timing and any additional costs of adapting the
facility for commercial manufacturing will depend on several factors, including
the progress of products through clinical trials, and are not yet determinable.
Total capital expenditures made during the six months ended June 30, 1997
were $724,000 of which $567,000 related to the refurbishment and equipping of
the Company's manufacturing facility in New Jersey and $157,000 reflected
equipment and computer-related purchases for the corporate office and research
laboratories in New York.
Certain Factors Affecting Forward-Looking Statements--Safe Harbor Statement
Except for the historical information contained herein, this Management's
Discussion and Analysis of Financial Condition and Results of Operations and
other portions of this report contain forward-looking statements that involve
certain risks and uncertainties. The Company's actual operations, performance
and results could differ materially from those reflected in, or anticipated by,
these forward-looking statements. In evaluating the Company and its operations,
performance and results, investors should consider, among other things, the
scientific and business risks and uncertainties of new product development in
the biotechnology field, the risk of rapid and significant technological change,
the risk of development by one or more competitors of products which compete
with the Company's proposed products and the risks and uncertainties discussed
in the Company's public filings with the Commission, including the Company's
most recent Annual Report on Form 10-K under the captions "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Standards No. 128 (SFAS 128), "Earnings Per Share". SFAS 128
establishes standards for computing and presenting earnings per share. In
accordance with the effective date of SFAS 128, the Company will adopt SFAS 128
as of December 31, 1997. This statement is not expected to have a material
impact on the Company's financial statements.
Page 10
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
(a) An annual meeting of stockholders was held on June 3, 1997 (the "Annual
Meeting").
(b) The directors elected at the Annual Meeting were Richard Barth, Jean
Carvais, Vincent T. DeVita, Jr., Robert F. Goldhammer, David M. Kies, Paul B.
Kopperl, William R. Miller, Harlan W. Waksal and Samuel D. Waksal. Such persons
are all of the directors of the Company whose term of office as a director
continued after the Annual Meeting.
(c) The matters voted upon at the Annual Meeting and the results of the
voting, including broker non-votes where applicable, are set forth below.
(i) Election of directors
Name In Favor Withheld Broker Non-Votes
- ---- -------- -------- ----------------
Richard Barth 20,671,171 778,505 N/A
Jean Carvais 20,671,671 778,005 N/A
Vincent T. DeVita, Jr 20,671,671 778,005 N/A
Robert F. Goldhammer 20,671,671 778,005 N/A
David M. Kies 20,761,371 778,305 N/A
Paul B. Kopperl 20,671,571 778,105 N/A
William R. Miller 20,671,671 778,005 N/A
Harlan W. Waksal 20,671,571 778,105 N/A
Samuel D. Waksal 20,671,271 778,405 N/A
(ii) The stockholders approved a proposal to amend the Company's 1996
Incentive Stock Option Plan (the "1996 ISO Plan"), generally to (i) increase the
total number of shares of Common Stock which may be issued pursuant to options
which may be granted under the 1996 ISO Plan from 1,500,000 to 3,000,000, which
number shall be reduced by the number of shares of Common Stock which have been
or may be issued pursuant to options granted under the Company's 1996
Non-Qualified Stock Option Plan (the "1996 Non-Qualified Plan"); and (ii) change
certain administration provisions of the 1996 ISO Plan. The stockholders voted
8,737,903 shares in favor, 4,057,048 shares against, 45,245 shares abstained
from voting and there were 8,609,480 broker non-votes.
(iii) The stockholders approved a proposal to amend the Company's 1996
Non-Qualified Stock Option Plan, generally to (i) increase the total number of
shares of Common Stock which may be issued pursuant to options which may be
granted under the 1996 Non-Qualified Plan from 1,500,000 to 3,000,000, which
number shall be reduced by the number of shares of Common Stock which have been
or may be issued pursuant to options granted under the 1996 ISO Plan; (ii)
change certain administration provisions of the 1996 Non-Qualified Plan and
(iii) clarify those persons eligible to participate in the 1996 Non-Qualified
Plan. The stockholders voted 8,975,273 shares in favor, 3,819,798 shares
against, 45,125 shares abstained from voting and there were 8,609,480 broker
non-votes.
(iv) The stockholders approved a proposal to amend the Company's
Certificate of Incorporation to increase the total number of shares of Common
Stock the Company is authorized to issue from 30,000,000 shares to 45,000,000
shares. The stockholders voted 19,145,871 shares in favor, 915,585 shares
against, 33,875 shares abstained from voting and there were 1,354,345 broker
non-votes.
(v) The stockholders ratified the appointment by the Board of Directors of
KPMG Peat Marwick LLP as the Company's independent certified public accountants
for the fiscal year ending December 31, 1997. The stockholders voted 21,310,356
shares in favor, 112,160 shares against, and 27,160 shares abstained from
voting. Broker non-votes were not applicable.
Page 11
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation and all amendments thereto
27.1 Financial Data Schedule
99.1 1996 Incentive Stock Option Plan, as amended
99.3 1996 Non-Qualified Stock Option Plan, as amended
(b) Reports on Form 8-K:
Date of Report Items Reported
-------------- --------------
April 14, 1997 Item 5
June 3, 1997 Item 5
Page 12
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.
IMCLONE SYSTEMS INCORPORATED
(Registrant)
Date: August 13, 1997 By /s/ Samuel D. Waksal
---------------------------
Samuel D. Waksal
President and Chief
Executive Officer
Date: August 13, 1997 By /s/ Carl S. Goldfischer
---------------------------
Carl S. Goldfischer
Vice President , Finance
and Chief Financial Officer
Page 13