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 MARCH 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-16043
ALTEON INC.
(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
(Address of principal executive offices)
(Zip Code)
(201) 934-5000
(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
On May 6, 2002, 31,824,888 shares of Registrant's Common Stock were outstanding.
Page 1 of 20 pages
The Exhibit Index is on page 19
ALTEON INC.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of March 31, 2002 and
December 31, 2001............................................. 3
Statements of Operations for the three months
ended March 31, 2002 and 2001................................. 4
Statements of Cash Flows for three months
ended March 31, 2002 and 2001................................. 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 1. FINANCIAL STATEMENTS
ALTEON INC.
BALANCE SHEETS
(UNAUDITED)
ASSETS
March 31, December 31,
2002 2001
------------- -------------
Current Assets:
Cash and cash equivalents................................................... $ 15,629,085 $ 4,249,439
Short-term investments...................................................... 11,410,596 6,476,384
Other current assets........................................................ 572,293 1,394,765
------------- -------------
Total current assets...................................................... 27,611,974 12,120,588
Property and equipment, net................................................. 968,613 1,109,676
Deposits and other assets................................................... 3,922 2,815
------------- -------------
Total assets................................................................... $ 28,584,509 $ 13,233,079
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.............................................................. $ 842,164 $ 307,153
Accrued expenses.............................................................. 2,614,974 2,054,980
------------- -------------
Total current liabilities................................................... 3,457,138 2,362,133
------------- -------------
Stockholders' Equity:
Preferred Stock, $0.01 par value, 1,993,329 shares
authorized, and 1,013 and 992 of Series G and 3,042
and 2,980 of Series H shares issued and outstanding,
as of March 31, 2002 and December 31, 2001,
respectively................................................................ 41 40
Common Stock, $0.01 par value, 80,000,000 shares
authorized, and 31,799,867 and 27,314,846 shares
issued and outstanding, as of March 31, 2002 and
December 31, 2001, respectively............................................. 317,999 273,148
Additional paid-in capital.................................................... 178,400,861 159,596,934
Accumulated deficit........................................................... (153,582,641) (149,008,641)
Accumulated other comprehensive (loss)/income................................. (8,889) 9,465
------------- -------------
Total stockholders' equity.................................................. 25,127,371 10,870,946
------------- -------------
Total liabilities and stockholders' equity....................................... $ 28,584,509 $ 13,233,079
============= =============
The accompanying notes are an integral part of these statements.
3
ALTEON INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months
Ended March 31,
-----------------------------
2002 2001
------------ -------------
Revenues:
Investment income.............................................................. $ 135,664 $ 152,528
------------ -------------
Expenses:
Research and development (which includes non-cash variable
stock compensation (benefit)/expense of $(46,838) and
$237,637 for the three months ended March 31, 2002 and
March 31, 2001, respectively)................................................ 3,287,257 2,210,541
General and administrative (which includes non-cash variable
stock compensation (benefit)/expense of $(587,107) and
$831,188 for the three months ended March 31, 2002
and March 31, 2001, respectively)............................................ 589,992 1,970,120
------------ -------------
Total expenses............................................................ 3,877,249 4,180,661
------------ -------------
Net loss.......................................................................... $ (3,741,585) $ (4,028,133)
------------ -------------
Preferred stock dividends..................................................... 832,415 765,265
------------ -------------
Net loss applicable to common stockholders........................................ $ (4,574,000) $ (4,793,398)
============ =============
Basic/diluted loss per share to common stockholders............................... $ (0.15) $ (0.21)
============ =============
Weighted average common shares used in computing
basic/diluted loss per share................................................... 31,472,436 22,489,934
============ =============
The accompanying notes are an integral part of these statements.
4
ALTEON INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months
---------------------------
Ended March 31,
2002 2001
------------ -----------
Cash Flows from Operating Activities:
Net loss............................................................. $ (3,741,585) $(4,028,133)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization........................................ 157,980 164,346
Amortization of deferred compensation................................ 5,721 87,536
Non-cash compensation (benefit)/expense related to
variable plan employee stock options............................... (633,945) 1,068,825
Changes in operating assets and liabilities:
Other current assets................................................. 821,365 1,399,232
Accounts payable and accrued expenses................................ 1,095,005 89,335
------------ -----------
Net cash used in operating activities.............................. (2,295,459) (1,218,859)
------------ -----------
Cash Flows from Investing Activities:
Capital expenditures................................................. (16,918) (18,762)
Purchases of marketable securities................................... (8,952,565) (4,973,055)
Sales and maturities of marketable securities........................ 4,000,000 3,066,000
------------ -----------
Net cash used in investing activities.............................. (4,969,483) (1,925,817)
------------ -----------
Cash Flows from Financing Activities:
Net proceeds from issuance of common stock........................... 18,644,588 163,920
------------ -----------
Net increase/(decrease) in cash and cash equivalents.................... 11,379,646 (2,980,756)
Cash and cash equivalents, beginning of period.......................... 4,249,439 3,600,328
------------ -----------
Cash and cash equivalents, end of period................................ $ 15,629,085 $ 619,572
============ ===========
The accompanying notes are an integral part of these statements.
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. 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 months ended March 31, 2002, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2002. 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, 2001.
NOTE 2 - CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash and cash equivalents include highly liquid investments that 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/(loss) as required by
SFAS 130 for the periods ended March 31, 2002 and 2001 (dollars in thousands):
2002 2001
------- -------
Net Loss............................................... $(3,742) $(4,028)
Net Unrealized (Loss)/Gain on Marketable Securities.... (18) 11
------- -------
Comprehensive Loss..................................... $(3,760) $(4,017)
======= =======
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 occur prior to the effective date. Under the interpretation,
stock options that are repriced must be accounted for as variable-plan
arrangements. This means that the Company is required 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 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. The total non-cash
stock compensation (benefit)/expense resulting from the repricing for the three
months ending March 31, 2002 and March 31, 2001, is $(633,945) and $1,068,825,
respectively.
NOTE 6 - RECENTLY ISSUED ACCOUNTING STANDARDS
In August 2001, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS No. 144"), which is effective for fiscal years beginning after
December 15, 2001, and addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. This statement supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("SFAS No. 121"), and the accounting and reporting
provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations -- Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
("APB No. 30"), for the disposal of a segment of a business. Alteon adopted the
standard on January 1, 2002, and the adoption of SFAS No. 144 did not have a
material effect on the Company's results of operations or financial position.
6
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. The
Company adopted SFAS No. 142 as of January 1, 2002.
Based on the Company's current activities, the adoption of these
pronouncements did not have an impact on the Company's results of operations,
cash flows or financial position.
NOTE 7 - STOCKHOLDERS' EQUITY
In January 2002, Alteon completed a public offering of 4,450,000 shares
of common stock, which provided net proceeds of approximately $18,588,000.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
We are a product-based biopharmaceutical company primarily engaged in
the discovery and development of oral drugs to reverse or slow down diseases of
aging and complications of diabetes. Our product candidates represent novel
approaches to some of the largest pharmaceutical markets. Two of our compounds
are in clinical development; several others are in early development. These
pharmaceutical candidates were developed as a result of our research on the
A.G.E. pathway, a fundamental pathological process and inevitable consequence of
aging that causes or contributes to many medical disorders, including
cardiovascular, kidney and eye diseases.
Our lead compound, ALT-711, is initially being developed for
cardiovascular indications, including systolic hypertension. We have 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, the SAPPHIRE (Systolic And Pulse Pressure
Hemodynamic Improvement by Restoring Elasticity) and SILVER (Systolic
Hypertension Interaction with Left VEntricular Remodeling) trials. The compound
is also under Phase I investigation in end-stage renal disease patients
undergoing peritoneal dialysis.
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.
A topical formulation of an A.G.E. Crosslink Breaker, ALT-744, is being
clinically evaluated in skin aging for cosmetic applications. We continue to
evaluate product development opportunities from among our A.G.E. Crosslink
Breaker compounds and other classes of compounds in our patent estate.
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 $153,583,000 as of March 31, 2002, 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, public offerings of common stock, 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 Loss carryforwards.
In January 2002, we completed a public offering of 4,450,000 shares of
common stock, which provided net proceeds of approximately $18,588,000.
In 2001, we sold $6,243,000 of our gross State Net Operating Loss
carryforwards and $802,000 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 allows 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 2001 were approximately
$1,187,000, and such amount was 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 2001 were
received on January 4, 2002.
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
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
rights of third parties. These risks and others are discussed under the heading
"Forward-Looking Statements and Cautionary Statements."
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
Total revenues for the three months ended March 31, 2002, and the three
months ended March 31, 2001, were $136,000 and $153,000, respectively. Revenues
were derived from interest earned on cash and cash equivalents and short-term
investments. The 11.1% decrease in income was attributable to the decrease in
short-term interest rates.
Our total expenses decreased to $3,877,000 for the three months ended
March 31, 2002, from $4,181,000 for the three months ended March 31, 2001, and
in each year consisted primarily of research and development expenses. Research
and development expenses were $3,287,000 and $2,211,000 for the three months
ended March 31, 2002 and March 31, 2001, respectively, which includes non-cash
variable stock compensation (benefit)/expense of $(47,000), and $238,000,
respectively. Excluding non-cash variable stock compensation expense, research
and development expenses increased by $1,361,000, or 69.0%. Research and
development expenses primarily consist of third-party expenses associated with
pre-clinical and clinical studies, manufacturing costs, including the
development and preparation of clinical supplies, personnel and
personnel-related expenses and an allocation of facility expense.
Research and development expenses for the three months ended March 31,
2002, consisted of approximately $1,025,000 in clinical trial expense related to
the Phase IIb SAPPHIRE and SILVER trials. These trials were initiated during
2001, and are currently enrolling patients. The release of data for these trials
is targeted for early 2003. Also included in research and development expenses
is $900,000 related to manufacturing and stability, which includes tablet
manufacturing, packaging and process development and approximately $230,000 in
pre-clinical expense.
Research and development expenses for the three months ended March 31,
2001, included approximately $700,000 of manufacturing and stability expenses
associated with the ALT-711 programs, $600,000 in personnel and
personnel-related expenses and $375,000 in pre-clinical expenses.
The development and successful commercialization of ALT-711 are subject
to substantial risks described in this Report. See, for example,
"Forward-Looking Statements and Cautionary Statements -- If we do not
successfully develop any products, we may not derive any revenues."
General and administrative expenses decreased to $590,000 for the three
months ended March 31, 2002, from $1,970,000 for the same period in 2001, and
includes non-cash variable stock compensation (benefit)/expense of $(587,000)
and $831,000, respectively. Excluding the non-cash variable stock compensation
expense, general and administrative expenses increased $38,000, or 3.3%.
Our net loss applicable to common stockholders decreased to $4,574,000
for the three months ended March 31, 2002, from $4,793,000 in the same period in
2001, a decrease of 4.6%. This was primarily a result of decreased general and
administrative expenses due to the inclusion of non-cash variable stock
compensation (benefit)/expense, 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 $832,000 and $765,000 for the three months ended
March 31, 2002 and 2001, respectively.
LIQUIDITY AND CAPITAL RESOURCES
We had cash, cash equivalents and short-term investments at March 31,
2002, of $27,040,000, compared to $10,726,000 at December 31, 2001. This is an
increase in cash, cash equivalents and short-term investments for the three
months ended March 31, 2002, of $16,314,000, which consisted of $18,588,000 of
net cash received in a public offering of common stock, $1,187,000 received for
the sale of our New Jersey State Net Operating Loss carryforwards and $34,000 in
stock option exercises. This was offset by $3,482,000 of cash used in
operations, consisting primarily of research and development expenses,
personnel-related costs and facility expenses and approximately $19,000 in
capital expenditures.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
At December 31, 2001, we had available Federal Net Operating Loss
carryforwards, which expire in various amounts from the years 2006 through 2020,
of approximately $135,500,000 and State Net Operating Loss carryforwards, which
expire in the years 2002 through 2007, of approximately $85,100,000. In
addition, we had Federal research and development tax credit carryforwards of
approximately $5,100,000 and State research and development tax credit
carryforwards of approximately $1,600,000. The amount of Federal net operating
loss and research and development tax credit carryforwards which can be utilized
in any one period may become limited by Federal income tax regulations if a
cumulative change in ownership of more than 50% occurs within a three-year
period.
In December 2001, we sold $6,243,000 of our gross State Net Operating
Loss carryforwards and $802,000 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 allows qualified
technology and biotechnology businesses 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 2001 were $1,187,000 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 2001 were received on January 4, 2002. The
State renews the Program annually and limits the aggregate proceeds to
$10,000,000. We cannot be certain if we will be able to sell any of the
carryforwards in the future.
In January 2002, we completed a public offering of 4,450,000 shares of
common stock, which provided net proceeds of approximately $18,588,000
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 2003.
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 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.
In addition, we are actively exploring partnering and regulatory pathways for
the continued development of pimagedine. As described above, we believe that
additional development of this compound and other product candidates will
require us to find additional 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.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
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 2003. While we expect to apply a
portion of the proceeds of our recent financings to the Phase IIb trials 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.
We have not yet requested or received regulatory approval for any
product from the FDA or any other regulatory body. All of our product candidates
are still 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.
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.
CLINICAL TRIALS REQUIRED FOR OUR PRODUCT CANDIDATES ARE EXPENSIVE AND
TIME-CONSUMING, AND THEIR OUTCOME IS UNCERTAIN.
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 length of time necessary to complete clinical trials
varies significantly and may be difficult to predict. Factors which can cause
delay or termination of our clinical trials include: (i) slower than expected
patient enrollment due to the nature of the protocol, the proximity of patients
to clinical sites, the eligibility criteria for the study, competition with
clinical trials for other drug candidates or other factors; (ii) lower than
expected retention rates of patients in a clinical trial; (iii) inadequately
trained or insufficient personnel at the study site to assist in overseeing and
monitoring clinical trials; (iv) delays in approvals from a study site's review
board; (v) longer treatment time required to demonstrate effectiveness or
determine the appropriate product dose; (vi) lack of sufficient supplies of the
product candidate; (vii) adverse medical events or side effects in treated
patients; (viii) lack of effectiveness of the product candidate being tested;
and (ix) regulatory changes.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Even if we obtain positive results from pre-clinical or clinical trials
for a particular product, we may not achieve the same success in future trials
of that product. 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.
Our product development costs will increase if we have delays in testing or
approvals, if we need to perform more or larger clinical trials than planned or
if our trials are not successful. Delays in our clinical trials may harm our
financial results and the commercial prospects for our products.
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 March 31, 2002, we had an accumulated deficit of $153,583,000. 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 (CONTINUED)
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 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 U.S. and abroad.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
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 U.S.
and foreign countries with respect to other agents that impact A.G.Es. 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 U.S. 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 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 U.S. 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 (CONTINUED)
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 U.S., 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 U.S. 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 (CONTINUED)
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 and chemicals. 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 2001 Annual Report on Form
10-K. There have been no material changes in our market risk position since
December 31, 2001.
16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 purportedly 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 filed a
notice of appeal to the Supreme Court of Delaware. On January 16, 2002, the
Supreme Court of Delaware heard oral argument on the appeal of Mr. and Mrs.
Grimes, and directed that oral argument on this appeal be heard en banc. On
April 23, 2002, the Supreme Court of Delaware heard the appeal, and a decision
is pending.
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 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.)
3.8 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.)
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.)
17
4.4 Registration Rights Agreement dated September 29, 2000. (Incorporated
by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K
filed on October 5, 2000.)
4.5 Form of Series 1 Common Stock Purchase Warrant. (Incorporated by
reference to Exhibit 4.2 to the Company's Current Report on Form 8-K
filed on October 5, 2000.)
4.6 Form of Series 2 Common Stock Purchase Warrant. (Incorporated by
reference to Exhibit 4.3 to the Company's Current Report on Form 8-K
filed on October 5, 2000.)
4.7 Registration Rights Agreement dated as of April 24, 1997, between
Alteon Inc. and the investors named on the signature page thereof.
(Incorporated by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K filed on May 9, 1997.)
4.8 Form of Common Stock Purchase Warrant. (Incorporated by reference to
Exhibit 4.2 to the Company's Current Report on Form 8-K filed on May 9,
1997.)
10.1 Stock Purchase Agreement dated January 4, 2002, between Alteon Inc. and
the Purchasers named therein. (Incorporated by reference to Exhibit 1
to the Company's Current Report on Form 8-K filed on January 7, 2002.)
10.2* Employment agreement dated as of February 11, 2002, between the Company
and Judith S. Hedstrom.
---------
* Denotes a management contract or compensatory plan or arrangement.
b) The following reports on Form 8-K were filed during the quarter ended
March 31, 2002:
On February 20, 2002, the Company filed a current report on Form 8-K,
dated February 14, 2002, announcing the appointment of Judith S. Hedstrom as
Senior Vice President, Corporate Development.
On January 23, 2002, the Company filed a current report on Form 8-K,
dated January 17, 2002, announcing the Company's sale of more than $1.1 million
of net operating loss carryforwards under a New Jersey program.
On January 7, 2002, the Company filed a current report on Form 8-K,
dated January 7, 2002, announcing that the Company entered into a stock purchase
agreement, raising net proceeds of approximately $18.6 million.
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: May 14, 2002
ALTEON INC.
By: /s/Kenneth I. Moch
----------------------------------------
Kenneth I. Moch
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 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 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.)
3.8 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.)
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.)
4.4 Registration Rights Agreement dated September 29, 2000. (Incorporated
by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K
filed on October 5, 2000.)
4.5 Form of Series 1 Common Stock Purchase Warrant. (Incorporated by
reference to Exhibit 4.2 to the Company's Current Report on Form 8-K
filed on October 5, 2000.)
4.6 Form of Series 2 Common Stock Purchase Warrant. (Incorporated by
reference to Exhibit 4.3 to the Company's Current Report on Form 8-K
filed on October 5, 2000.)
4.7 Registration Rights Agreement dated as of April 24, 1997, between
Alteon Inc. and the investors named on the signature page thereof.
(Incorporated by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K filed on May 9, 1997.)
4.8 Form of Common Stock Purchase Warrant. (Incorporated by reference to
Exhibit 4.2 to the Company's Current Report on Form 8-K filed on May 9,
1997.)
19
10.1 Stock Purchase Agreement dated January 4, 2002, between Alteon Inc. and
the Purchasers named therein. (Incorporated by reference to Exhibit 1
to the Company's Current Report on Form 8-K filed on January 7, 2002.)
10.2* Employment agreement dated as of February 11, 2002, between the Company
and Judith S. Hedstrom.
----------
* Denotes a management contract or compensatory plan or arrangement.
20