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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

Commission file number 0-15360

BIOJECT MEDICAL TECHNOLOGIES INC.

Registrant’s telephone number, including area code: (908) 470-2800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [   ]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

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BIOJECT MEDICAL TECHNOLOGIES INC.
FORM 10-Q
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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

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BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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BIOJECT MEDICAL TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Presentation

The financial information included herein for the three month periods ended June 30, 2002 and 2001 is unaudited; however, such information reflects all adjustments consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial information as of March 31, 2002 is derived from Bioject Medical Technologies Inc.’s 2002 Annual Report on Form 10-K. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Bioject’s 2002 Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

Note 2. Inventories

Inventories are stated at the lower of cost or market. Cost is determined in a manner, which approximates the first-in, first out (FIFO) method. Costs utilized for inventory valuation purposes include labor, materials and manufacturing overhead. Net inventories consist of the following:

Note 3. Net Loss Per Share

The following common stock equivalents are excluded from the diluted loss per share calculations, as their effect would have been antidilutive:

Note 4. Subsequent Event — Shareholder Rights Plan

On July 1, 2002, Bioject’s board of directors adopted a shareholder rights agreement. To implement the agreement, Bioject issued a dividend of one right for each share of its common stock held by shareholders of record as of the close of business on July 19, 2002.

The purpose of the rights agreement is to obtain maximum value for shareholders in the event of an unsolicited acquisition attempt. The agreement was not adopted in response to any efforts to acquire the Company and the Company is not aware of any such efforts.

Each right initially entitles shareholders to purchase a fractional share of Bioject’s preferred stock for $50.00. However, the rights are not immediately exercisable and will become exercisable only if certain events related to an unsolicited acquisition attempt occur. For example, unless earlier redeemed for $0.001 per right, when a person or group acquires 15% or more of Bioject’s common stock, all rights holders (except the person or group who acquired the triggering amount of shares) will be able to exercise their rights for shares of Bioject having a value of twice the right’s then-current exercise price.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning prospects for future strategic corporate relationships, current corporate partners, prospects for sales of our products into new, high leverage markets, and generally heightened prospects for the adoption and use of needle-free technology. Such forward looking statements (often, but not always, using words or phrases such as “expects” or “does not expect,” “is expected,” “anticipates” or “does not anticipate,” “plans,” “estimates” or “intends,” or stating that certain actions, events or results “may,” “could,” “would,” “might” or “will” be taken, occur or be achieved) involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance, or achievements expressed or implied by such forward looking statements. Such risks, uncertainties and other factors include, without limitation, the risk that our products, including the cool.click™ or the SeroJet™, will not be accepted by the market, the risk that we will be unable to enter into additional strategic corporate licensing and supply agreements or maintain existing agreements, the fact that our business has never been profitable and may never be profitable, uncertainties related to the time required to complete research and development, obtaining necessary clinical data and government clearances, the risk that we may be unable to produce our products at a unit cost necessary for the products to be competitive in the market and the risk that we may be unable to comply with the extensive government regulations applicable to our business. Readers of this Form 10-Q are referred to our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended March 31, 2002, for further discussions of factors which could affect future results.

Forward-looking statements are based on the estimates and opinions of management on the date the statements are made. We assume no obligation to update forward-looking statements if conditions or management’s estimates or opinions should change, even if new information becomes available or other events occur in the future.

Overview

We develop needle-free injection systems that improve the way patients take medications and vaccines.

Our long-term goal is to become the leading supplier of needle-free injection systems to the pharmaceutical industry. In fiscal 2003, we will focus our business development efforts on new and existing licensing and supply agreements with leading pharmaceutical and biotechnology companies. By bundling customized needle-free delivery systems with partners’ injectable medications and vaccines, we can enhance demand for these products in the healthcare provider and end user markets.

In fiscal 2003, our clinical research efforts will be aimed primarily at clinical research collaborations in the areas of vaccines and drug delivery. Currently, we are involved in collaborations with approximately 30 institutions.

In fiscal 2003, our other research and development efforts will be primarily focused on the development of the smaller, lighter Iject™ II and development of products for our strategic partners. The Iject™ II has been modeled using a more streamlined design, thus making it more cost effective to manufacture while retaining the same flexibility and performance characteristics of the original Iject™.

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Revenues and results of operations have fluctuated and can be expected to continue to fluctuate significantly from quarter to quarter and from year to year. Various factors may affect quarterly and yearly operating results including: i) the length of time to close product sales; ii) customer budget cycles; iii) the implementation of cost reduction measures; iv) uncertainties and changes in product sales due to third party payer policies and proposals relating to healthcare cost containment; v) the timing and amount of payments under licensing and technology development agreements; and vi) the timing of new product introductions by us and our competitors.

We do not expect to report net income from operations in fiscal 2003.

Results of Operations

Quarter Ended June 30, 2002 Compared to Quarter Ended June 30, 2001

Product sales increased to $679,000 in the first quarter of fiscal 2003 from $491,000 in the first quarter of fiscal 2002, primarily due to increased sales of B2000 syringes and vial adapters to new and existing customers and the cool.click™, which is sold to Serono for use with Saizen, Serono’s pediatric human growth hormone.

License and development fees increased to $366,000 in the first quarter of fiscal 2003 from $129,000 in the first quarter of fiscal 2002. We currently have licensing and/or development agreements with Serono and Alkermes.

Manufacturing expense is made up of the cost of products sold and manufacturing overhead expense related to excess manufacturing capacity. Manufacturing expense increased to $1.1 million in the first quarter of fiscal 2003 from $600,000 in the first quarter of fiscal 2002. The increased manufacturing expense in the first quarter of fiscal 2003 compared to the first quarter of fiscal 2002 is primarily due to production of the cool.click™ for Serono’s U.S. customers and for their worldwide launch of the cool.click™ and the increase in manufacturing overhead due to increased payroll and related expenses.

Research and development expense increased to $793,000 in the first quarter of fiscal 2003 from $529,000 in the first quarter of fiscal 2002. The increase in the first quarter of fiscal 2003 compared to the first quarter of fiscal 2002 is primarily due to increased payroll and related expenses and expenses associated with research collaborations and the development of the Iject™ II disposable product, and various other new product developments and improvements.

Selling, general and administrative expenses increased to $1.2 million in the first quarter of fiscal 2003 from $851,000 in the first quarter of fiscal 2002. Approximately $258,000 of the increase resulted from increases in payroll and related expenses due to the addition of two executive officers in the second and third quarters of fiscal 2002 and the addition a Vice President of Business Development in the first quarter of fiscal 2003.

Preferred stock dividends were zero in the first quarter of fiscal 2003 compared to $306,000 in the first quarter of fiscal 2002 due to changes made to the terms of our Series A Preferred Stock in the third quarter of fiscal 2002.

Liquidity and Capital Resources

Since our inception in 1985, we have financed our operations, working capital needs and capital expenditures primarily from private placements of securities, the exercise of stock options and warrants, proceeds received from our initial public offering in 1986, proceeds received from a public offering of common stock in November 1993, licensing and technology revenues and revenues from sales of products. Net proceeds received from issuance of securities from inception through June 30, 2002 totaled approximately $100 million.

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Total cash, cash equivalents and short and long-term marketable securities at June 30, 2002 were $25.6 million compared to $27.0 million at March 31, 2002. Working capital at June 30, 2002 was $12.8 million compared to $13.4 million at March 31, 2002.

Net accounts receivable decreased to $805,000 at June 30, 2002 from $1.7 million at March 31, 2002 due primarily to the timing of payments received from Serono. Included in the balance at June 30, 2002, was $353,000 due from Serono.

Inventories decreased to $1.3 million at June 30, 2002 from $1.5 million at March 31, 2002 due to the timing of production and shipments made in the first quarter of fiscal 2003.

Accounts payable decreased to $354,000 at June 30, 2002 from $615,000 at March 31, 2002 due primarily to the timing of payments made and decreased inventory purchases.

Receivable from related party, current and long-term, totaling $125,000 at June 30, 2002 relates to a three-year, non-interest bearing loan to our Chief Executive Officer, related to his relocation assistance from Oregon to New Jersey. The note is being forgiven over the three-year term of the note, beginning January 2002, so long as he remains Bioject’s Chief Executive Officer.

Capital expenditures totaled $369,000 in the first quarter of fiscal 2003, primarily for the purchase of production molds for manufacturing and office equipment for the New Jersey office. We anticipate spending up to a total of $2.0 million in fiscal 2003, primarily for production automation for sterile fill of our Iject™ disposable product and other manufacturing and office equipment.

NEW ACCOUNTING PRONOUNCEMENTS

Asset Retirements and Impairment or Disposal of Long Lived Assets

In August 2001, the FASB approved SFAS No. 143, “Accounting for Asset Retirement Obligations,” which addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. In October 2001, the FASB approved SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of” (“SFAS 121”) and the accounting and reporting provisions of APB 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” for the disposal of a segment of a business. SFAS No. 144 retains many of the fundamental provisions of SFAS No. 121, but resolves certain implementation issues. The provisions of SFAS Nos. 143 and 144 were adopted April 1, 2002 and did not have a significant impact on our financial position or results of operations.

In July 2002, the FASB approved SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 addresses the financial accounting and reporting for obligations associated with an exit activity, including restructuring, or with a disposal of long-lived assets. Exit activities include, but are not limited to, eliminating or reducing product lines, terminating employees and contracts and relocating plant facilities or personnel. SFAS No. 146 specifies that a company will record a liability for a cost associated with an exit or disposal activity only when that liability is incurred and can be measured at fair value. Therefore, commitment to an exit plan or a plan of disposal expresses only management’s intended future actions and, therefore, does not meet the requirement for recognizing a liability and the related expense. SFAS No. 146 is effective prospectively for exit or disposal activities initiated after December 31, 2002, with earlier adoption encouraged. The Company does not anticipate that the adoption of SFAS No. 146 will have a material effect on its financial position or results of operations.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies have not changed since the disclosure included in our Annual Report on Form 10-K for the year ended March 31, 2002.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

PART II

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On June 1, 2002, we issued a warrant to MedaCorp in exchange for consulting services exercisable for 15,000 shares of our common stock at an exercise price of $4.85 per share. The warrant is immediately exercisable and expires June 1, 2005. In issuing this warrant, we relied on an exemption from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933.

On July 1, 2002, our board of directors adopted a shareholder rights agreement. To implement the agreement, we issued a dividend of one right for each share of our common stock held by shareholders of record as of the close of business on July 19, 2002.

Each right initially entitles shareholders to purchase a fractional share of Bioject preferred stock for $50.00. However, the rights are not immediately exercisable and will become exercisable only if certain events related to an unsolicited acquisition attempt occur. For example, unless earlier redeemed for $0.001 per right, when a person or group acquires 15% or more of our common stock, all rights holders (except the person or group who acquired the triggering amount of shares) will be able to exercise their rights for shares of Bioject having a value of twice the shareholder right’s then-current exercise price.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The following exhibits are filed herewith and this list is intended to constitute the exhibit index:

(b)  Reports on Form 8-K

There was one report on Form 8-K filed during the quarter ended June 30, 2002. On May 10, 2002 a report on Form 8-K was filed pursuant to Item 4, Changes in Registrant’s Certifying Accountant. This Report on Form 8-K was amended on May 16^th, May 22^nd and May 24^th.

In addition, one report on Form 8-K was filed on July 2, 2002 pursuant to Item 5. Other Events and Regulation FD Disclosure, regarding the adoption by the board of directors of a rights agreement.

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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.

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