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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORTS PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000
Commission File Number: 0-21990
OXiGENE, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 13-3679168
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(State or other jurisdiction of
incorporation (IRS Employer
or organization) Identification No.)
321 Arsenal Street
Watertown, MA 02472
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(Address of principal executive offices, including zip code)
(617) 673-7800
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(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share NASDAQ National Market
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Title of Each Class Name of Each Exchange
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III herein, or any amendment to this Form
10-K. [ ]
The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 21, 2001 was $54,393,930.68 based
on the closing price of $5.1875 on that date.
As of March 21, 2001 the aggregate number of outstanding shares of Common
Stock of the registrant was 11,375,593.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's Proxy Statement for the Annual Meeting of Stockholders,
scheduled to be held on June 11, 2001, is incorporated by reference to Part III
(Items 10, 11, 12 and 13) of this form 10-K.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
UNDER THE SECURITIES LITIGATION REFORM ACT OF 1995
Except for historical information contained herein, this Annual Report on
Form 10-K ("Annual Report") contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements involve known and unknown risks and uncertainties that may cause the
Company's actual results or outcomes to be materially different from those
anticipated and discussed herein. Further, the Company operates in an industry
sector where securities values may be volatile and may be influenced by
regulatory and other factors beyond the Company's control. Important factors
that the Company believes may cause such differences are discussed in the "Risk
Factors" section of this Annual Report and in the cautionary statements
accompanying the forward-looking statements in this Annual Report. In assessing
forward-looking statements contained herein, readers are urged to read carefully
all Risk Factors and cautionary statements contained in this Annual Report.
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TABLE OF CONTENTS
PART I........................................................................4
1. BUSINESS..................................................................4
INTRODUCTION..............................................................4
PRODUCT DEVELOPMENT AND MARKETING STRATEGY................................5
TECHNOLOGY OVERVIEW.......................................................6
OXIGENE'S CLINICAL TRIAL PROGRAM..........................................7
PRODUCT DEVELOPMENT AND REGULATORY PROCESSES..............................8
RESEARCH AND DEVELOPMENT AND COLLABORATIVE ARRANGEMENTS..................10
PATENTS AND TRADE SECRETS................................................11
EMPLOYEES................................................................13
SCIENTIFIC ADVISORY BOARD AND CLINICAL TRIAL ADVISORY BOARD..............13
COMPETITION..............................................................14
RISK FACTORS.............................................................14
GLOSSARY OF SCIENTIFIC TERMS.............................................18
2. PROPERTIES...............................................................19
3. LEGAL PROCEEDINGS........................................................19
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................19
PART II......................................................................19
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS....19
6. SELECTED FINANCIAL DATA..................................................21
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS............................................................21
OVERVIEW.................................................................21
RESULTS OF OPERATIONS....................................................22
LIQUIDITY AND CAPITAL RESOURCES..........................................23
TAX MATTERS..............................................................24
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...............24
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..............................25
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.....................................................25
PART III.....................................................................25
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......................25
11. EXECUTIVE COMPENSATION...................................................25
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...........25
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...........................25
PART IV......................................................................25
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.........25
INDEX TO EXHIBITS............................................................28
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PART I
1. BUSINESS
INTRODUCTION
OXiGENE, Inc. ("OXiGENE" or the "Company") is an international
biopharmaceutical company engaged principally in research into and the
development of products for use in the treatment of cancer. The Company's
activities initially were directed primarily towards products designed to
complement and enhance the clinical efficacy of radiation and chemotherapy,
which are the most common and traditional forms of non-surgical cancer
treatment. Recently, however, the Company's efforts have focused on developing
products for application as direct cancer treatment agents, particularly
vascular targeting agents. Additionally, the Company is investigating certain of
its developmental stage products for anti-inflammatory agents and other
applications such as ocular neo-vascularization and skin disorders. Certain
Company activities are conducted with others, either through licensing
arrangements, collaborations or joint ventures. Currently, OXiGENE has in
various stages of clinical development therapeutic product candidates that
derive from two principal technology platforms.
The Combretastatin Platform. The Company's primary technology platform is
based on Combretastatin. Combretastatin is a family of proprietary small
molecule anti-tumor vascular targeting agents that destroy the existing blood
vessels within, and to some extent the blood vessels leading to, a tumor,
thereby stopping the growth of the tumor, shrinking it and preventing it from
metastasizing. Blood vessels in normal tissue are much more resistant to the
action of Combretastatin. Combretastatin targets the inner areas and center of
the tumor, which are not otherwise readily reached by chemotherapeutic agents or
radiation, and is expected thereby also to enhance the efficacy of those forms
of treatment. Ultimately, the Company expects to participate in the development
of a Combretastatin-based product that will cause the targeted tumors to
disappear, acting either alone or in combination with other chemotherapeutic
agents or radiation.
The Company has entered into an exclusive research collaboration and
licensing agreement with Bristol-Myers Squibb Company ("BMS") for the
development and commercialization of Combretastatin anti-tumor vascular
targeting agents. Under this agreement, BMS has agreed to provide up to $70
million for the following: licensing fees, including an upfront payment;
development milestones and research funding in exchange for worldwide rights to
develop Combretastatin compounds as a systemic cancer treatment, including the
lead compound, Combretastatin A-4 prodrug (CA4P). If a product is successfully
launched, the agreement provides for additional royalty payments. Additionally,
BMS will assume all research, development, commercialization and/or marketing
costs of all in-licensed products. The agreement covers the systemic usage of
CA4P, and OXiGENE has maintained all rights for non-systemic uses. Preclinical
studies aimed at determining the ability of CA4P to attack vessels caused by
angiogenic processes in the eyes and skin, which would not be covered in the
Company's agreement with BMS, are currently underway. Preliminary work toward
reducing such vasculature in an experimental eye model was carried out at the
laboratory of Donald Armstrong, Ph.D., D.Sc., University of Florida, College of
Veterinary Medicine, Division of Ophthalmology.
Vascular targeting agents like Combretastatin are distinguishable from
anti-angiogenesis agents as a direct cancer treatment technology. Products that
are developed as anti-angiogenesis agents attempt to prevent the formation of
new tumor blood vessels as opposed to destroying existing ones. The Company
believes that anti-angiogenesis products, if successful, can prevent the
continued growth of tumors but do not shrink existing tumors like
Combretastatin.
Combretastatins are a family of naturally occurring, highly toxic substances,
of which OXiGENE's lead compound is CA4P. CA4P is an inactive synthetic
derivative that becomes activated, and thereupon becomes toxic, when it contacts
a tumor's blood vessels and cells. Recent work directed at understanding how
Combretastatin works shows CA4P can have dramatic effects on the shape of newly
formed endothelial cells, such as those formed in malignant tumors, but less
effect on quiescent endothelial cells which are found in healthy, normal
tissues. For example, in vitro effects of CA4P on tubulin cytoskeleton and
endothelial cell shape include rapid changes in endothelial cell shape that
dramatically alter capillary blood flow and, as a result, cause an occlusion of
blood vessels within tumors. The eventual result is stoppage of blood flow,
which is critical to tumor maintenance and growth, and consequently a cascade of
tumor cell death by nutrient and oxygen deprivation.
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The Company has developed a synthetic process for the manufacture of
Combretastatin phosphates. The Company believes that this synthetic water
soluble Combretastatin can be produced in commercial volumes at reasonable cost.
Certain Combretastatins were discovered by Dr. George R. Pettit, Regents
Professor of Chemistry at Arizona State University ("ASU"). ASU has granted the
Company an exclusive, world-wide, royalty-bearing license with respect to the
commercial rights to particular Combretastatins, and the Company continues to
work with Dr. Pettit. Specific Combretastatins have been successfully tested in
vitro and in vivo in laboratories in the United States and Europe. The Company's
most promising Combretastitin product, CA4P, is currently undergoing Phase I/II
clinical testing in the United States and the United Kingdom. In November 2000,
BMS received approval from the U.S. Food and Drug Administration ("FDA") for its
Investigational New Drug application ("IND") for the next phase of clinical
development of CA4P.
The Benzamide Platform. The benzamide platform was originally developed by
OXiGENE around inhibition of DNA repair processes. The third generation
benzamide is Declopramide (formerly Oxi-104). Declopramide makes tumor cells
more susceptible to radiation damage and/or chemotherapy. Although the molecular
mechanism of action is not totally elucidated, there is clear evidence that
Declopramide inhibits the action of the nuclear transcription factor kappa B
("NF-kB"). NF-kB helps activate many genes inside cells usually in response to
certain forms of stress or damaging insults. There is increasing evidence that
NF-kB is involved in preventing the cell death processes in tumors which are
initiated by conventional chemotherapy and radiation treatments. NF-kB is also
involved in the switching on of proteins involved both in inflammation and in
angiogenesis (the creation of new blood vessels). In current Phase I/II clinical
studies in the United States, the Company has found that Declopramide, when
administered in combination with chemotherapeutic agents, has not exhibited any
of the central nervous system side effects that were experienced in connection
with the Company's previous formulations of products that, like Declopramide,
are based on N-substituted benzamides. Those earlier products have been
abandoned by the Company. Declopramide entered into a Phase II clinical trial in
December 2000, as a second line therapy in conjunction with two well-known
chemotherapeutic agents, 5-FU (5-fluorouracil) and Leucovorin.
As a consequence of the Company's substantially increased focus on the
development of vascular targeting agent products and technology and recent
developments regarding its Benzamide platform, the Company's technology platform
for Cordycepin, a drug that inhibits DNA replication, is not currently being
actively pursued.
General. The Company is a Delaware corporation that was originally
incorporated in New York in 1988. The Company maintains offices in the United
States at 321 Arsenal Street Watertown, MA 02472 (telephone: 617-673-7800; fax:
617-924-9229), and in Sweden at Blasieholmsgatan 2C, S-111 48 Stockholm, Sweden
(telephone: 011-46-8-678-8720; fax: 011-46-8-678-8605). In October 2000, the
Company announced that the corporate headquarters will move to Watertown, MA,
and that the Stockholm office will close during 2001. Consistent with its tight
budget policy, the Company maintains a small employee and facilities base, with
administrative and scientific functions and most other activities, including
product development, regulatory oversight and clinical testing, being overseen
from Watertown, Massachusetts. Substantial scientific activities are conducted
pursuant to collaborative arrangements with universities and regulatory and
clinical testing functions are generally the subject of contracts with third
party, specialty enterprises. References in this Annual Report to "OXiGENE" or
the "Company" mean OXiGENE, Inc. and its wholly-owned Swedish subsidiary OXiGENE
Europe AB.
PRODUCT DEVELOPMENT AND MARKETING STRATEGY
The Company's strategy is to develop innovative therapeutics for large,
under-served markets-such as oncology, ophthalmology, and dermatology-in a
cost-efficient manner. To that end, the Company has established relationships
with universities, research organizations and other institutions in these
fields. The Company intends to broaden these relationships, rather than expand
its in-house research, development and clinical staff. The Company plans to
market its products, if and when approved, generally through strategic alliances
and joint ventures with unaffiliated pharmaceutical companies.
The Company has entered into an exclusive licensing and research
collaboration agreement with BMS to develop, produce and market Combretastatin.
Under the agreement, the Company granted BMS worldwide rights to
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develop Combretastatin compounds for systemic use and BMS assumed responsibility
for the manufacture and clinical development of CA4P, with the exception of
three Phase I/II clinical trials conducted by OXiGENE in the United States and
United Kingdom.
In May 2000, the Company entered into a joint venture agreement with
Peregrine Pharmaceuticals ("Peregrine") (formerly Techniclone Corporation),
forming ARCUS Therapeutics LLC to collaborate in the research and development of
vascular targeting agent technologies and to commercialize those technologies.
The joint venture includes an upfront licensing fee and milestone payments to
Peregrine by OXiGENE as well as OXiGENE's substantial funding of development
expenses, based on development success, related to commercializing a vascular
targeting agent product. Peregrine and OXiGENE will equally share profits,
royalties and certain fees generated by the joint venture.
In June 1999, the Company entered into a research collaboration agreement
with Active Biotech of Sweden to explore the use of OXiGENE's benzamide and
nicotinamide technology (the benzamide technology also being the platform
technology for Declopramide) in the treatment of inflammatory diseases. Under
the agreement, Active Biotech will evaluate the technology's potential as a
treatment for inflammatory diseases. Active Biotech will conduct research with
an option to jointly develop anti-inflammatory drug candidates with OXiGENE upon
successful completion of the initial research.
Additionally, the Company has collaborative arrangements with a number of
academic and other research institutions and organizations in the United States
and Europe, including: the University of Lund in Lund, Sweden; the Danish Cancer
Society, Aarhus, Denmark; Gray Laboratory in Middlesex, United Kingdom; the
University of Florida in Gainesville, Florida; Baylor University in Waco, Texas;
University of Texas South Western Medical Center, Dallas, Texas; and ASU in
Tempe, Arizona. See "--Research and Development and Collaborative Arrangements."
While OXiGENE is likely to continue exploring other licensing and development
opportunities for its technologies with other companies, there can be no
assurance that the Company will be successful in establishing new, or
maintaining new or existing, collaborative agreements or licensing arrangements;
that any collaborative partner will not be pursuing alternative technologies or
developing alternative compounds either on its own or in collaboration with
others, directed at the same diseases as those involved in its collaborative
arrangements with the Company; that any such collaborative partners will devote
resources to the Company's technologies or compounds on a basis favorable to the
Company; that any such arrangements will be on terms favorable to OXiGENE; or
that any current or future licensees will be successful in commercializing
products. Finally, if the Company's collaboration arrangements are terminated
prior to their expiration or if the other parties to such arrangements fail to
adequately perform, there can be no assurance that submission of product
candidates for regulatory approval will not be delayed. See "--Research and
Development and Collaborative Arrangements."
TECHNOLOGY OVERVIEW
OXiGENE has therapeutic product candidates in clinical development comprising
two principal technology platforms: Combretastatin and Benzamide. Declopramide
is the third generation of the Company's N-substituted benzamide agents.
Combretastatin: An Anti-Tumor Vascular Targeting Agent. Combretastatins are
organic small molecules found naturally in the bark of the African Bush Willow,
(Combretum caffrum). They were discovered and isolated a decade ago by George R.
Pettit, Ph.D. of ASU. In May 1997, OXiGENE and ASU entered into an option
agreement to develop and test Combretastatin. The agreement granted OXiGENE an
option to acquire an exclusive, worldwide, royalty-bearing license with respect
to the Combretastatins commercial rights, which OXiGENE exercised and
subsequently signed a license agreement on August 2, 1999.
OXiGENE's lead Combretastatin-family therapeutic candidate, CA4P, is a
derivative of the natural Combretastatin A-4 subtype found by Dr. Pettit. It is
a member of a relatively new class of drugs--anti-tumor vascular targeting
agents--that shrink solid tumors by selectively targeting and destroying
existing tumor-specific blood vessels. Phase I/II studies of Combretastatin have
been essentially completed in the U.S. and Europe in patients with solid tumors.
Further trials in the cancer therapy field will be directed by BMS.
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Anti-tumor vascular targeting is a cancer therapy that departs significantly
from other current approaches to treating cancer. In contrast to traditional
methods involving a direct attack on cancer cells, anti-tumor vascular targeting
agents attack a tumor's life support system, a network of existing and emerging
blood vessels. Preclinical studies have shown that the use of these therapies
can cause a tumor to shrink.
According to the Cancer Research Campaign, a cancer organization in the
United Kingdom, nearly 90 percent of all cancers--more than 200 types--are solid
tumors and, therefore, potential candidates for anti-tumor vascular targeting.
Despite advances in treatment with surgery, radiation and chemotherapy, serious
problems with those conventional treatments persist. Many solid tumors remain
incurable, especially when the tumor has metastasized or is a large mass at the
time of diagnosis. Surgery may not be capable of treating certain tumors because
of their location, and chemotherapy and radiation may not be effective in
attacking the tissue core of the tumor. Also, and importantly, chemotherapy and
radiation treatment damage healthy cells along with cancerous cells, resulting
in serious side effects for patients and, in many instances, eventually induce
drug resistance in the tumor.
While angiogenesis inhibitors (anti-angiogenesis agents) and anti-tumor
vascular targeting agents, such as Combretastatin, both target a tumor's blood
vessels, they differ in their approach and in their end result. With
angiogenesis inhibition, the aim is to prevent tumor growth by inhibiting the
formation of new tumor-specific blood vessels that feed the tumor. As the tumor
is not destroyed, it can form new feeder blood vessels after treatment has
stopped. Anti-tumor vascular targeting agents, on the other hand, aim to destroy
tumors by selectively attacking and destroying their existing blood vessels,
particularly those within the tumor, creating a rapid and irreversible shutdown
of these blood vessels. Such an effect is not observed with anti-angiogenesis
drugs.
The Company believes that shutting off a tumor's blood supply is an efficient
therapeutic strategy. Whereas most cancer drugs attack individual cancer cells,
the Company believes that its Combretastatin agent can destroy many tumor cells
simultaneously. Moreover, this result is achieved with relatively small doses,
as a result of which Combretastatin may avoid side effects that accompany many
other cancer drugs.
Benzamide Platform Declopramide is a N-substituted benzamide that was
identified by the Company as an agent that inhibits DNA repair and enhances the
effectiveness of radiation and chemotherapy in vitro. Recent tests with this
compound have shown that it can inhibit the activity of NF-kB, a transcription
factor that switches on genes involved in cell survival pathways within tumor
cells following the usually lethal effects of conventional cancer treatment. The
result is that some tumor cells will as a result of NF-kB activation survive
treatment and lead to re-growth of the tumor. Indeed, tumors that express high
levels of NF-kB are known to be much more resistant to the effects of
conventional chemotherapuetic approaches than those tumors that express low
levels of NF-kB. Declopramide is now in Phase II clinical testing as an enhancer
of chemotherapy.
NF-kB also switches on the production of many proteins, such as TNF (tumor
necrosis factor), which drive inflammatory processes. Therefore, NF-kB
inhibitors as well as having potential in cancer treatment also potentially have
a role in a wide range of inflammatory diseases. The use of the Company's
proprietary benzamide compounds in inflammatory conditions is ongoing. See
"--Research and Development and Collaborative Arrangements."
Declopramide is in Phase II clinical study in the U.S. in patients with
advanced-stage colorectal cancer. This Phase II study combines Declopramide with
5-FU (5-fluorouracil) and leucovorin, traditional chemotherapeutic agents.
OXIGENE'S CLINICAL TRIAL PROGRAM
Combretastatin A-4 Prodrug. In May 1997, OXiGENE and ASU entered into an
agreement to develop and test certain Combretastatins. Combretastatins are a
family of naturally-occurring anti-mitotic, cytotoxic molecules, that were
identified and isolated by Dr. George R. Pettit, Regents Professor of Chemistry,
and his colleagues at ASU, from the African Bush Willow. CA4P, the Company's
lead therapeutic candidate of the family, is a wholly synthetic, water soluble,
manufactured molecule. OXiGENE believes that CA4P specifically attacks existing
tumor vasculature, first occluding blood flow to and from the tumor and later,
causing death and regression of the tumor blood vessels. Vasculature is critical
to both the survival of a solid tumor mass and its continued growth and,
therefore, represents a key target in novel cancer treatment. Loss of these
tumor-specific blood vessels ultimately results in the cascade of tumor cell
death by nutrient and oxygen deprivation, as well as a loss of the ability of
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tumors to metastasize. From ASU, OXiGENE has acquired an exclusive, world-wide,
royalty-bearing license with respect to the commercial rights to certain
Combretastatins. The Company began testing CA4P in three Phase I/II dose
escalation clinical trials during the fourth quarter 1998 and the first quarter
1999. Each of these clinical trials, which examined the safety, pharmacokinetics
and mode of action of CA4P using three different dose regimens in patients with
advanced solid cancers, have been essentially completed. Further clinical
studies will be directed by BMS pursuant to its licensing agreement with the
Company. In November 2000, BMS received approval for its IND for CA4P from the
FDA.
OXiGENE has developed a third generation compound, Declopramide, in the
family of N-substituted benzamides, which is capable of enhancing the ability of
radiation/chemotherapy to act on cancer cells. The Company believes, on the
basis of its research activities to date, that Declopramide should act without
producing significant toxic side effects.
The current emphasis of the Company's clinical trial program in the benzamide
platform is on evaluating the safety and efficacy of Declopramide in combination
with chemotherapy. Currently, one Phase II open-label clinical trial is on-going
to evaluate Declopramide in combination with 5-FU (5-fluorouracil) and
Leucovorin in patients with advanced colorectal cancer. The trial is expected to
be completed in early 2002.
General. OXiGENE's products are in an early stage of development. In order to
achieve profitable operations on a continuing basis, the Company, alone or in
collaboration with others, must successfully develop, manufacture, introduce and
market its products. The time frame necessary to achieve market success for any
individual product is long and uncertain. See "--Product Development and
Regulatory Processes." The products currently under development by the Company
will require significant additional research and development and extensive
preclinical and clinical testing prior to application for commercial use. A
number of companies in the biotechnology and pharmaceutical industries have
suffered significant setbacks in clinical trials, even after showing promising
results in earlier studies or trials. Although the Company has obtained
favorable results to date in preclinical studies and clinical trials of certain
of its products, such results may not be indicative of results that will
ultimately be obtained in or throughout such clinical trials, and there can be
no assurance that clinical testing will show any of the Company's products to be
safe or efficacious. Additionally, there can be no assurance that the Company
will not encounter problems in its clinical trials that will cause the Company
to delay, suspend or terminate those clinical trials. There can also be no
assurance that the Company's research or product development efforts or those of
its collaborative partners will be successfully completed, that any compounds
currently under development by the Company will be successfully developed into
drugs, or that any products will receive regulatory approval on a timely basis,
if at all. If any such problems occur, the Company could be materially and
adversely affected.
PRODUCT DEVELOPMENT AND REGULATORY PROCESSES
Research-the first step in biopharmaceutical product development-initially
involves optimization of leading chemical structures into leading compounds.
Once a leading compound has been identified, the preclinical phase commences. In
that phase, certain selected compounds are tested for therapeutic potential in a
number of animal models and undergo laboratory testing, with the objective of
characterizing the investigated compounds in relation to existing treatment and
getting a first indication of the compounds' development potential. Successful
preclinical work may lead to the filing of an IND, or a foreign equivalent, with
the relevant national regulatory authorities. The IND is a permission to
administer the compound to humans in clinical trials. Several years of research
and testing generally are necessary before an IND may be obtained and clinical
development may commence. There can be no certainty that submission of an IND
will result in FDA authorization to commence clinical trials or that
authorization of a particular phase of a clinical trial program will result in
authorization of other phases or that the completion of any clinical trials will
result in FDA approval.
The clinical development of new drugs is subject to approval by the health
authorities in individual countries, which have broad discretionary powers. For
example, the FDA reviews the results of all clinical studies and can discontinue
a trial at any time if there is a significant safety issue, or if there is
convincing evidence that the therapy is not effective for the chosen indication.
The requirements regarding the duration of a clinical phase vary considerably
among countries. For life threatening and severely debilitating conditions where
products provide meaningful therapeutic benefit over existing treatments or
where no satisfactory treatment currently exists, however, it is possible to
accelerate the development process in the United States through the "Accelerated
Drug Approval
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Program." In other countries, the trial process for drugs directed toward life
threatening diseases is shortened by lower requirements regarding the patient
sample size required to be met in the trials.
The time periods mentioned below are indications only and may vary and be
materially longer. Upon successful completion of the development program, a New
Drug Application ("NDA"), or a foreign equivalent, may be submitted to the
authorities, and, if approved, the product may then be marketed upon the terms
and conditions of such approval. Submission of an NDA does not assure that the
FDA will approve a product for manufacturing and marketing. Clinical trials are
typically conducted in three sequential phases, but the phases may overlap.
Phase I. The purpose of a Phase I study is to evaluate the toxicity of the
tested compound and to establish how the tested compound is tolerated and
decomposed in the human body. A Phase I clinical trial traditionally tests the
compound for safety (adverse effects), dosage tolerance, metabolism,
distribution, excretion and pharmacodynamics in a small group of healthy
individuals. A Phase I may last up to one year.
Phase II. A Phase II study marks the beginning of clinical trials on a
limited number of patients to (i) determine the efficacy of the compound for
specific indications, (ii) determine dosage tolerance and optimal dosage and
(iii) identify possible adverse effects and safety risks. The trials also seek
to establish the most effective route of administration. Trials are conducted on
a larger, but still limited number of carefully monitored patients. A Phase II
study may last up to two and one-half years.
Phase III. If preliminary evidence suggesting effectiveness has been obtained
during Phase II evaluations and the compound is found to have an acceptable
safety profile in Phase II evaluations, a Phase III trial may be undertaken. A
Phase III is an extensive clinical trial in a large number of patients. The
number of patients in a Phase III trial program depends to a great extent on the
clinical indications that the drug addresses. Trials are often double-blinded
and involve a detailed statistical evaluation of test results. The compound is
tested against placebos and existing treatment, if such treatment is available.
The product is manufactured in commercial quantities (batch manufacturing) and
tested for shelf life, or stability, and further evaluation of the clinical
efficacy and safety of the compound takes place. Phase III may last several
years and is the most time-consuming and expensive part of a clinical trial
program. There can be no assurance that Phase I, Phase II or Phase III testing
will be completed successfully within any specified time period, if at all, with
respect to any of the Company's products.
OXiGENE, like other biopharmaceutical companies, will be subject to strict
controls covering the manufacture, labeling, supply and marketing of any
products it may develop and market. The most important regulation is the
requirement to obtain and maintain regulatory approval of a product from the
relevant regulatory authority to enable that product to be marketed in a given
country. Further, OXiGENE is subject to strict controls over clinical trials of
its potential pharmaceutical products.
The regulatory authorities in each country may impose their own requirements
and may refuse to grant, or may require additional data before granting, an
approval even though the relevant product has been approved by another
authority. The United States and European Union ("EU") countries have very high
standards of technical appraisal and, consequently, in most cases a lengthy
approval process for pharmaceutical products. The time required to obtain such
approval in particular countries varies, but generally takes from six months to
several years, if at all, from the date of application, depending upon the
degree of control exercised by the regulatory authority, the duration of its
review procedures and the nature of the product. The trend in recent years has
been towards stricter regulation and higher standards.
In the United States, the primary regulatory authority is the FDA. In
addition to regulating clinical procedures and processes, the FDA investigates
and approves market applications for new pharmaceutical products and is
responsible for regulating the labeling, marketing and monitoring of all such
products, whether marketed or under investigation. Upon approval in the United
States, a drug may only be marketed for the approved indications in the approved
dosage forms and dosages. In addition to obtaining FDA approval for each
indication to be treated with each product, each domestic drug manufacturing
establishment must register with the FDA, list its drug products with the FDA,
comply with current Good Manufacturing Practice ("cGMP") requirements and be
subject to inspection by the FDA. Foreign manufacturing establishments
distributing drugs in the United States also must comply with cGMP requirements
and list their products and are subject to periodic inspection by the FDA or by
local authorities under agreement with the FDA.
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In Europe, the European Committee for Proprietary Medicinal Products provides
a mechanism for EU-member states to exchange information on all aspects of
product licensing and assesses license applications submitted under two
different procedures (the multistate and the high-tech concentration
procedures). The EU has established a European agency for the evaluation of
medical products, with both a centralized community procedure and a
decentralized procedure, the latter being based on the principle of mutual
recognition between the member states.
There can be no assurances that any of the Company's products will ever
obtain the governmental approvals necessary to permit commercial sales of any of
its products. Further, even if regulatory approval of a product is obtained,
such approval may entail limitations on the indicated uses for which that
product may be marketed.
RESEARCH AND DEVELOPMENT AND COLLABORATIVE ARRANGEMENTS
OXiGENE's research and development programs are generally pursued in
collaboration with academic and other institutions. Currently, the Company has
collaborative agreements and arrangements with a number of such institutions in
the United States and abroad, including the University of Lund (Lund, Sweden),
the Danish Cancer Society (Aarhus, Denmark), the Gray Laboratory Cancer Research
Trust (Middlesex, United Kingdom), the University of Florida (Gainesville,
Florida), Baylor University (Waco, Texas), University of Texas South Western
Medical Center, (Dallas, Texas) and ASU (Tempe, Arizona).
In addition, the Company has entered into an exclusive research collaboration
and licensing agreement with BMS with respect to the development, production and
marketing of Combretastatin. Under this agreement, BMS has agreed to provide up
to $70 million for the following: licensing fees, including an upfront payment;
development milestones and research funding to OXiGENE. OXiGENE has granted to
BMS worldwide rights to develop Combretastatin compounds, including CA4P for
systemic use in all indications. BMS assumed responsibility for the manufacture
and clinical development of CA4P, with the exception of three ongoing Phase I/II
clinical trials conducted by OXiGENE in the United States and United Kingdom. In
addition, OXiGENE is entitled to receive royalties from any sales of systemic
drugs resulting from the collaboration and has retained the rights for
non-systemic use in all indications.
On May 17, 2000 the Company entered into a joint venture agreement with
Peregrine Pharmaceuticals ("Peregrine") (formerly Techniclone Corporation),
forming ARCUS Therapeutics LLC ("ARCUS") to develop and commercialize vascular
targeting agent ("VTA") technologies. ARCUS has patent protection over VTA
technologies used in the treatment of solid tumors by disrupting the function
for use of the tumor blood vessels. Under the terms of the agreement, Peregrine
will supply its intellectual property to the joint venture, and OXiGENE will
provide licenses with respect to its next generation tubulin-binding compounds
for use in conjunction with a Peregrine antibody and, based on the development
success of the joint venture, will be required to spend up to $20 million to
fund the development expenses of ARCUS. Any further funding of the joint venture
thereafter would be shared by the partners on an equal basis. In addition, the
Company has paid Peregrine an upfront licensing fee of $1 million in cash and
purchased $2 million, or 585,009 shares, of Peregrine `s common stock. Peregrine
has filed a registration statement covering the resale of such shares under the
Securities Act of 1933 by OXiGENE which has been declared effective; however,
there can be no assurances that OXiGENE will be able to sell such shares on
favorable terms, if at all. Additionally, under the terms of the joint venture
agreement, any sublicensing fees generated within the joint venture will be
allocated 75% to Peregrine and 25% to the Company until Peregrine has received
$10 million in sublicense fee revenues. Thereafter, the joint venture partners
will share licensing fees on an equal basis. The Company will also be required
to pay Peregrine $1 million in cash and purchase an additional $1 million in
Peregrine common stock upon the filing of an IND for the first clinical
candidate developed by ARCUS. Furthermore, Peregrine and OXiGENE will share
equally any royalty income or profit from the joint venture.
In June 1999, the Company and Active Biotech of Sweden entered into a
research collaboration agreement regarding OXiGENE's benzamide and nicotinamide
technology in the treatment of inflammatory diseases. Under the agreement,
Active Biotech will explore and evaluate the technology's potential as a
treatment for inflammatory diseases. Active Biotech will contribute resources to
conduct the research, and has an option to jointly develop anti-inflammatory
drug candidates with OXiGENE upon successfully completing the initial research.
-10-
The Company incurred approximately $8.1 million, $8.4 million and $10.4
million in research and development expenses in the years ended December 31,
2000, 1999 and 1998, respectively. Most of these amounts represent external
research and development expenditures.
Currently, the Company is not required to pay any royalties or licensing fees
for technology and products developed with financial assistance from or at the
facilities of such agencies and institutions, except for a 5% gross royalty
payable to Preventive Medicine Institute, a New York not-for-profit corporation
affiliated with the Strang Cancer Prevention Center in New York, New York with
respect to an exclusive worldwide license of the patent covering the Poly (ADP
Ribose) Polymerase diagnostic assay and certain costs related to the filing,
prosecuting and maintaining of patents and copyrights. Recently, however, the
Company has entered into agreements with a number of universities, particularly
in the United States, that may require payment of royalties in respect of
inventions made in the course of work performed pursuant to those agreements in
the event the Company exercises its option under those agreements to acquire an
exclusive, world-wide license. Generally, royalty rates are not fixed and will
be negotiated when and if the Company exercises its option to acquire a license.
There can be no assurance that such licensing negotiations will be concluded
successfully or that any royalties or fees will not be material as to their
amount.
PATENTS AND TRADE SECRETS
To date, OXiGENE's principal products have been based on certain previously
known compounds. The Company anticipates that any products it develops hereafter
may include or be based on the same or other compounds owned or produced by
unaffiliated parties, as well as synthetic compounds it may discover. Although
the Company expects to seek patent protection for any compounds it discovers,
there is no assurance that any or all of them will be subject to effective
patent protection. Further, the development of regimens for the administration
of pharmaceuticals, which generally involve specifications for the frequency,
timing and amount of dosages, has been, and the Company believes will continue
to be, important to the Company's efforts, although those processes, as such,
may not be patentable.
Patent Protection. It is the Company's policy to seek patent protection in
the United States and in foreign countries. Primarily because of different
patent laws in various jurisdictions, the scope of, and hence the protection
afforded by, any patents OXiGENE may receive may vary even though they relate
essentially to the same subject matter.
The patent position of firms in the Company's industry generally involves
highly complex legal and other issues, resulting in both an apparent
inconsistency regarding the breadth of claims allowed in United States patents
and general uncertainty as to their legal interpretation and enforceability.
Accordingly, there can be no assurance that patent applications owned by the
Company will result in patents being issued or that, if issued, the patents will
afford competitive protection.
Further, there can be no assurance that products or processes developed by
the Company will not be covered by third party patents, in which case continued
development and marketing of those products or processes could require a license
under such patents. There can be no assurance that if a legal action were to be
brought against the Company on the basis of any third party patents, such action
would be resolved in the Company's favor. Such an unfavorable result against the
Company could result in monetary damages and injunctive relief. Further, even a
favorable result could cause expenditure of substantial monetary and other
resources in connection with the Company's defense against any such action.
Granted Patents and Pending Applications. The following is a brief
description of the Company's current patent position, both in the United States
and abroad. As U.S. patent applications are generally maintained in secrecy by
the U.S. Patent and Trademark Office for at least some time after filing and
because publication of discoveries in the scientific or patent literature often
lags behind actual discoveries, OXiGENE cannot be certain that it was the first
creator of inventions covered by its pending applications or that it was the
first to file patent applications for those inventions.
As of March 30, 2001, the Company is the assignee of eight granted U.S.
patents, five pending U.S. patent applications, and of granted patents and/or
pending applications in other countries (and/or international applications
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designating other countries) corresponding to seven of the granted U.S. patents
and four of the pending U.S. applications. One of the pending U.S. applications
was filed in 1996, one in 1997, one in 1998 (based on a 1997 provisional
application), and two in 2000 (of which one was based on a 1999 provisional
application and the other is a continuation-in-part of one of the granted
patents). In addition, the Company expects to be the assignee of two regular
U.S. patent applications expected to be filed in 2001 respectively based on two
pending provisional patent applications filed in 2000, and of expected (not yet
filed) international and foreign counterparts thereof.
Specifically, the Company is the assignee of a U.S. patent, granted April 20,
1993, for glutathione-s-transferase mu (an inherited enzyme) as a measure of
drug resistance, covering a test for resistance to nitrosoureas (a class of
chemotherapeutic agents). In addition, the Company is the assignee of a U.S.
patent, granted August 23, 1994, for tumor or cancer cell-killing therapy
(covering methods of using N-substituted benzamides as radio- and
chemosensitizers), and of granted patents in Australia, Canada, Europe
(designating 13 countries), Ireland, Israel, Japan, Mexico, Russia and South
Africa (as well as a pending application in Denmark) corresponding thereto. The
Company is also the assignee of two U.S. patents, both granted October 1, 1996,
for methods of administering and pharmaceutical formulations containing
N-substituted benzamides and/or acid addition salts thereof and for methods of
administering phenothiazines and/or acid addition salts thereof, and of granted
patents in Australia, Israel, Mexico and South Africa and pending European and
other foreign applications corresponding to these two U.S. patents. Further, the
Company is the assignee of a U.S. patent granted July 20, 1999, for a method of
testing immune competency, and of granted patents in Australia and New Zealand
and pending European and other foreign applications corresponding thereto. The
Company is also the assignee of a U.S. patent granted February 1, 2000, for
carotenoid-nicotinamide-zinc compositions and methods of treatment using the
same, and of a counterpart granted Australian patent and pending European and
other foreign applications. In addition, the Company is the assignee of a U.S.
patent granted February 22, 2000, for the use of benzamides and nicotinamides as
anti-inflammatory agents, and of granted counterpart patents in Australia and
South Africa and pending counterpart foreign applications in Europe and
elsewhere. Further, the Company is the assignee of a U.S. patent granted August
8, 2000, for N-acetyl 3-choloroprocainamide, acid addition salts thereof, and
methods of use, and of corresponding foreign applications. The Company's pending
U.S. applications and foreign and/or international counterparts cover further
methods of treatment and compositions.
Moreover, the Company is the exclusive licensee of a U.S. patent, granted
January 9, 1996, for a diagnostic test involving measurements related to the
cellular process of DNA repair and drug resistance, and is the exclusive
licensee of corresponding granted Canadian, European and Japanese patents. The
owner of the licensed patents is Preventive Medicine Institute, a New York
not-for-profit corporation affiliated with the Strang Cancer Prevention Center
in New York, New York.
The Company is also the exclusive licensee of five U.S. patents, one pending
international application, and of granted patents and/or pending applications in
other countries corresponding to three of the granted U.S. patents relating to
Combretastatins. The owner of record of the licensed patents and applications is
the Arizona Board of Regents, a corporate body of the State of Arizona, acting
for and on behalf of ASU.
As of February 21, 2001, the Company is the exclusive licensee of two issued
United States patents, one pending United States patent application and two
pending international applications, relating to anti-mitotic agents which
inhibit tubulin polymerization. The owner of the licensed patents and patent
applications is Baylor University.
Trade Secrets and Technological Know-How. While the Company generally has and
will continue to pursue a policy of seeking patent protection to preserve its
proprietary technology, it also has and will continue to rely on trade secrets,
unpatented proprietary information and continuing technological innovation to
develop and maintain its competitive position. There can be no assurance,
however, that others will not independently develop substantially equivalent
proprietary information and technology or otherwise gain access to such or
equivalent trade secrets, proprietary information or technology or that OXiGENE
can meaningfully protect its rights to such secrets, proprietary information and
technology.
OXiGENE generally requires its employees and Scientific Advisory Board
members to enter into confidentiality agreements with the Company. Those
agreements provide that all confidential information developed or made known to
the individual during the course of the relationship is to be kept confidential
and not to be disclosed to third parties, except in specific circumstances.
There can be no assurance, however, that any such agreement will provide
meaningful protection for the Company's trade secrets, proprietary information
or
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technology in the event of unauthorized use or disclosure of such information.
Moreover, although the Company has confidentiality agreements with the
institutions or their employees that perform its research, development,
preclinical tests and clinical trials, there can be no assurance that these
employees will abide by the terms of such agreements.
EMPLOYEES
The Company's policy has been, and continues to be, to maintain a relatively
small number of executives and other employees and to rely as much as possible
on consultants and independent contractors for its research, development,
preclinical tests and clinical trials. As of March 21, 2001, the Company had 15
full-time employees, of which 8 were engaged in research and development and
monitoring of clinical trials. Most of the Company's preclinical tests and
clinical trials are subcontracted and performed at certain universities in the
United States and Europe with the assistance of contract research organizations.
The Company plans to expand its activities in drug development, regulatory and
other areas in the U.S., and therefore expects to increase the number of
employees in its Watertown, MA office.
SCIENTIFIC ADVISORY BOARD AND CLINICAL TRIAL ADVISORY BOARD
OXiGENE's Clinical Trial Advisory Board assesses and evaluates the Company's
clinical trial program. The Scientific Advisory Board discusses and evaluates
the Company's research and development projects. Members of the Clinical Trial
Advisory Board and the Scientific Advisory Board are independent and have no
involvement with the Company other than serving on such board.
Some members of the Scientific Advisory Board and the Clinical Trial Advisory
Board receive cash compensation. Others have from time to time received, and are
expected to continue to receive, options to purchase shares of Common Stock of
the Company. All members are reimbursed for reasonable out-of-pocket expenses.
The composition of the Scientific Advisory Board is being reviewed due to the
Company's revised research portfolio but the new members will continue to
operate under the Chairmanship of Professor Hans Wigzell.
HANS WIGZELL, M.D., Ph.D. is Professor of Immunology at the Karolinska
Institute, Stockholm, Sweden, a well-known medical research institute in Europe.
Professor Wigzell is the chairman of OXiGENE's Scientific Advisory Board and
also serves as an advisor to the Company's Board of Directors. He was for many
years a member of the Nobel committee for the prize in medicine, of which he
also has served as chairman. Professor Wigzell is currently a member of the
editorial board of several international medical journals and has published more
than 500 articles in the areas of tumor biology, immunology, cell biology and
infectious diseases.
The members of the Company's Clinical Trial Advisory Board are:
--------------------------------------------------------------
HAKAN MELLSTEDT, M.D. PH.D. is Professor of Oncologic Biotherapy at the
Karolinska Institute and Administrative Director of Cancer Center Karolinska,
Karolinska Institute, Stockholm, Sweden. He holds a position as Chief Physician
at the Department of Oncology (Radiumhemmet), Karolinska Hospital, Stockholm and
has specialist certificates in Oncology, Hematology and Internal Medicine. He is
the Chairman of the Swedish Society of Oncology. Professor Mellstedt is
currently a member of the Editorial Board of several international scientific
journals and has published more than 375 articles in the areas of hematology,
medical oncology, tumor immunology and the development of
immunotherapeutics/biotherapeutics in hematological malignancies as well as in
solid tumors. Professor Mellstedt is the Chairman of OXiGENE's Clinical Trial
Advisory Board.
MARGARET A. TEMPERO, M.D. is Deputy Director of the University of California
San Francisco Cancer Center and Professor and Chief of the Division of Medical
Oncology. Dr. Tempero is vice chairman of the Board of the National
Comprehensive Cancer Network. She also serves on the Board of the American
Society of Clinical Oncology and on the Board of Scientific Counselors, which is
advisory to the intramural programs on the National Cancer Institute. She holds
or has held editorial positions on numerous prestigious journals such as Cancer
Research, Journal of Clinical Oncology, Clinical Cancer Research and the
American Journal of Medicine. She is also credited with over 100 original
articles and book chapters.
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JAN B. VERMORKEN, M.D., PH.D. is Professor of Oncology and head of the
Department of Medical Oncology of the University Hospital of the University of
Antwerp, Belgium. Professor Vermorken has held numerous functions with the Dutch
Cancer Society and the European Organization for Research on Treatment of Cancer
(EORTC), and currently is a member of EORTC's Early Clinical Studies Group and
the Subcommittee for Chemotherapy of EORTC's Head and Neck Cancer Cooperative
Group. Professor Vermorken has lectured extensively in the area of gynecological
oncology and currently serves of the Editorial Board of the International
Journal of Gynecological Oncology.
LEE S. ROSEN, M.D. is Adjunct Assistant Professor at UCLA's Department of
Medicine, Division of Hematology-Oncology and is a Director of UCLA's Cancer
Therapy Development Program. In 1995, Dr. Rosen received the Merit Award of the
American Association of Cancer Research and in 1996, Dr. Rosen was the recipient
of the Fellow Merit Award of the American Society of Clinical Oncology.
COMPETITION
The industry in which the Company is engaged is characterized by rapidly
evolving technology and intense competition. The Company's competitors include,
among others, major pharmaceutical, biopharmaceutical and biotechnology
companies, many of which have financial, technical and marketing resources
significantly greater than those of the Company. In addition, many of the small
companies that compete with the Company have also formed collaborative
relationships with large, established companies to support research,
development, clinical trials and commercialization of products that may be
competitive with those of the Company. Academic institutions, governmental
agencies and other public and private research organizations are also conducting
research activities and seeking patent protection and may commercialize products
on their own or through joint ventures or other collaborations.
The Company is aware of a number of companies engaged in the research,
development and testing of new cancer therapies or ways of increasing the
effectiveness of existing therapies. Such companies include, among others,
Agouron Pharmaceuticals, Inc., AstraZeneca, Aventis, Bayer, Ciba-Geigy Ltd., Eli
Lilly and Company, EntreMed Inc., Glaxo Wellcome PLC, Johnson & Johnson, Matrix
Pharmaceuticals, Inc., NeoPharm, Inc., Pharmacyclics, Inc., Pfizer Inc.and
Pierre Fabre S.A., some of whose products have already received, or are in the
process of receiving, regulatory approval or are in later stages of clinical
trials.
The Company is also aware of companies engaged in the research, development
and testing of diagnostic assays for cancer, including Introgen Therapeutics,
Inc., AntiCancer Inc., Transgene S.A. and Medarex Inc. There are other companies
that have developed, or are in the process of developing, technologies that are,
or in the future may be, the basis for competitive products in the field of
cancer therapy or other products the Company intends to develop. Some of those
products may have an entirely different approach or means of accomplishing the
same desired effects as the products being developed by the Company, such as
gene transfer therapy, immunotherapy and photodynamic therapy. There can be no
assurance that the Company's competitors will not succeed in developing
technologies and products that are more effective, safer or more affordable than
those being developed by the Company.
The Company expects that if any of its products gain regulatory approval for
sale they will compete primarily on the basis of product efficacy, safety,
patient convenience, reliability, price and patent protection. The Company's
competitive position also will depend on its ability to attract and retain
qualified scientific and other personnel, develop effective proprietary products
and implement joint ventures or other alliances with large pharmaceutical
companies in order to jointly market and manufacture its products.
RISK FACTORS
History of Losses and Anticipated Future Financial Results; Uncertainty of
Future Profitability. The Company has experienced net losses every year since
its inception and, as of December 31, 2000, had an accumulated deficit of
approximately $56.5 million. The Company anticipates incurring substantial
additional losses over at least the next several years due to, among other
factors, the need to expend substantial amounts on its continuing clinical
trials and anticipated research and development activities and the general and
administrative expenses associated with those activities. The Company has not
commercially introduced any product and its products are in varying stages of
development and testing. The Company's ability to attain profitability will
depend upon its ability to
-14-
develop products that are effective and commercially viable, to obtain
regulatory approval for the manufacture and sale of its products and to license
or otherwise market its products successfully. There can be no assurance that
the Company will ever achieve profitability or that profitability, if achieved,
can be sustained on an ongoing basis. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Early Stage of Product Development; Uncertainties of Clinical Trials;
Unproven Safety and Efficacy. OXiGENE's products are in an early stage of
development. In order to achieve profitable operations on a continuing basis,
the Company, alone or in collaboration with others, must successfully develop,
manufacture, introduce and market its products. The time frame necessary to
achieve market success for any individual product is long and uncertain. See
"--Product Development and Regulatory Processes." The products currently under
development by the Company will require significant additional research and
development and extensive preclinical and clinical testing prior to application
for commercial use. A number of companies in the biotechnology and
pharmaceutical industries have suffered significant setbacks in clinical trials,
even after showing promising results in earlier studies or trials. Although the
Company has obtained favorable results to date in preclinical studies and
clinical trials of certain of its products, such results may not be indicative
of results that will ultimately be obtained in or throughout such clinical
trials, and there can be no assurance that clinical testing will show any of the
Company's products to be safe or efficacious. Additionally, the Company
previously encountered problems in its clinical trials and may in the future
experience problems that may cause it to delay, suspend or terminate those
clinical trials. There can also be no assurance that the Company's research or
product development efforts or those of its collaborative partners will be
successfully completed, that any compounds currently under development by the
Company will be successfully developed into drugs, or that any products will
receive regulatory approval on a timely basis, if at all. If any such problems
occur, the Company could be materially and adversely affected.
Need for Additional Funds; Uncertainty of Future Funding. The Company's
operations to date have consumed substantial amounts of cash. Negative cash flow
from the Company's operations is expected to continue and even to accelerate
over at least the next several years. The Company's capital requirements will
depend on numerous factors, including: the progress of preclinical testing and
clinical trials; the progress of the Company's research and development
programs; the time and costs required to obtain regulatory approvals; the
resources devoted to manufacturing methods and advanced technologies; the
ability to obtain licensing arrangements; the cost of filing, prosecuting and,
if necessary, enforcing patent claims; the cost of commercialization activities
and arrangements; and the demand for the Company's products if and when
approved. The Company will have to raise substantial additional funds to
complete development of any product or bring products to market. Issuance of
additional equity securities by the Company, for these or other purposes, could
result in dilution to then existing stockholders. There can be no assurance that
additional financing will be available on acceptable terms, if at all. If
adequate funds are not available on acceptable terms, the Company may be
required to delay, scale back or eliminate one or more of its product
development programs or obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of its technologies or products that the Company would not otherwise relinquish,
which may have a material adverse effect on the Company.
Dependence on Others for Clinical Development and Manufacturing and
Marketing. The Company has limited experience in drug development, the
regulatory approval process, manufacturing and marketing. Accordingly, OXiGENE
has depended, and in the future is likely to continue to depend, on others for
assistance in many areas, including research, conducting preclinical testing and
clinical trials, the regulatory approval process, manufacturing and marketing.
Although the Company considers its relations with existing collaborative
partners to be satisfactory, most of its current arrangements are short term in
nature. Funding requirements, competitive factors or prioritization of other
opportunities may lead the Company to seek additional arrangements with third
parties. While OXiGENE is likely to continue to explore other licensing and
development opportunities for its technologies with other companies, there can
be no assurance that the Company will be successful in establishing new, or
maintaining new or existing, collaborative agreements or licensing arrangements;
that any collaborative partner will not be pursuing alternative technologies or
developing alternative compounds either on its own or in collaboration with
others, directed at the same diseases as those involved in its collaborative
arrangements with the Company; that any such collaborative partners will devote
resources to the Company's technologies or compounds on a basis favorable to the
Company; that any such arrangements will be on terms favorable to OXiGENE; or
that any current or future licensees will be successful in commercializing
products. Finally, if the Company's collaboration arrangements are terminated
prior to their expiration or if the other parties to such arrangements fail to
adequately perform, there can
-15-
be no assurance that submission of product candidates for regulatory approval
will not be delayed. See "--Research and Development and Collaborative
Arrangements."
Clinical Trials; Government Regulation and Health Care Reform; Managed Care.
The Company's research and development activities, preclinical testing and
clinical trials, and the manufacturing and marketing of its products are subject
to extensive regulation by numerous governmental authorities in the United
States and other countries. See "-- Product Development and Regulatory
Processes." Preclinical testing and clinical trials and manufacturing and
marketing of OXiGENE's products are and will continue to be subject to the
rigorous testing and approval processes of the FDA, the Swedish Medical Products
Agency and other corresponding foreign regulatory authorities. Clinical testing
and the regulatory process generally take many years and require the expenditure
of substantial resources. In addition, delays or rejections may be encountered
during the period of product development, clinical testing and FDA regulatory
review of each submitted application. Similar delays may also be encountered in
foreign countries. There can be no assurance that, even after such time and
expenditures, regulatory approval will be obtained for any products developed by
OXiGENE or that a product, if approved in one country, will be approved in other
countries. See "--Product Development and Regulatory Processes." Moreover, if
regulatory approval of a product is granted, such approval may entail
limitations on the indicated uses for which that product may be marketed.
Further, even if such regulatory approval is obtained, a marketed product, its
manufacturer and its manufacturing facilities are subject to continual review
and periodic inspections, and later discovery of previously unknown problems
(such as previously undiscovered side effects) with a product, manufacturer or
facility may result in restrictions on such product, manufacturer or facility,
including a possible withdrawal of the product from the market. Failure to
comply with the applicable regulatory requirements can, among other things,
result in fines, suspensions of regulatory approvals, product recalls, operating
restrictions, injunctions and criminal prosecution. Additionally, further
government regulation may be established which could prevent or delay regulatory
approval of the Company's products. Further, the U.S. Congress continues to
debate various health care reform proposals which, if adopted, may have a
material adverse effect on the Company. Moreover, continued cost control
initiatives by health care maintenance organizations and similar programs may
affect the financial ability and willingness of patients and their health care
providers to utilize certain therapies.
Competition and Risk of Technological Obsolescence. The Company is engaged in
a rapidly evolving field. Competition from other pharmaceutical companies,
biotechnology companies and research and academic institutions is intense and
expected to increase. Many of those companies and institutions have
substantially greater financial, technical and human resources than the Company.
Those companies and institutions also have substantially greater experience in
developing products, in conducting clinical trials, in obtaining regulatory
approval and in manufacturing and marketing pharmaceutical products.
Accordingly, competitors may succeed in obtaining regulatory approval for their
products more rapidly than the Company. Competitors have developed or are in the
process of developing technologies that are, or in the future may be, the basis
for competitive products. Some of those products may have an entirely different
approach or means of accomplishing the desired therapeutic effect than products
being developed by the Company. See "--Competition." There can be no assurance
that the Company's competitors will not succeed in developing technologies and
products that are more effective and/or cost competitive than those being
developed by the Company or that would render the Company's technology and
products less competitive or even obsolete. In addition, one or more of the
Company's competitors may achieve product commercialization or patent protection
earlier than the Company, which could materially adversely affect the Company.
Dependence on Patents and Proprietary Technology. To date, OXiGENE's
principal products have been based on certain previously known compounds. The
Company anticipates that products it develops hereafter may include or be based
on the same or other compounds owned or produced by unaffiliated parties, as
well as synthetic compounds it may discover. Although the Company expects to
seek patent protection for any compounds it discovers and/or for any specific
uses it discovers for new or previously known compounds, there is no assurance
that any or all of them will be subject to effective patent protection. Further,
the development of regimens for the administration of pharmaceuticals, which
generally involve specifications for the frequency, timing and amount of
dosages, has been, and the Company believes may continue to be, important to the
Company's efforts, although those processes, as such, may not be patentable.
The Company's success will depend, in part, on its ability to obtain patents,
protect its trade secrets and operate without infringing on the proprietary
rights of others. As of March 30, 2001, the Company is the assignee of eight
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granted U.S. patents, five pending U.S. patent applications, and of granted
patents and/or pending applications in other countries (and/or international
applications designating other countries) corresponding to seven of the granted
U.S. patents and four of the pending U.S. applications, and is also the
exclusive licensee of a number of U.S. and foreign patents and pending
applications and pending international applications. The patent position of
pharmaceutical and biotechnology firms like OXiGENE generally is highly
uncertain and involves complex legal and factual questions, resulting in both an
apparent inconsistency regarding the breadth of claims allowed in U.S. patents
and general uncertainty as to their legal interpretation and enforceability.
Accordingly, there can be no assurance that patent applications assigned or
exclusively licensed to the Company will result in patents being issued, that
any issued patents assigned or exclusively licensed to the Company will provide
the Company with competitive protection or will not be challenged by others, or
that the patents of others will not have an adverse effect on the ability of the
Company to do business. Moreover, since some of the basic research relating to
one or more of the Company's patent applications and/or patents was performed at
various universities and/or funded by grants, there can be no assurance that one
or more universities, employees of such universities and/or grantors will not
assert that they have certain rights in such research and any resulting
products, although the Company is not aware of any such assertions or any basis
therefor. Furthermore, there can be no assurance that others will not
independently develop similar products, will not duplicate any of the Company's
products or, if patents are issued to the Company, will not design around such
patents. In addition, the Company may be required to obtain licenses to patents
or other proprietary rights of others in or outside of the United States. No
assurance can be given that any licenses required under any such patents or
proprietary rights would be made available on terms acceptable to the Company,
if at all. If the Company does not obtain such licenses, it could encounter
delays in product market introductions while it attempts to design around such
patents, or could find that the development, manufacture or sale of products
requiring such licenses is foreclosed. In addition, the Company could incur
substantial costs in defending itself in suits brought against it or in
connection with patents to which it holds a license or in bringing suit to
protect the Company's own patents against infringement. The Company generally
requires employees, Scientific Advisory Board members and the institutions that
perform its preclinical and clinical tests to enter into confidentiality
agreements with the Company. Those agreements provide that all confidential
information developed or made known to the individual during the course of the
relationship with the Company is to be kept confidential and not to be disclosed
to third parties, except in specific circumstances. There can be no assurance,
however, that any such agreement will provide meaningful protection for the
Company's trade secrets or other confidential information in the event of
unauthorized use or disclosure of such information. See "--Patents and Trade
Secrets."
Dependence on Certain Officers and Directors and Others. The Company believes
that its success is, and will likely continue to be, materially dependent upon
its ability to retain the services of certain of its current officers and
directors, particularly Dr. Bjorn Nordenvall, its Chief Executive Officer, and
Dr. David Chaplin, its Chief Operating Officer. The loss of the services of any
of these individuals could have a material adverse effect on the Company. In
addition, the Company has established relationships with universities, hospitals
and research institutions, which have historically provided, and continue to
provide, the Company with access to research laboratories, clinical trials,
facilities and patients. Additionally, the Company believes that it may, at any
time and from time to time, be materially dependent on the services of
consultants and other unaffiliated third parties.
Product Liability Exposure; Limited Insurance Coverage. The use of the
Company's products in clinical trials and for commercial applications, if any,
may expose the Company to liability claims, in the event such products cause
injury, disease or result in adverse effects. These claims could be made
directly by health care institutions, contract laboratories, patients or others
using such products. Although the Company has obtained liability insurance
coverage for its ongoing clinical trials, and there can be no assurance that
such coverage will be in amounts sufficient to protect the Company against
claims or recalls that could have a material adverse effect on the financial
condition and prospects of the Company. Further, adverse product and similar
liability claims could negatively impact the Company's ability to obtain or
maintain regulatory approvals for its technology and products.
Price Volatility of the Common Stock. The market price of the Common Stock
has been, and likely will continue to be, highly volatile as frequently is the
case with the publicly-traded securities of pharmaceutical research and
development companies. See "Market For Registrant's Common Equity and Related
Stockholder Matters." Factors such as results of clinical trials, announcements
of research developments and results by the Company or its competitors and
government regulatory action affecting the Company's products in both the United
States and foreign countries have had, and may continue to have, a significant
effect on the Company's business and on the market price of the Common Stock. As
of December 31, 2000, an aggregate of 35,612 stock appreciation rights
-17-
("SARs"), with a weighted average exercise price of $7.16 per SAR, had been
granted to certain clinical investigators and consultants. The Company is not
required to make any cash payments upon exercise of any such SAR. If and when
the spread between the market price of the Company's Common Stock and the
exercise price of the SARs changes, the charge for financial reporting purposes
to research and development will be adjusted to reflect an increase or decrease,
as the case may be, in the market price of the Company's Common Stock. In
addition, as of December 31, 2000, the Company had issued options to purchase an
aggregate of 163,758 shares of its common stock to certain consultants and
advisory board members who are not employees. Such options are accounted for at
their fair value and also result in a charge for financial reporting purposes.
The future charge related to these options are also influenced by changes in the
price of the Company's common stock. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations." In addition, substantially
all of the shares of Common Stock issuable upon exercise of outstanding options,
SARs and warrants have been registered and may be sold from time to time
hereafter. Such sales, as well as future sales of Common Stock by existing
stockholders, or the perception that sales could occur, could adversely affect
the market price of the Common Stock. The price and liquidity of the Common
Stock may also be significantly affected by trading activity and market factors
related to the Nasdaq and Stockholm Stock Exchange markets, which factors and
the effects thereof may differ between those markets.
No Dividends. The Company has not declared or paid dividends on its Common
Stock since its inception and does not intend to declare or pay any dividends to
its stockholders in the foreseeable future. See "Market For Registrant's Common
Equity and Related Stockholder Matters."
GLOSSARY OF SCIENTIFIC TERMS
Angiogenesis................. The creation of new blood vessels
Chemotherapy................. Drugs that control cancer growth
Control group................ A group of patients involved in a clinical trial
who are receiving placebos
Cytotoxic.................... Tumor-killing agent
DNA.......................... Chemical building blocks of genetic material
Double-blind study........... A study in which neither the investigators
assessing the outcome of the trial nor the
patients know whether the patient is receiving the
drug being investigated or merely a placebo. The
outcome can only be determined when the results
are decoded
Enzyme....................... A protein that carries out a metabolic function by
converting one substance to another
IND.......................... An "Investigational New Drug" application filed
with the U.S. Food and Drug Administration that
permits the administration of compounds to humans
in clinical trials
Malignant cell............... Cancer cell
Metabolic function........... Living process of growth and reproduction
NDA.......................... A "New Drug Application" filed with the U.S. Food
and Drug Administration, which, if approved,
allows a drug to be marketed in the U.S.
Necrosis..................... Cell death by decomposition after replication
-18-
N-substituted benzamide...... Class of drugs believed by OXiGENE to sensitize
radiation and chemotherapy
Poly (ADP Ribose) Polymerase. An enzyme involved in the DNA repair process. Also
known as Adenosine Diphosphate Ribosyl Transferase
or ADPRT
Placebo...................... A non-active substance given to a control group of
patients in a clinical trial to duplicate the
treatment method, but without the administration
of the active drug under investigation
Radiation.................... Physical energy that splits molecules and induces
DNA damage
2. PROPERTIES
The Company's executive offices are located in Watertown, Massachusetts. On
February 28, 2000, the Company signed a lease for the Watertown office at the
Arsenal on the Charles, in Watertown, Massachusetts. The initial term of the
lease is ten years and three months, with a yearly lease of approximately
$294,410 for the first five years, and a lease of approximately $324,350 for the
following five years. In connection with the listing of its Common Stock on the
Stockholm Stock Exchange, the Company opened an office in Stockholm, Sweden. In
October 2000, the Company announced that the corporate headquarter was moving to
Watertown, MA, from Stockholm and that the Stockholm office will close during
2001. The Stockholm office is leased at an annual rate of approximately $50,500
and the lease expires on September 30, 2003. The Company is seeking to sublease
its office space in Stockholm. The Company does not own or lease any
laboratories or other research and development facilities.
3. LEGAL PROCEEDINGS
There are no material suits or claims pending or, to the best of the
Company's knowledge, threatened against the Company.
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to the vote of security holders of the Company during
the fourth quarter of the year ended December 31, 2000.
PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Effective November 19, 1996, the Company's Common Stock and Warrants
commenced trading on the Nasdaq National Market under the symbol "OXGN." Prior
thereto, since the completion of the Company's initial public offering in August
1993, the Company's securities had been listed for quotation on the Nasdaq
Small-Cap Market. The Company's shares of Common Stock are also traded on the OM
Stockholm Exchange in Sweden. The following table sets forth the high and low
per share and per warrant prices for the Company's Common Stock and Warrants for
each quarterly period within the two most recent fiscal years.
As of December 22, 1999, the Company redeemed its outstanding publicly traded
Warrants, and currently no such Warrants are outstanding.
Calendar Year Common Stock Warrants
- ------------- --------------------- --------------------
High Low High Low
--------- --------- -------- --------
1999
- ----
First Quarter $ 11.6875 $ 7.4375 $ 4.5000 $ 1.8750
Second Quarter 11.1250 7.8125 2.8750 1.1875
Third Quarter 11.0000 8.3125 2.4375 1.1250
Fourth Quarter 20.1250 12.3125 6.7500 1.59375
-19-
2000
- ----
First Quarter $ 26.0000 $ 13.3750
Second Quarter 21.0000 9.7500
Third Quarter 11.8750 8.1250
Fourth Quarter 10.1250 5.3100
As of March 21, 2001, there were 58 holders of record of the Company's Common
Stock. The Company believes, based on the number of proxy statements and related
materials distributed in connection with its 2000 Annual Meeting of
Stockholders, that there are approximately 10,000 beneficial owners of its
Common Stock.
The Company has not declared any cash dividends on its Common Stock since its
inception in 1988, and does not intend to pay cash dividends in the foreseeable
future. The Company presently intends to retain future earnings, if any, to
finance the growth and development of its business.
-20-
6. SELECTED FINANCIAL DATA
SUMMARY FINANCIAL INFORMATION
OXIGENE, INC.
Year ended December 31,
------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
------------ ------------ ------------ ------------ ------------
STATEMENT OF OPERATIONS DATA:
Revenues:
Licensing revenue $ - $ - $ - $ 1,271,918 $ 1,694,944
Interest income 684,039 2,217,467 1,997,991 1,340,738 1,921,961
------------ ------------ ------------ ------------ ------------
Total revenues 684,039 2,217,467 1,997,991 2,612,656 3,616,905
Expenses:
Costs related to licensing revenue - - - 1,250,000 1,161,612
Amortization of license agreement - - - 40,639 222,536
Research and development 4,822,834 7,281,504 10,358,913 8,397,799 8,057,671
General and administrative 1,819,638 3,046,484 3,135,871 3,336,463 3,160,489
Interest expense - - - 36,620 102,043
------------ ------------ ------------ ------------ ------------
Total expenses 6,642,472 10,327,988 13,494,784 13,061,521 12,704,351
------------ ------------ ------------ ------------ ------------
Net loss $ (5,958,433) $ (8,110,521) $(11,496,793) $(10,448,865) $ (9,087,446)
============ ============ ============ ============ ============
Basic and dilutive net loss per common
share
$ (0.80) $ (0.83) $ (1.13) $ (1.02) $ (0.81)
Weighted average number of common shares 7,440 9,770 10,201 10,274 11,181
outstanding (in thousands)
Year ended December 31,
------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
------------ ------------ ------------ ------------ ------------
BALANCE SHEET DATA:
Cash and cash equivalents $ 40,517,182 $ 40,136,662 $ 31,756,534 $ 30,447,803 $ 27,062,762
Available for sale security - - - - 548,738
Working capital 40,418,846 39,889,394 29,907,659 38,386,299 26,306,690
Total assets 41,168,759 41,152,357 33,018,825 42,659,727 31,229,242
Total liabilities 650,001 951,088 2,827,011 11,557,021 10,082,892
Accumulated deficit (17,358,307) (25,468,828) (36,965,621) (47,414,486) (56,501,932)
Total stockholders' equity 40,518,758 40,201,269 30,191,814 31,102,706 21,146,350
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
OXiGENE is an international biopharmaceutical company engaged principally in
research and the development of products for use in the treatment of cancer.
Historically, the Company's activities were directed primarily towards products
designed to complement and enhance the clinical efficacy of radiation and
chemotherapy, which are the most common and traditional forms of non-surgical
cancer treatment. Recently, however, the Company has focused its efforts on
developing products for applications such as direct cancer treatment agents,
ocular neo-vascularization, skin disorders and anti-inflammatory agents.
-21-
OXiGENE has devoted substantially all of its efforts and resources to
research and development conducted on its own behalf and through strategic
collaborations with clinical institutions and other organizations. Consequently,
OXiGENE believes that its research and development expenditures have been
somewhat lower than those of other comparable biopharmaceutical companies.
On December 15, 1999, the Company entered into a Research Collaboration and
License Agreement with Bristol-Myers Squibb Company ("BMS"), to sub-license the
rights to certain patent rights and other know-how and technology to which the
Company has an exclusive license (the "Sub-License Agreement"). Pursuant to the
terms of the Sub-License Agreement, BMS paid a non-refundable license fee, will
reimburse certain expenses incurred by the Company and fund future research to
be performed by the Company based on a research program determined by a joint
development committee. BMS will assume all research, development,
commercialization and/or marketing costs of all in-licensed products. In
addition, BMS will pay additional amounts upon certain milestones being reached
and royalties on future net sales of products.
On May 17, 2000, the Company entered into a joint venture agreement with
Peregrine Pharmaceuticals, Inc. ("Peregrine"), formerly Techniclone Corporation,
forming ARCUS Therapeutics LLC ("ARCUS") to develop and commercialize vascular
targeting agent ("VTA") technologies. ARCUS has patent protection over VTA
technologies used in the treatment of solid tumors by disrupting the function of
the tumor blood vessels. Under the terms of the agreement, Peregrine will supply
its intellectual property to the joint venture, and OXiGENE will provide
licenses with respect to its next generation tubulin-binding compounds and,
based on the development success of the joint venture, OXiGENE will be required
to spend up to $20 million to fund the development expenses of ARCUS. Any
further funding of the joint venture thereafter would be shared by the partners
on an equal basis. In addition, the Company has paid Peregrine an upfront
licensing fee of $1 million in cash and purchased $2 million, or 585,009 shares,
of Peregrine's common stock. Peregrine has filed a registration statement
covering the resale of such shares under the Securities Act of 1933 by OXiGENE
which has been declared effective; however, there can be no assurances that
OXiGENE will be able to sell such shares on favorable terms, if at all.
Additionally, under the terms of the joint venture agreement, any sublicensing
fees generated within the joint venture will be allocated 75% to Peregrine and
25% to the Company until Peregrine has received $10 million in sublicense fee
revenues. Thereafter, the joint venture partners will share licensing fees on an
equal basis. The Company will also be required to pay Peregrine $1 million in
cash and purchase an additional $1 million in Peregrine common stock upon the
filing of an IND Application for the first clinical candidate developed by
ARCUS. Furthermore, Peregrine and OXiGENE will share equally any royalty income
or profit from the joint venture.
OXiGENE has generated a cumulative net loss of approximately $56.5 million
for the period from its inception through December 31, 2000. OXiGENE expects to
incur significant additional operating losses over at least the next several
years, principally as a result of its continuing clinical trials and anticipated
research and development expenditures. The principal source of OXiGENE's working
capital has been the proceeds of private and public equity financing and the
exercise of warrants and stock options, and, prior to entering into the BMS
Sub-License Agreement, the Company had no material amount of licensing or other
fee income. As of December 31, 2000, OXiGENE had no long-term debt or loans
payable except for certain liabilities under the licensing agreement.
RESULTS OF OPERATIONS
Year ended December 31, 2000 and 1999
Revenues
During the year ended December 31, 2000 and 1999, the Company had licensing
revenue of $1.7 million and $1.3 million, respectively, and approximately $1.9
million and $1.3 million in interest income, respectively. The increase in
licensing revenue of $0.4 million in 2000 compared to 1999 is due to the fact
that the year 2000 was the first whole year of accounting for the licensing
revenue emanating from the BMS Sub-License Agreement. Interest income increased
$0.6 million in 2000 compared to 1999. The reason for the increase in interest
income is that the Company's overall cash position increased because of the
significant license fee received upon signing of the Sub-License Agreement with
BMS.
-22-
Expenses
Total expenses for the year ended December 31, 2000 and 1999 amounted to
approximately $12.7 and $13.1 million, respectively. Research and development
expenses decreased to $8.1 million, from $8.4 million for the comparable 1999
period. Under the BMS Sub-License Agreement, approximately $1.2 million of
research and development expenses in 2000, compared to $1.3 million in 1999,
were recoverable and, accordingly, has been classified as costs relating to
licensing revenue and is not included in research and development expenses.
Stock appreciation rights ("SARs") previously granted by the Company to certain
clinical investigators and consultants effect the research and development
expenses with a charge for financial reporting in reporting periods, when the
market value per share of Common Stock increases. In addition, non-qualified
stock options ("NQSO") granted to certain consultants and advisory board members
who are not employees effect the research and development expenses relative to
the fair value of the options vested during the respective reporting period.
During 2000 and 1999, the Company recorded approximately $0.5 million and $0.7
million, respectively, of research and development expenses related to options
issued for services provided by non-employees. Because the market value of the
Company's Common Stock at December 31, 2000 was lower than the market value at
December 31, 1999, the cumulative charge relative to SARs previously recorded
for financial reporting purposes decreased in 2000 by approximately $0.4
million. In 1999, a $0.2 million charge was recorded regarding the SARs. Without
giving effect to the charge or credit related to SARs or NQSOs, research and
development expenses for the year ended December 31, 2000 increased by
approximately $0.5 million, compared to the comparable 1999 period. Generally,
the Company makes payments to its clinical investigators if and when certain
predetermined milestones in its clinical trials are reached, rather than on a
fixed quarterly or monthly basis. As a result of the foregoing and the existence
of outstanding SARs and NQSOs, research and development expenses have
fluctuated, and are expected to continue to fluctuate, from quarter to quarter.
General and administrative expenses for the year ended December 31, 2000
decreased to approximately $3.2 million from $3.3 million for the comparable
1999 period. In an effort to preserve cash and reduce cash flow requirements,
the Company's policy has been to minimize the number of employees and to use
outside consultants to the extent practicable. OXiGENE expects that its clinical
trial expenses will increase as it expands its clinical trial program, and
initiates research and clinical trials on its new compounds.
Year ended December 31, 1999, and 1998.
During the year ended December 31, 1999, the Company recognized approximately
$1.3 million of licensing revenue pursuant to the BMS Sub-License Agreement and
approximately $1.3 million of interest income. During the year ended December
31, 1998, the Company had no licensing revenues and approximately $2.0 million
of interest income. The Company's total expenses for the year ended December 31,
1999, decreased to approximately $13.1 million from approximately $13.5 million
for the comparable 1998 period. Research and development expenses for those
years were approximately $8.4 million and $10.4 million, respectively. Excluding
a $0.2 million charge in 1999 and a $0.3 million credit in 1998 related to SARs
and a $0.7 million charge in 1999 and a $1.6 million charge in 1998 related to
NQSOs to non-employees, research and development expense decreased $1.6 million.
Approximately $1.3 million of research and development expenses in 1999 were
recoverable under the BMS Sub-License Agreement and, accordingly, has been
classified as costs relating to licensing revenue and is not included in
research and development expenses. The remaining decrease is attributed to the
discontinuation of the Neu-Sensamide project. General and administrative
expenses for the year ended December 31, 1999, increased to approximately $3.3
million from approximately $3.1 million for the comparable 1998 period.
LIQUIDITY AND CAPITAL RESOURCES
OXiGENE has experienced net losses and negative cash flow from operations
each year since its inception, except in the year 2000, and as of December 31,
2000, the Company had an accumulated deficit of approximately $56.5 million. The
Company expects to incur substantial additional expenses, resulting in
significant losses, over at least the next several years due to, among other
factors, its continuing clinical trials and anticipated research and development
activities. To date, the Company has financed its operations principally through
net proceeds it has received from private and public equity financing.
The Company had cash and cash equivalents of approximately $27.1 million at
December 31, 2000, compared to approximately $30.4 million at December 31, 1999.
The reason for this relatively small decrease in the Company's cash and cash
equivalents of approximately $3.4 million, compared to the net loss of $9.1
million, is that
-23-
the Company received a significant licensing fee upon the signing of the BMS
Sub-License Agreement with BMS. During the year ended December 31, 2000, the
Company received approximately $ 0.4 million, compared to $10.2 million in 1999,
upon the exercise of options and warrants.
OXiGENE's policy is to contain its fixed expenditures by maintaining a
relatively small number of employees and relying as much as possible on outside
services for its research, development, preclinical testing and clinical trials.
The Company maintains small offices in Stockholm, Sweden (executive offices and
investor relations), and in Boston, Massachusetts (for drug development and
clinical trials). In October 2000, the Company announced that the corporate
headquarter will move to Watertown, MA, and that the Stockholm office in Sweden
will close down during 2001. The Company makes quarterly payments to the
University of Lund, Lund, Sweden, for pre-clinical research. For the years ended
December 31, 2000, 1999, and 1998, the amounts paid to the University of Lund,
was approximately $0.9 million, $1.1 million, and $0.6 million, respectively.
The Company has an agreement with ILEX (TM) Oncology Inc., a contract research
organization in San Antonio, Texas ("ILEX"), pursuant to which ILEX performs
contract research services and clinical trials for the Company in connection
with the preclinical and clinical testing of compounds under development by the
Company, particularly Declopramide and Combretastatin. During the years ended
December 31, 2000, 1999, and 1998, the Company paid ILEX approximately $1.4
million, $1.9 million, and $2.3 million, respectively. The amounts paid to ILEX
have fluctuated, and are expected to continue to fluctuate.
On August 2, 1999, the Company entered into an exclusive License Agreement
for the commercial development, use and sale of products or services covered by
certain patent rights owned by a U.S. university. The Company paid an initial
license fee of $0.2 million and, is required to pay additional license fees in
ten equal semi-annual installments of $0.2 million commencing June 1, 2000. The
Company also is required to pay royalties on future net sales of products. The
present value of the amounts payable to the university is approximately $1.0
million at December 31, 2000. In addition, on May 17, 2000, the Company entered
into a joint venture agreement with Peregrine Pharmaceuticals, forming ARCUS
Therapeutics LLC ("ARCUS"). Under the terms of the agreement, the Company is
required to spend up to $20 million without a definitive timeline to fund the
development expenses of ARCUS.
The Company anticipates that its cash and cash equivalents as of December 31,
2000, should be sufficient to satisfy the Company's projected cash requirements
as of that date for approximately 24 months. However, working capital and
capital requirements may vary materially from those now planned due to numerous
factors including, but not limited to, the progress with preclinical testing and
clinical trials; progress of the Company's research and development programs;
the time and costs required to obtain regulatory approvals; the resources the
Company devotes to manufacturing methods and advanced technologies; the ability
of the Company to obtain collaborative or licensing arrangements; the costs of
filing, prosecuting and, if necessary, enforcing patent claims; the cost of
commercialization activities and arrangements; and the demand for its products
if and when approved. The Company anticipates that it will have to seek
substantial additional private or public financing or enter into collaborative
arrangements with one or more third parties to complete the development of any
products or bring products to market. There can be no assurance that additional
financing will be available on acceptable terms, if at all. The Company had no
material commitments for capital expenditures as of December 31, 2000.
TAX MATTERS
As of December 31, 2000, the Company had net operating loss carry forwards of
approximately $76.8 million for U.S. and foreign income tax purposes, of which
$45.9 million expires for U.S. purposes through 2020. The utilization of
approximately $2.5 million of such U.S. net operating losses is subject to an
annual limitation, pursuant to Section 382 of the U.S. Internal Revenue Code, of
approximately $0.4 million.
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's cash and cash equivalents are maintained primarily in US dollar
accounts and amounts payable for research and development to research
organizations are contracted in US dollars. Accordingly, the Company's exposure
to foreign currency risk is limited because its transactions are primarily based
in US dollars. The Company does not have any other exposure to market risk. The
Company will develop policies and procedures to manage market risk in the future
as circumstances may require.
-24-
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14 for a list of the OXiGENE Financial Statements and Schedules and
Supplementary Information filed as part of this report.
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item, insofar as it relates to directors, is
incorporated herein by reference to the Company's definitive Proxy Statement
with respect to the Company's Annual Meeting of Stockholders scheduled to be
held on June 11, 2001.
11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to
the Company's definitive Proxy Statement with respect to the Company's Annual
Meeting of Stockholders scheduled to be held on June 11, 2001.
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference to
the Company's definitive Proxy Statement with respect to the Company's Annual
Meeting of Stockholders scheduled to be held on June 11, 2001.
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference to
the Company's definitive Proxy Statement with respect to the Company's Annual
Meeting of Stockholders scheduled to be held on June 11, 2001.
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents Filed with this Report.
The following documents are filed as part of this report.
1. Financial Statements
The financial statements listed in the accompanying List of Financial
Statements covered by Report of Independent Auditors.
2. Financial Statement Schedules
None.
3. Exhibits
The information called for by this paragraph is contained in the Index
to Exhibits of this report which is incorporated herein by reference.
-25-
(b) Reports on Form 8-K.
None
-26-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
OXiGENE, INC.
By: /s/ Bjorn Nordenvall
-------------------------------------
Bjorn Nordenvall
President and Chief Executive Officer
March 30, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Bjorn Nordenvall President, Chief March 30, 2001
- ----------------------- Executive Officer and
Bjorn Nordenvall Director (principal
executive officer)
/s/ Bo Haglund Chief Financial Officer March 30, 2001
- -----------------------
Bo Haglund
/s/ Marvin H. Caruthers Director March 30, 2001
- -----------------------
Marvin H. Caruthers
Director March __, 2001
- -----------------------
Joel-Tomas Citron
/s/ Michael Ionata Director March 30, 2001
- -----------------------
Michael Ionata
/s/ Arthur B. Laffer Director March 30, 2001
- -----------------------
Arthur B. Laffer
Director March __, 2001
- -----------------------
Ronald W. Pero
/s/ Per-Olof Soderberg Director March 30, 2001
- -----------------------
Per-Olof Soderberg
/s/ Gerald A. Eppner Director March 30, 2001
- -----------------------
Gerald A. Eppner
-27-
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
3.1 Restated Certificate of Incorporation of the Registrant.*
3.2 By-Laws of the Registrant.*
3.3 Certificates of Amendment of Certificate of Incorporation,
dated June 21, 1995 and November 15, 1996.**
4.1 Representatives' Warrant Agreement (including form of
Representatives' Warrant Certificate), dated August 26, 1993,
between the Company and RAS Securities Corp.*
4.2 Warrant Agreement (including form of Warrant Certificate),
dated August 26, 1993, between the Company and American
Stock Transfer & Trust Company.*
10.1 Patent License Agreement dated as of October 7, 1991 between
Preventive Medicine Institute and Bio-Screen, Inc.*
10.2 Amended and Restated Stock Incentive Plan of Registrant
dated as of May 15, 1993.*
10.3 Employment Agreement, dated as of April 4, 1997, between
Registrant and Dr. Ronald W. Pero. ***
10.4 Executive Employment Agreement, dated as of October 9, 1993,
between Registrant and Bjorn Nordenvall, M.D.,
Ph.D.+
10.5 Consulting Agreement, dated as of October 9, 1995, between
OXiGENE (Europe) AB and B. Omentum Consulting AB. +
10.6 Consulting Agreement, dated as of August 1, 1995, between
Registrant and IPC Nordic A/S. +
10.7 OXiGENE 1996 Stock Incentive Plan, as amended. ++
10.8 Collaborative Research Agreement, dated as of August 1,
1997, between the Registrant and Boston Medical Center
Corporation. ***
10.9 Technology Development Agreement, dated as of May 27, 1997,
between the Registrant and the Arizona Board of Regents,
acting for and on behalf of Arizona State University. ***
10.10 Office Lease, dated February 28, 2000, between Registrant
and Charles River Business Center Associates, L.L.C.
10.11 Consulting Agreement, dated as of May 1, 1998, between
Registrant and Dr. Claus Moller. ****
10.12 Research Collaboration and License Agreement, dated as of
December 15, 1999, between OXiGENE Europe AB and
Bristol-Myers Squibb Company. +++
23 Consent of Ernst & Young, LLP.
-28-
99.1 U.S. Patent Number 5,204,241, issued April 20, 1994,
registered to Ronald W. Pero, regarding
glutathione-s-transferase Mu as a measure of drug
resistance. ++
99.2 U.S. Patent Number 5,340,565, issued August 23, 1994,
registered to Ronald W. Pero, regarding tumor or cancer cell
killing therapy and agents useful therefor. ++
99.3 U.S. Patent Number 5,482,833, issued January 9, 1996,
registered to Ronald W. Pero and Daniel G. Miller,
regarding a test to determine the predisposition or
susceptibility to DNA-associated diseases. ++
99.4 International Application Published under the Patent
Cooperation Treaty (PCT) Number WO96/14565, published May 17,
1996, registered to Ronald W. Pero, regarding a method of
testing immune competency. ++
- -------------------------------
* Incorporated by reference to the Registrant's Registration
Statement on Form S-1 (file no. 33-64968) and any
amendments thereto.
** Incorporated by reference to the Registrant's Annual Report
on Form 10-K for fiscal year ended December 31, 1996.
*** Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997.
**** Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999.
+ Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995.
++ Incorporated by reference to the Registrant's Registration
Statement on Form S-8 (file no. 333-92747) and any
amendments thereto.
+++ Incorporated by reference to the Registrant's Current Report
on Form 8-K, filed on December 28, 1999.
-29-
Form 10-K Item 14(a)(1)
OXiGENE, Inc.
List of Consolidated Financial Statements
The following consolidated financial statements of OXiGENE, Inc. are included in
Item 8:
Report of Independent Auditors F- 2
Consolidated Balance Sheets--December 31, 1999 and 2000 F- 3
Consolidated Statements of Operations--Years Ended
December 31, 1998, 1999 and 2000 F- 4
Consolidated Statements of Stockholders' Equity--Years Ended December 31,
1998, 1999, and 2000 F- 5
Consolidated Statements of Cash Flows--Years Ended
December 31, 1998, 1999 and 2000 F- 6
Notes to Consolidated Financial Statements F- 7
Schedules for which provision is made in the applicable accounting regulation of
the Securities and Exchange Commission are not required under the related
instructions or are inapplicable and, therefore, have been omitted.
F-1
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
OXiGENE, Inc.
We have audited the accompanying consolidated balance sheets of OXiGENE, Inc.
(the "Company") as of December 31, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 2000. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of OXiGENE, Inc. at
December 31, 2000 and 1999, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31, 2000
in conformity with accounting principles generally accepted in the United
States.
ERNST & YOUNG LLP
New York, New York
January 30, 2001
F-2
OXiGENE, Inc.
Consolidated Balance Sheets
December 31
1999 2000
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 30,447,803 $ 27,062,762
Available-for-sale security (Note 4) - 548,738
Accounts receivable--sublicense agreement (Note 1) 9,250,000 -
Prepaid expenses 338,750 287,033
Interest receivable 207,453 277,603
Other 769,713 61,381
------------ ------------
Total current assets 41,013,719 28,237,517
Furniture, fixtures and equipment, at cost 221,826 827,117
Accumulated depreciation (114,375) (173,417)
------------ ------------
107,451 653,700
License agreements, net of accumulated amortization of $40,639 and
$263,174 at December 31, 1999 and 2000, respectively (Note 4) 1,458,957 2,236,422
Deposits 79,600 101,603
------------ ------------
Total assets $ 42,659,727 $ 31,229,242
============ ============
Liabilities and stockholders' equity
Current liabilities:
Amount payable for license agreement--current (Note 5) $ 224,697 $ 250,943
Accrued expenses:
Research and development expenses 1,130,905 687,400
Other accrued expenses 447,189 498,421
Other payables 824,629 494,063
------------ ------------
Total current liabilities 2,627,420 1,930,827
Amount payable under license agreement--noncurrent (Note 5) 951,519 707,316
Deferred licensing revenue (Note 1) 7,978,082 7,444,749
Commitments (Notes 4 and 5)
Stockholders' equity (Note 2):
Common stock, $.01 par value:
Authorized shares--60,000,000 shares at December 31, 1999 and
2000; issued and outstanding shares-- 11,261,268 shares at
December 31, 1999; 11,375,593 shares at
December 31, 2000 112,613 113,736
Common stock issuable - 369,656
Additional paid-in capital 81,556,261 81,984,525
Accumulated deficit (47,414,486) (56,501,932)
Accumulated other comprehensive income (loss) 472,610 (972,790)
Notes receivable (2,288,733) (3,609,356)
Deferred compensation (1,335,559) (237,489)
------------ ------------
Total stockholders' equity 31,102,706 21,146,350
------------ ------------
Total liabilities and stockholders' equity $ 42,659,727 $ 31,229,242
============ ============
See accompanying notes.
F-3
OXiGENE, Inc.
Consolidated Statements of Operations
Year ended December 31
1998 1999 2000
------------ ------------ ------------
Revenues
Licensing revenue (Note 1) $ - $ 1,271,918 $ 1,694,944
Interest income 1,997,991 1,340,738 1,921,961
------------ ------------ ------------
1,997,991 2,612,656 3,616,905
Expenses
Costs relating to licensing revenue (Note 1) - 1,250,000 1,161,612
Amortization of license agreement (Note 1) - 40,639 222,536
Research and development (Note 4) 10,358,913 8,397,799 8,057,671
General and administrative (including related party
transactions of approximately $631,000,
$821,000 and $554,000 in 1998, 1999 and 2000,
respectively) (Note 6) 3,135,871 3,336,463 3,160,489
Interest expense - 36,620 102,043
------------ ------------ ------------
Total expenses 13,494,784 13,061,521 12,704,351
------------ ------------ ------------
Net loss $(11,496,793) $(10,448,865) $ (9,087,446)
============ ============ ============
Basic and diluted net loss per common share $ (1.13) $ (1.02) $ (0.81)
Weighted-average number of common shares outstanding 10,200,567 10,273,902 11,181,426
See accompanying notes.
F-4
OXiGENE, Inc.
Consolidated Statements of Stockholders' Equity
Additional
Common Stock, Common Stock Paid-in
.01 Par Value Issuable Capital
--------------------------------------------------------------------------------
Shares Amounts Shares Amounts
--------------------------------------------------------------------------------
Balance at December 31, 1997 10,185,765 $ 101,858 - $ - $ 65,348,603
Net loss for 1998 - - - - -
Foreign currency translation
adjustment for 1998 - - - - -
Comprehensive loss - - - - -
Issuance of common stock upon
exercise of options and warrants 21,284 213 - - 125,807
Accrued stock appreciation rights - - - - (334,881)
Options issued for services - - - - 3,261,197
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1998 10,207,049 102,071 - - 68,400,726
Net loss for 1999 - - - - -
Foreign currency translation
adjustment for 1999 - - - - -
Comprehensive loss - - - - -
Issuance of common stock upon
exercise of options and warrants 1,045,337 10,453 - - 12,511,385
Issuance of common stock upon exercise
of stock appreciation rights 987 10 - - 9,490
Accrued stock appreciation rights - - - - 208,360
Issuance of common stock for
services at $9.50 per share 7,895 79 - - 74,921
Options issued for services - - - - 351,379
provided by nonemployees
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1999 11,261,268 112,613 - - 81,556,261
Net loss for 2000 - - - - -
Unrealized loss from
available-for-sale security - - - - -
Foreign currency translation
adjustment for 2000 - - - - -
Comprehensive loss - - - - -
Issuance of common stock upon
exercise of options and warrants 105,716 1,057 42,000 369,656 1,307,352
Issuance of common stock upon exercise
of stock appreciation rights 6,609 66 - - 148,634
Accrued stock appreciation rights - - - - (385,106)
Options issued for services
provided by non-employees - - - - (642,616)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 2000 11,373,593 $ 113,736 42,000 $ 369,656 $ 81,984,525
============ ============ ============ ============ ============
Accumulated
Other Total
Accumulated Comprehensive Notes Deferred Stockholders'
Deficit Income (Loss) Receivable Compensation Equity
--------------------------------------------------------------------------------
Balance at December 31, 1997 $(25,468,828) $ 219,636 $ - $ - 40,201,269
Net loss for 1998 (11,496,793) - (11,496,793)
Foreign currency translation
adjustment for 1998 - 106,252 - - 106,252
------------
Comprehensive loss - - - - (11,390,541)
------------
Issuance of common stock upon
exercise of options and warrants - - 126,020
Accrued stock appreciation rights - - - - (334,881)
Options issued for services - - - (1,671,250) 1,589,947
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1998 (36,965,621) 325,888 - (1,671,250) 30,191,814
Net loss for 1999 (10,448,865) - - - (10,448,865)
Foreign currency translation
adjustment for 1999 - 146,722 - - 146,722
------------
Comprehensive loss - - - - (10,302,143)
------------
Issuance of common stock upon (2,288,733) - -
exercise of options and warrants - - - - 10,233,105
Issuance of common stock upon exercise
of stock appreciation rights - - - - 9,500
Accrued stock appreciation rights - - - - 208,360
Issuance of common stock for
services at $9.50 per share - - - - 75,000
Options issued for services
provided by nonemployees - - - 335,691 687,070
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1999 (47,414,486) 472,610 (2,288,733) (1,335,559) 31,102,706
Net loss for 2000 (9,087,446) - - - (9,087,446)
Unrealized loss from
available-for-sale security - (1,451,262) - - (1,451,262)
Foreign currency translation
adjustment for 2000 - 5,862 - - 5,862
------------
Comprehensive loss - - - - (10,532,846)
------------
Issuance of common stock upon exercise
of options and warrants - - (1,320,623) - 357,442
Issuance of common stock upon exercise
of stock appreciation rights - - - - 148,700
Accrued stock appreciation rights - - - - (385,106)
Options issued for services
provided by non-employees - - - 1,098,070 455,454
------------ ------------ ------------ ------------ ------------
Balance at December 31, 2000 $(56,501,932) $ (972,790) $ (3,609,356) $ (237,489) $ 21,146,350
============ ============ ============ ============ ============
See accompanying notes.
F-5
OXiGENE, Inc.
Consolidated Statements of Cash Flows
Year ended December 31
1998 1999 2000
------------------------------------------------
Operating activities
Net loss $(11,496,793) $(10,448,865) $ (9,087,446)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation 61,622 16,274 79,968
Abandonment of furniture, fixtures and equipment 3,903 97,560 5,403
Compensation related to issuance of warrants,
options and stock appreciation rights 1,255,066 979,930 219,048
Amortization of deferred licensing revenue - (21,918) (533,333)
Amortization of license agreements - 40,639 222,536
Changes in operating assets and liabilities:
Accounts receivable--license agreement - (1,250,000) 9,250,000
Prepaid expenses and other current assets (297,037) (352,593) 692,734
Accounts payable, accrued expenses and
other payables 1,917,412 (372,048) (665,665)
------------ ------------ ------------
Net cash (used in) provided by operating
activities (8,555,827) (11,311,021) 183,245
------------ ------------ ------------
Investing activities
Investment in available-for-sale security - - (2,000,000)
Amount paid for license agreements - (323,380) (1,217,957)
Deposits - - (22,003)
Purchase of furniture, fixtures and equipment (41,349) (21,361) (636,900)
------------ ------------ ------------
Net cash used in investing activities (41,349) (344,741) (3,876,860)
------------ ------------ ------------
Financing activities
Proceeds from issuance of common stock 126,020 10,233,105 357,442
------------ ------------ ------------
Net cash provided by financing activities 126,020 10,233,105 357,442
------------ ------------ ------------
Effect of exchange rate on changes in cash 91,028 113,926 (48,868)
------------ ------------ ------------
Net decrease in cash and cash equivalents (8,380,128) (1,308,731) (3,385,041)
Cash and cash equivalents at beginning of period 40,136,662 31,756,534 30,447,803
------------ ------------ ------------
Cash and cash equivalents at end period $ 31,756,534 $ 30,447,803 $ 27,062,762
============ ============ ============
Supplemental Disclosure
Interest paid $ - $ 36,620 $ 95,303
============ ============ ============
See accompanying notes.
F-6
OXiGENE, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
1. Description of Business and Significant Accounting Policies
Description of Business
OXiGENE, Inc. (the "Company") is a biopharmaceutical company developing a
diverse portfolio of products to combat cancer and other major diseases. The
Company was in the development stage through December 15, 1999.
On December 15, 1999, the Company entered into a Research Collaboration and
License Agreement with a pharmaceutical company, to sub-license the rights to
certain patent rights and other know-how and technology to which the Company had
an exclusive license (the "Sub-license Agreement"). Pursuant to the terms of the
Sublicense Agreement, the pharmaceutical company will pay a nonrefundable
license fee, reimburse certain expenses incurred by the Company and fund future
research to be performed by the Company based on a research program determined
by a joint development committee. In addition, the pharmaceutical company will
pay additional amounts upon certain milestones being reached and royalties on
future net sales of products.
Principles of Consolidation
The financial statements include the accounts of the Company and its
wholly-owned subsidiary in Sweden, OXiGENE (Europe) AB. OXiGENE (Europe) AB
manages and controls the Company's research and development work, and monitors
European clinical trials. All material intercompany balances and transactions
have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
The nonrefundable fee paid under the sublicense agreement is being recognized as
licensing revenue on a straight-line basis over the term the sublicense
agreement. Licensing revenue for the reimbursement of costs is recognized as
costs are incurred.
License Agreement
The present value of the amount payable under the license agreement (see Note 4)
has been capitalized and is being amortized over the term of the agreement
(approximately 15.5 years).
Depreciation
Furniture, fixtures and equipment are recorded at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the assets,
which is principally seven years.
F-7
OXiGENE, Inc.
Notes to Consolidated Financial Statements (continued)
1. Description of Business and Significant Accounting Policies (continued)
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments with a maturity of
three months or less when purchased to be cash equivalents.
At December 31, 2000 and 1999, substantially all of cash and cash equivalents
was deposited in one financial institution.
Available-for-Sale Security
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses, net of tax, if any, reported as other comprehensive income
(loss) in shareholders' equity. Realized gains and losses and declines in value
judged to be other-than-temporary on available-for-sale securities are included
in investment income. The cost of securities sold is based on the specific
identification method. Interest and dividends on securities classified as
available-for-sale are included in investment income. During 1998 and 1999, the
Company had no available-for-sale securities. During 2000, it acquired one such
security (see Note 4).
Foreign Currency Translation
Assets and liabilities of the subsidiary are translated at year-end rates and
income and expenses are translated at average exchange rates prevailing during
the year. Translation adjustments arising from differences in exchange rates
from period to period have been reported as other comprehensive income in
stockholders' equity.
Patents and Patent Applications
The Company has filed applications for patents in connection with technologies
being developed. The patent applications and any patents issued as a result of
these applications are important to the protection of the Company's technologies
that may result from its research and development efforts. The pharmaceutical
industry is highly competitive and patents may be challenged from time to time.
The Company intends to vigorously defend its issued patents and may therefore
incur significant costs in the defense of the patents and related technologies.
Costs associated with the patents and patent applications are expensed as
incurred.
Income Taxes
The Company accounts for income taxes based upon the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS
109"). Under SFAS 109, the liability method is used for accounting for income
taxes, and deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities.
Net Loss Per Share
Basic and diluted net loss per share was calculated in accordance with the
provisions of Statement of Financial Accounting Standards No. 128, Earnings Per
Share, by dividing the net loss per share by the weighted-average number of
shares outstanding, excluding an insignificant number of antidilutive restricted
shares. All options and warrants issued by the Company were antidilutive and,
accordingly, excluded from the calculation of weighted-average shares.
F-8
OXiGENE, Inc.
Notes to Consolidated Financial Statements (continued)
1. Description of Business and Significant Accounting Policies (continued)
Stock-Based Compensation
The Company accounts for stock options and stock appreciation rights granted to
employees in accordance with APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations because the Company believes the
alternative fair value accounting provided for under Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS
123"), requires the use of option valuation models that were not developed for
use in valuing stock options. The Company also has issued options to
nonemployees for services provided to the Company. Such options have been
accounted for at fair value in accordance with the provisions of SFAS 123 and
the Emerging Issues Task Force consensus in Issue No. 96-18, Accounting for
Equity Instruments That are Issued to Other Than Employees for Acquiring, or in
Conjunction With Selling Goods or Services. Such compensation expense is
recognized based on the vested value of the compensation cost at the respective
balance sheet dates.
Comprehensive Income (Loss)
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("SFAS 130"), establishes rules for the reporting and display of
comprehensive income (loss) and its components and requires unrealized gains or
losses on the Company's available-for-sale securities and the foreign currency
translation adjustments to be included in other comprehensive income (loss).
Accumulated other comprehensive income (loss) consists of unrealized loss on
available for sale security and accumulated foreign currency translation
adjustments at December 31, 2000 and accumulated foreign currency translation
adjustments at December 31, 1999.
Recent Accounting Pronouncement
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin 101 ("SAB 101"), Revenue Recognition in Financial
Statements, which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC. SAB 101, as amended, was
effective no later than the fourth fiscal quarter of fiscal years beginning
after December 15, 1999 and requires companies to report any changes in revenue
recognition as a cumulative change in accounting principle at the time of
implementation in accordance with Accounting Principles Board Opinion No. 20,
Accounting Changes. SAB 101 had no effect on the Company's revenue recognition
policies.
F-9
OXiGENE, Inc.
Notes to Consolidated Financial Statements (continued)
2. Stockholders' Equity
Options and Warrants
The following is a summary of the Company's stock option, warrant and stock
appreciation rights activity:
Number of Options, Warrants and Stock Appreciation Rights
Nonqualified Stock Stock Incentive Stock Appreciation
Options Options Rights Stock Warrants
----------------------------------------------------------------------------
Balance at December 31, 1997 1,025,972 148,362 49,612 1,063,634
Granted during 1998 240,594 - - -
Exercised during 1998 (20,000) - - (1,284)
Canceled during 1998 (47,500) (6,000) - (115,800)
Adjustment for options repriced
during 1998 (114,585) (3,049) - -
---------- ---------- ---------- ----------
Balance at December 31, 1998 1,084,481 139,313 49,612 946,550
Granted during 1999 254,925 - - -
Exercised during 1999 (238,750) (10,831) (4,000) (795,756)
Canceled during 1999 (10,000) - - (150,794)
---------- ---------- ---------- ----------
Balance at December 31, 1999 1,090,656 128,482 45,612 -
Granted during 2000 313,130 - - 10,764
Exercised during 2000 (136,952) - (10,000) (10,764)
Canceled during 2000 (100,000) - - -
---------- ---------- ---------- ----------
Balance at December 31, 2000 1,166,834 128,482 35,612 -
========== ========== ========== ==========
F-10
OXiGENE, Inc.
Notes to Consolidated Financial Statements (continued)
2. Stockholders' Equity (continued)
Weighted-Average Price of Options, Warrants and
Stock Appreciation Rights
Nonqualified Stock Incentive Stock Appreciation
Stock Options Options Rights Stock Warrants
------------------------------------------------------------------------------
Balance at December 31, 1997 $ 20.76 $ 11.43 $ 7.26 $ 12.63
Granted during 1998 9.99 - - -
Exercised during 1998 5.44 - - 13.41
Canceled during 1998 28.20 28.81 - 10.92
Balance at December 31, 1998 10.50 9.44 7.26 12.93
Granted during 1999 11.95 - - -
Exercised during 1999 9.08 8.94 7.25 12.83
Canceled during 1999 32.13 - - 13.41
Balance at December 31, 1999 10.95 9.48 7.26 -
Granted during 2000 9.26 - - 13.41
Exercised during 2000 10.03 - 7.63 13.41
Canceled during 2000 28.81 - - -
Balance at December 31, 2000 9.07 9.48 7.16 -
Options, Warrants and Stock Appreciation Rights Exercisable
Stock
Nonqualified Stock Incentive Appreciation
Stock Options Options Rights Stock Warrants
----------------------------------------------------------------------------
December 31, 1997:
Exercisable 445,814 129,519 49,612 1,063,634
Weighted-average exercise price $ 10.07 $ 7.01 $ 7.26 $ 12.63
December 31, 1998:
Exercisable 401,846 123,988 49,612 946,550
Weighted-average exercise price $ 8.40 $ 9.02 $ 7.26 $ 12.93
December 31, 1999:
Exercisable 649,535 128,482 45,612 -
Weighted-average exercise price $ 10.22 $ 9.48 $ 7.26 $ -
December 31, 2000:
Exercisable 718,715 128,482 35,612 -
Weighted-average exercise price $ 8.95 $ 9.48 $ 7.16 $ -
F-11
OXiGENE, Inc.
Notes to Consolidated Financial Statements (continued)
2. Stockholders' Equity (continued)
Options and Stock Appreciation Rights Outstanding
Stock Stock
Nonqualified Incentive Appreciation
Stock Options Options Rights
---------------------------------------------------
December 31, 2000:
Exercise prices ranging from $5.50 per share to $8.25 per share:
Outstanding 476,505 115,000 35,612
Weighted-average exercise price $ 6.37 $ 8.00 $ 7.16
Weighted-average remaining contractual life 6.0 years 3.0 years 3.4 years
Exercisable 328,500 115,000 35,612
Weighted-average exercise price $ 5.96 $ 8.00 $ 7.16
Exercise prices ranging from $8.50 per share to $12.75 per share:
Outstanding 604,186 - -
Weighted-average exercise price $ 9.85 $ - $ -
Weighted-average remaining contractual life 8.1 years - -
Exercisable 313,697 - -
Weighted-average exercise price $ 9.65 $ - $ -
Exercise prices ranging from $15.00 per share to $22.13 per share:
Outstanding 86,143 13,482 -
Weighted-average exercise price $18.54 $22.13 $ -
Weighted-average remaining contractual life 8.3 years 5.5 years -
Exercisable 76,518 13,482 -
Weighted-average exercise price $18.99 $22.13 $ -
Stock Option Plans
During 1992, the Board of Directors implemented a Stock Incentive Option Plan
(the "Plan"). The Plan, which was amended in 1993, provided for the grant of
options to purchase up to 1,166,900 shares of common stock to any officer,
director and employee of the Company upon the terms and conditions (including
price, exercise date and number of shares) determined by the Board of Directors
or a committee selected by the Board of Directors to administer the Plan. The
Plan provided for the issuance of stock appreciation rights.
Under the Plan, the exercise price determined by the Board of Directors or
committee must be at least 100% of the fair market value of the Company's common
stock as of the date of the grant. Upon termination of employment, any granted
option, vested or unvested, shall, to the extent not previously exercised,
terminate except under certain conditions as outlined in the Plan. The options
granted under the Plan are generally exercisable at specific dates over a
ten-year period.
In 1996, the Company's stockholders approved the OXiGENE 1996 Stock Incentive
Plan (the "1996 Plan"). Certain directors, officers and employees of the Company
and its subsidiary and consultants and advisors thereto may be granted options
to purchase shares of common stock of the Company. Under the terms of the 1996
Plan, "incentive stock options" (ISOs) within the meaning of Section 422 of the
Internal Revenue Code, "nonqualified stock options" (NQSOs) and stock
appreciation rights may be granted. A maximum of 1,500,000 shares may be the
subject of ISOs, NQSOs and stock appreciation rights under the 1996 Plan.
F-12
OXiGENE, Inc.
Notes to Consolidated Financial Statements (continued)
2. Stockholders' Equity (continued)
In 1998, the Company extended the term of certain options and stock appreciation
rights (see below) issued to employees. Such options and stock appreciation
rights expired in May 1998 and were extended to June 1999. In the fourth quarter
of 1998, the Company recorded compensation expense of approximately $650,000
relating to this extension.
On December 14, 1998, the Company repriced certain options issued to employees,
directors and members of the Scientific Advisory Board. Pursuant to the
revision, the number of options issued to these employees was reduced by 117,634
and the exercise price was reduced to $8.93 per share (market value on December
14, 1998) and $10.00 per share. However, the term of the options was not
revised.
In 2000, 1999 and 1998, the Company also recorded stock-based compensation
expense of approximately $455,000, $687,000 and $939,000, respectively, in
connection with other options issued to non-employees.
At December 31, 2000, the Company has committed to grant additional options to
employees and non-employees to purchase 95,600 shares of common stock (42,600
shares and 53,000 shares, respectively) as follows: 2001 - 38,700; 2002 -
38,700; and 2003 - 18,200. The exercise price of these options will be equal to
the fair value of the Company's common stock on date of grant and generally vest
one year from date of grant. In addition, the Company has a commitment to issue
30,000 shares of common stock to an officer upon the consummation of a strategic
alliance by the Company in connection with the development and marketing of
certain of its products under development. The exercise price of these options
will be the fair value of the Company's common stock on the day the Board
authorizes such alliance.
Stock Appreciation Rights
From 1993 through 1995, the Board of Directors granted stock appreciation rights
to 77,000 shares at exercise prices ranging from $5.88 to $7.63. Stock
appreciation rights expire ten years from date of grant.
In 1999 and 2000, stock appreciation rights to 4,000 and 10,000 shares were
exercised when the market values of the Company's common stock exceeded the
exercise price of the stock appreciation rights and 987 and 6,609 shares,
respectively, were issued.
The Company records a charge for financial reporting purposes when the market
value of the common stock exceeds the exercise price of the stock appreciation
rights. The charge is adjusted to reflect subsequent changes in market value.
Because stock appreciation rights are satisfied, upon exercise, only by the
distribution of shares of common stock of the Company, the charge related to
unexercised stock appreciation rights is credited to additional paid-in capital.
The market value of the Company's common stock at December 31, 2000 ($5.88) was
less than the market value at December 31, 1999 ($15.63) and, accordingly, the
charge previously recorded for financial reporting purposes was decreased by
approximately $385,000 to reflect the decline in value of the unexercised stock
appreciation rights at December 31, 2000.
Stock Warrants
During 1993, the Company completed an initial public offering of 1,500,000 units
at $6.00 per unit and an over-allotment issuance of 105,000 units at $6.00 per
unit. Each unit consists of one share of the Company's common stock and one
warrant (the "Public Warrant"). Each warrant was exercisable for one share of
the Company's common stock at a price of $7.00 per share during the first year
of exercisability. Thereafter, the exercise price increased each year by $2.00.
In connection with this offering, the Company sold to the Underwriters, for
nominal consideration, 150,000 Warrants (the "Underwriters' Warrants"). The
Underwriters' Warrants were initially exercisable at a price of $9.90 per unit
for a period of four years, commencing August 26, 1994. The shares of common
stock and warrants issuable upon the exercise of the Underwriters' Warrants are
identical to those included
F-13
OXiGENE, Inc.
Notes to Consolidated Financial Statements (continued)
2. Stockholders' Equity (continued)
in the units offered in the initial public offering except that the warrants
contained in the Underwriters' Warrants were initially exercisable to purchase
one share of common stock at $11.55. In January 1997, to comply with
anti-dilution provisions, the number of shares issuable upon the exercise of the
Public Warrants and Underwriters' Warrants were revised to 1,717,350 and
163,500, respectively.
The exercise prices of such warrants were also revised to $10.35 (subsequently
increased to $12.35 and $14.35 in August 1996 and 1997, respectively) and $8.95
per share, respectively. In addition, the total shares of common stock issuable
upon the exercise of the warrant contained in the Underwriters' Warrants was
increased to 172,500 and the exercise price was revised to $13.69 per share. In
July 1998, the term of the Public Warrants that were due to expire in August
1998 were extended through December 31, 1999. The amended terms of these
warrants include a redemption feature. On December 2, 1999, the Company
announced that it would exercise its right to redeem the Public Warrants if they
were not exercised prior to December 21, 1999 (the required notice period per
the warrant agreement). Public Warrants to purchase 755,756 shares of common
stock were exercised in 1999.
In addition, the Company has issued warrants to directors and other individuals
of which warrants to purchase 40,000 shares that were outstanding as December
31, 1998 were exercised in 1999. There were no Public Warrants and Underwriters'
Warrants outstanding at December 31, 1999 and 2000.
Notes Receivable and Other
The holders of certain stock options exercised such options by the presentation
to the Company of nonrecourse promissory notes. Such options could be exercised
only by the presentation of such nonrecourse promissory notes. In accordance
with the terms of the promissory notes, the number of shares and the exercise
price payable for the shares were fixed upon the exercise of the options. The
shares vest over periods ranging from 3 to 5 years.
In 1999, the Company issued 7,875 shares as consideration for research and
development services. Such shares were valued at their fair market value which
amounted to approximately $75,000.
Common Stock Reserved for Issuance
As of December 31, 2000, the Company has reserved approximately 1,796,000 shares
of its common stock for issuance in connection with stock options, stock
appreciation rights and warrants.
Stock-Based Compensation
Pro forma information regarding net loss and loss per share is required by SFAS
123, and has been determined as if the Company had accounted for its employee
stock options and stock appreciation rights under the fair value method of SFAS
123. The fair value for these options and stock appreciation rights was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions for 1998, 1999 and 2000:
Assumption 1998 1999 2000
- --------------------------------------------------------------------------------------------------------
Risk-free rate 4.80% 6.25% 6.08%
Dividend yield 0.00% 0.00% 0.00%
Volatility factor of the expected market price of the Company's
common stock .858 .762 .813
Average life 4 years 4 years 4 years
F-14
OXiGENE, Inc.
Notes to Consolidated Financial Statements (continued)
2. Stockholders' Equity (continued)
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options and stock appreciation rights have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options and stock appreciation rights.
For purposes of pro forma disclosures, the estimated fair value of the options
and stock appreciation rights is amortized to expense over the vesting period of
the options and stock appreciation rights. The Company's pro forma information
follows:
1998 1999 2000
-------------------------------------------------
Pro forma net loss $(13,900,000) $(13,200,000) $(10,100,000)
Pro forma net loss per share $(1.36) $(1.29) $(0.91)
The weighted-average fair value of options granted during the years ended
December 31, 1998, 1999 and 2000 were $7.00, $7.11 and $5.69, respectively.
3. Income Taxes
At December 31, 2000, the Company had net operating loss carryforwards of
approximately $76,800,000 for U.S. and foreign income tax purposes, $45,900,000
expiring for U.S. purposes through 2020. The utilization of approximately
$2,500,000 of such U.S. net operating losses is subject to an annual limitation
pursuant to Section 382 of the Internal Revenue Code of approximately $350,000.
Components of the Company's deferred tax asset at December 31, 1999 and 2000 are
as follows:
1999 2000
-----------------------------
Net operating loss carryforwards $ 22,303,000 $ 25,479,000
Compensatory stock options, warrants and stock
appreciation rights 1,018,000 1,046,000
Unrealized loss on available-for-sale security - 581,000
------------ ------------
Total deferred tax asset 23,321,000 27,106,000
------------ ------------
Valuation allowance (23,321,000) (27,106,000)
------------ ------------
Net deferred tax asset $ - $ -
============ ============
The change in valuation allowance amounted to increases of approximately
$3,130,000 and $3,145,000 for the years ended 1998 and 1999, respectively.
F-15
OXiGENE, Inc.
Notes to Consolidated Financial Statements (continued)
4. Joint Venture Agreement
On May 17, 2000, the Company entered into a joint venture agreement with
Peregrine Pharmaceutical Inc. ("Peregrine", formerly Techniclone Corporation),
forming ARCUS Therapeutics, LLC ("ARCUS") to develop and commercialize certain
technologies. Under the terms of the agreement, Peregrine and the Company will
supply intellectual property and a license to use certain compounds,
respectively, to the joint venture.
Based on the development success of the joint venture, the Company will be
required to fund up to $20 million for the development expenses of ARCUS. Any
further funding of the joint venture thereafter would be shared by the partners
on an equal basis. The Company funded approximately $508,000 of the development
costs during the year, which is included in research and development costs.
In addition, the Company has paid Peregrine an upfront licensing fee of $1
million in cash, which is being amortized on a straight-line basis over 5 years.
The Company also purchased $2 million of Peregrine's common stock at the then
fair market value. At December 31, 2000, such investment is classified as an
available for sale security and the unrealized loss of approximately $1,451,000
is reflected as other comprehensive income in stockholders' equity.
Additionally, under the terms of the joint venture agreement, any sublicensing
fees generated within the joint venture will be allocated 75% and 25% to
Peregrine and the Company, respectively, until Peregrine has received $10
million in sublicense fee revenues. Thereafter, the joint venture partners will
share licensing fees on an equal basis. The Company also will be required to pay
Peregrine an additional licensing fee of $1 million in cash and will purchase an
additional $1 million in Peregrine common stock upon the filing of an
Investigational New Drug Application for the first clinical candidate developed
by ARCUS. Furthermore, Peregrine and the Company will share equally any royalty
income or profit from the joint venture.
5. Commitments and Contingencies
Leases
The Company leases premises in facilities in the Boston area and Stockholm,
Sweden. Rent expense for the years ended December 31, 1998, 1999 and 2000 was
approximately $228,000, $202,000 and $251,000, respectively.
The minimum annual rent commitments for the above leases are as follows:
2001 $ 294,000
2002 294,000
2003 295,000
2004 295,000
2005 306,000
Thereafter 1,500,000
----------
$2,984,000
==========
License Agreements
On August 2, 1999, the Company entered into an exclusive license for the
commercial development, use and sale of products or services covered by certain
patent rights owned by a U.S. university (the "License Agreement"). The Company
paid an initial license fee of $200,000 and, is required to pay additional
license fees in ten equal semi-annual installments of $160,000 commencing June
1, 2000. The license agreement and the related obligation have been recorded at
the present value of the amount payable using an effective rate of 8.7%. The
Company also is required to pay royalties on future net sales of products.
F-16
OXiGENE, Inc.
Notes to Consolidated Financial Statements (continued)
5. Commitments and Contingencies (continued)
The Company has another license agreement to patent rights to a certain product.
The agreement requires the Company to pay royalties, as defined, based on
revenues received by the Company in respect to the specified product. This
license expires in October, 2011 and the product has not yet been commercially
developed.
On April 14, 2000, the Company entered into a licensing agreement to license
certain technology to a pharmaceutical company. The agreement entitles the
Company to share proceeds under subsequent sublicensing and receive royalties,
as defined. Under the licensing agreement, the Company is obligated to pay 50%
of development costs up to $200,000.
Litigation
From time-to-time, the Company may be a party to litigation arising from the
normal course of its business. The Company is and will continue to vigorously
defend the actions and claims against it. In the opinion of management, these
claims are either without merit or, based in part on opinions from legal
counsel, will not have a material adverse effect on the Company's financial
position.
6. Related Party Transactions
The Company has consulting agreements with certain organizations whose principal
stockholders are officers of the Company. Consulting fees paid to such
organizations amounted to approximately $330,000, $482,000 and $156,000 for the
years ended December 31, 1998, 1999 and 2000, respectively.
During 1998, 1999 and 2000, the Company incurred approximately $301,000,
$339,000 and $398,000, respectively, in fees for services provided by a law
firm, of which one of the members of the Board of Directors is a partner.
7. Foreign Operations
Summary financial information for assets, liabilities at December 31, 1998, 1999
and 2000 and expenses and net loss for the years then ended related to foreign
operations are as follows:
December 31
1998 1999 2000
----------------------------------------------------
Assets $ 32,512,000 $ 21,043,000 $ 26,644,000
Liabilities 1,600,000 776,000 597,000
Expenses 8,654,000 5,871,000 4,542,000
Net loss 8,639,000 5,865,000 2,535,000
Foreign exchange gains for the years ended December 31, 1998, 1999, and 2000
were not significant.
F-17
OXiGENE, Inc.
Notes to Consolidated Financial Statements (continued)
8. Quarterly Results of Operations (Unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 2000 and 1999:
Three months ended,
--------------------------------------------------------------------------
March 31, June 30, September 30, December 31,
2000 2000 2000 2000
--------------------------------------------------------------------------
Licensing revenue $ 483,000 $ 380,000 $ 384,000 $ 448,000
Interest income 449,000 529,000 499,000 445,000
--------------- ------------- ------------- -------------
Total revenues 932,000 909,000 883,000 893,000
Costs relating to licensing revenue 347,000 249,000 250,000 316,000
Net loss (2,820,000) (1,495,000) (2,689,000) (2,083,000)
Basic and diluted net
loss per share $ (0.25) $ (0.13) $ (0.24) $ (0.19)
Three months ended,
--------------------------------------------------------------------------
March 31, June 30, September 30, December 31,
1999 1999 1999 1999
--------------------------------------------------------------------------
Licensing revenue $ - $ - $ - $ 1,272,000
Interest income 375,000 337,000 312,000 317,000
--------------- ------------- ------------- -------------
Total revenues 375,000 337,000 312,000 1,589,000
Costs relating to licensing revenue - - - 1,250,000
Net loss (1,853,000) (2,444,000) (3,239,000) (2,913,000)
Basic and diluted net
loss per share $ (0.18) $ (0.24) $ (0.32) $ (0.28)
F-18