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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 1-12128
MATRITECH, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2985132
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
330 NEVADA STREET
NEWTON, MASSACHUSETTS 02160
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 928-0820
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
REGISTERED
The Boston Stock Exchange
Common Stock, $.01 Par Value
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
(TITLE OF CLASS)
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. [X] Yes [_] 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 of this Form 10-K or any
amendment to this Form 10-K. [_]
Aggregate market value, as of March 5, 1997, of Common Stock held by non-
affiliates of the registrant: $90,491,223 based on the last reported sale
price on the Nasdaq Stock Market.
Number of shares of Common Stock outstanding on March 5, 1997: 16,041,318.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant intends to file a definitive Proxy Statement pursuant to
Regulation 14A within 120 days of the end of the fiscal year ended December
31, 1996. Portions of such Proxy Statement are incorporated by reference in
Part III of this report.
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PART I
ITEM 1. BUSINESS.
OVERVIEW
Matritech develops, manufactures and markets innovative cancer diagnostic
products based on its proprietary nuclear matrix protein ("NMP") technology.
The nuclear matrix, a three dimensional protein framework within the nucleus
of cells, plays a fundamental role in determining cell type by physically
organizing the contents of the nucleus, including DNA. The Company has
demonstrated that there are differences in the types and amounts of NMPs found
in cancerous and normal tissue and believes the detection of such differences
in NMPs provides important diagnostic information about cellular
abnormalities, including cancer. Using its proprietary NMP technology and
expertise, the Company is developing a series of non-invasive or minimally
invasive cancer diagnostic tests for bladder, colorectal, prostate, cervical
and breast cancer, among others, which the Company believes will be more
accurate and allow for reduced treatment costs and a higher standard of
patient care than currently available tests.
NMP22 Bladder Cancer Test. The Company's first product based on its NMP
technology, the Matritech NMP22/1/ Test Kit for bladder cancer, was approved
for sale in the United States by the U.S. Food and Drug Administration ("FDA")
in July 1996 as a prognostic indicator for the recurrence of bladder cancer.
The NMP22 Test Kit has been commercially available in Europe since 1995 and is
currently being marketed in Asia (excluding Japan) and in many other countries
outside the United States. The Company has retained worldwide manufacturing
rights for the NMP22 Test Kit as well as marketing rights in the United
States. The Company has entered into exclusive distribution agreements for the
NMP22 Test Kit in Japan and China and has additional distribution arrangements
in selected European and other countries worldwide.
Colorectal Cancer Test. The Company has also developed a blood-based test
utilizing its NMP technology for the management of colorectal cancer patients.
In October 1996, the Company began clinical trials of this product for the
purpose of providing the FDA with data upon which to base approval for the
marketing and sale of this product in the United States. In April 1996,
Matritech reported at the annual meeting of the American Association for
Cancer Research the results of a preliminary study involving over 150 subjects
which showed the clinical sensitivity of carcinoembryonic antigen ("CEA") in
identifying subjects with colon cancer was 42% compared to 67% clinical
sensitivity for the Company's NMP-based test. The Company has retained
worldwide manufacturing and marketing rights for its colorectal cancer assay.
Cervical, Prostate and Breast Cancer Tests. The Company has also identified
NMPs specific to cervical, prostate and breast cancer and is currently
developing diagnostic tests based on its proprietary NMP technology for these
cancers. Matritech is collaborating with Bayer Corporation ("Bayer") on the
development of an automated diagnostic test for cervical cancer. The Company
anticipates beginning a preliminary clinical study for its cervical cancer
diagnostic test during the second half of 1997. The Company plans to develop
additional assays for lung, liver, pancreatic, stomach and renal cancers.
Matritech was incorporated in Delaware in October 1987. The Company's
facilities are located at 330 Nevada Street, Newton, Massachusetts 02160 and
its telephone number is (617) 928-0820.
CANCER DIAGNOSTICS MARKET
The cancer diagnostics market is comprised of several overlapping
categories, each corresponding to a stage in the identification and management
of the disease. The categories are screening, diagnosing, monitoring and
evaluating prognosis. Screening tests and procedures, such as mammograms and
Pap smears, are performed regularly on individuals who may have no evidence of
ill health because the tests are effective in revealing
- --------
/1NMP22(R)/is a registered trademark and NuMA(TM) and Matritech(TM) are
trademarks of Matritech, Inc. All other trademarks used in this report are
the property of their respective owners.
2
hidden, asymptomatic disease. Screening tests do not yield a final diagnosis.
An actual diagnosis of cancer is usually made after microscopic examination of
a tissue biopsy. Following diagnosis, additional tests can be used to monitor
the course of the disease and the patient's response to treatment. These
monitoring tests may be repeated at regular intervals, often every three
months, and may be continued for the life of an individual in order to detect
the recurrence of cancer. In addition, diagnostic tests are also used to
evaluate a patient's prognosis and to select appropriate therapy. Patients
identified as having a high risk of recurrence will be monitored more closely
and may receive more aggressive treatment. Generally cancer diagnostic assays
are not intended for screening or for diagnosis, but are intended to monitor
patients with known disease or to make a prognosis related to the recurrence
of cancer in previously treated patients.
Ideally, a cancer diagnostic assay for use in a clinical laboratory should
be both sensitive and specific. Clinical sensitivity refers to the percentage
of cases in which the assay correctly identifies the presence of disease.
Clinical specificity refers to the percentage of cases in which the assay
correctly identifies the absence of disease. Clinical sensitivity and
specificity percentages reported from studies and trials of cancer diagnostic
products may not be directly comparable, as results may be affected by the
number of subjects studied, variability in the stages of disease present in
the subject population and the demographic composition of the subject
population, among other factors.
Effective in vitro diagnostic assays can reduce the need for more invasive
or expensive procedures for diagnosing cancer, such as surgery, biopsy, bone
scans and in vivo imaging. There are only a limited number of FDA-approved in
vitro cancer diagnostic tests currently available and the relatively low
clinical sensitivity and specificity of these tests have limited their
clinical utility. The Company believes that these tests suffer from inherent
inaccuracies because they detect substances that are only indirectly
correlated with the underlying cancer cells. As a consequence of low clinical
sensitivity, these tests yield false negatives and many patients with cancer
are not diagnosed early enough to receive effective treatment, resulting in
additional costs and morbidity. Conversely, low clinical specificity yields
false positives resulting in unnecessary, expensive and painful treatment of
patients without malignant disease.
NMP TECHNOLOGY
The Company believes that its NMP technology will allow it to develop cost-
effective in vitro assays that are more accurate than those currently
available. The nuclear matrix, a three-dimensional protein framework within
the nucleus of cells, helps organize active genes ("DNA") in the nucleus. In
this way, the nuclear matrix plays a fundamental role in determining cell type
and cell function. Although the specific mechanisms of action are not yet
fully understood, Matritech and independent scientists have demonstrated that
there are differences in the types and amounts of NMPs found in cancerous and
normal tissues and also among different types of normal cells. For example,
during 1993 and 1994, three NMP-related scientific papers were published, two
in Cancer Research and one in the Proceedings of the National Academy of
Sciences, which described NMPs specific to prostate, breast and colon cancer
tissues. These NMPs were shown to be present in 100% of the cancer tissue
specimens examined, but were absent in all of the normal tissue specimens.
Subsequent to these papers, the Company has examined numerous additional
cancer tissue specimens with similar results. Matritech also has demonstrated
that cell death, including cell death related to early tumor development,
results in the release of NMPs into bodily fluids. As a result, elevated
levels of NMPs may be found in the bodily fluids of cancer patients. The
Company is not aware of any other cancer marker or class of markers which
exhibit this level of clinical specificity and sensitivity.
The Company uses its proprietary technology and expertise to identify,
isolate and extract NMPs from cancerous and normal tissues. Following
extraction, the Company's scientists characterize and sequence these cancer-
specific NMPs, which generally are absent, or present at low levels, in the
urine, blood and cells of healthy individuals. The Company then develops
proprietary antibodies to these NMPs and incorporates the antibodies into
industry-standard diagnostic formats, such as blood-based immunoassays.
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The Company's core NMP technology is licensed from Massachusetts Institute
of Technology ("MIT"). Under the current terms of the Company's license from
MIT, the Company's worldwide license is exclusive until the expiration of all
patent rights in 2006, and non-exclusive thereafter. The Company has made
additional advances in NMP technology, has filed its own patent applications
for related protection and has been notified that claims in its patent
identifying colon cancer specific NMPs have been allowed.
MATRITECH'S PRODUCTS AND PRODUCTS UNDER DEVELOPMENT
The Matritech NMP22 Test Kit for Bladder Cancer
In July 1996, Matritech's NMP22 Test Kit for bladder cancer was approved for
sale in the United States by the FDA. The Company is currently marketing this
product through its own sales force in the United States and through
distributors in major markets worldwide, except in Japan where in December
1996 the Company's exclusive distributor submitted data from its clinical
trials in order to obtain regulatory approval for the product. Sales of the
NMP22 Test Kit began in certain countries in Europe in 1995.
The Company conducted an extensive clinical trial of the NMP22 Test Kit
involving more than 1,000 subjects at 13 sites, including bladder cancer
patients, patients with other cancers, patients with non-cancerous urinary
conditions (such as urinary tract infections) and healthy subjects. In this
trial, the NMP22 Test Kit exhibited clinical sensitivity of 70% and clinical
specificity of 79%. Statistical analysis of the data from this trial revealed
that a negative NMP22 test result for urine specimens obtained from a bladder
cancer patient approximately 10 days after transurethral resection of his or
her tumor was over 85% predictive of the absence of bladder cancer in that
patient three to six months after treatment.
The Company believes that the use of the NMP22 Test Kit will enable
urologists to manage bladder cancer patients with less invasive and less
frequent procedures, thereby potentially reducing treatment costs while
maintaining a high standard of patient care. If a bladder cancer patient's
NMP22 value is low (less than or equal to 10 units per milliliter) 10 or more
days after surgery, there is a high probability that the follow-up cystoscopic
examination will not indicate a recurrence of disease. Using this information,
the urologist may decide to postpone this exam in order to reduce the cost,
anxiety and risk to the patient. Similarly, an NMP22 value greater than 10
units per milliliter indicates a higher risk that the follow-up cystoscopic
examination will indicate a recurrence of disease, enabling the urologist to
make more aggressive treatment decisions.
The Company has retained worldwide manufacturing rights for the NMP22 Test
Kit, as well as all marketing rights in the United States. In June 1996, the
Company and its then exclusive distributor in Europe terminated their
distribution agreement for the NMP22 Test Kit. The Company now has entered
into distribution arrangements in selected European and other countries
worldwide.
Colorectal Cancer Product
The Company has also developed and is testing a blood-based test utilizing
its NMP technology for the management of colorectal cancer patients.
The Company has identified certain NMPs that are elevated in blood from
patients with colorectal cancer. The Company has also demonstrated that the
types and amounts of certain NMPs differ between colorectal cancer and normal
colorectal tissues. The Company is using proprietary antibodies to detect one
of these proteins, NuMA, and has developed an assay for colorectal cancer
based on these antibodies. In April 1996, Matritech reported at the annual
meeting of the American Association for Cancer Research the results of a
preliminary study involving over 150 subjects which showed the clinical
sensitivity of CEA in identifying subjects with colon cancer was 42% compared
to 67% clinical sensitivity for the Company's NMP-based test. In October 1996,
the Company began clinical trials of this product for the purpose of providing
the FDA with data upon which to base approval for the marketing and sale of
this product in the United States. The results of this trial will be submitted
to the FDA in order to seek approval to sell the product in the United States.
Following manufacturing
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scale-up and FDA approval for export, the Company intends to introduce the
product into certain countries outside of the United States during the first
half of 1997.
The Company has worldwide manufacturing and marketing rights for its
colorectal cancer assay. In May 1996, the rights of Yamanouchi Pharmaceutical
Co. Ltd., ("Yamanouchi") with respect to this product were terminated. The
Company is seeking distributors for its colorectal cancer test outside the
United States. See "--Strategic Alliances."
Cervical Cancer Product
As part of the Company's collaboration with Bayer to develop a cervical
cancer assay product, Matritech announced in August 1996 the discovery of
three specific NMPs associated with cervical cancer. In September 1996, the
Company also reported the achievement of a milestone under the agreement with
Bayer and subsequently received the related milestone payment. Bayer provided
funding to Matritech for the identification of cervical cancer specific NMPs
and is continuing to fund development of monoclonal antibodies which recognize
malignant and pre-malignant or dysplastic cervical cancer cells. These
antibodies will be used in clinical laboratories, in conjunction with
instruments developed by Bayer, to automate the review and evaluation of
cancerous cervical cells. This system will initially be designed as a
complement to the Pap smear procedure.
Under the terms of the Company's agreement with Bayer, Bayer has the option,
upon payment to Matritech, to acquire exclusive worldwide rights to distribute
the cervical cancer assay for automated systems and non-exclusive worldwide
rights for a manual assay product. Matritech has maintained its worldwide
manufacturing rights to its cervical cancer product. See "--Strategic
Alliances."
Prostate Cancer Product
In collaboration with clinicians at Johns Hopkins University Medical School,
Matritech scientists have identified a nuclear matrix protein present in
elevated amounts in the cells of prostate cancer patients and absent, or
present in low amounts, in normal individuals and those with benign disease.
The Company has developed an antibody, PRO4:216, to this protein which has
been tested by the Johns Hopkins University scientists using prostate
biopsies. The scientists at Johns Hopkins University have reported that the
antibody is clinically useful in differentiating prostate cancer cells from
their normal and benign counterparts. Matritech scientists have confirmed that
this protein is released into the blood and intend to use it as a basis for a
fluid based assay for use in the management of prostate cancer patients.
Matritech has a research agreement with the University of Pittsburgh to
identify specific nuclear matrix proteins for predicting prostate cancer
metastasis. Scientists at the University of Pittsburgh have identified these
types of proteins and have isolated and obtained partial peptide sequence.
Matritech intends to produce specific monoclonal antibodies to these proteins
and develop a blood and/or tissue based prostate cancer test. Matritech
intends to conduct preliminary and clinical trials leading toward a submission
for FDA approval. The Company has retained worldwide manufacturing and
marketing rights for the prostate cancer test.
Breast Cancer Product
The Company has identified certain NMPs present in breast cancer tissue and
absent in normal tissue. Matritech intends to develop antibodies reactive with
these NMPs and evaluate these antibodies on patient blood samples. The Company
intends to select antibodies to be used in assays and conduct clinical trials
to generate data required to apply for FDA approval of such assays. Matritech
believes that the distinctive NMP patterns found in breast cancer cells and
the Company's ability to detect these NMPs in blood may enable it to develop a
more accurate breast cancer blood assay intended to improve patient
management.
The development and marketing of the Company's breast cancer products are
covered by agreements with AB Sangtec Medical ("Sangtec") and Yamanouchi,
which give Sangtec exclusive rights to market the
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Company's breast cancer product in Europe and Yamanouchi exclusive rights to
market the Company's breast cancer product in Japan and Taiwan. The Company
has retained worldwide manufacturing rights for its breast cancer assay, as
well as all marketing rights in the United States. See "--Strategic
Alliances."
Other Cancer Diagnostics Products
In addition to the Company's NMP22 Test Kit and its colorectal, prostate,
cervical and breast cancer products under development, the Company also
intends to develop diagnostic assays based on its proprietary NMP technology
for lung, liver, pancreatic, stomach and renal cancers.
STRATEGIC ALLIANCES
To accelerate the early research and development of its products, the
Company has pursued a strategy of entering into strategic alliances to fund
research and development programs for selected cancer assays. These agreements
typically involve up-front and milestone payments in exchange for the right to
obtain exclusive distribution rights in selected geographical markets. In
order to retain control of its core NMP technology, the Company has not
licensed or sublicensed any of its technology to third-parties. The Company
has retained manufacturing rights for its NMP22 Test Kit and all other
products in development, except for certain rights that could be granted to
certain of its corporate partners if the Company fails to deliver required
quantities of product. Under the terms of these funded development
arrangements and other distribution arrangements discussed below, the
Company's partners purchase finished products or components from Matritech at
prices based on Matritech's list price, local reimbursement rates or the
partners' net selling price.
Konica. In 1994, the Company entered into a distribution agreement with
Konica. The Konica agreement grants exclusive distribution rights in Japan for
the NMP22 Test Kit in exchange for $325,000 in licensing fees. Under the terms
of its agreement with Konica, Matritech will sell NMP22 Test Kits to Konica
for resale in Japan at prices based on Japanese reimbursement rates. Konica is
responsible for obtaining the necessary approvals from the Japanese Ministry
of Health and Welfare ("Koseisho") to import and sell the NMP22 Test Kit.
Clinical trials must be conducted in Japan and the results submitted to
Koseisho prior to obtaining such approvals. Konica submitted clinical trial
data to Koseisho in December 1996. Konica has limited manufacturing rights if
the Company fails to deliver required quantities of test kits.
Bayer. In June 1995, Matritech signed a joint development and distribution
agreement with Bayer and received an initial payment of $150,000. Under the
terms of the agreement, Bayer provided funding to Matritech for the
identification of cervical cancer-specific NMPs and is currently funding the
development of monoclonal antibodies which recognize malignant and pre-
malignant or dysplastic cervical cancer cells. These antibodies will be used
in clinical laboratories, in conjunction with instruments developed by Bayer,
to automate the review and evaluation of cells obtained from cervical smears.
Under the terms of the Company's agreement with Bayer, Bayer has the option,
upon payment to Matritech, to acquire exclusive worldwide rights to distribute
the cervical cancer assay for automated systems and non-exclusive worldwide
rights for a manual assay product. If Bayer exercises its option, it would
purchase components from Matritech and would pay Matritech a percentage of
Bayer's net selling price. In the year ended December 31, 1996, the Company
received $120,000 in milestone payments under this agreement.
Yamanouchi. In 1991, Matritech and Yamanouchi entered into a development and
supply agreement for the development of seven serum assays (breast,
colorectal, lung, liver, pancreatic, stomach and renal cancers) for exclusive
sale by Yamanouchi in Japan and Taiwan. The agreement provides for development
payments to the Company by Yamanouchi to be paid upon the accomplishment of
certain milestones. Matritech has received $1 million in milestone payments to
date. Yamanouchi did not make any payments to the Company in 1996. In May
1996, Yamanouchi's rights with respect to the Company's colorectal cancer test
were terminated. The purchase price for any products distributed by Yamanouchi
will be based on Yamanouchi's net selling price.
Sangtec. In 1990, Matritech and Sangtec, a Swedish company, entered into a
development and supply agreement which provides for the payment by Sangtec to
Matritech of up to $700,000 for the development of
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breast cancer products, of which $60,000 has been paid to Matritech as of
December 31, 1996. The development payments are to be made over time, upon the
successful achievement of certain technical milestones by Matritech and
Sangtec. Sangtec has the exclusive right to market in Europe any breast cancer
serum assay developed under the agreement. The purchase price to be paid to
the Company for any products distributed by Sangtec will be based on Sangtec's
net selling price. Sangtec has limited manufacturing rights if the Company
fails to meet Sangtec's product delivery requirements.
MARKETING AND SALES
The Company has retained all rights to sell all of its products in the
United States, except for products for the automated detection of cervical
cancer, for which Bayer has an option to acquire exclusive rights. Matritech
is selling its NMP22 Test Kit in the United States to clinical laboratories
using its own direct sales force. The Company currently has five full-time
sales representatives. The Company intends to expand this sales force as sales
of the NMP22 Test Kit may warrant or if new products are added. The Company
may use one or more distributors for sales to low-volume customers.
In foreign markets, the Company initially plans to use distributors, but may
establish its own sales offices when international sales warrant such a direct
presence. Matritech currently has funded development and marketing agreements
pursuant to which the Company has granted co-exclusive or exclusive rights to
distribute the resulting products in exchange for product development funding.
See "--Strategic Alliances."
During the fiscal year ended December 31, 1996 the Company received
approximately 16%, 21%, 11% and 13% of its revenue from collaborative research
and development fees, license fees and product sales payments from Medical
Systems, SPA, OmniPharmnet, UroCor, Inc. and Wallace ADL, respectively.
During the fiscal years ended December 31, 1994, 1995 and 1996, 26%, 26.9%
and 24%, respectively, of the Company's total product sales were from the
United States and 74%, 73.1% and 76%, respectively, were from foreign
countries.
THIRD-PARTY REIMBURSEMENT
The Company's ability to successfully commercialize its potential products
will depend in part on the extent to which reimbursement for the cost of such
products will be available from government health administration authorities,
private health insurers and other third-party payors. The Company believes
that FDA approval of a diagnostic product facilitates third-party
reimbursement, but there can be no assurance that reimbursement will be
available for such products or, if available, that it will be adequate.
In the case of private insurance, the reimbursement of any medical device,
whether approved, or for investigational use only or for research use, is at
the sole discretion of the patient's individual carrier. The decision to
reimburse can be made on a case-by-case basis (as is done for research
therapies) or on a system-wide basis (such as screening mammography).
Historically, the decision to reimburse for a new medical procedure is made by
the carrier's medical director or review committee. This group will base their
reimbursement decision on published clinical data and information by the
treating physicians. Even if a procedure has been approved for reimbursement,
there are no assurances that the insurance carrier will continue to reimburse
the procedure.
Health care reform is an area of continuing national attention and a
priority of many governmental officials. Certain reform proposals, if adopted,
could impose limitations on the prices the Company will be able to charge in
the United States for its products or the amount of reimbursement available
for the Company's products from governmental agencies or third-party payors.
MANUFACTURING AND FACILITIES
The Company currently assembles its test kits in its 22,500 square-foot
facility in Newton, Massachusetts and relies on subcontractors for certain
components and processes. The Company's lease is for a term of five years and
expires on December 31, 2000. The annual base rent for each year of the term
is $230,625. The
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Company believes that its current facilities are adequate to satisfy the
Company's needs as it expands its manufacturing capabilities for at least the
next two years, including the initial phases of commercial production.
Thereafter, the Company may be required to establish additional manufacturing
facilities elsewhere. There can be no assurance that the Company will be able
to extend its lease or lease other space on reasonable terms. The Company has
retained all manufacturing rights, except for certain rights that could be
granted to certain of its corporate partners if the Company fails to perform
under its agreements with those corporate partners. See "--Strategic
Alliances."
The Company currently relies on sole suppliers for certain key components
for its NMP22 Test Kit. In the event that the components from such suppliers
should become unavailable for any reason, the Company would seek alternative
sources of supply, which may entail making regulatory submissions and
obtaining regulatory approvals from the FDA or such alternative suppliers.
Although the Company attempts to maintain an adequate level of inventory to
provide for these and other contingencies, should its manufacturing process be
disrupted as a result of a shortage of key components or a revalidation of new
components, there can be no assurance that the Company would be able to meet
its commitments to customers. The Company is also subject to the FDA's GMP
requirements. See "--Government Regulation."
COMPETITION
Matritech is not aware of any other company using NMP technology to develop
diagnostic or therapeutic products. However, competition in the development
and marketing of cancer diagnostics and therapeutics, using a variety of
technologies, is intense.
There are many pharmaceutical companies, biotechnology companies, public and
private universities and research organizations actively engaged in the
research and development of clinical cancer diagnostic products. Many of these
organizations have financial, manufacturing, marketing and human resources
greater than those of the Company. Matritech expects that its diagnostic
products will compete largely on the basis of clinical utility, accuracy
(sensitivity and specificity), ease of use and other performance
characteristics, price, and patent position, as well as on the capabilities of
the Company and its marketing partners.
The Company expects that certain of its assays will compete with existing
FDA-approved assays, including BTA, which was recently approved for monitoring
bladder cancer, CEA, which is used primarily for monitoring colorectal and
breast cancers, PSA, which is used primarily for monitoring and screening
prostate cancer, and TRUQUANT BR RIA, which is used for monitoring breast
cancer. Matritech is also aware of a number of companies exploring the
application of oncogene technology to cancer diagnostics.
A number of companies are attempting to develop automated instruments for
Pap smear analysis that would compete with the cervical cancer product that
the Company is developing with Bayer. These companies are computerizing image
analysis techniques to automate much of the work currently done by
cytotechnologists. To date, two of these instruments have been approved by the
FDA for rescreening Pap smear slides previously identified by a
cytotechnologist as normal. It is not known if or when such instruments will
be approved for initial screening.
The Company's diagnostic products will also compete with more invasive or
expensive procedures such as surgery, bone scans, magnetic resonance imaging
("MRI") and other in vivo imaging techniques. Matritech believes that its
products, if successfully commercialized, will contribute to improved patient
management and lower overall costs, by providing accurate information and, in
some cases, by providing an alternative to these invasive or costly
procedures.
Should the Company decide to develop and seek to market therapeutic
products, competition will be based, among other things, on product efficacy,
safety, reliability, price and patent position as well as the state of the
industry and capabilities of the Company, future marketing partners and
competitors.
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In addition, there can be no assurance that competing diagnostic and
therapeutic products based on other technologies will not be introduced by
other companies and adversely affect the competitive position of the Company.
PATENTS, LICENSES AND TRADE SECRETS
Matritech's diagnostic technology is protected by three United States
patents owned by MIT and expiring in 2006, with corresponding foreign patents
granted and/or patent applications pending in Canada and selected countries in
Europe and the Far East. The NMP technology owned by MIT is licensed to
Matritech worldwide in exchange for royalties payable until the expiration of
underlying patent rights. MIT has licensed its patent rights to Matritech on
an exclusive basis through 2006.
The protection offered by these patents extends to the detection and
measurement of NMPs, or associated nucleic acids, using antibody or gene probe
formats, as well as to certain assay methods exploiting NMPs. To strengthen
its protection of NMP technology in the United States, MIT voluntarily applied
for the reissue of one of its patents and the United States Patent and
Trademark Office has agreed to grant the reissue. Matritech has filed
additional United States patent applications on related NMP advances and
corresponding applications under the Patent Cooperation Treaty designating
Canada, Australia and selected countries in Europe and the Far East. The
Company currently has one United States patent and 11 applications on file in
the United States on these disclosures. The Company intends to file additional
patent applications in the future. The Company believes that any patents that
may issue from its applications will provide competitive protection for its
products after expiration of its license from MIT. The Company also intends to
rely on its unpatented proprietary information to maintain and develop its
commercial position.
GOVERNMENT REGULATION
Diagnostic Products
The medical devices to be marketed and manufactured by the Company are
subject to extensive regulation by the FDA, and, in some instances, by foreign
governments. Pursuant to the Federal Food, Drug and Cosmetic Act of 1976, as
amended, and the regulations promulgated thereunder (the "FDC Act"), the FDA
regulates the clinical testing, manufacture, labeling, distribution, and
promotion of medical devices. Noncompliance with applicable requirements can
result in, among other things, fines, injunctions, civil penalties, recall or
seizure of products, total or partial suspension of production, failure of the
government to grant premarket clearance or premarket approval for devices,
withdrawal of marketing approvals, and criminal prosecution. The FDA also has
the authority to request repair, replacement or refund of the cost of any
device manufactured or distributed by the Company.
In the United States, medical devices and diagnostics are classified into
one of three classes (class I, II, or III) on the basis of the controls deemed
necessary by the FDA to reasonably assure their safety and effectiveness.
Under FDA regulations, class I devices are subject to general controls (for
example, labeling, premarket notification and adherence to GMPs) and class II
devices are subject to general and special controls (for example, performance
standards, postmarket surveillance, patient registries, and FDA guidelines).
Generally, class III devices are those which must receive PMA by the FDA to
ensure their safety and effectiveness (for example, life-sustaining, life-
supporting and implantable devices, or new devices which have not been found
substantially equivalent to legally marketed devices).
Before a new device can be introduced into the market, the manufacturer must
generally obtain marketing clearance through the filing of either a 510(k)
notification or a PMA. A 510(k) clearance will be granted if the submitted
information establishes that the proposed device is "substantially equivalent"
to a legally marketed class I or II medical device, or to a class III medical
device for which the FDA has not called for a PMA. The FDA may determine that
a proposed device is not substantially equivalent to a legally marketed
device, or that additional information or data are needed before a substantial
equivalence determination can be made. A request for additional data may
require that clinical studies of the safety and efficacy of the device be
performed.
9
Commercial distribution of a device for which a 510(k) notification is
required can begin only after the FDA issues an order finding the device to be
"substantially equivalent" to a predicate device. It generally takes from four
to twelve months from submission to obtain a 510(k) clearance, but may take
longer. The FDA may determine that a proposed device is not substantially
equivalent to a legally marketed device, or that additional information is
needed before a substantial equivalence determination can be made.
A PMA application must be filed if a proposed device is not substantially
equivalent to a legally marketed class I or class II device, or if it is a
class III device for which the FDA has called for PMAs. A PMA application must
be supported by valid scientific evidence which typically includes clinical
trial data to demonstrate safety and the effectiveness of the device. The PMA
application must also contain the results of all relevant bench tests,
laboratory and animal studies, a complete description of the device and its
components, and a detailed description of the methods, facilities and controls
used to manufacture the device, as well as proposed labeling.
Upon receipt of a PMA application, the FDA makes a threshold determination
as to whether the application is sufficiently complete to permit a substantive
review. If the FDA determines that the PMA application is sufficiently
complete to permit a substantive review, the FDA will accept the application
for filing. Once the submission is accepted for filing, the FDA begins an in-
depth review of the PMA. An FDA review of a PMA application generally takes
one to two years from the date the PMA application is accepted for filing, but
may take significantly longer. The review time is often significantly extended
as a result of the FDA requiring more information or clarification of
information already provided in the submission. During the review period, an
advisory committee, typically a panel of clinicians and/or other appropriate
experts in the relevant fields, will likely be convened to review and evaluate
the application and provide recommendations to the FDA as to whether the
device should be approved. The FDA is not bound by the recommendations of the
advisory committee but generally follows them. Toward the end of the PMA
review process, the FDA generally will conduct an inspection of the
manufacturer's facilities to ensure that the facilities are in compliance with
applicable GMP requirements.
If the FDA's evaluations of both the PMA application and the manufacturing
facilities are favorable, the FDA will either issue an approval letter or an
approvable letter, which usually contains a number of conditions which must be
met in order to secure final approval for sale of the device. When and if
those conditions have been fulfilled to the satisfaction of the FDA, the
agency will issue a PMA approval letter, authorizing commercial marketing of
the device for certain indications. If the FDA's evaluations of the PMA
application or manufacturing facilities are not favorable, the FDA will deny
approval of the PMA application or issue a "not approvable letter." The FDA
may also determine that additional clinical trials are necessary, in which
case PMA approval may be substantially delayed while additional clinical
trials are conducted and submitted in an amendment to the PMA. The PMA process
can be expensive, uncertain and lengthy and a number of devices for which FDA
approval has been sought by other companies have never been approved for
marketing.
Once a device has successfully completed the PMA approval process,
modifications to the device, its labeling, or manufacturing process may
require approval by the FDA of PMA supplements or new PMAs. Supplements to a
PMA often require the submission of the same type of information required for
an initial PMA, except that the supplement is generally limited to that
information needed to support the proposed change from the product covered by
the original PMA.
Although clinical investigations of most devices are subject to the
investigational device exemption ("IDE") requirements, clinical investigations
of in vitro diagnostic ("IVDs") tests are exempt from the IDE requirements,
including FDA approval of investigations, provided the testing is non-
invasive, does not require an invasive sampling procedure that presents
significant risk, does not introduce energy into a subject, and the tests are
not used as a diagnostic procedure without confirmation of the diagnosis by
another medically established diagnostic product or procedure. IVD
manufacturers must also establish distribution controls to assure that IVDs
distributed for the purposes of conducting clinical investigations are used
only for that purpose. Pursuant to current FDA policy, manufacturers of IVDs
labeled for investigational use only ("IUO") or research use only ("RUO") are
encouraged by the FDA to establish a certification program under which
investigational
10
IVDs are distributed to or utilized only by individuals, laboratories, or
health care facilities that have provided the manufacturer with a written
certification of compliance indicating that (1) the device will be used for
investigational or research purposes only, and (2) results will not be used
for diagnostic purposes without confirmation of the diagnosis under another
medically established diagnostic device or procedure. In addition, the
certification program requirements for IUO products should include assurances
that all investigations or studies will be conducted with approval from an
institutional review board ("IRB"), using an IRB-approved study protocol and
patient informed consent and that the device will be labeled in accordance
with the applicable labeling regulations. Sponsors of clinical trials are
permitted to sell those devices distributed in the course of the study
provided such compensation does not exceed recovery of the costs of
manufacture, research, development and handling.
In July 1996 the FDA approved Matritech's NMP22 Test Kit for sale in the
United States as a prognostic indicator for bladder cancer (i.e., as a
predictor of bladder cancer recurrence following therapy, such as surgical
excision of cancerous tissue).
Any products manufactured or distributed by the Company pursuant to FDA
clearances or approvals are subject to pervasive and continuing regulation by
the FDA, including recordkeeping requirements and reporting of adverse
experiences with the use of the device. Device manufacturers are required to
register their establishments and list their devices with the FDA, and are
subject to periodic inspections by the FDA and certain state agencies. The FDC
Act requires devices to be manufactured in accordance with GMP regulations
which impose certain procedural and documentation requirements upon the
Company with respect to manufacturing and quality assurance activities.
Labeling and promotional activities are subject to scrutiny by the FDA and,
in certain instances, by the Federal Trade Commission. The NMP22 Test Kit may
only be promoted by the Company as a prognostic indicator. The FDA actively
enforces regulations prohibiting the promotion of devices for unapproved uses
and the promotion of devices for which premarket clearance or approval has not
been obtained. Consequently, the Company cannot promote the NMP22 Test Kit for
cancer screening or for any other unapproved use. Failure to comply with these
requirements can result in regulatory enforcement action by the FDA that would
adversely affect the Company's ability to conduct testing necessary to obtain
market clearance for these products and, consequently, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company and its products are also subject to a variety of state laws and
regulations in those states or localities where its products are or will be
marketed. Any applicable state or local regulations may hinder the Company's
ability to market its products in those states or localities. Manufacturers
are also subject to numerous federal, state and local laws relating to such
matters as safe working conditions, manufacturing practices, environmental
protection, fire hazard control, and disposal of hazardous or potentially
hazardous substances. There can be no assurance that the Company will not be
required to incur significant costs to comply with such laws and regulations
now or in the future or that such laws or regulations will not have a material
adverse effect upon the Company's ability to do business.
Foreign Sales
Export of unapproved products subject to the PMA requirements must be
approved in advance by the FDA for export unless they are approved for use by
the regulatory authorities in any member community of the European Community,
and certain other countries in which case they may be exported to any country
without FDA approval. To obtain FDA export approval, when it is required,
certain requirements must be met and information must be provided to the FDA,
including, with some exceptions, documentation demonstrating that the product
is approved for import into a country to which it is to be exported and safety
data from animal or human studies. There can be no assurance that FDA will
grant export approval when such approval is necessary, or that the countries
to which the devices are to be exported will approve the devices for import.
Failure on the part of the Company to obtain export approvals, when required,
could significantly delay and impair the
11
Company's ability to continue exports of its devices and could have a material
adverse effect on the Company's business, financial condition or results of
operations.
The introduction of the Company's developmental-stage test products in
foreign markets will also subject the Company to foreign regulatory clearances
which may impose additional substantial costs and burdens. International sales
of medical devices are subject to the regulatory requirements of each country.
The regulatory review process varies from country to country. Many countries
also impose product standards, packaging requirements, labeling requirements
and import restrictions on devices. In addition, each country has its own
tariff regulations, duties and tax requirements. In Germany, where the Company
began selling its NMP22 Test Kit for bladder cancer in 1995, no regulatory
approval comparable to the United States PMA is required prior to public sale
of diagnostic products. In Japan, where the Company's distributor for NMP22,
Konica, is responsible for obtaining the necessary approvals from Koseisho to
import and sell the NMP22 product, clinical trials have been conducted and the
results submitted to Koseisho in December, 1996 in order to obtain such
approval. The process of obtaining Koseisho approval in Japan may require as
much time as to obtain a PMA in the U.S.
The approval by the FDA and foreign government authorities is unpredictable
and uncertain and no assurance can be given that the necessary approvals or
clearances will be granted on a timely basis or at all. Delays in receipt of,
or a failure to receive, such approvals or clearances, or the loss of any
previously received approvals or clearances, could have a material adverse
effect on the business, financial condition and results of operations of the
Company.
Changes in existing requirements or adoption of new requirements or policies
could adversely affect the ability of the Company to comply with regulatory
requirements. Failure to comply with regulatory requirements could have a
material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that the Company will not be
required to incur significant costs to comply with laws and regulations in the
future or that laws or regulations will not have a material adverse effect
upon the Company's business, financial condition or results of operations. See
"Risk Factors--Risks Associated with Extensive Government Regulation."
CLIA
Pursuant to the Clinical Laboratory Improvement Amendments ("CLIA"), the FDA
will assign a complexity category to each new in vitro diagnostic test. This
category will determine the rigor of quality control that must be followed by
purchasers and users of the device and, thus, can affect purchasing decisions
of laboratories and hospitals. In addition, as part of the premarket review
process, manufacturers must establish that the device's quality control
instructions are commensurate with CLIA quality control requirements for that
device. The review period for in vitro diagnostic tests may be extended due to
these new CLIA requirements.
Other
In order for the Company to conduct preliminary studies or clinical trials
at a hospital or other health care facility, the Company's research
collaborators must first obtain approval from the IRB of the hospital or
health care facility. In each case, a written protocol must be submitted to
the IRB describing the study or trial, which is reviewed by the IRB with a
view to protecting the safety and privacy of the institution's patients.
In addition to the regulatory framework for clinical trials and product
approvals, the Company is subject to regulation under federal, state and local
law, including requirements regarding occupational safety, laboratory
practices, environmental protection and hazardous substance control, and may
be subject to other present and possible future local, state, federal and
foreign regulation.
EMPLOYEES
As of March 7, 1997, the Company had 46 full-time employees, 22 of whom were
engaged in research and development. The Company's future success depends in
part on its ability to recruit and retain talented and
12
trained scientific, technical, marketing and business personnel. The Company
has been successful to date in hiring and retaining such personnel, but there
can be no assurance that such success will continue. None of the Company's
employees is represented by a labor union, and the Company considers its
relations with its employees to be excellent.
RESEARCH AND DEVELOPMENT
Matritech's future success will depend in large part on its ability to
develop and bring to market new products based on its proprietary NMP
technology. Accordingly, Matritech devotes substantial resources to research
and development. The Company has assembled a scientific staff with a variety
of complementary skills in several advanced research disciplines, including
molecular biology, immunology and protein chemistry. In addition, Matritech
maintains consulting and advisory relationships with a number of prominent
researchers.
During 1994, 1995 and 1996 Matritech spent approximately $3.5 million, $3.0
million and $3.9 million, respectively, on research and development.
Substantially all of these expenditures were related to the development of
diagnostic products.
ITEM 2. PROPERTIES.
Beginning in October 1995, the Company relocated its facilities from
Cambridge, Massachusetts to Newton, Massachusetts, where it leases corporate
headquarters, research and development and manufacturing facilities which
occupy approximately 22,500 square feet. The Company's lease is for a term of
five (5) years and expires on or about December 31, 2000. The annual base rent
for each year of the term is $230,625. The Company believes that its current
facilities are adequate to satisfy the Company's needs for the foreseeable
future, including the initial phases of commercial production and has not made
a determination whether it will seek to extend its lease when it expires in
2000 or seek to lease space elsewhere. There can be no assurance that the
Company will be able to extend its lease or lease other space on reasonable
terms.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not currently a party to any litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock trades on The Nasdaq Small Cap Market tier of The
Nasdaq Stock Market ("Nasdaq"), under the symbol: "NMPS" and on the Boston
Stock Exchange under the Symbol: "MPS." The following table sets forth the
range of quarterly high and low sales price information for the Common Stock
as reported by Nasdaq for the periods indicated.
HIGH LOW
-------- --------
FISCAL 1995
First Quarter............................................ $ 2 3/16 $1 1/2
Second Quarter........................................... 2 3/4 1 15/16
Third Quarter............................................ 4 2 3/8
Fourth Quarter........................................... 4 1/2 2 7/8
FISCAL 1996
First Quarter............................................ 11 7/8 3 9/16
Second Quarter........................................... 18 9 1/2
Third Quarter............................................ 13 1/4 7 1/8
Fourth Quarter........................................... 13 5/8 6 7/8
As of March 20, 1997, there were approximately 271 shareholders of record.
The Company believes that shares of the Company's Common Stock held in bank,
money management, institution and brokerage house "nominee" names may account
for at least an estimated 4,900 additional beneficial holders.
The Company has never paid cash dividends on its Common Stock. The Company
currently intends to retain any earnings to finance future growth and
therefore does not anticipate paying any cash dividends in the foreseeable
future.
14
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data presented below for each year in the five-year
period ended December 31, 1996 have been derived from the Company's financial
statements, which have been audited by Arthur Andersen LLP, independent public
accountants. This data should be read in conjunction with the financial
statements, related notes, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and other financial information included
elsewhere in this report.
1992 1993 1994 1995 1996
----------- ------------ ------------ ------------ ------------
STATEMENTS OF OPERATIONS
DATA:
Revenues:
Collaborative research
and development,
license fees and
product sales......... $ 91,206 $ 187,071 $ 1,314,334 $ 1,023,438 $ 1,881,833
Interest and other
income................ 72,245 81,218 91,591 216,865 528,583
----------- ------------ ------------ ------------ ------------
Total revenues.......... 163,451 268,289 1,405,925 1,240,303 2,410,416
Expenses:
Research &
development........... 2,176,558 2,728,224 3,470,122 3,014,125 3,909,793
Selling, general &
administrative........ 1,021,370 1,820,798 1,591,525 2,308,773 3,665,298
----------- ------------ ------------ ------------ ------------
Total expenses.......... 3,197,928 4,549,022 5,061,647 5,322,898 7,575,091
Net Loss................ $(3,034,477) $ (4,280,733) $ (3,655,722) $ (4,082,595) $ (5,164,675)
=========== ============ ============ ============ ============
Net loss per common
share(1)............... $ (.86) $ (.80) $ (.46) $ (.38) $ (.32)
=========== ============ ============ ============ ============
Weighted average number
of common shares
outstanding(1)......... 3,544,524 5,319,072 7,951,721 10,733,769 15,900,467
=========== ============ ============ ============ ============
1992 1993 1994 1995 1996
----------- ------------ ------------ ------------ ------------
BALANCE SHEET DATA:
Cash, cash equivalents,
and short-term
investments............ $ 3,512,298 $ 2,656,083 $ 3,974,237 $ 11,009,310 $ 6,770,336
Working capital......... 3,404,939 2,410,014 3,419,323 10,838,756 7,165,462
Total assets............ 4,076,499 3,274,708 4,582,194 11,959,203 8,669,861
Accumulated deficit..... (8,956,680) (13,237,413) (16,893,135) (20,975,730) (26,140,405)
Total stockholders'
equity................. $ 3,783,937 $ 2,855,971 $ 3,878,067 $ 11,351,178 $ 7,783,984
- --------
(1) See Note 1 of Notes to Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
The Company was incorporated in 1987 to develop, manufacture and market
innovative cancer diagnostic products based on its proprietary NMP technology.
Matritech has been unprofitable since inception and expects to incur
significant operating losses for at least the next two years. The Company was
considered a development-stage company until the fourth quarter of 1995. For
the period from inception to December 31, 1996, the Company incurred a
cumulative net loss of approximately $26.1 million.
The Company sells its NMP22 Test Kit through its own direct sales force in
the United States and through distributors outside the United States. The
Company entered into agreements with several new distributors in Europe and
the Far East in the second half of 1996. The Company's 1996 product revenue
includes initial stocking orders of the NMP22 Test Kit from such new
distributors. Consequently, fourth quarter product revenue is not necessarily
indicative of future quarters in 1997 since the distributors' inventory of the
NMP22 Test Kit is high in anticipation of market launches around the world.
See "Factors that may Affect Future Results--Fluctuating Operating Results."
15
RESULTS OF OPERATIONS
Year Ended December 31, 1996 Compared with Year Ended December 31, 1995
Collaborative research and development revenue, license fees and product
sales increased to $1,882,000 for the year ended December 31, 1996 from
$1,023,000 for the year ended December 31, 1995. Revenue from product sales
increased 389% to $1,678,000 for the year ended December 31, 1996 as compared
to $343,000 in 1995. This increase was primarily due to worldwide sales of the
Company's NMP22 Test Kit for bladder cancer which was approved for sale in the
United States by the FDA in July 1996. Revenue generated from collaborative
research and development and license fees in the year ended December 31, 1996
consisted of $120,000 in milestone payments from a funded development
agreement with Bayer, and $84,000 in SBIR funding for the Company's cancer
therapy development project. Collaborative research and development revenue
and license fees in the year ended December 31, 1995 consisted of $280,000 in
license fees from a marketing agreement, which was terminated in June 1996,
with Boehringer Ingelheim International GmbH ("BII"), $210,000 from a funded
development agreement with Bayer and $190,000 in SBIR funding for the
Company's prostate, colon and drug screening assay projects.
Interest and other income was $528,000 for the year ended December 31, 1996
and $217,000 for the year ended December 31, 1995. The increase was due to
significantly higher average cash balances available for investment throughout
1996 as compared to 1995 resulting from financings during the third and fourth
quarter of 1995.
Research and development expenses increased 30% to $3,910,000 for the year
ended December 31, 1996 from $3,014,000 for the year ended December 31, 1995.
The increase is primarily due to the scale-up of product manufacturing for the
Company's NMP22 Test Kit for bladder cancer, and to a lesser extent, increased
personnel costs in the research department, and costs associated with the
initial stages of clinical trials for the Company's colorectal cancer test
which began in October 1996.
Selling, general and administrative expenses increased 59% to $3,665,000 for
the year ended December 31, 1996 from $2,309,000 for the year ended December
31, 1995. During the second half of 1996, the Company expensed approximately
$209,000 of costs associated with a proposed public offering which the Company
elected not to complete. Excluding these expenses, selling, general and
administrative expenses increased 50%, primarily from increased sales and
marketing personnel costs, the termination of the Company's marketing
agreement with BII and the establishment of marketing programs to promote the
Company's products worldwide. The balance of the increase is primarily related
to increased salaries, professional fees and expenses associated with
termination of the Company's former lease for its Cambridge facility.
The Company incurred a net loss of $5,165,000 for the year ended December
31, 1996, as compared to a net loss of $4,083,000 for the year ended December
31, 1995. The increased loss resulted primarily from increased sales,
marketing and manufacturing expenses for the NMP22 Test Kit for bladder
cancer, and to a lesser extent, the expenses associated with increased
research and development and new clinical trial costs, expenses related to the
withdrawn public offering, increased professional fees, and termination costs
of the Company's marketing agreement with BII and the lease at its former
Cambridge facility.
Year Ended December 31, 1995 Compared with Year Ended December 31, 1994
Collaborative research and development revenue, license fees and product
sales decreased to $1,023,000 for the year ended December 31, 1995 from
$1,314,000 for the year ended December 31, 1994. Revenue generated from
collaborative research and development and license fees in the year ended
December 31, 1995 consisted of $280,000 in license fees from a marketing
agreement, which was terminated in June 1996, with BII, $210,000 from a funded
development agreement with Bayer, and $190,000 in SBIR grants for the
Company's prostate, colon and cancer therapy development projects.
Collaborative research and development revenue and license fees in the year
ended December 31, 1994 consisted of $720,000 in license fees from a marketing
agreement with BII, $325,000 in license fees from a marketing agreement with
Konica, $100,000 in milestone revenues from
16
Hybritech Incorporated ("Hybritech") relating to a funded development and
marketing agreement, which has been terminated, and $68,000 in SBIR funding
for the Company's prostate cancer research project. Revenue from product sales
increased 240% to $343,000 for the year ended December 31, 1995 as compared to
$101,000 in 1994. This increase was primarily due to expanded sales of the
Company's NMP22 Test Kit in Europe and Japan. Product sales in Europe during
1995 were minimal due to product introduction in the second quarter and a
shift in the business focus of BII, the Company's former exclusive distributor
in Europe.
Interest and other income was $217,000 for the year ended December 31, 1995
and $92,000 for the year ended December 31, 1994, an increase of 136%
resulting from a combination of higher interest rates and significantly higher
average cash balances available for investment throughout 1995 as compared to
1994 resulting from financings during 1995.
Research and development expenses decreased 13% to $3,014,000 for the year
ended December 31, 1995 from $3,470,000 for the year ended December 31, 1994.
The decrease was due to reductions in both product development expenses and
clinical trial costs associated with the Company's bladder cancer diagnostic
product which was submitted to the FDA in November 1994.
Selling, general and administrative expenses increased 45% to $2,309,000 for
the year ended December 31, 1995 from $1,592,000 for the year ended December
31, 1994. The increase primarily relates to increased professional fees for
the Company's patent protection applications and consulting fees as well as
the establishment in February 1995 of an internal sales and marketing function
and the expenses related to the launch of the Company's NMP22 Test Kit in
certain countries in Europe in 1995 and the anticipated launch in the United
States in 1996. The balance of the increase was attributable to expenses
incurred for the relocation of the Company to larger facilities in Newton,
Massachusetts during the latter part of 1995.
The Company incurred a net loss of $4,083,000 for the year ended December
31, 1995, as compared to a net loss of $3,656,000 for the year ended December
31, 1994. The increased loss for the year ended December 31, 1995 was
primarily a result of decreased revenues from license fees and increased
selling, general and administrative expenses which were partially offset by a
reduction in research and development expenses.
Liquidity and Capital Resources
Since its inception, the Company has financed its operations primarily
through private and public offerings of its securities and through funded
development and marketing agreements. In September 1995, the Company received
net proceeds of approximately $6,658,000 from the private sale of common
stock. In December 1995, the Company received net proceeds of approximately
$4,656,000 from the exercise of certain common stock warrants which the
Company had called for redemption. During the year ended December 31, 1996,
the Company received net proceeds of approximately $1,514,000 from the
exercise of common stock options and warrants. In June 1995, the Company
signed a product development and marketing option agreement with Bayer and
received a $150,000 initial payment. Under this agreement, Matritech is
eligible to receive further milestone and option payments upon the completion
of specific product development milestones. In the years ended December 31,
1995 and 1996, Matritech received $60,000 and $120,000 respectively, in
milestone payments under this agreement. At December 31, 1996, the Company had
cash and cash equivalents of $6,770,000 and working capital $7,165,000.
The Company's operating activities used cash of approximately $5,505,000,
$4,188,000 and $3,231,000 for the years ended December 31, 1996, 1995, 1994,
respectively, primarily to fund the Company's operating loss.
The Company's investing activities used cash of approximately $240,000,
$147,000 and $99,000 in the years ended December 31, 1996, 1995, 1994,
respectively, primarily for purchase of equipment, leasehold improvements and
certain intangible assets.
17
Financing activities provided cash of approximately $1,506,000, $11,371,000
and $4,648,000 in the years ended December 31, 1996, 1995 and 1994,
respectively, primarily from the sale of equity securities and the exercise of
stock options and warrants, net of payments of capital lease obligations.
Capital expenditures totaled approximately $285,000 during the year ended
December 31, 1996, which consisted primarily of computer systems, laboratory
equipment and leasehold improvements to the Company's facilities in Newton,
Massachusetts. The Company currently estimates that it will acquire
approximately $948,000 of capital equipment during the year ended December 31,
1997, consisting primarily of computer systems, laboratory equipment and
office equipment.
The Company expects to incur continued research and development expenses and
other costs, including costs related to clinical studies to commercialize
additional products based upon its NMP technology. The Company expects that
such costs will increase in the fiscal year ending December 31, 1997 and will
result in continued losses from operations. The Company may require
substantial additional funds to complete new product development, conduct
clinical trials and manufacture and market its products.
The Company's future capital requirements will depend on many factors,
including: continued scientific progress in its research and development
programs; the magnitude of these programs; progress with clinical trials for
its diagnostic products; the time involved in obtaining regulatory approvals;
the costs involved in filing, prosecuting and enforcing patent claims;
competing technological and market developments; the ability of the Company to
establish additional development and marketing arrangements to provide funding
for research and development and to conduct clinical trials, obtain regulatory
approvals, and manufacture and market certain of the Company's products.
The Company is currently seeking alternatives for obtaining additional long-
term funding for its operations from various sources including collaborative
arrangements and additional public or private financings. The Company
anticipates that its existing capital resources including working capital and
interest thereon will satisfy its capital needs at least through 1997. The
foregoing forward-looking statement is subject to uncertainties and there can
be no assurance that the Company's needs may not change. See "Factors that may
Affect Future Results--Access to Capital." The survival of the Company in the
long term, however, is dependent on its ability to generate revenue from sales
of its products. There can be no assurance that such additional funding will
be available on terms acceptable to the Company, if at all, or that, in the
long term, the Company will be able to generate sufficient revenue to achieve
and maintain profitability.
Factors that may Affect Future Results
The Company's future financial and operational results are subject to a
number of material risks and uncertainties that may affect such results or
conditions, including:
History of Operating Losses and Anticipated Future Losses. The Company has
incurred operating losses since its inception and expects to incur significant
operating losses for at least the next two years. The Company expects to
improve operating results in future periods, however, there can be no
assurance that the Company will achieve or maintain profitability or that its
revenue growth can be sustained in the future.
Fluctuation in Operating Results. The Company's future operating results may
vary significantly from quarter to quarter or from year to year depending on a
number of factors including: the timing and size or orders from the Company's
customers and distributors; the timing of payments from corporate partners and
research grants; regulatory approvals and the introduction of new products by
the Company; and the market acceptance of the Company's products. The
Company's current planned expense levels are based in part upon expectations
as to future revenue. Consequently, profits may vary significantly from
quarter to quarter or year to year based on the timing of revenue. Revenue or
profits in any period will not necessarily be indicative of results in
subsequent periods.
18
Uncertainties Associated with Future Performance. The Company's success in
the market for diagnostic products will depend, in part, on the Company's
ability to: successfully develop, test, produce and market its products;
obtain necessary governmental approvals in a timely manner; attract and
maintain key employees; and successfully respond to technological changes in
its marketplace. The Company's success in markets outside the United States is
dependent on the performance of independent distributors over which the
Company has limited control.
Near-Term Dependence Upon NMP22. The Company anticipates that in the near-
term it will be substantially dependent on the success of the NMP22 Test Kit,
which was approved for sale in the U.S. by the FDA in July 1996 and expects to
generate substantially all of its near-term products sales from the sale of
NMP22 Test Kits. The Company would experience a material adverse effect on its
business, financial condition and results of operations if the NMP22 Test Kit
does not achieve wide market acceptance. The remainder of the Company's
products are in clinical trials or in development and there can be no
assurance that it will be successful with such clinical trials and product
development.
Access to Capital. The Company will consider from time to time various
financing alternatives and may seek to raise additional capital through equity
or debt financings or by entering into corporate partnering arrangements.
There can be no assurance, however, that this funding will be available on
terms acceptable to the Company, it at all.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is contained in the financial
statements set forth in Item 14(a) under the caption "Financial Statements" as
a part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no changes in or disagreements with accountants on
accounting or financial disclosure matters during the Company's two most
recent fiscal years.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS
The information concerning directors of the Company required under this item
is incorporated herein by reference to the Company's definitive proxy
statement pursuant to Regulation 14A, to be filed with the Commission not
later than 120 days after the close of the Company's fiscal year ended
December 31, 1996 under the headings "Occupations of Directors and Executive
Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance."
EXECUTIVE OFFICERS
The information concerning executive officers of the Company required under
this item is incorporated herein by reference to the Company's definitive
proxy statement pursuant to Regulation 14A, to be filed with the Commission
not later than 120 days after the close of the Company's fiscal year ended
December 31, 1996 under the headings "Occupations of Directors and Executive
Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance."
ITEM 11. EXECUTIVE COMPENSATION.
The information required under this item is incorporated herein by reference
to the Company's definitive proxy statement pursuant to Regulation 14A, to be
filed with the Commission not later than 120 days after the
19
close of the Company's fiscal year ended December 31, 1996, under the heading
"Compensation and Other Information Concerning Directors and Officers."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required under this item is incorporated herein by reference
to the Company's definitive proxy statement pursuant to Regulation 14A, to be
filed with the Commission not later than 120 days after the close of the
Company's fiscal year ended December 31, 1996, under the heading "Securities
Ownership of Management and Principal Stockholders."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information, if any, required under this item is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the Commission within 120 days after the close of the
Company's fiscal year ended December 31, 1996, under the heading "Certain
Relationships and Related Transactions."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Consolidated Financial Statements.
Report of Independent Public Accountants.
Balance Sheets as of December 31, 1995 and 1996.
Statements of Operations for the Years ended December 31, 1994, 1995
and 1996.
Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1994, 1995 and 1996.
Statements of Cash Flows for the Years ended December 31, 1994, 1995
and 1996.
Notes to Financial Statements.
2. No schedules are submitted because they are not applicable, not
required or because the information is included in the Financial
Statements or Notes to Financial Statements.
3. List of Exhibits.
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
3.1 Amended and Restated Certificate of Incorporation of
the Registrant (filed as Exhibits 3, 4.1 to the
Company's Registration Statement No. 33-46158 on Form
S-1 and incorporated herein by reference).
3.2 Amended and Restated By-Laws of the Registrant (filed
as Exhibits 3.2, 4.1 to the Company's Registration
Statement No. 33-46158 on Form S-1 and incorporated
herein by reference).
3.3 Certificate of Amendment dated June 16, 1994, of
Amended and Restated Certificate of Incorporation of
the Registrant (filed as Exhibit 3.2 of the Company's
Quarterly Report on Form 10-Q for thefiscal quarter
ended June 30, 1995 and incorporated herein by
reference).
3.4 Certificate of Amendment dated June 5, 1995, of
Amended and Restated Certificate of Incorporation of
the Registrant (filed as Exhibit 3.3 of the Company's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1995 and incorporated herein by
reference).
20
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
4.1 Description of Capital Stock contained in the
Registrant's Amended and Restated Certificate of
Incorporation, filed as Exhibits 3.1, 3.3 and 3.4.
10.1* License Agreement between Matritech and the
Massachusetts Institute of Technology dated December
14, 1987, as amended March 15, 1988, December 20,
1989 and March 4, 1992 (filed as Exhibit 10.1 to the
Company's Registration Statement No. 33-46158 on Form
S-1 and incorporated herein by reference).
10.2* Development and Supply Agreement between Matritech
and AB Sangtec Medical dated June 5, 1990, as amended
on January 2, 1992 (filed as Exhibit 10.2 to the
Company's Registration Statement No. 33-46158 on Form
S-1 and incorporated herein by reference).
10.3* Development and Supply Agreement between Matritech
and Yamanouchi Pharmaceutical Co., Ltd. dated
September 27, 1991 (filed as Exhibit 10.4 to the
Company's Registration Statement No. 33-46158 on Form
S-1 and incorporated herein by reference).
10.4 1988 Stock Plan (filed as Exhibit 10.8 to the
Company's Registration Statement No. 33-46158 on Form
S-1 and incorporated herein by reference).
10.5 1992 Stock Plan as amended as of June 7, 1996 (filed
as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1996
and incorporated herein by reference).
10.6 Amended and Restated 1992 Non-Employee Director Stock
Plan as amended as of June 7, 1996 (filed as Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1996 and
incorporated herein by reference).
10.7 1992 Employee Stock Purchase Plan (filed as Exhibit
10.11 to the Company's Registration Statement No. 33-
46158 on Form S-1 and incorporated herein by
reference).
10.8 Second Amended and Restated Registration Rights
Agreement dated May 4, 1990, as amended February 26,
1992 (filed as Exhibit 10.13 to the Company's
Registration Statement No. 33-46158 on Form S-1 and
incorporated herein by reference).
10.9 Form of Indemnity Agreement with directors (filed as
Exhibit 10.14 to the Company's Registration Statement
No. 33-46158 on Form S-1 and incorporated herein by
reference).
10.10* Amendment to Development and Supply Agreement between
Matritech and AB Sangtec Medical dated March 5, 1992
(filed as Exhibit 10.15 to the Company's Registration
Statement No. 33-46158 on Form S-1 and incorporated
herein by reference).
10.11 Fourth Amendment dated March 18, 1993 to License
Agreement between the Company and the Massachusetts
Institute of Technology dated December 14, 1987, as
amended (filed as Exhibit 10.15 to the Company's Form
10-K for the year ended December 31, 1992 and
incorporated herein by reference).
10.12 Amendment dated November 30, 1992 to Development and
Supply Agreement between the Company and AB Sangtec
Medical dated June 5, 1990, as amended (filed as
Exhibit 10.16 to the Company's Form 10-K for the year
ended December 31, 1992 and incorporated herein by
reference).
21
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
10.13 Amendment dated November 30, 1992 to Development and
Supply Agreement between the Company and Yamanouchi
Pharmaceutical Co., Ltd. dated September 27, 1991, as
amended (filed as Exhibit 10.17 to the Company's Form
10-K for the year ended December 31, 1992 and
incorporated herein by reference).
10.14* License Agreement between the Company and The Johns
Hopkins University dated as of August 4, 1993 (filed
as Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993
and incorporated herein by reference).
10.15* Amendment dated July 7, 1993 to Development and
Supply Agreement between the Company and AB Sangtec
Medical dated June 5, 1990, as amended (filed as
Exhibit 10.3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993
and incorporated herein by reference).
10.16* Amendment dated June 30, 1993 to Development and
Supply Agreement between the Company and Yamanouchi
Pharmaceutical Co., Ltd dated September 27, 1991, as
amended (filed as Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993 and incorporated herein by
reference).
10.17 Amendment dated January 25, 1994 to Development and
Supply Agreement between the Company and Yamanouchi
Pharmaceutical Co., Ltd dated September 27, 1991, as
amended (filed as Exhibit 10.22 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 and incorporated herein by
reference).
10.18 Amendment dated January 18, 1994 to Development and
Supply Agreement between the Company and AB Sangtec
Medical dated June 5, 1990, as amended (filed as
Exhibit 10.23 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993 and
incorporated herein by reference).
10.19 Fifth Amendment dated April 14, 1994 to License
Agreement between the Company and the Massachusetts
Institute of Technology dated December 14, 1987
(filed as Exhibit 10.1 to the Company's Form 10-Q for
the quarter ended March 31, 1994 and incorporated
herein by reference).
10.20* Exclusive Distribution Agreement between the Company
and Boehringer Ingelheim International GmbH dated as
of August 5, 1994 (filed as Exhibit 10.1 to the
Company's Form 10-Q for the period ended September
30, 1994 and incorporated herein by reference).
10.21* Exclusive Distribution Agreement between the Company
and Konica Corporation dated as of November 9, 1994.
(Filed as Exhibit 10.26 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1994 and incorporated herein by
reference).
10.22* Distribution Agreement between the Company and Toray-
Fuji Bionics, Inc. dated as of April 10, 1995 (filed
as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995 and
incorporated herein by reference).
10.23* License Agreement between the Company and Yale
University dated as of March 21, 1995 (filed as
Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995 and
incorporated herein by reference).
10.24* Development Agreement between the Company and Bayer
Corporation dated as of June 13, 1995 (filed as
Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1995
and incorporated herein by reference).
22
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
10.25 Lease Agreement between the Company and One Nevada
Realty Trust dated October 6, 1995 (filed as Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1995 and
incorporated herein by reference).
10.26 Sixth Amendment dated March 1, 1996 to License
Agreement between Matritech and the Massachusetts
Institute of Technology dated December 31, 1987, as
amended (filed as Exhibit 10.26 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and incorporated herein by
reference).
10.27* Matritech NMP22(R) Test Kits Term Sheet and
Distribution Agreement between Matritech, Inc. and
UroCor, Inc., dated as of January 25, 1996 and as
amended, March 29, 1996 (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1996 and incorporated
herein by reference)
23** Consent of Arthur Andersen LLP.
27** Financial Data Schedule
--------
* Confidential Treatment Granted for portions thereof
** Filed herewith.
(b) Reports on Form 8-K.
Not Applicable
(c) Exhibits.
The Company hereby files as exhibits to this Form 10-K those exhibits
listed in Item 14(a)(3), above.
(d) Executive Compensation Plans and Arrangements.
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
10.4 1988 Stock Plan (filed as Exhibit 10.8 to the
Company's Registration Statement No. 33-46158 on Form
S-1 and incorporated herein by reference).
10.5 1992 Stock Plan as amended as of June 7, 1996 (filed
as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1996
and incorporated herein by reference).
10.6 Amended and Restated 1992 Non-Employee Director Stock
Plan as amended as of June 7, 1996 (filed as Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1996 and
incorporated herein by reference).
10.7 1992 Employee Stock Purchase Plan (filed as Exhibit
10.11 to the Company's Registration Statement No. 33-
46158 on Form S-1 and incorporated herein by
reference).
(e) Financial Statement Schedules.
The Company hereby files as financial statement schedules to this
Form 10-K those financial statement schedules listed in Item
14(a)(2), above, which are attached hereto.
23
MATRITECH, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Public Accountants................................. F-2
Balance Sheets as of December 31, 1995 and 1996.......................... F-3
Statements of Operations for the Years Ended December 31, 1994, 1995 and
1996.................................................................... F-4
Statements of Stockholders' Equity for the Years Ended December 31, 1994,
1995 and 1996........................................................... F-5
Statements of Cash Flows for the Years Ended 31, 1994, 1995 and 1996..... F-6
Notes to Financial Statements............................................ F-7
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Matritech, Inc.:
We have audited the accompanying balance sheets of Matritech, Inc. (a
Delaware corporation) as of December 31, 1995 and 1996, and the related
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. 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 generally accepted auditing
standards. 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 financial position of Matritech, Inc. as of
December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts January 31, 1997
F-2
MATRITECH, INC.
BALANCE SHEETS
DECEMBER 31,
--------------------------
1995 1996
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................ $ 11,009,310 $ 6,770,336
Accounts receivable.............................. 113,139 814,544
Inventories...................................... 192,385 343,058
Interest receivable and prepaid expense.......... 131,947 123,401
------------ ------------
Total current assets........................... 11,446,781 8,051,339
------------ ------------
PROPERTY AND EQUIPMENT, AT COST:
Laboratory equipment............................. 729,935 949,508
Office equipment................................. 137,876 186,228
Laboratory furniture............................. 44,511 55,772
Leasehold improvements........................... 39,671 45,871
------------ ------------
951,993 1,237,379
Less--Accumulated depreciation and amortization.. 596,721 701,769
------------ ------------
355,272 535,610
------------ ------------
OTHER ASSETS, NET.................................. 157,150 82,912
------------ ------------
$ 11,959,203 $ 8,669,861
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable..................................... $ 18,387 $ --
Accounts payable................................. 340,560 422,559
Accrued expenses................................. 214,178 463,318
Deferred revenue................................. 34,900 --
------------ ------------
Total current liabilities...................... 608,025 885,877
------------ ------------
COMMITMENTS (Note 3)
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value--
Authorized--4,000,000 shares
Issued and outstanding--none.................... -- --
Common stock, $.01 par value--
Authorized--40,000,000 shares
Issued and outstanding--15,194,127 shares in
1995 and
6,032,734 shares in 1996....................... 151,941 160,327
Additional paid-in capital....................... 32,174,967 33,764,062
Accumulated deficit.............................. (20,975,730) (26,140,405)
------------ ------------
Total stockholders' equity..................... 11,351,178 7,783,984
------------ ------------
$ 11,959,203 $ 8,669,861
============ ============
The accompanying notes are an integral part of these financial statements.
F-3
MATRITECH, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
REVENUES:
Collaborative research and
development, license fees and product
sales................................ $ 1,314,334 $ 1,023,438 $ 1,881,833
Interest and other income............. 91,591 216,865 528,583
----------- ----------- -----------
1,405,925 1,240,303 2,410,416
----------- ----------- -----------
EXPENSES:
Research and development.............. 3,470,122 3,014,125 3,909,793
Selling, general and administrative... 1,591,525 2,308,773 3,665,298
----------- ----------- -----------
5,061,647 5,322,898 7,575,091
----------- ----------- -----------
Net loss................................ $(3,655,722) $(4,082,595) $(5,164,675)
=========== =========== ===========
NET LOSS PER COMMON SHARE............... $ (.46) $ (.38) $ (.32)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING............................ 7,951,721 10,733,769 15,900,467
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-4
MATRITECH, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK
------------------- ADDITIONAL TOTAL
NUMBER PAR PAID-IN DEFERRED ACCUMULATED STOCKHOLDERS'
OF SHARES VALUE CAPITAL COMPENSATION DEFICIT EQUITY
---------- -------- ----------- ------------ ------------ -------------
BALANCE, DECEMBER 31,
1993................... 7,014,433 $ 70,144 $16,055,266 $(32,026) $(13,237,413) $ 2,855,971
Sale of common stock,
net of commissions and
issuance costs of
$748,797.............. 2,746,358 27,464 4,623,118 -- -- 4,650,582
Exercise of common
stock options......... 4,550 46 3,685 -- -- 3,731
Issuance of common
stock under employee
stock purchase plan... 3,029 30 8,981 -- -- 9,011
Amortization of
deferred compensation,
net of option
forfeitures........... -- -- (2,210) 16,704 -- 14,494
Net loss............... -- -- -- -- (3,655,722) (3,655,722)
---------- -------- ----------- -------- ------------ -----------
BALANCE, DECEMBER 31,
1994................... 9,768,370 97,684 20,688,840 (15,322) (16,893,135) 3,878,067
Sale of common stock,
net of commissions and
issuance costs of
$241,789.............. 3,000,000 30,000 6,628,211 -- -- 6,658,211
Exercise of common
stock purchase
warrants, net of
commissions and
issuance costs of
$168,884.............. 2,342,373 23,424 4,632,980 -- -- 4,656,404
Exercise of common
stock options......... 72,663 726 53,674 -- -- 54,400
Issuance of common
stock under employee
stock purchase plan... 10,721 107 18,655 -- -- 18,762
Redemption of common
stock purchase
warrants.............. -- -- (400) -- -- (400)
Amortization of
deferred compensation,
net of option
forfeitures........... -- -- 153,007 15,322 -- 168,329
Net loss............... -- -- -- -- (4,082,595) (4,082,595)
---------- -------- ----------- -------- ------------ -----------
BALANCE, DECEMBER 31,
1995................... 15,194,127 151,941 32,174,967 -- (20,975,730) 11,351,178
Exercise of common
stock options......... 104,294 1,043 181,359 -- -- 182,402
Exercise of common
stock purchase
warrants.............. 728,453 7,284 1,324,790 -- -- 1,332,074
Issuance of common
stock under employee
stock purchase plan... 5,860 59 10,196 -- -- 10,255
Compensation related to
issuance of common
stock options......... -- -- 72,750 -- -- 72,750
Net loss............... -- -- -- -- (5,164,675) (5,164,675)
---------- -------- ----------- -------- ------------ -----------
BALANCE, DECEMBER 31,
1996................... 16,032,734 $160,327 $33,764,062 $ -- $(26,140,405) $ 7,783,984
========== ======== =========== ======== ============ ===========
The accompanying notes are an integral part of these financial statements.
F-5
MATRITECH, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................... $(3,655,722) $(4,082,595) $(5,164,675)
Adjustments to reconcile net loss to
net cash used in operating
activities--
Depreciation and amortization......... 103,064 112,158 133,952
Amortization of deferred
compensation......................... 14,494 168,329 --
Compensation related to issuance of
common stock options................. -- -- 72,750
Changes in assets and liabilities--
Accounts receivable.................. 8,098 (110,467) (701,405)
Inventories.......................... (1,204) (138,552) (150,673)
Interest receivable and prepaid
expenses............................ 83 (57,626) 8,546
Accounts payable..................... (22,977) 142,290 81,999
Accrued expenses..................... 43,433 23,352 249,140
Deferred revenue..................... 280,000 (245,100) (34,900)
----------- ----------- -----------
Net cash used in operating
activities......................... (3,230,731) (4,188,211) (5,505,266)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment..... (30,520) (91,792) (285,386)
(Increase) decrease in other assets.... (68,853) (55,657) 45,334
----------- ----------- -----------
Net cash used in investing
activities......................... (99,373) (147,449) (240,052)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock and
warrants.............................. 4,650,582 6,658,211 --
Proceeds from the exercise of common
stock purchase warrants............... -- 4,656,404 1,332,074
Proceeds from exercise of common stock
options............................... 3,731 54,400 182,402
Proceeds from issuance of common stock
under employee stock purchase plan.... 9,011 18,762 10,255
Payments on redemption of warrants..... -- (400) --
Payments on note payable............... (15,066) (16,644) (18,387)
----------- ----------- -----------
Net cash provided by financing
activities......................... 4,648,258 11,370,733 1,506,344
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ 1,318,154 7,035,073 (4,238,974)
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR................................... 2,656,083 3,974,237 11,009,310
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR.. $ 3,974,237 $11,009,310 $ 6,770,336
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-6
MATRITECH, INC.
NOTES TO FINANCIAL STATEMENTS
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Matritech, Inc. (the Company) was incorporated on October 29, 1987 to
develop, produce and distribute products for the diagnosis and potential
treatment of cancer based on its proprietary nuclear matrix protein
technology. This technology was licensed to the Company by the Massachusetts
Institute of Technology (MIT). The Company was considered a development-stage
company until the fourth quarter of 1995, when the Company significantly
increased its product revenue.
The Company is devoting substantially all of its efforts toward product
research and development, raising capital and marketing products. The Company
is subject to risks common to companies in similar stages of development,
including dependence on key individuals, competition from substitute products
and larger companies, the development of commercially usable products and the
need to obtain adequate additional financing necessary to fund the development
of its future products.
In 1995, the Company began to sell its NMP22 Test Kits in certain countries
in Europe through a distributor. In July 1996, the Company received FDA
approval to begin selling the NMP22 Test Kit in the United States.
The accompanying financial statements reflect the application of certain
accounting policies as described in this note and elsewhere in the
accompanying financial statements and notes.
(a) Revenue Recognition
The Company recognizes revenue from collaborative research and development
arrangements as milestones are achieved; revenue from nonrefundable license
agreements upon the signing of the agreement; and revenue from products sales
upon shipment.
(b) Cash Equivalents
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. The Company applies Statement
of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Under SFAS No. 115, securities that
the Company has the positive intent and ability to hold to maturity are
reported at amortized cost, which approximates fair market value, and are
classified as held-to-maturity. These securities include cash and cash
equivalents, which consist of auction market preferred stocks at December 31,
1995 and 1996.
(c) Inventories
Inventories are stated at the lower of cost or market and consist of the
following:
DECEMBER 31,
-----------------
1995 1996
-------- --------
Raw materials............................................ $ 80,472 $189,101
Work-in-process.......................................... 2,977 2,337
Finished goods........................................... 108,936 151,620
-------- --------
$192,385 $343,058
======== ========
F-7
MATRITECH, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(d) Depreciation and Amortization
The Company provides for depreciation and amortization using accelerated and
straight-line methods by charges to operations in amounts that allocate the
cost of property and equipment over their estimated useful lives as follows:
ASSET CLASSIFICATION USEFUL LIFE
-------------------- -----------
Laboratory equipment........... 10 Years
Office equipment............... 5 Years
Laboratory furniture........... 5 Years
Leasehold improvements......... Life of lease
The Company amortizes certain intangible assets, including license fees,
over their estimated useful lives of three to five years.
(e) Uses of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(f) Concentration of Credit Risk
SFAS No. 105, Disclosure of Information About Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk, requires disclosure of any significant off-balance-sheet and credit risk
concentrations. Financial instruments that subject the Company to credit risk
consist primarily of cash and cash equivalents and trade accounts receivable.
The Company places its investments in highly rated financial institutions and
investment-grade securities. The Company has not experienced any losses on its
investments to date. The Company has not experienced any material losses
related to receivables from individual customers or groups of customers.
(g) Disclosure of Fair Value of Financial Instruments
The Company's financial instruments consist mainly of cash and cash
equivalents, accounts receivable and accounts payable. The carrying amounts of
the Company's financial instruments approximate fair value.
(h) Research and Development
Research and development expenses in the accompanying statements of
operations are expensed as incurred and include both funded and unfunded
research and development expenses.
(i) Net Loss per Common Share
Net loss per common share was computed using the weighted average number of
common shares outstanding during the period. Common stock equivalents have not
been included, as the impact would be antidilutive.
(j) Postretirement Benefits
The Company has no obligations for postretirement benefits.
F-8
MATRITECH, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(2) INCOME TAXES
The Company follows the provisions of SFAS No. 109, Accounting for Income
Taxes. Under the provisions of SFAS No. 109, the Company recognizes a current
tax liability or asset for current taxes payable or refundable and a deferred
tax liability or asset for the estimated future tax effects of temporary
differences between the carrying value of assets and liabilities for financial
reporting and their tax basis and carryforwards to the extent they are
realizable.
The Company's net deferred tax asset consists of the following:
DECEMBER 31,
-------------------------
1995 1996
----------- ------------
Net operating loss carryforwards................ $ 8,464,000 $ 10,529,000
Tax credits..................................... 1,015,000 1,203,000
Temporary differences........................... (53,000) (59,000)
----------- ------------
Net deferred tax asset........................ 9,426,000 11,673,000
Valuation allowance............................. (9,426,000) (11,673,000)
----------- ------------
$ -- $ --
=========== ============
At December 31, 1996, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $26,323,000, which
expire through 2011. The Company also has certain tax credits available to
offset future federal and state income taxes, if any. Net operating loss
carryforwards and credits are subject to review and possible adjustments by
the Internal Revenue Service, and they may be limited in the event of certain
cumulative changes in the ownership interests of significant stockholders over
a three-year period in excess of 50%.
Due to its history of operating losses, the Company has not recorded a
deferred tax asset for the potential future benefit of its deferred tax
assets, as the realization of such asset is uncertain.
(3) LEASE COMMITMENTS
The Company leases office and laboratory facilities and certain equipment
under operating leases that expire through 2000. Annual commitments under
these operating leases are as follows:
YEAR AMOUNT
---- --------
1997............................ $262,000
1998............................ 255,000
1999............................ 239,000
2000............................ 231,000
--------
$987,000
========
Rent expense for the years ended December 31, 1994, 1995 and 1996 was
approximately $344,000, $371,000 and $333,000, respectively.
(4) NOTE PAYABLE
The Company had an obligation under an equipment note payable, which was
paid in full at December 31, 1996.
F-9
MATRITECH, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) ACCRUED EXPENSES
Accrued expenses consist of the following:
DECEMBER 31,
-----------------
1995 1996
-------- --------
Clinical trials costs................................... $ 60,525 $239,782
Payroll and related costs............................... 45,976 82,095
Professional fees....................................... 52,467 43,575
Printing and design costs............................... 34,973 26,301
Other................................................... 20,237 71,565
-------- --------
$214,178 $463,318
======== ========
(6) LICENSE AGREEMENT
MIT has granted the Company a worldwide exclusive license to certain
technology, which was extended when the Company obtained FDA approval of its
first cancer diagnostic product in 1996, until the expiration of all patent
rights in 2006. Upon termination of the exclusivity provision, the Company may
continue to develop and market products under nonexclusive terms. Pursuant to
the license agreement, the Company pays royalties on the sales of products
incorporating the licensed technology.
(7) COMMON STOCK
(a) Sales of Common Stock
On September 2, 1994, the Company completed a private placement of 2,346,373
units (the Units) for $1.875 per Unit. Each Unit consisted of one share of the
Company's common stock and one Class A redeemable common stock purchase
warrant, having an exercise price equal to $2.06 per share and a term of five
years. The Company received net proceeds of approximately $3.6 million after
commissions and estimated expenses of the offering. During 1995, 2,342,373 of
these warrants were exercised at $2.06 per share. Net proceeds from the
exercise after commissions totaled $4,656,404. The Company redeemed the
remaining 4,000 warrants for $.10 per warrant.
In addition, the Company issued a warrant to purchase 234,637 additional
Units at an exercise price equal to $2.25 per Unit to the placement agent
(Placement Agent Warrants). During 1996, 214,637 of the Placement Agent
Warrants and 204,637 of the underlying Class B warrants were exercised for net
proceeds of $756,886, pursuant to which the Company issued 400,693 shares of
common stock and warrants to purchase 30,000 shares of common stock at $2.06
per share through September 1999.
In September 1995, the Company completed a private placement of 3,000,000
shares of common stock for $2.30 per share. Net proceeds from the private
placement totaled $6,658,211 after commissions and offering expenses.
F-10
MATRITECH, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(b) Warrants
In connection with the Company's bridge financings and public offerings, the
Company issued warrants to purchase common stock. The exercise price and
number of shares issuable pursuant to certain warrants are subject to further
adjustment for dilutive events, as defined. The following table summarizes the
outstanding warrants (exclusive of the warrants discussed in Note 7(a)) and
their attributes as of December 31, 1996:
NUMBER EXERCISE
GRANT DATE OF WARRANTS PRICE EXPIRATION DATE
---------- ----------- -------- --------------------
February and March 1992............ 19,026 $ 3.09 July 1998
May 1992........................... 25,071 $ 2.82 July 1998
July 1992.......................... 2,799 $ 3.09 July and August 1997
July 1993.......................... 32,664 $ 1.80 July 1998
During 1996, 419,356 warrants were exercised, pursuant to which 327,760
shares of common stock were issued for proceeds of $575,188.
(c) Stock Option and Purchase Plans
The Company has granted incentive and nonqualified options under its 1988
and 1992 option plans and the 1992 Directors' Plan. All option grants, prices
and vesting periods are determined by the Board of Directors. Incentive stock
options must be granted at a price not less than the fair market value on the
date of grant, as determined by the Board of Directors. During 1996, the
Company recognized a compensation charge of $72,750 related to the issuance of
nonqualified stock options below fair market value on the date of grant.
There are 221,234 common shares available for future grants under existing
option plans at December 31, 1996. The following table summarizes stock option
activity:
NUMBER OPTION PRICE
OF OPTIONS PER SHARE
---------- ------------
Options outstanding, December 31, 1993............... 380,513 $ .82-$ 5.00
Granted............................................ 18,806 2.00- 3.31
Exercised.......................................... (4,550) .82
Terminated......................................... (17,655) .82- 5.00
-------- ------------
Options outstanding, December 31, 1994............... 377,114 .82- 5.00
Granted............................................ 162,762 .83- 3.63
Exercised.......................................... (91,652) .83- 2.00
Terminated......................................... (10,100) 1.76-3.38
-------- ------------
Options outstanding, December 31, 1995............... 438,124 .82- 5.00
Granted............................................ 624,649 3.63- 13.13
Exercised.......................................... (104,294) .82- 3.38
Terminated......................................... (38,701) 1.81- 13.13
-------- ------------
Options outstanding, December 31, 1996............... 919,778 $.82-$13.13
======== ============
Options exercisable, December 31, 1996............... 264,971 $.82-$13.13
======== ============
The Company has reserved and may issue up to an aggregate of 225,000 shares
of common stock under the Employee Stock Purchase Plan. Stock is sold at 85%
of fair market value, as defined. At December 31, 1995 and 1996, the Company
has accumulated payroll deductions of $10,255 and $26,674, respectively, for
the issuance of 5,860 shares and 7,621 shares of common stock, respectively,
which are issued in the following year to employees pursuant to the plan. At
December 31, 1996, 196,277 shares are available under the plan.
F-11
MATRITECH, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In October 1995, the Financial Accounting Standards Board (FASB) issued SFAS
No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 requires the
measurement of the fair value of stock options, including stock purchase
plans, or warrants granted to employees to be included in the statement of
operations or disclosed in the notes to financial statements. The Company has
determined that it will continue to account for stock-based compensation for
employees under Accounting Principles Board Opinion No. 25 and elect the
disclosure-only alternative under SFAS No. 123. The Company has computed the
pro forma disclosures required under SFAS No. 123 for options granted in 1995
and 1996 and stock issued pursuant to the stock purchase plan using the Black-
Scholes option pricing model prescribed by SFAS No. 123. The weighted average
assumptions used for 1995 and 1996 are as follows:
1995 1996
---------- ----------
Risk-free interest rate......................... 5.63%-7.79% 5.54%-6.83%
Expected dividend yield......................... -- --
Expected life................................... 7 Years 7 years
Expected volatility............................. 70% 80%
The Black-Scholes option-pricing 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-pricing models require the input of
highly subjective assumptions including expected stock price volatility.
Because the Company's employee stock options 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.
The total fair value of the options granted during 1995 and 1996 was
computed as approximately $157,000 and $4,065,000, respectively. Of these
amounts approximately $27,000 and $196,000 would be charged to operations for
the years ended December 31, 1995 and 1996, respectively. The remaining
amount, approximately $4,000,000, would be amortized over the remaining
vesting periods. The resulting pro forma compensation expense may not be
representative of the amount to be expected in future years as pro forma
compensation expense may vary based upon the number of options granted.
The pro forma net loss and pro forma net loss per common share presented
above have been computed assuming no tax benefit. The effect of a tax benefit
has not been considered since a substantial portion of the stock options
granted are incentive stock options and the Company does not anticipate a
future deduction associated with the exercise of these stock options.
The pro forma effect of SFAS No. 123 for the years ended December 31, 1995
and 1996 is as follows:
1995 1996
------------------------ ------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- ----------- ----------- -----------
Pro forma net loss...... $(4,082,595) $(4,110,014) $(5,164,675) $(5,360,717)
=========== =========== =========== ===========
Pro forma net loss per
share.................. $ (.38) $ (.38) $ (.32) $ (.34)
=========== =========== =========== ===========
(d) Reserved Shares
As of December 31, 1996, the following shares of common stock were reserved
for future issuance:
1988 and 1992 Stock Option Plans.............................. 926,013
1992 Employees Stock Purchase Plan............................ 203,898
Exercise of Warrants Outstanding.............................. 129,560
1992 Director Stock Option Plan............................... 215,000
---------
1,474,471
=========
F-12
MATRITECH, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(8) DISTRIBUTION AND EQUITY PURCHASE AGREEMENTS WITH BOEHRINGER INGELHEIM
INTERNATIONAL
During 1994, the Company entered into a distribution and equity purchase
agreement with Boehringer Ingelheim International, GmbH (BII). BII acted as
the semiexclusive distributor of one of the Company's cancer diagnostic tests,
as well as certain of its research diagnostic products, in Europe. In August
1994, BII purchased 400,000 shares of the Company's common stock at $2.50 per
share. In addition, in September 1994, BII paid $1 million for the exclusive
distribution rights described above.
Under certain circumstances, BII had the right to obtain 160,000 additional
shares of common stock from the Company at no additional cost. Accordingly,
the Company deferred $280,000 of the $1 million license fee, which represented
the fair value of the potential additional 160,000 shares. During 1995, the
circumstances under which BII had the right to obtain the 160,000 additional
shares expired, and the Company recognized the $280,000 deferred license fee.
The Company terminated this agreement in 1996 and in connection with the
termination recorded a charge of approximately $85,000 to selling, general and
administrative expenses.
(9) SIGNIFICANT REVENUE FROM THIRD PARTIES
The Company received revenue of greater than 10% of total collaborative
research and development, license fees and product sales from the following
number of customers during the following periods:
PERCENTAGE OF REVENUES
CUSTOMER
---------------------------------------------
SIGNIFICANT
CUSTOMERS A B C D E F G
----------- --- --- --- --- --- --- ---
Year ended December 31, 1994..... 2 -- 55% 29% -- -- -- --
Year ended December 31, 1995..... 2 -- 27% -- 21% -- -- --
Year ended December 31, 1996..... 4 16% 21% 11% 13%
(10) GEOGRAPHIC INFORMATION
Product sales by geographic destination as a percentage of total product
sales are as follows:
YEARS ENDED
----------------
1994 1995 1996
---- ---- ----
Europe................................................... 8.2% 20.1% 41.5%
Pacific Rim.............................................. 65.0 45.9 31.5
United States............................................ 26.0 26.9 24.0
All other................................................ .8 7.1 3.0
F-13
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, IN THE CITY OF
NEWTON, COMMONWEALTH OF MASSACHUSETTS, ON THE 25TH DAY OF MARCH, 1997.
MATRITECH, INC.
/s/ Stephen D. Chubb
By: ______________________________
Stephen D. Chubb
Director, Chairman and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED.
SIGNATURE TITLE DATE
/S/ Stephen D. Chubb Director, Chairman March 25, 1997
- ------------------------------------- and Chief Executive
STEPHEN D. CHUBB Officer, (Principal
Executive Officer)
/s/ David L. Corbet Director, President March 25, 1997
- ------------------------------------- and Chief Operating
DAVID L. CORBET Officer
/s/ Leslie R. Teso Vice President, March 25, 1997
- ------------------------------------- Finance, Secretary
LESLIE R. TESO and Treasurer
(Principal
Accounting Officer)
/s/ J. Robert Buchanan Director March 21, 1997
- -------------------------------------
J. ROBERT BUCHANAN
/s/ Thomas R. Morse Director March 25, 1997
- -------------------------------------
THOMAS R. MORSE
Director
- -------------------------------------
DAVID RUBINFIEN
/s/ T. Stephen Thompson Director March 25, 1997
- -------------------------------------
T. STEPHEN THOMPSON
/s/ C. William Zadel Director March 25, 1997
- -------------------------------------
C. WILLIAM ZADEL
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (filed as Exhibits 3, 4.1 to the Company's
Registration Statement No. 33-46158 on Form S-1 and
incorporated herein by reference).
3.2 Amended and Restated By-Laws of the Registrant (filed as
Exhibits 3.2, 4.1 to the Company's Registration Statement No.
33-46158 on Form S-1 and incorporated herein by reference).
3.3 Certificate of Amendment dated June 16, 1994, of Amended and
Restated Certificate of Incorporation of the Registrant
(filed as Exhibit 3.2 of the Company's Quarterly Report on
Form 10-Q for thefiscal quarter ended June 30, 1995 and
incorporated herein by reference).
3.4 Certificate of Amendment dated June 5, 1995, of Amended and
Restated Certificate of Incorporation of the Registrant
(filed as Exhibit 3.3 of the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1995 and
incorporated herein by reference).
4.1 Description of Capital Stock contained in the Registrant's
Amended and Restated Certificate of Incorporation, filed as
Exhibits 3.1, 3.3 and 3.4.
10.1* License Agreement between Matritech and the Massachusetts
Institute of Technology dated December 14, 1987, as amended
March 15, 1988, December 20, 1989 and March 4, 1992 (filed as
Exhibit 10.1 to the Company's Registration Statement No. 33-
46158 on Form S-1 and incorporated herein by reference).
10.2* Development and Supply Agreement between Matritech and AB
Sangtec Medical dated June 5, 1990, as amended on January 2,
1992 (filed as Exhibit 10.2 to the Company's Registration
Statement No. 33-46158 on Form S-1 and incorporated herein by
reference).
10.3* Development and Supply Agreement between Matritech and
Yamanouchi Pharmaceutical Co., Ltd. dated September 27, 1991
(filed as Exhibit 10.4 to the Company's Registration
Statement No. 33-46158 on Form S-1 and incorporated herein by
reference).
10.4 1988 Stock Plan (filed as Exhibit 10.8 to the Company's
Registration Statement No. 33-46158 on Form S-1 and
incorporated herein by reference).
10.5 1992 Stock Plan as amended as of June 7, 1996 (filed as
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1996 and incorporated
herein by reference).
10.6 Amended and Restated 1992 Non-Employee Director Stock Plan as
amended as of June 7, 1996 (filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1996 and incorporated herein by
reference).
10.7 1992 Employee Stock Purchase Plan (filed as Exhibit 10.11 to
the Company's Registration Statement No. 33-46158 on Form S-1
and incorporated herein by reference).
10.8 Second Amended and Restated Registration Rights Agreement
dated May 4, 1990, as amended February 26, 1992 (filed as
Exhibit 10.13 to the Company's Registration Statement No. 33-
46158 on Form S-1 and incorporated herein by reference).
10.9 Form of Indemnity Agreement with directors (filed as Exhibit
10.14 to the Company's Registration Statement No. 33-46158 on
Form S-1 and incorporated herein by reference).
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
10.10* Amendment to Development and Supply Agreement between
Matritech and AB Sangtec Medical dated March 5, 1992 (filed
as Exhibit 10.15 to the Company's Registration Statement No.
33-46158 on Form S-1 and incorporated herein by reference).
10.11 Fourth Amendment dated March 18, 1993 to License Agreement
between the Company and the Massachusetts Institute of
Technology dated December 14, 1987, as amended (filed as
Exhibit 10.15 to the Company's Form 10-K for the year ended
December 31, 1992 and incorporated herein by reference).
10.12 Amendment dated November 30, 1992 to Development and Supply
Agreement between the Company and AB Sangtec Medical dated
June 5, 1990, as amended (filed as Exhibit 10.16 to the
Company's Form 10-K for the year ended December 31, 1992 and
incorporated herein by reference).
10.13 Amendment dated November 30, 1992 to Development and Supply
Agreement between the Company and Yamanouchi Pharmaceutical
Co., Ltd. dated September 27, 1991, as amended (filed as
Exhibit 10.17 to the Company's Form 10-K for the year ended
December 31, 1992 and incorporated herein by reference).
10.14* License Agreement between the Company and The Johns Hopkins
University dated as of August 4, 1993 (filed as Exhibit 10.2
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993 and incorporated herein by
reference).
10.15* Amendment dated July 7, 1993 to Development and Supply
Agreement between the Company and AB Sangtec Medical dated
June 5, 1990, as amended (filed as Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993 and incorporated herein by reference).
10.16* Amendment dated June 30, 1993 to Development and Supply
Agreement between the Company and Yamanouchi Pharmaceutical
Co., Ltd dated September 27, 1991, as amended (filed as
Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993 and incorporated
herein by reference).
10.17 Amendment dated January 25, 1994 to Development and Supply
Agreement between the Company and Yamanouchi Pharmaceutical
Co., Ltd dated September 27, 1991, as amended (filed as
Exhibit 10.22 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993 and incorporated
herein by reference).
10.18 Amendment dated January 18, 1994 to Development and Supply
Agreement between the Company and AB Sangtec Medical dated
June 5, 1990, as amended (filed as Exhibit 10.23 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 and incorporated herein by
reference).
10.19 Fifth Amendment dated April 14, 1994 to License Agreement
between the Company and the Massachusetts Institute of
Technology dated December 14, 1987 (filed as Exhibit 10.1 to
the Company's Form 10-Q for the quarter ended March 31, 1994
and incorporated herein by reference).
10.20* Exclusive Distribution Agreement between the Company and
Boehringer Ingelheim International GmbH dated as of August 5,
1994 (filed as Exhibit 10.1 to the Company's Form 10-Q for
the period ended September 30, 1994 and incorporated herein
by reference).
10.21* Exclusive Distribution Agreement between the Company and
Konica Corporation dated as of November 9, 1994. (Filed as
Exhibit 10.26 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 and incorporated
herein by reference).
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
10.22* Distribution Agreement between the Company and Toray-Fuji
Bionics, Inc. dated as of April 10, 1995 (filed as Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995 and incorporated herein by
reference).
10.23* License Agreement between the Company and Yale University
dated as of March 21, 1995 (filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995 and incorporated herein by reference).
10.24* Development Agreement between the Company and Bayer
Corporation dated as of June 13, 1995 (filed as Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1995 and incorporated herein by
reference).
10.25 Lease Agreement between the Company and One Nevada Realty
Trust dated October 6, 1995 (filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1995 and incorporated herein by
reference).
10.26 Sixth Amendment dated March 1, 1996 to License Agreement
between Matritech and the Massachusetts Institute of
Technology dated December 31, 1987, as amended (filed as
Exhibit 10.26 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995 and incorporated
herein by reference).
10.27* Matritech NMP22(R) Test Kits Term Sheet and Distribution
Agreement between Matritech, Inc. and UroCor, Inc., dated as
of January 25, 1996 and as amended, March 29, 1996 (filed as
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1996 and incorporated
herein by reference)
23** Consent of Arthur Andersen LLP.
27** Financial Data Schedule
--------
* Confidential Treatment Granted for portions thereof
** Filed herewith.