SEC Info  
  Home     Search     My Interests     Help     Sign In     Please Sign In  

Penederm Inc · 10-Q · For 3/31/98

Filed On 5/7/98   ·   SEC File 0-23112   ·   Accession Number 858876-98-6

  in   Show  and 
  As Of               Filer                 Filing     On/For/As Docs:Pgs

 5/07/98  Penederm Inc                      10-Q        3/31/98    2:16

Quarterly Report   ·   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      15     53K 
 2: EX-27       Financial Data Schedule                                1      5K 


10-Q   ·   Quarterly Report
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page
2Item 1. Financial Statements
10-Q1st Page of 15TOCTopPreviousNextBottomJust 1st
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 Commission File Number 0-22314 PENEDERM INCORPORATED (Exact name of registrant as specified in its charter) DELAWARE 77-0146116 (State of other jurisdiction of I.R.S. Employer Identification Number incorporation or organization) 320 LAKESIDE DRIVE FOSTER CITY, CALIFORNIA 94404 (Address of principal executive offices) (Zip Code) (650) 358-0100 (Registrant's telephone number, including area code) Indicate by check 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 month (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate number of shares outstanding of each of the issuer's classes of common stock, at the latest practicable date: Class Outstanding as of: MARCH 31, 1998 ----- --------------------------------- Common Stock 8,256,057
10-Q2nd Page of 15TOC1stPreviousNextBottomJust 2nd
PENEDERM INCORPORATED TABLE OF CONTENTS FORM 10-Q Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets- March 31, 1998 and December 31, 1997 3 Condensed Consolidated Statements of Operations- Three months ended March 31, 1998 and 1997 4 Condensed Consolidated Statements of Cash Flows- Three months ended March 31, 1998 and 1997 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 2. Sale of Unregistered Securities 13 Item 6. Exhibits and Reports on Form 8-K 13 Signature Page 14
10-Q3rd Page of 15TOC1stPreviousNextBottomJust 3rd
PENEDERM INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 1998 and December 31, 1997 (in thousands) March 31, December 31, 1998 1997 ----------- ----------- (unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 1,608 $ 1,519 Short-term marketable securities 1,000 3,102 Accounts receivable 2,760 1,013 Inventory 1,962 1,501 Prepaid expenses and other current assets 654 466 ---------- ---------- Total current assets 7,984 7,601 Marketable securities - 1,000 Property and equipment, at cost, less accumulated depreciation and amortization 304 267 Intangible and other assets 1,746 1,363 ---------- ---------- Total assets $ 10,034 $ 10,231 ========== ========== LIABILITIES Current liabilities: Accounts payable $ 1,321 $ 1,264 Accrued liabilities 3,982 3,763 ---------- ---------- Total current liabilities 5,303 5,027 Long-term obligations 8 10 ---------- ---------- Total liabilities 5,311 5,037 STOCKHOLDERS' EQUITY Common stock, $.01 par value 83 82 Additional paid-in capital 57,160 56,222 Accumulated deficit (52,520) (51,110) ---------- ---------- Total stockholders' equity 4,723 5,194 ---------- ---------- Total liabilities and stockholders' equity $ 10,034 $ 10,231 ========== ========== See accompanying notes. Note: The condensed consolidated balance sheet at December 31, 1997 has been derived from audited financial statements as of that date.
10-Q4th Page of 15TOC1stPreviousNextBottomJust 4th
PENEDERM INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share data) (unaudited) Three Months Ended March 31, ------------------ 1998 1997 ---- ---- Revenues: Product sales $ 2,730 $ 2,601 Licensing revenues 1,271 300 ---------- ---------- Total revenues 4,001 2,901 ---------- ---------- Costs and expenses: Cost of product sales 726 763 Research and development 2,392 1,223 Sales and marketing 1,829 2,163 General and administrative 508 328 ---------- ---------- Total costs and expenses 5,455 4,477 ---------- ---------- Loss from operations (1,454) (1,576) Interest income, net 44 59 ---------- ---------- Net loss $ (1,410) $ (1,517) ========== ========== Basic and diluted net loss per share $ (0.17) $ (0.20) ========== ========== Number of shares used in computing basic and diluted net loss per share 8,191 7,583 ========== ========== See accompanying notes.
10-Q5th Page of 15TOC1stPreviousNextBottomJust 5th
PENEDERM INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three Months Ended March 31, ------------------ Increase (decrease) in cash and cash equivalents 1998 1997 ---- ---- Cash flows from operating activities: Net loss $ (1,410) $ (1,517) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 94 81 Increase in accounts receivable (1,747) (2,785) Increase in inventory (461) (166) Increase in prepaid expenses and other current assets (188) (587) Increase in accounts payable and accrued liabilities 278 763 Increase in other assets (32) (2) -------- -------- Net cash used in operating activities (3,466) (4,213) -------- -------- Cash flows from investing activities: Purchases of available-for-sale securities - (5,013) Maturities of available-for-sale securities 2,102 253 Sales of available-for-sale securities 1,000 249 Acquisition of intangible assets (400) - Acquisition of fixed assets (82) (43) -------- -------- Net cash provided by (used in) investing activities 2,620 (4,554) -------- -------- Cash flows from financing activities: Issuance of common stock in private placement - 8,975 Issuance of common stock under equity line of credit 890 - Proceeds from issuance of common stock 49 90 Repayment of long-term obligations (4) (3) -------- -------- Net cash provided by financing activities 935 9,062 -------- -------- Net increase in cash and cash equivalents 89 295 Cash and cash equivalents at beginning of period 1,519 3,062 -------- -------- Cash and cash equivalents at end of period $ 1,608 $ 3,357 ======== ======== See accompanying notes.
10-Q6th Page of 15TOC1stPreviousNextBottomJust 6th
PENEDERM INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Interim Unaudited Financial Information The accompanying interim unaudited condensed consolidated financial statements of Penederm Incorporated (the Company) for the three month periods ended March 31, 1998 and 1997, have been prepared in accordance with generally accepted accounting principles for interim financial statements and include all adjustments (consisting of normal and recurring adjustments) that the Company considers necessary for a fair presentation of the operating results and cash flows for these periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for an entire year. These financial statements should be read in conjunction with the audited financial statements and notes included as part of the Company's Form 10-K for the year ended December 31, 1997. 2. Inventory Inventories are stated at the lower of cost (first-in, first-out) or market and consisted of the following: March 31, December 31, (In thousands) 1998 1997 ---- ---- Raw materials $ 691 $ 572 Finished goods 1,271 929 ------- ------- $ 1,962 $ 1,501 ======= ======= 3. Net Loss Per Share Net loss per share is computed using the weighted average number of common shares outstanding during the period. Common stock equivalents relating to stock options are excluded from the computation as their effect is anti-dilutive. 4. Comprehensive Income As of January 1, 1998, the company adopted Statement of Financial Accounting Standard (SFAS) No. 130, Reporting Comprehensive Income. SFAS 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this statement had no impact on the Company's net loss or stockholders' equity.
10-Q7th Page of 15TOC1stPreviousNextBottomJust 7th
Part I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward Looking Statements The statements in "Management's Discussion and Analysis of Financial Condition and Results of Operations" that relate to future plans, events or performance, including statements relating to future revenue and expense levels, are forward-looking statements which involve risks and uncertainties including, but not limited to, product development and market acceptance risks, product manufacturing risks, risks associated with the establishment and management of a sales force, the development of competitive therapies, the pricing of competitive therapies, the results of current and future licensing and other collaborative relationships, the results of financing efforts, developments regarding intellectual property rights and litigation, risks of product nonapproval or delays or post-approval reviews by the FDA or foreign regulatory authorities, and other risks identified in the Company's most recent Form 10-K and other Securities and Exchange Commission filings. Actual results, events or performance may differ materially. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Recent Events Penederm announced in January 1998 that it had entered into an agreement with Alpharma Inc., a leading multinational pharmaceutical company, to market Alpharma's recently approved permethrin cream 5% for the treatment of sarcoptes scabiei (scabies infection) under its trade name Acticin. In February, the Company announced that it had received approval from the United States Food and Drug Administration to market its Avita gel product in the United States for the treatment of acne. Penederm recently commenced the commercial launch of Avita gel and Acticin, increasing the number of dermatologic pharmaceutical products offered by the Company to four. On March 31 1998, the Company amended its current agreement with Kaken Pharmaceutical Co. Ltd. to provide the Company with an option to develop and market oral forms of butenafine (the active drug in Mentax) in North and South America. If the option for the oral form of butenafine is exercised, and assuming an oral drug product could be successfully developed, the development process would be expected by management to take several years before such product could be commercialized.
10-Q8th Page of 15TOC1stPreviousNextBottomJust 8th
During the first quarter of 1998, the Company met certain development milestones under one of its agreements with SmithKline Beecham plc. The agreement involves the co-development by the companies of a new formulation of an undisclosed currently marketed over- the-counter (OTC) topical product. The Company was paid a related development milestone payment and intends to negotiate a final license agreement related to the product during the second quarter of 1998. In March 1998, the Company entered into an agreement for generic tretinoin 0.025% cream to be manufactured by its contract manufacturer for an undisclosed generic pharmaceutical company. The Company believes that Retin-A (Ortho) has 97% of the 0.025% cream tretinoin market segment. The Company will receive royalties and certain other minimum payments under the agreement. Penederm also met certain development milestones for a topical nail antifungal product being co-developed by the Company and Schering-Plough HealthCare Products Inc. and was paid a related milestone payment during the quarter. The Company also reacquired promotional rights related to the podiatry promotion of prescription Mentax cream effective April 15, 1998. Overview Penederm is a pharmaceutical company that specializes in developing and marketing dermatology products. Penederm now offers four prescription topical drug treatments to dermatologists: - Mentax, a prescription topical cream treatment for three skin fungal conditions: tinea pedis (athlete's foot), tinea corporis (ringworm) and tinea cruris (groin fungus) - Avita cream and gel, prescription topical treatments for acne, and - Acticin, a prescription topical cream treatment for scabies infection.
10-Q9th Page of 15TOC1stPreviousNextBottomJust 9th
Penederm has several other pharmaceutical products for fungal inflammatory conditions, psoriasis, nail fungus and Mentax skin treatment line extensions in human clinical trials. The Company also sells its patented TopiCare Delivery Compounds for use in cosmetics and personal care products, and markets its own over-the- counter (OTC) skin care products. Penederm has established collaborative relationships with other pharmaceutical companies as follows: COMPANY PRODUCT AREA TERRITORY ------- ------------ --------- In-License and Co- Development Agreements: ----------------------- Kaken Pharmaceutical Penederm in-licensed United States, Canada, Company Ltd. (Kaken) butenafine, the active Mexico and Latin ingredient incorporated in America for skin Mentax antifungal; U.S., Canada, Europe, Mexico, Latin America, Australia and New Zealand for nail antifungal SmithKline Beecham plc Undisclosed OTC product SmithKline option to (SmithKline) market worldwide Alpharma, Inc. Acticin for scabies United States (Alpharma) Out-License Agreements: ----------------------- Schering-Plough Prescription and OTC skin United States and HealthCare antifungal and nail Canada Products, Inc. antifungal (Schering-Plough) UCB Group of Belgium Prescription antifungal Europe, Africa and (UCB) products Middle East Warner Wellcome Consumer OTC dry skin Canada Health Products (Warner) SmithKline OTC consumer products Europe and Eastern Europe Pierre Fabre Inc. DuraScreen sunscreen United States (Pierre Fabre) Allergan, Inc. Butenafine topical Central and South (Allergan) antifungal and retinoic America acid cream and gel Mylan Laboratories, Inc. Co-promote Mentax cream to United States (Mylan) primary care physicians
10-Q10th Page of 15TOC1stPreviousNextBottomJust 10th
The Company has been unprofitable since inception. For the period from inception through March 31, 1998, the Company incurred a cumulative net loss of $52,520,000. Penederm's sources of working capital have been equity financings, product sales to corporate partners, sales of Mentax, Avita and over-the-counter products, product license fees, sales of TopiCare Delivery Compounds and interest earned on investments. Results of Operations Three Months Ended March 31, 1998 and 1997 Total revenues for the three months ended March 31, 1998 of $4,001,000 increased 38% from $2,901,000 in the same period of 1997. The first quarter of 1998 reflects product revenues of $2,730,000 from Avita cream and Mentax sales and initial product stock shipments of the Company's recently launched Acticin and Avita gel products. Product revenues of $2,601,000 in the first quarter of 1997 consisted primarily of initial product stocking shipments of the Company's first pharmaceutical product, Mentax. Licensing revenues increased to $1,271,000 in the first quarter of 1998, compared to $300,000 in the same quarter of the prior year, as a result of increased attainment of performance milestones under various corporate partnering arrangements in 1998 versus the comparable prior year period. The Company's cost of sales decreased to $726,000 in the three months ended March 31, 1998 from $763,000 in the same period of 1997 primarily due to a change in revenue mix favoring higher margin products.
10-Q11th Page of 15TOC1stPreviousNextBottomJust 11th
The Company's research and development expenses increased 96% to $2,392,000 in the three months ended March 31, 1998 from $1,223,000 in the same period of 1997 due to the timing and size of human clinical trials. The Company commenced two Phase III human clinical studies of its 501 cream combination product during the third quarter of 1997. These studies are being conducted at over 32 clinical sites and involve over 1,600 patients. Sales and marketing expenses decreased to $1,829,000 in the three months ended March 31, 1998 from $2,163,000 for the same period of 1997. The prior year period includes costs related to the initial launch of the Company's first drug product. These costs did not recur in 1998, but were partially replaced by increased costs related to internalizing the Company's sales force. General and administrative expenses increased 55% to $508,000 in the three months ended March 31, 1998 from $328,000 in the same period of 1997. General and administrative expenses in the first quarter of 1997 reflect a recovery of legal fees related to prior patent litigation. Net interest income was $44,000 in the three months ended March 31, 1998 and $59,000 in the same period of 1997. The Company expects that annual revenues, and costs and expenses will continue to increase in the future, due principally to further commercialization of its pharmaceutical products. Sales and marketing expenses are expected to increase significantly from the prior year reflecting the increased costs associated with its sales force. The Company also expects some expansion of research and development programs, increased patent and regulatory costs, expansion of regulatory, clinical and quality assurance capabilities, and increased administrative support costs. In addition, sales of a product upon initial market introduction generally include a significant amount of initial orders for inventory by wholesalers and distributors and are not necessarily indicative of actual demand for that product by patients and physicians. There can be no assurance that distributors and wholesalers will be able to forecast demand for product accurately. Fluctuations in operating results will occur to the extent that sell through of products does not meet distributors' or wholesalers' expectations. The Company also expects that future operating results may be subject to quarterly variations that may impact cash flow from operations. Operating results for the three months ended March 31, 1998 are not necessarily indicative of future operating results.
10-Q12th Page of 15TOC1stPreviousNextBottomJust 12th
Liquidity and Capital Resources The Company's principal sources of capital to date have been the proceeds from public and private offerings of its equity securities, including a March 1997 private placement for which the net proceeds were approximately $9,000,000. In January 1998, the Company entered into an agreement with an investment group for an equity line of credit which allows the Company to access up to $10 million through sales of its common stock over a period ending in April 2000. At March 31, 1998, the Company had cash, cash equivalents and investments totaling $2,608,000, and approximately $9 million was available under the equity line of credit. Cash expenditures related to operating activities, the acquisition of fixed assets and repayment of long-term obligations totaled $3,552,000 in the three months ended March 31, 1998 and $4,259,000 for the same period in 1997. Operating activities were comprised of research and development, clinical trials, product sales, promotion and general administration activities. The Company also made milestone payments of $400,000 related to the in-licensing of drug compounds in the three months ended March 31, 1998. No similar milestone payments were made in the first three months of 1997. The Company expects that amounts expended historically are not indicative of future expenditures by the Company, which the Company believes will increase. The Company expects to continue to incur substantial expenditures related to the further research and development of its technologies, development of its products, acquisition of additional products and rights to drug compounds and sales and marketing. The Company believes that its capital resources, including anticipated revenues (consisting of product sales, license fees and royalties), proceeds from sales of common stock under the equity line of credit and interest income earned on its invested cash balances, will satisfy the Company's working capital and identified capital expenditure requirements at least through March 31, 1999. The Company's future capital requirements will depend on many factors, including the commercial success of the Company's products, progress of the Company's collaborative and independent research and development programs, payments received under collaborative agreements with other companies, if any, the results and costs of preclinical and clinical testing for the Company's products, the costs associated with and the timing of regulatory approvals, technological advances, the status of competitive products, and the commercial success of Penederm's strategic relationships. There can be no assurance that additional funds will be available to the Company on favorable terms, if at all, to permit the Company to continue with its current plan for operations.
10-Q13th Page of 15TOC1stPreviousNextBottomJust 13th
Part II Item 2. Sales of Unregistered Securities The Company issued an aggregate of 96,983 shares of its Common Stock (the "Shares") for an aggregate consideration of $988,500 in an unregistered transaction in the fiscal quarter ended March 31, 1998. The Shares were issued pursuant to the Common Stock Investment Agreement dated as of January 21, 1998 between the Company and Promethean Investment Group, L.L.C. (the "Investor"). Based on representations made by the Investor in the Agreement, the Company issued the Shares pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, as amended. Part II Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K None.
10-Q14th Page of 15TOC1stPreviousNextBottomJust 14th
SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PENEDERM INCORPORATED May 7, 1998 /s/ Lloyd H. Malchow ----------- -------------------------------- Date Lloyd H. Malchow, President and Chief Executive Officer May 7, 1998 /s/ Michael A. Bates ----------- -------------------------------- Date Michael A. Bates, Vice President Finance and Administration and Chief Financial Officer
10-QLast Page of 15TOC1stPreviousNextBottomJust 15th
INDEX TO EXHIBITS Exhibit No. Description ------- ----------- 27 Financial Data Schedule

Dates Referenced Herein   and   Documents Incorporated By Reference

Referenced-On Page
This 10-Q Filing   Date First   Last      Other Filings
3/31/9721010-Q
12/31/973610-K
1/1/986
1/21/9813
For The Period Ended3/31/98113
4/15/988
Filed On / Filed As Of5/7/9814
3/31/9912
 
TopList All Filings


Filing Submission   -   Alternative Formats (Word / Rich Text, HTML, Plain Text, SGML, XML, et al.)
Copyright © 2008 Fran Finnegan & Company  All Rights Reserved.
www.secinfo.com - Tue, 7 Oct 2008 06:24:01.3 GMT - Privacy - Help