Ilex - Quartalbericht - 500 Beiträge pro Seite

[Warren Bluffet]

ILEX ONCOLOGY INC (ILXO)
Quarterly Report (SEC form 10-Q)
MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion is included to describe the Company`s financial position and results of operations for the three month period ended March 31, 2000. The Consolidated Financial Statements and notes thereto contain detailed information that should be referred to in conjunction with this discussion.


GENERAL


ILEX Oncology, Inc. (the "Company" or "ILEX") develops pharmaceuticals for treating and preventing cancer and provides contract research services to other companies developing anticancer drugs. We have a portfolio of seven anticancer products in clinical development and several preclinical stage products. We built this portfolio by in-licensing and acquiring product candidates developed by others and do not conduct early-stage drug discovery research ourselves.

We operate through two reportable segments: ILEX Products, through which we develop our own portfolio of anticancer compounds, and ILEX Services, which is our full service oncology-focused contract research organization ("CRO"). ILEX Services manages the preclinical research and clinical trials for our own product candidates as well as oncology products being developed by other companies. In addition to building our expertise in cancer drug development, our CRO business generates revenue, reduces our cost to perform our own research and development, and gives us access to product in-licensing opportunities.

We are continuing to progress with our lead product candidate, CAMPATH(R) (alemtuzumab), being developed in partnership with Millennium Pharmaceuticals, Inc. The partnership, Millennium & ILEX Partners, L.P. ("M&I Partners") submitted the Biologics License Application ("BLA") to the U.S. Food and Drug Administration ("FDA") for CAMPATH in December 1999, was accepted for filing in February 2000. CAMPATH is an investigational humanized monoclonal antibody. It has received "fast track" designation from the FDA. The FDA has granted orphan drug designation to CAMPATH.

Additionally, the Marketing Authorization Application (MAA) for CAMPATH has been accepted for review in April 2000 by the European Agency for the Evaluation of Medicinal Products (EMEA). The application, which was submitted in late March, will be reviewed under the EMEA`s centralized procedure, required for biotechnology products. The application is based largely on the results of a pivotal clinical trial, which were first reported at the European Haematology Association meeting in Barcelona, Spain in June 1999.

We currently have no products available for sale. We have incurred losses since inception and had an accumulated deficit through March 31, 2000 of $80.7 million. Our losses have resulted primarily from product development activities, including in-licensing of products for which we pay fees, and related administrative expenses. We expect to continue to incur operating losses for the next several years. To date we have not generated any significant revenue from the sale of our drug candidates.





ILEX ONCOLOGY, INC.

MARCH 31, 2000 - QUARTERLY REPORT ON FORM 10-Q


Our revenue for the foreseeable future will be limited to product development funding under our collaborative relationships, our CRO revenue, interest income, and other miscellaneous income. In addition, if marketing approval is received from the FDA with respect to our lead product candidate, CAMPATH, and if CAMPATH is successfully commercialized, we will receive a portion of the profits generated by its sale. M&I Partners may not obtain marketing approval of CAMPATH, successfully commercialize it, or ever generate profits from its sale.

Most of the development of CAMPATH has been conducted by us on behalf of M&I Partners. M&I Partners pays us for these services. We have historically accounted for these CAMPATH development activities as follows:

o our operating revenue includes product development revenue we receive from M&I Partners; o our research and development expenses include all of the development costs for CAMPATH, which are largely offset by M&I Partners` revenue we receive; and o our actual share of CAMPATH development costs is reported as equity in losses of research and development partnerships.

Our CRO business generates revenue by performing services for companies within the pharmaceutical and biotechnology industries. The terms of our contracts vary, ranging from several months to two years, and generally may be terminated upon notice of 60 to 90 days by our customers. We recognize revenue with respect to our services either on a percentage-of-completion or fee-for-service basis as work is performed. The CRO business performs all of the development services for ILEX Products; however, our consolidated CRO revenue does not include any amounts related to the services provided to ILEX Products.


RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2000 AND 1999



OPERATING REVENUES


Total revenue increased to $6.6 million in the first quarter of 2000, from approximately $3.4 million in the first quarter of 1999. The increase of approximately $3.2 million, or 94%, was due to an additional $3.1 million of CRO revenues, as well as a slight increase of $0.1 million in product development revenues. The increase of $3.1 million, or 124%, in CRO revenues to $5.6 million in 2000, compared to $2.5 million in 1999, reflects an increase in the number of contracts in process with existing clients, as well as an expansion in the client base.


OPERATING EXPENSES


Total Operating Expenses. Total operating expenses increased to $11.4 million in the first quarter of 2000 from approximately $7.4 million in 1999. This increase of approximately $4.0 million, or 54%, is attributable to an increase in direct costs of research services, as well as an increase in research and development costs. ILEX believes that research and development costs will continue to increase in future periods as the Company expands its preclinical and clinical trials associated with developing additional compounds.

Research and Development Costs. Research and development costs increased to $5.3 million in the first quarter of 2000, from approximately $3.6 million in 1999. This increase of $1.7 million, or 47%, was due to an increase in resources devoted to developing the Company`s product pipeline.

Direct Cost of Research Services. Direct cost of research services expense increased to $5.1 million during the first quarter of 2000, from $3.0 million in 1999. This increase of $2.1 million, or 70%, is attributable to the addition of new contracts, including the size and complexity of contract research projects, and an expanded client base. Additionally, as a result of the increasing number of contracts, the number of employees related to CRO services has increased almost 16 percent to approximately 200 total employees at March 31, 2000.

General and Administrative Costs. General and administrative costs remained relatively constant at $0.9 million for the first quarter of 2000 and 1999. This reflects the Company`s commitment to controlling overall general and administrative costs.


OPERATING LOSS


The loss from operations increased to $4.8 million in the first quarter of 2000, from $4.0 million in 1999. This increase of $0.8 million, or 20%, is due to an increase in direct costs related to the increase in contract research projects, as well as increased spending on the Company`s proprietary products, partially offset by an increase in CRO revenues.





ILEX ONCOLOGY, INC.

MARCH 31, 2000 - QUARTERLY REPORT ON FORM 10-Q



EQUITY IN INCOME OF RESEARCH AND DEVELOPMENT PARTNERSHIPS AND CONTRACT RESEARCH

AFFILIATE


Equity in income in joint ventures and contract research affiliate was $39,000 for the first quarter of 2000, compared to ($0.8) million in 1999, an increase of $0.8 million, or 100%. This increase is primarily attributable to a reduction in losses incurred by a research and development partnership as a result of advances made to the partnership from a third party, as required by a distribution and development agreement.


NET INTEREST INCOME


Net interest income increased to $1.5 million in the first quarter of 2000, from approximately $0.3 million in 1999. This increase of $1.2 million, or 400%, is attributable to an increase in average cash and investment balances during the first quarter of the year, as a result of proceeds received from common stock offerings during the last six months of 1999, as well as a private placement in March 2000.


NET LOSS


Net loss decreased $1.1 million during the first quarter of 2000, or 24%, to $3.4 million, from $4.5 million in 1999. Net loss per share decreased $0.21 per share to $0.15 per share in 2000, from $0.36 per share in 1999.


LIQUIDITY AND CAPITAL RESOURCES


ILEX has historically financed its operations primarily through the sale of its capital stock, through development and licensing fee revenues provided by its collaborative partners under its collaborative agreements and through fee-for-service or participatory revenues pursuant to contracts with its CRO clients. We receive payments under collaborative agreements primarily in the form of development funding, milestone payments, if milestones are achieved, and royalties, if products are commercialized.

In March 2000, we sold 3.0 million shares of common stock at $45 per share to selected institutional and other accredited investors in a private placement. Gross proceeds to the Company were approximately $135.0 million. Net proceeds to the Company were approximately $127.3 million.

At March 31, 2000, we had cash, cash equivalents, restricted investments and investments in marketable securities of $214.8 million and working capital of $183.3 million. Cash, cash equivalents, restricted investments and investments in marketable securities increased approximately $125.7 million primarily as a result of the private placement previously mentioned. Our cash requirements are expected to continue to increase each year as we expand our activities and operations. It is possible we will never be able to generate significant product revenue or achieve or sustain profitability.

Until our business can generate sufficient levels of cash from product sales, we expect to continue to finance our operations through existing cash, revenue from collaborative relationships, CRO revenue, and proceeds from the sale of equity securities. Under the terms of our agreement with IMPATH Inc., ILEX Services is prohibited from incurring any debt without IMPATH`s consent. We plan to continue our policy of investing available funds in government securities and investment-grade, interest-bearing securities, primarily with maturities of one year or less. We do not invest in derivative financial instruments, as defined by Statement of Financial Accounting Standards No. 119.

Our future expenditures and capital requirements will depend on numerous factors, including without limitation, the progress of our research and development programs, the progress of our preclinical and clinical testing, the magnitude and scope of these activities, the time and costs involved in obtaining regulatory approvals, the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, competing technological and market developments, changes in or termination of existing collaborative arrangements, our ability to establish, maintain and avoid termination of collaborative arrangements, and the purchase of capital equipment and acquisitions of compounds, technologies or businesses. Our cash requirements are expected to continue to increase each year as it expands its activities and operations. At March 31, 2000, we had no material commitments for capital expenditures. There can be no assurance that we will ever be able to generate product revenue or achieve or sustain profitability.

We believe our existing cash, cash equivalents, and marketable securities will be adequate to support our operations for the near term, including any potential acquisitions or in-licensing opportunities. There can be no assurance, however, that we will not require additional financing in the future, or that such additional funding, if needed, will be available on terms acceptable to us or at all.





ILEX ONCOLOGY, INC.

MARCH 31, 2000 - QUARTERLY REPORT ON FORM 10-Q



FORWARD-LOOKING STATEMENTS - CAUTIONARY STATEMENTS


This Quarterly Report on Form 10-Q contains certain "forward-looking" statements as such term is defined in the Private Securities Litigation Reform Act of 1995 and information relating to the Company and its subsidiaries that are based on the beliefs of the Company`s management as well as assumptions made by and information currently available to the Company`s management. When used in this report, the words "anticipate," "believe," "estimate," "expect" and "intend" and words or phrases of similar import, as they relate to the Company or its subsidiaries or Company management, are intended to identify forward-looking statements. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitations, competitive factors, general economic conditions, failure to receive FDA approval of our drugs, relationships with pharmaceutical and biotechnology companies, the ability to develop safe and efficacious drugs, variability of royalty, license and other revenue, failure to satisfy performance obligations, ability to enter into future collaboration agreements, failure to achieve positive results in clinical trials, failure to complete current or secure new contracts with contract research services clients, uncertainty regarding the Company`s patents and proprietary rights (including the risk that the Company may be forced to engage in costly litigation to protect such patent rights and the material adverse consequences to the Company if there were unfavorable outcome of any such litigation), governmental regulation and supervision, technological change, changes in industry practices, one-time events and other factors described herein or in the Company`s Registration Statement on Form S-3 (Registration File No. 333-32000) filed March 8, 2000, and the Company`s annual, quarterly and other reports filed with the Securities and Exchange Commission. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward-looking statements.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Market risk represents the risk of loss that may impact the financial position, results of operations, or cash flows of the Company due to adverse changes in financial market prices, including interest rate risk, foreign currency exchange rate risk, commodity price risk, and other relevant market rate or price risks.

We are exposed to some market risk through interest rates, related to its investment of its cash, cash equivalents, restricted investments and investments in marketable securities of approximately $214.8 million at March 31, 2000. These funds are generally invested in highly liquid treasury bills, money market accounts with short-term maturities and corporate bonds. As such instruments mature and the funds are reinvested, we are exposed to changes in market interest rates. This risk is not considered material and we manage such risk by continuing to evaluate the best investment rates available for short-term high quality investments. We have not used derivative financial instruments in its investment portfolio.

Our European operations are denominated in local currency. We have unhedged transaction exposures in these currencies which are not considered material. We have not entered into any forward foreign exchange contracts for speculative, trading or other purposes.





ILEX ONCOLOGY, INC.

MARCH 31, 2000 - QUARTERLY REPORT ON FORM 10-Q

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