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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
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COMMISSION FILE NUMBER: 000-21291
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INTROGEN THERAPEUTICS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 74-2704230
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
301 CONGRESS AVENUE, SUITE 1850
AUSTIN, TEXAS 78701
(Address of principal executive offices, including zip code)
(512) 708-9310
(Registrant's telephone number, including area code)
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 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
--- ---
As of June 30, 2002, the Registrant had 21,464,748 shares of its common stock,
$0.001 par value per share, issued and outstanding.
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INTROGEN THERAPEUTICS, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NO.
------- --------------------- --------
Item 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets - as of
December 31, 2001 and June 30, 2002 (unaudited)............ 3
Condensed Consolidated Statements of Operations for
the Three and Six Months Ended June 30, 2001 and
June 30, 2002 (unaudited).................................. 4
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 2001 and
June 30, 2002 (unaudited).................................. 5
Notes to Condensed Consolidated Financial
Statements (unaudited)..................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk................................................ 21
PART II. OTHER INFORMATION
-------- -----------------
Item 1. Legal Proceedings........................................... 21
Item 2. Changes in Securities and Use of Proceeds................... 22
Item 3. Defaults Upon Senior Securities............................. 22
Item 4. Submission of Matters to a Vote of Security Holders......... 22
Item 5. Other Information........................................... 23
Item 6. Exhibits and Reports on Form 8-K............................ 23
SIGNATURES............................................................... 24
2
PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30,
2001 2002
------------ ------------
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents ........................................ $ 37,396,627 $ 10,875,619
Short-term investments ........................................... 11,427,915 25,917,295
Accounts receivable .............................................. 137,014 74,355
Other current assets ............................................. 674,407 591,220
------------ ------------
Total current assets ........................................... 49,635,963 37,458,489
Property and equipment, net of accumulated depreciation
of $6,405,884 and $7,365,190, respectively ..................... 10,443,017 9,559,779
Other assets ....................................................... 345,477 321,169
------------ ------------
Total assets ................................................... $ 60,424,457 $ 47,339,437
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities ......................... $ 4,974,203 $ 6,255,088
Deferred revenue ................................................. -- 285,170
Current portion of capital lease obligations and notes payable.... 1,486,376 1,583,198
------------ ------------
Total current liabilities ..................................... 6,460,579 8,123,456
Capital lease obligations, net of current portion .................. 957,467 525,523
Notes payable, net of current portion .............................. 8,079,121 7,686,619
Deferred revenue, long-term ........................................ 361,467 490,461
------------ ------------
Total liabilities ............................................. 15,858,634 16,826,059
------------ ------------
Commitments and contingencies
Stockholders' Equity:
Series A non-voting convertible preferred stock, $.001 par
value, 100,000 shares authorized, 100,000
shares issued and outstanding .................................... 100 100
Common stock, $.001 par value; 50,000,000 shares
authorized, 21,446,363 and 21,464,748 shares issued
and outstanding, respectively .................................... 21,446 21,465
Additional paid-in capital ......................................... 94,544,109 94,503,375
Deferred compensation .............................................. (2,485,220) (1,693,516)
Accumulated deficit ................................................ (47,514,612) (62,318,046)
------------ ------------
Total stockholders' equity ....................................... 44,565,823 30,513,378
------------ ------------
Total liabilities and stockholders' equity ....................... $ 60,424,457 $ 47,339,437
============ ============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2001 2002 2001 2002
------------ ------------ ------------ ------------
Contract services, grant and other revenue ............. $ 268,872 $ 321,769 $ 293,313 $ 550,551
Costs and expenses:
Research and development ............................ 6,074,922 5,805,134 9,861,055 12,503,725
General and administrative .......................... 1,632,143 1,679,282 2,834,996 3,434,291
------------ ------------ ------------ ------------
Loss from operations .............................. (7,438,193) (7,162,647) (12,402,738) (15,387,465)
Interest income ........................................ 340,801 165,862 447,030 357,492
Interest expense ....................................... (246,713) (203,399) (468,518) (422,712)
Other income ........................................... 191,159 333,413 353,570 649,251
------------ ------------ ------------ ------------
Net loss .......................................... $ (7,152,946) $ (6,866,771) $(12,070,656) $(14,803,434)
============ ============ ============ ============
Net loss per share, basic and diluted ............. $ (0.34) $ (0.32) $ (0.57) $ (0.69)
============ ============ ============ ============
Shares used in computing basic and diluted net
loss per share ............................... 21,335,576 21,463,163 21,300,268 21,456,707
============ ============ ============ ============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
2001 2002
------------ ------------
Cash flows from operating activities:
Net loss .................................................................. $(12,070,656) $(14,803,434)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation .............................................................. 1,160,480 959,306
Compensation related to issuance of stock options ......................... 843,460 741,377
Changes in assets and liabilities:
Decrease (increase) in accounts receivable .............................. 709,262 62,659
Decrease (increase) in inventory ........................................ 750,000 --
Decrease (increase) in other assets ..................................... (66,067) 107,495
Increase (decrease) in accounts payable and accrued liabilities ......... 2,427,477 1,280,885
Increase (decrease) in deferred revenue ................................. (763,000) 414,164
------------ ------------
Net cash used in operating activities ................................. (7,009,044) (11,237,548)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment ..................................... (626,689) (76,068)
Purchases of short-term investments ..................................... (36,066,344) (37,878,178)
Maturities of short-term investments .................................... 52,267,397 23,388,798
------------ ------------
Net cash provided (used in) by investing activities ................... 15,574,364 (14,565,448)
------------ ------------
Cash flows from financing activities:
Proceeds from sale of common stock ...................................... 35,349 9,612
Proceeds from issuance of notes payable ................................. 1,331,231 --
Principal payments under capital lease obligations and notes
payable .............................................................. (431,615) (727,624)
------------ ------------
Net cash provided by (used in) financing activities ................... 934,965 (718,012)
------------ ------------
Net increase (decrease) in cash .............................................. 9,500,285 (26,251,008)
Cash, beginning of period .................................................... 4,699,663 37,396,627
------------ ------------
Cash, end of period .......................................................... $ 14,199,948 $ 10,875,619
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest .................................................... $ 485,053 $ 414,950
============ ============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
INTROGEN THERAPEUTICS, INC. AND SUBSIDIARIES
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FORMATION AND BUSINESS
Introgen Therapeutics, Inc., a Delaware corporation, and its subsidiaries
(Introgen) develop gene therapy products for the treatment of cancer. Introgen's
lead product candidate, ADVEXIN(R) gene therapy, combines the naturally
occurring p53 tumor suppressor gene with Introgen's adenoviral gene delivery
system. Introgen is conducting pivotal Phase III clinical trials of ADVEXIN gene
therapy in head and neck cancer, has completed a Phase II clinical trial of
ADVEXIN gene therapy in non-small cell lung cancer, is conducting a Phase II
clinical trial of ADVEXIN gene therapy in breast cancer, and is conducting
several Phase I clinical trials of ADVEXIN gene therapy in other types of
cancer. While the timeline for enrollment of patients in this trial has
lengthened slightly from earlier estimates, Introgen does not expect this
timeline change to materially delay its requests for the approval of ADVEXIN
gene therapy with regulatory agencies. Introgen is developing additional gene
therapy product candidates, notably those based on the mda-7 and PTEN genes, as
well as associated vector technologies for delivering the gene-based products
into target cells. Introgen's INGN 241 product candidate, which combines the
mda-7 gene with Introgen's gene delivery system, is undergoing safety testing in
a Phase I clinical trial. Introgen is developing therapies for cancer and other
diseases based on the use of genes as therapeutic agents, which may offer safer
and more effective treatments than are currently available.
Introgen manufactures its own gene therapy-based products for use in
clinical trials. Introgen has not generated any significant revenues from
unaffiliated third parties, nor is there any assurance of future product
revenues. Introgen's research and development activities involve a high degree
of risk and uncertainty, and its ability to successfully develop, manufacture
and market its proprietary products is dependent upon many factors. These
factors include, but are not limited to, the need for additional financing, the
reliance on collaborative research and development arrangements with corporate
and academic affiliates, and the ability to develop manufacturing, sales and
marketing experience. Additional factors include uncertainties as to patents and
proprietary technologies, competitive technologies, technological change and
risk of obsolescence, development of products, competition, government
regulations and regulatory approval, and product liability exposure. As a result
of the aforementioned factors and the related uncertainties, there can be no
assurance of Introgen's future success.
Since its inception in 1993, Introgen has used its resources primarily to
conduct research and development activities for ADVEXIN gene therapy and, to a
lesser extent, for other product candidates. At June 30, 2002, Introgen had an
accumulated deficit of approximately $62.3 million. Introgen anticipates that it
will incur losses in the future that are likely to be greater than losses
incurred in prior years. While the cash needed for operating activities may
increase as the ADVEXIN gene therapy Phase III clinical trials and research and
development of various gene therapy technologies continue, Introgen is taking
measures to reduce the amount of cash used in its operating activities. Since
inception, Introgen's only significant revenues have been payments from Aventis
Pharma (Aventis) under collaborative research and development agreements for
Introgen's early-stage development work on ADVEXIN gene therapy and Aventis'
purchases of ADVEXIN gene therapy product Introgen manufactured for Aventis' use
in the later-stage clinical trials it previously performed. Introgen has also
earned revenue and other income from federal research grants, contract services
and process development activities, the lease of a portion of its facilities to
The University of Texas M. D. Anderson Cancer Center and interest income on cash
placed in short-term investments.
Until June 30, 2001, Introgen developed therapeutics based on p53 and on
K-ras pathway inhibition under two collaboration agreements with Aventis
Pharmaceuticals, Inc., a wholly-owned subsidiary of Aventis. In June 2001,
Introgen and Aventis restructured this collaborative relationship. Under this
restructuring, Introgen assumed responsibility for the worldwide development of
all p53- and K-ras-based products, and acquired additional marketing and
commercialization rights with respect to those products. Introgen assumed the
control and performance of ongoing clinical trials for p53- and K-ras-based
products and is now fully responsible for all pre-clinical research and
development and clinical trials for new gene therapy products. Introgen has
agreed to pay Aventis for certain costs Aventis incurred in completing the
transition of these clinical trials from Aventis to Introgen. Introgen has
either paid or accrued for these costs.
6
In accordance with the restructured p53 and K-ras collaboration agreement,
Aventis licensed to Introgen all patents covering the manufacture, sale,
offering for sale, importation or use of ADVEXIN gene therapy, all K-ras patents
and delivery patents and targeting technologies. Aventis agreed not to conduct
any activities directed to the development or commercialization of any gene
therapy products using the p53 or K-ras genes for a period running through 2008.
Introgen now has the exclusive, worldwide right to market and manufacture the
products developed under each of the prior collaboration agreements, as well as
any new p53- or K-ras-based gene therapy products. Aventis transferred to
Introgen all trademarks and goodwill associated with the developed p53-based
gene therapy products.
2. BASIS OF PRESENTATION
The accompanying condensed, consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC) and, accordingly, do
not include all of the information and footnotes required under generally
accepted accounting principles in the United States for complete financial
statements. In the opinion of management, all accounting entries considered
necessary for a fair presentation have been made in preparing these financial
statements. Operating results for the three and six month periods ended June 30,
2002, are not necessarily indicative of the results that may be expected for the
entire fiscal year. For further information, refer to the consolidated financial
statements and footnotes thereto as of December 31, 2001, and for the six months
then ended, included in Introgen's Transition Report on Form 10-K, as filed with
the SEC on March 20, 2002 and to the condensed, consolidated financial
statements as of March 31, 2002, and for the three months then ended included in
Introgen's Quarterly Report on Form 10-Q, as filed with the SEC on May 15, 2002.
3. NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of shares
of common stock outstanding. Due to losses incurred in all periods presented,
the shares associated with stock options, warrants and non-voting convertible
preferred stock are not included because they are anti-dilutive.
4. INVESTMENT IN VIRRX, INC.
Introgen has an ongoing agreement with VirRx, Inc. (VirRx) to purchase
shares of VirRx Series A Preferred Stock. Introgen purchased $150,000 and
$225,000 of this stock for cash during the quarter and six months ended June 30,
2002, respectively. Introgen has agreed to purchase an additional $150,000 of
this stock for cash on the first day of each quarter through January 1, 2006.
VirRx is required to use the proceeds from these stock sales in accordance with
the terms of a collaboration and license agreement between Introgen and VirRx
for the development of VirRx's technologies. Introgen may unilaterally terminate
this collaboration and license agreement with 90 days prior notice at any time
after March 7, 2003, which would also terminate the requirement for Introgen to
make any additional stock purchases. Provided the collaboration and license
agreement remains in place, Introgen will make additional milestone stock
purchases, either for cash or through the issuance of Introgen common stock,
upon the completion of Phase I, Phase II and Phase III clinical trials involving
technologies licensed under this agreement and will make a $5.0 million cash
milestone payment to VirRx, for which Introgen receives no VirRx stock, upon
approval by the United States Food and Drug Administration (FDA) of a biologics
license application involving these technologies. To the extent Introgen has
already made cash milestone payments, it may receive a credit of 50% of the
Phase II clinical trial milestone payments and 25% of the Phase III clinical
trial milestone payments against this $5.0 million cash milestone payment. The
additional milestone stock purchases and cash payment are not anticipated to be
required in the near future. Introgen has an option to purchase all outstanding
shares of VirRx at any time until March 2007.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read in conjunction with our
condensed consolidated financial statements and the related notes thereto
included in this Quarterly Report on Form 10-Q. The discussion and analysis
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements are based on our current expectations and
entail various risks and uncertainties. Our actual results could differ
materially from those projected in the forward-looking statements as a result of
various factors, including those set forth below under "Factors Affecting Future
Operating Results."
7
OVERVIEW
We are a leading developer of gene therapy products for the treatment of
cancer. Our drug discovery and development programs have resulted in innovative
approaches by which physicians use genes to treat cancer and other diseases. Our
lead product candidate, ADVEXIN(R) gene therapy, combines the p53 gene, one of
the most potent members of a group of naturally occurring genes, the tumor
suppressor genes, which act to protect cells from becoming cancerous, with a
gene delivery system that we have developed and extensively tested. We are
conducting pivotal Phase III clinical trials of ADVEXIN gene therapy in head and
neck cancer. While the timeline for enrollment of patients in this trial has
lengthened slightly from earlier estimates, we do not expect this timeline
change to materially delay our requests for the approval of ADVEXIN gene therapy
with regulatory agencies. Pivotal Phase III trials are typically the final
trials required for FDA approval. We have completed a Phase II clinical trial in
non-small cell lung cancer, a category that includes approximately 80% of the
various types of lung cancer. Phase II trials are efficacy trials. We are
conducting a Phase II trial of ADVEXIN gene therapy in breast cancer. We are
also conducting several Phase I clinical trials, or safety trials, of ADVEXIN
gene therapy in other types of cancer. To date, doctors at clinical sites in
North America, Europe and Japan have treated hundreds of patients with ADVEXIN
gene therapy, establishing a large safety database.
We are developing additional gene therapy product candidates that we believe
may be effective in treating certain cancers, notably those product candidates
based on the mda-7 and PTEN genes, as well as associated vector technologies for
delivering the gene-based products into target cells. Our INGN 241 product
candidate, which combines the mda-7 gene with our gene delivery system, is
undergoing safety testing in a Phase I clinical trial.
Since our inception in 1993, we have used our resources primarily to conduct
research and development activities for ADVEXIN gene therapy and, to a lesser
extent, for other product candidates. At June 30, 2002, we had an accumulated
deficit of approximately $62.3 million. We anticipate that we will incur losses
in the future that are likely to be greater than losses incurred in prior years.
At June 30, 2002, we had cash, cash equivalents and short-term investments of
$36.8 million. During the six months ended June 30, 2002, we used $11.2 million
of cash for operating activities. While this cash usage rate may increase in
future periods as we continue our ADVEXIN gene therapy Phase III clinical trials
and our research and development of various other gene therapy technologies, we
are taking measures to reduce the amount of cash used in our operating
activities. Since our inception, our only significant revenues have been
payments from Aventis under collaborative research and development agreements
for our early-stage development work on ADVEXIN gene therapy and Aventis'
purchases of ADVEXIN gene therapy product we manufactured for use in the
later-stage clinical trials it previously performed. As a result of the June
2001 restructuring of our collaborative relationship with Aventis, we no longer
receive these revenues from Aventis. We have also earned revenue and other
income from federal research grants, contract services and process development
activities, the lease of a portion of our facilities to M. D. Anderson Cancer
Center and interest income on cash placed in short-term investments. We may
raise additional funds through public or private equity offerings, debt
financings or additional corporate collaboration and licensing arrangements. We
do not know whether such additional financing will be available when needed, or
on terms favorable to us or our stockholders.
Until June 30, 2001, we developed therapeutics based on p53 and on K-ras
pathway inhibition under two collaboration agreements with Aventis
Pharmaceuticals, Inc., a wholly-owned subsidiary of Aventis. In June 2001, we
restructured this collaborative relationship. Under this restructuring, we
assumed responsibility for the worldwide pre-clinical and clinical development
of all p53- and K-ras-based gene therapy products, acquired all marketing and
commercialization rights with respect to those products, sold $25.0 million of
non-voting preferred stock to Aventis, made a one-time payment in August 2001 of
$2.0 million to Aventis in consideration for internal costs it incurred in
facilitating the transition of control and performance of these clinical trials
to us. We have accrued a liability for amounts we may have to pay Aventis for
additional costs it incurred with third parties in completing the transition of
these clinical trials to us. We no longer receive collaborative research and
development or product sales revenue from Aventis, which, over the life of the
collaboration, totaled $57.2 million and $7.5 million, respectively.
In accordance with the restructured p53 and K-ras collaboration agreement,
Aventis licensed to us all of its patents covering the manufacture, sale,
offering for sale, importation or use of ADVEXIN gene therapy and other K-ras
patents, delivery patents and targeting technologies. Aventis also agreed, for a
period running through June 2008, not to conduct any activities directed to the
development or commercialization of any gene therapy products using the p53 or
K-ras genes. We now have the exclusive, worldwide right to market and
manufacture the products developed under each of the prior collaboration
agreements, as well as any new p53- or K-ras-based gene therapy products.
Aventis transferred to us all trademarks and goodwill associated with ADVEXIN
gene therapy.
8
SUMMARY OF CRITICAL ACCOUNTING POLICIES
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles in the United States 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.
Short-Term Investments. Short-term investments consist of investments in
short-term, investment grade securities, which consist primarily of federal and
state government obligations, commercial paper and/or corporate bonds with
various maturity dates not exceeding one year. All short-term investments have
been classified as held-to-maturity and are carried at amortized cost. At any
point in time, amortized costs may be greater or less than fair value. If
investments are sold prior to maturity, we could incur a realized gain or loss
based on the fair market value of the investments at the date of sale.
Additionally, we could incur future losses on investments if the investment
issuer becomes impaired or the investment is downgraded.
Research and Development Costs. In conducting our clinical trials of ADVEXIN
gene therapy and other product candidates, we procure services from numerous
third-party vendors. The cost of these services constitutes a significant
portion of the cost of these trials and of our research and development expenses
in general. These vendors do not necessarily provide us billings for their
services on a regular basis and, accordingly, are not a timely source of
information to determine the costs we have incurred relative to their services
for any given accounting period. As a result, we make significant accounting
estimates as to the amount of costs we have incurred relative to these vendors
in each accounting period. These estimates are based on numerous factors,
including, among others, costs set forth in our contracts with these vendors,
the period of time over which the vendor will render the services and the rate
of enrollment of patients in our clinical trials. Using these estimates, we
record expenses and accrued liabilities in each accounting period that we
believe fairly represent our obligations to these vendors. Actual results could
differ from these estimates, resulting in increases or decreases in the amount
of expense recorded and the related accrual.
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTERS ENDED JUNE 30, 2002 AND 2001
REVENUES
Contract Services, Grant and Other Revenue. We earn contract services
revenues from third parties under agreements to provide manufacturing process
development services and to produce products for them. We earn grant revenue
under research grants from U.S. Government agencies. Contract services, grant
and other revenue was $322,000 for the quarter ended June 30, 2002, compared to
$269,000 for the quarter ended June 30, 2001, an increase of 20%. This increase
was primarily due to our having multiple contract services agreements in place
in 2002 with Biogen, Inc. and other companies, compared to limited activity in
2001, and having in place a larger number of federal grants in 2002 compared to
2001.
COSTS AND EXPENSES
Research and Development. Research and development expenses, excluding
compensation related to the issuance of stock options of $107,000 in 2002 and
$122,000 in 2001, were $5.7 million for the quarter ended June 30, 2002,
compared to $6.0 million for the quarter ended June 30, 2001, a decrease of 5%.
These expenses in 2001 included a one-time charge of approximately $2.0 million
related to the restructuring of our collaborative relationship with Aventis in
June 2001, resulting in our assuming responsibility for conducting and funding
the Phase II and Phase III clinical trials for ADVEXIN gene therapy subsequent
to that date. Excluding the one-time charge referred to above, these expenses
increased 43% in the quarter ended June 30, 2002 compared to the quarter ended
June 30, 2001.
General and Administrative. General and administrative expenses, excluding
compensation related to the issuance of stock options of $244,000 in 2002 and
$295,000 in 2001, were $1.4 million for the quarter ended June 30, 2002,
compared to $1.3 million for the quarter ended June 30, 2001, an increase of 8%.
This increase is primarily a result of our assuming responsibility for
conducting the Phase II and Phase III clinical trials for ADVEXIN gene therapy
in 2002, whereas we did not have that responsibility in 2001.
Compensation Related to the Issuance of Stock Options. Compensation related
to the issuance of stock options was $351,000 for the quarter ended June 30,
2002, compared with $417,000 for the quarter ended June 30, 2001, a decrease of
16%. This decrease was due to deferred compensation arising from the issuance of
certain stock options becoming fully amortized subsequent to June 30, 2001. The
amount of compensation expense to be recorded in future periods may increase if
additional options are issued at a price below the market price of common stock
at the date of grant or are issued to individuals or entities other than
employees or directors
9
and may decrease if unvested options for which deferred compensation has been
recorded are subsequently forfeited or as previously recorded deferred
compensation becomes fully amortized.
INTEREST INCOME, INTEREST EXPENSE AND OTHER INCOME
Interest income was $166,000 for the quarter ended June 30, 2002, compared
with $341,000 for the quarter ended June 30, 2001, a decrease of 51%. This
decrease was due to a decrease in interest rates between periods, lower average
cash and investment balances and our more conservative investment philosophy
subsequent to the events of September 11, 2001.
Interest expense was $203,000 for the quarter ended June 30, 2002, compared
with $247,000 for the quarter ended June 30, 2001, a decrease of 18%. This
decrease was due to lower principal amounts upon which interest was incurred in
2002 compared to 2001 as a result of continuing debt service payments on notes
payable and capital lease obligations.
Other income was $333,000 for the quarter ended June 30, 2002, compared to
$191,000 for the quarter ended June 30, 2001, an increase of 74%. This increase
was due to additional amounts paid to us by M. D. Anderson Cancer Center for
common area maintenance charges under their lease of space from us.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
REVENUES
Contract Services, Grant and Other Revenue. We earn contract services
revenues from third parties under agreements to provide manufacturing process
development services and to produce products for them. We earn grant revenue
under research grants from U.S. Government agencies. Contract services, grant
and other revenue was $551,000 for the six months ended June 30, 2002, compared
to $293,000 for the six months ended June 30, 2001, an increase of 88%. This
increase was primarily due to our having multiple contract services agreements
in place in 2002 with Biogen, Inc. and other companies, compared to limited
activity in 2001, and having in place a larger number of federal grants in 2002
compared to 2001.
COSTS AND EXPENSES
Research and Development. Research and development expenses, excluding
compensation related to the issuance of stock options of $214,000 in 2002 and
$233,000 in 2001, were $12.3 million for the six months ended June 30, 2002,
compared to $9.6 million for the six months ended June 30, 2001, an increase of
28%. These expenses in 2001 included a one-time charge of approximately $2.0
million related to the restructuring of our collaborative relationship with
Aventis in June 2001. Excluding this one-time charge, these expenses increased
62% for the six month period ended June 30, 2002 compared to the six month
period ended June 30, 2001. The increase in this expense is a result of our
being responsible for all expenses of the ADVEXIN clinical trials in 2002,
whereas we incurred no such expenses in 2001, except for the one-time charge
referred to above, since Aventis paid the costs of those trials during that
time.
General and Administrative. General and administrative expenses, excluding
compensation related to the issuance of stock options of $527,000 in 2002 and
$610,000 in 2001, were $2.9 million for the six months ended June 30, 2002,
compared to $2.2 million for the six months ended June 30, 2001, an increase of
32%. This increase was due to additional administrative costs we incurred,
primarily during the three months ended March 31, 2002, in connection with our
assuming responsibility for conducting the Phase II and Phase III clinical
trials for ADVEXIN gene therapy as a result of the restructuring of our
collaborative relationship with Aventis.
Compensation Related to the Issuance of Stock Options. Compensation related
to the issuance of stock options was $741,000 for the six months ended June 30,
2002, compared with $843,000 for the six months ended June 30, 2001, a decrease
of 12%. This decrease was due to deferred compensation arising from the issuance
of certain stock options becoming fully amortized subsequent to June 30, 2001.
The amount of compensation expense to be recorded in future periods may increase
if additional options are issued at a price below the market price of common
stock at the date of grant or are issued to individuals or entities other than
employees or directors and may decrease if unvested options for which deferred
compensation has been recorded are subsequently forfeited or as previously
recorded deferred compensation becomes fully amortized.
10
INTEREST INCOME, INTEREST EXPENSE AND OTHER INCOME
Interest income was $357,000 for the six months ended June 30, 2002,
compared with $447,000 for the six months ended June 30, 2001, a decrease of
20%. Interest income for 2001 is net of a $500,000 reduction to recognize the
decline in the market value of certain commercial paper held as an investment.
Excluding the effects of this reduction, our interest income declined due to a
decrease in interest rates between periods, lower average cash and investment
balances and our more conservative investment philosophy subsequent to the
events of September 11, 2001.
Interest expense was $423,000 for the six months ended June 30, 2002,
compared with $469,000 for the six months ended June 30, 2001, a decrease of
10%. This decrease was a result of lower principal amounts upon which interest
was incurred in 2002 compared to 2001 as a result of continuing debt service
payments on notes payable and capital lease obligations.
Other income was $649,000 for the six months ended June 30, 2002, compared
to $354,000 for the six months ended June 30, 2001, an increase of 83%. This
increase in other income was due to our lease of space to M. D. Anderson Cancer
Center that was in place for all of the 2002 period but for only a portion of
the 2001 period.
LIQUIDITY AND CAPITAL RESOURCES
We have incurred annual operating losses since our inception, and at June
30, 2002, we had an accumulated deficit of $62.3 million. From inception through
June 30, 2002, we have financed our operations using $49.7 million of
collaborative research and development payments from Aventis, $32.2 million of
net proceeds from our initial public offering in October 2000, $39.4 million of
private equity sales to Aventis, $14.6 million of private equity sales, net of
offering costs, to others, $7.5 million of sales of ADVEXIN gene therapy product
to Aventis for use in later-stage clinical trials, $9.2 million in mortgage
financing from banks for our facilities, $4.3 million in leases from commercial
leasing companies to acquire equipment pledged as collateral for those leases
and $5.7 million from interest income earned on cash and short- and long-term
investments.
At June 30, 2002, we had cash and short-term investments of $36.8 million,
compared with $48.8 million at December 31, 2001. This decrease was primarily a
result of the use of cash to fund our operations. For at least the next two
years, we expect to focus our activities primarily on conducting Phase III
clinical trials, conducting data analysis, preparing regulatory documentation
including FDA submissions and conducting pre-marketing activities for ADVEXIN
gene therapy. We also expect to continue our research and development of various
other gene therapy technologies. The majority of our expenditures over this
period will most likely relate to the clinical trials of ADVEXIN gene therapy.
These activities may increase the rate at which we use cash in the future as
compared to the cash we used for operating activities during the six months
ended June 30, 2002. We believe our existing working capital can fund our
operations for the next eighteen to twenty-one months, although unforeseen
events could shorten that time period. However, we have recently taken measures
to reduce the amount of cash used in our operating activities. Our existing
resources may not be sufficient to support the commercial introduction of any of
our product candidates. We may raise additional funds through public or private
equity offerings, debt financings or additional corporate collaboration and
licensing arrangements. We do not know whether such additional financing will be
available when needed, or on terms favorable to us or our stockholders.
Net cash used in operating activities was $11.2 million for the six months
ended June 30, 2002, compared with $7.0 million for the six months ended June
30, 2001. In general, this increase in cash used was due to Introgen having
responsibility for conducting the Phase II and Phase III clinical trials for
ADVEXIN gene therapy in 2002 whereas we did not have this responsibility in
2001. Specifically, the increase in cash used was primarily the result of a
higher net loss in 2002 compared to 2001, after considering adjustments for
depreciation and compensation related to the issuance of stock options, offset
primarily by (1) a decrease in receivables and inventory that was smaller in
2002 than in 2001 due to the primary activity in these accounts in 2001 being
related to the restructuring of the Aventis collaboration in 2001, (2) an
increase in accounts payable and accrued liabilities that was smaller in 2002
than in 2001 because the 2001 increase included $2.0 million related to expenses
we agreed to pay Aventis in connection with the restructuring of the Aventis
collaboration in 2001 and (3) an increase in deferred revenue in 2002 compared
to a decrease in this amount in 2001 due to (a) the deferral of the recognition
of income under the lease of space to M. D. Anderson Cancer Center, which was in
effect for the entire 2002 period but for only a portion of the 2001 period and
(b) a decrease in deferred revenue in 2001 relating to the earning of revenue on
sales of inventory to Aventis, an activity that no longer exists due to the
restructuring of the Aventis collaboration in June 2001.
Net cash used in investing activities was $14.6 million for the six months
ended June 30, 2002, compared to net cash provided by investing activities of
$15.6 million for the six months ended June 30, 2001. The change in the amounts
of purchases and maturities of short-term investments for the six months ended
June 30, 2002, as compared to the six months ended June 30, 2001, was due to a
11
significant portion of our investment activity in the 2001 period being in
short-term investments, followed by a period subsequent to September 11, 2001,
during which we concentrated our investments in cash and cash equivalents, which
was then followed in the 2002 period by more investments in short-term
securities. The costs associated with purchases of property and equipment
declined in 2002 compared to 2001 because the 2001 period included costs related
to the completion of tenant improvements to the space leased to M. D. Anderson
Cancer Center, for which there were no similar costs in 2002. While we have no
obligations at this time to purchase significant amounts of additional property
or equipment, our needs may change. It may be necessary for us to purchase
larger amounts of property and equipment to support our clinical programs and
other research, development and manufacturing activities. We may need to obtain
debt or lease financing to facilitate such purchases. If that financing is not
available, we may need to use our existing resources to fund those purchases,
which could result in a reduction in the cash, cash equivalents and short-term
investments available to fund operating activities.
Net cash used in financing activities was $718,000 for the six months ended
June 30, 2002, and net cash provided by financing activities was $935,000 for
the six months ended June 30, 2001. This change between periods is due to the
2001 period including the receipt of proceeds from a note payable used to
finance tenant improvements for the lease of space to M. D. Anderson Cancer
Center, which were completed in 2001. Meanwhile, principal payments under
capital lease obligations and notes payable were higher in 2002 compared to 2001
due to debt service payments on this note payable being payable for the entire
2002 period while they were payable for only a portion of the 2001 period.
We have an ongoing agreement with VirRx, Inc. (VirRx) to purchase shares of
VirRx Series A Preferred Stock. We purchased $150,000 and $225,000 of this stock
for cash during the three and six months ended June 30, 2002, respectively. We
have agreed to purchase an additional $150,000 of this stock for cash on the
first day of each quarter through January 1, 2006. VirRx is required to use the
proceeds from these stock sales in accordance with the terms of a collaboration
and license agreement between VirRx and us for the development of VirRx's
technologies. We may unilaterally terminate this collaboration and license
agreement with 90 days prior notice after March 7, 2003, which would also
terminate our requirement to make any additional stock purchases. Provided the
collaboration and license agreement remains in place, we will make additional
milestone stock purchases, either for cash or through the issuance of our common
stock, upon the completion of Phase I, Phase II and Phase III clinical trials
involving technologies licensed under this agreement and we will make a $5.0
million cash milestone payment to VirRx, for which we receive no VirRx stock,
upon FDA approval of a biologics license application involving these
technologies. To the extent we have already made cash milestone payments, we may
receive a credit of 50% of the Phase II clinical trial milestone payments and
25% of the Phase III clinical trial milestone payments against this $5.0 million
cash milestone payment. The additional milestone stock purchases and cash
payment are not anticipated to be required in the near future. We have an option
to purchase all outstanding shares of VirRx at any time until March 2007.
We have fixed debt service and lease payment obligations under notes payable
and capital leases for which the liability is reflected on our balance sheet. We
used the proceeds from these notes payable and leases to finance facilities and
equipment. Aggregate payments due under these obligations are as follows:
Total debt service payments and capital lease payments for the six months ending
December 31, 2002.................................................................. $ 1,146,279
Total debt service and capital lease payments for the year ending December 31,
2003............................................................................... 2,218,278
2004............................................................................... 1,440,121
2005............................................................................... 1,312,536
2006............................................................................... 860,280
Thereafter........................................................................... 9,670,332
--------------
Total debt service and capital lease payments......................................... 16,647,826
Less portion representing interest.................................................. (6,852,486)
--------------
Total principal balance at June 30, 2002.............................................. $ 9,795,340
==============
Categories in which the principal balances are presented as of June 30, 2002:
Current portion of obligations under capital leases
and notes payable................................................................ $ 1,583,198
Capital lease obligations, net of current portion................................... 525,523
Notes payable, net of current portion............................................... 7,686,619
--------------
Total principal balance at June 30, 2002.............................................. $ 9,795,340
==============
12
We have a fixed rent obligation under a ground lease for the land on which
we built our facilities. Since this is an operating lease, there is no liability
reflected on our balance sheet for this item, which is in accordance with
generally accepted accounting principals. We make total annual rent payments of
$136,188 under this lease which will continue until the expiration of the
initial term of this lease in September 2026. We have other operating leases
expiring in 2002 with significantly smaller rent payments that we also account
for as operating leases. Future annual rental payments due under all operating
leases are as follows:
Six months ending December 31, 2002................ $ 81,594
Year ending December 31,
2003........................................... 136,188
2004........................................... 136,188
2005........................................... 136,188
2006........................................... 136,188
Thereafter..................................... 2,689,713
-------------
Total minimum lease payments under operating
leases......................................... $ 3,316,059
=============
In the normal course of business, we enter into various long-term agreements
with vendors to provide services to us. Some of these agreements require
up-front payment prior to services being rendered, some require periodic monthly
payments and some provide for the vendor to bill us for their services as they
are rendered. In substantially all cases, we may cancel these agreements at any
time with minimal or no penalty and pay the vendor only for services actually
rendered. Regardless of the timing of the payments under these agreements, we
record the expenses incurred in the periods in which the services are rendered.
We pay consulting fees of approximately $175,000 per annum to a company
owned by the Chairman of our Board of Directors and which formerly employed one
of our directors. We are obligated to continue paying this fee until we
terminate the services of that company at our option.
We have a consulting agreement with an individual primarily responsible for
the creation of one of our technologies, who is also one of our stockholders.
This agreement provides for payments to such individual of $165,000 per annum
until September 30, 2002, $181,500 per annum from October 1, 2002 through
September 30, 2003, and $200,000 per annum through the end of its term on
September 30, 2009, with such future payments subject to adjustment for
inflation. We may terminate this agreement at our option upon one year's advance
notice. If we had terminated this agreement as of June 30, 2002, we would have
been obligated to make final payments to this individual totaling $177,375.
FACTORS AFFECTING FUTURE OPERATING RESULTS
WE MAY ENCOUNTER DELAYS OR DIFFICULTIES IN CLINICAL TRIALS FOR OUR PRODUCT
CANDIDATES, WHICH MAY DELAY OR PRECLUDE REGULATORY APPROVAL OF SOME OR ALL OF
OUR PRODUCT CANDIDATES.
In order to commercialize our product candidates, we must obtain regulatory
approvals. Satisfaction of regulatory requirements typically takes many years,
and involves compliance with requirements covering research and development,
testing, manufacturing, quality control, labeling and promotion of drugs for
human use. To obtain regulatory approvals, we must, among other requirements,
complete clinical trials demonstrating that our product candidates are safe and
effective for a particular cancer type or other disease.
We are conducting Phase III clinical trials of our lead product candidate,
ADVEXIN(R) gene therapy, for the treatment of head and neck cancer, and are
conducting numerous Phase I and Phase II clinical trials of ADVEXIN gene therapy
for other cancer types. Current or future clinical trials may demonstrate that
ADVEXIN gene therapy is neither safe nor effective.
While we are conducting a Phase I clinical trial with INGN 241, a product
candidate based on the mda-7 gene, our most significant clinical trial activity
and experience has been with ADVEXIN gene therapy. We will need to continue
conducting significant research and animal testing, referred to as pre-clinical
testing, to support performing clinical trials for our other gene therapy
product candidates. It will take us many years to complete pre-clinical testing
and clinical trials, and failure could occur at any stage of testing. Current or
future trials may demonstrate that INGN 241 or other product candidates are
neither safe nor effective.
13
Any delays or difficulties we encounter in our pre-clinical research and
clinical trials, in particular the Phase III clinical trials of ADVEXIN gene
therapy for the treatment of head and neck cancer, may delay or preclude
regulatory approval. Our product development costs will increase if we
experience delays in testing or regulatory approvals or if we need to perform
more or larger clinical trials than planned. Any delay or preclusion could also
delay or preclude the commercialization of ADVEXIN gene therapy or any other
product candidates. In addition, we or the FDA might delay or halt any of our
clinical trials of a product candidate at any time for various reasons,
including:
o the failure of the product candidate to be more effective than current
therapies;
o the presence of unforeseen adverse side effects of a product candidate,
including its delivery system;
o the longer than expected time required to determine whether or not a
product candidate is effective;
o the death of patients during a clinical trial, even though the product
candidate may not have caused those deaths;
o the failure to enroll a sufficient number of patients in our clinical
trials;
o the inability to produce sufficient quantities of a product candidate to
complete the trials; or
o the inability to commit the necessary resources to fund the clinical
trials.
We may encounter delays or rejections in the regulatory approval process
because of additional government regulation from future legislation or
administrative action or changes in FDA policy during the period of product
development, clinical trials and FDA regulatory review. Failure to comply with
applicable FDA or other applicable regulatory requirements may result in
criminal prosecution, civil penalties, recall or seizure of products, total or
partial suspension of production or injunction, as well as other regulatory
action against our product candidates or us.
Outside the United States, our ability to market a product is contingent
upon receiving clearances from the appropriate regulatory authorities. This
foreign regulatory approval process includes all of the risks associated with
FDA clearance described above.
WE HAVE A HISTORY OF OPERATING LOSSES AND EXPECT TO INCUR SIGNIFICANT
ADDITIONAL OPERATING LOSSES.
We have generated operating losses since we began operations in June 1993.
As of June 30, 2002, we had an accumulated deficit of approximately $62.3
million. We expect to incur substantial additional operating expenses and losses
over the next several years as our research, development, pre-clinical testing
and clinical trial activities increase. We have no products that have generated
any commercial revenue. Presently, we earn minimal revenue from contract
services activities, grants, interest income and rent from the lease of a
portion of our facilities to M. D. Anderson Cancer Center. In the past, we
earned revenue from Aventis under collaborative agreements for research and
development and sales of ADVEXIN gene therapy for use in Aventis' clinical
trials, neither of which revenues we will receive in the future under our
restructured agreements with Aventis. We do not expect to generate revenues from
the commercial sale of products in the foreseeable future, and we may never
generate revenues from the sale of products.
IF WE CONTINUE TO INCUR OPERATING LOSSES FOR A PERIOD LONGER THAN WE
ANTICIPATE AND FAIL TO OBTAIN THE CAPITAL NECESSARY TO FUND OUR OPERATIONS, WE
WILL BE UNABLE TO ADVANCE OUR DEVELOPMENT PROGRAM AND COMPLETE OUR CLINICAL
TRIALS.
Developing a new drug and conducting clinical trials for multiple disease
indications is expensive. We expect that we will fund our operations over the
next eighteen to twenty-one months with our current working capital, resulting
primarily from the net proceeds from our initial public offering in October
2000, the sale of Series A Non-Voting Convertible Preferred Stock to Aventis in
June 2001, income from contract services and research grants, debt financing of
equipment acquisitions, the lease of a portion of our facilities to M. D.
Anderson Cancer Center and interest on invested funds. We may need to raise
additional capital sooner, however, due to a number of factors, including:
o an acceleration of the number, size or complexity of our clinical
trials;
o slower than expected progress in developing ADVEXIN gene therapy, INGN
241 or other product candidates;
14
o higher than expected costs to obtain regulatory approvals;
o higher than expected costs to pursue our intellectual property strategy;
o higher than expected costs to further develop our manufacturing
capability; and
o higher than expected costs to develop our sales and marketing
capability.
We do not know whether additional financing will be available when needed,
or on terms favorable to us or our stockholders. We may raise any necessary
funds through public or private equity offerings, debt financings or additional
corporate collaboration and licensing arrangements. To the extent we raise
additional capital by issuing equity securities, our stockholders will
experience dilution. If we raise funds through debt financings, we may become
subject to restrictive covenants. To the extent that we raise additional funds
through collaboration and licensing arrangements, we may be required to
relinquish some rights to our technologies or product candidates, or grant
licenses on terms that are not favorable to us.
AS A RESULT OF THE RESTRUCTURING OF OUR COLLABORATIVE RELATIONSHIP WITH
AVENTIS, OUR PRODUCT DEVELOPMENT MAY BE DELAYED.
In the past, we relied to a significant extent on Aventis to fund and
support the development of products based on the p53 and K-ras genes, including
ADVEXIN gene therapy. In June 2001, we restructured our collaborative
relationship with Aventis. Under this restructuring, we assumed responsibility
for the worldwide development of all p53- and K-ras-based products. Our
development and commercialization efforts for these products could be delayed if
we are unable to commit the necessary resources to fund the development of the
p53 and K-ras programs.
Historically, Aventis agreed on an annual basis whether, and to what extent,
it would continue to fund our early-stage development in North America of
products based on the p53 or K-ras genes, which includes pre-clinical research
and development and Phase I clinical trials. Since we assumed responsibility for
the development of all p53 and K-ras products under the terms of the
restructuring, if we decide to continue this development, we would have to fund
this development ourselves or obtain funding from other sources. If we are
unable to commit the necessary resources to fund this development, then our
development and commercialization effort would be delayed.
Under the terms of the prior collaboration agreements with Aventis, once we
had completed Phase I clinical trials of a product candidate based on the p53
and K-ras genes, Aventis could have elected to pursue later-stage clinical
development of that product candidate, which includes conducting Phase II and
Phase III clinical trials, commercializing the product, making all further
submissions to existing Investigational New Drug applications and preparing all
product license applications. However, under the terms of the restructuring, we
are responsible for later-stage clinical development. If we are unable to commit
the necessary resources to fund this development, then our development and
commercialization effort would be delayed.
IF WE CANNOT MAINTAIN OUR CORPORATE AND ACADEMIC ARRANGEMENTS AND ENTER INTO
NEW ARRANGEMENTS, PRODUCT DEVELOPMENT COULD BE DELAYED.
Our strategy for the research, development and commercialization of our
product candidates may require us to enter into contractual arrangements with
corporate collaborators, academic institutions and others. We have entered into
sponsored research and/or collaborative arrangements with several entities,
including M. D. Anderson Cancer Center, Imperial Cancer Research Technology
Limited, the National Cancer Institute and Corixa Corporation. Our success
depends upon our collaborative partners performing their responsibilities under
these arrangements. We cannot control the amount and timing of resources our
collaborative partners devote to our research and testing programs or product
candidates, which can vary because of factors unrelated to such programs or
product candidates. These relationships may in some cases be terminated at the
discretion of our collaborative partners with only limited notice to us. We may
not be able to maintain our existing arrangements, enter into new arrangements
or negotiate current or new arrangements on acceptable terms, if at all. Some of
our collaborative partners may also be researching competing technologies
independently from us to treat the diseases targeted by our collaborative
programs.
IF WE ARE NOT ABLE TO CREATE EFFECTIVE COLLABORATIVE MARKETING RELATIONSHIPS,
WE MAY BE UNABLE TO MARKET ADVEXIN GENE THERAPY SUCCESSFULLY OR IN A COST
EFFECTIVE MANNER.
To effectively market our products, we will need to develop sales, marketing
and distribution capabilities. In order to develop or otherwise obtain these
capabilities, we may have to enter into marketing, distribution or other similar
arrangements with third parties
15
in order to successfully sell, market and distribute our products. To the extent
that we enter into any such arrangements with third parties, our product
revenues are likely to be lower than if we directly marketed and sold our
products, and any revenues we receive will depend upon the efforts of such third
parties. We have no experience in marketing or selling pharmaceutical products
and we currently have no sales, marketing or distribution capability. We may be
unable to develop sufficient sales, marketing and distribution capabilities to
successfully commercialize our products.
SERIOUS UNWANTED SIDE EFFECTS ATTRIBUTABLE TO GENE THERAPY MAY RESULT IN
GOVERNMENTAL AUTHORITIES IMPOSING ADDITIONAL REGULATORY REQUIREMENTS OR A
NEGATIVE PUBLIC PERCEPTION OF OUR PRODUCTS.
Serious unwanted side effects attributable to treatment, which physicians
classify as treatment-related adverse events, occurring in the field of gene
therapy may result in greater governmental regulation of our product candidates
and potential regulatory delays relating to the testing or approval of our
product candidates. The death in 1999 of a patient undergoing gene therapy using
an adenoviral vector to deliver a gene for disease treatment in a clinical
trial, which trial was unrelated to our clinical trials, was widely publicized.
As a result of this death, the United States Senate held hearings concerning the
adequacy of regulatory oversight of gene therapy clinical trials and to
determine whether additional legislation is required to protect volunteers and
patients who participate in such clinical trials. The Recombinant DNA Advisory
Committee, or RAC, which acts as an advisory body to the National Institutes of
Health, or NIH, evaluated and continues to evaluate the use of adenoviral
vectors in gene therapy clinical trials. The RAC has made recommendations to the
NIH director concerning prospective review of study designs and adverse event
reporting procedures, and the FDA has requested that sponsors of clinical trials
provide detailed procedures for supervising clinical investigators and clinical
trial conduct. In addition, the FDA has recently begun to conduct more frequent
inspections at clinical trial sites. Implementation of any additional review and
reporting procedures or other additional regulatory measures could increase the
costs of or prolong our product development efforts or clinical trials.
Following routine procedure, we report to the FDA and other regulatory
agencies serious adverse events that we believe may be reasonably related to our
gene therapy treatment. Such serious adverse events, whether treatment related
or not, could result in negative public perception of our gene therapy treatment
and require additional regulatory review or measures, which could increase the
cost of or prolong our clinical trials.
To date no governmental authority has approved any gene therapy product for
sale in the United States or internationally. The commercial success of our
products will depend in part on public acceptance of the use of gene therapies,
which are a new type of disease treatment for the prevention or treatment of
human diseases. Public attitudes may be influenced by claims that gene therapy
is unsafe, and gene therapy may not gain the acceptance of the public or the
medical community. Negative public reaction to gene therapy could also result in
greater government regulation and stricter clinical trial oversight.
IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, OUR
COMPETITORS MAY BE ABLE TO TAKE ADVANTAGE OF OUR RESEARCH AND DEVELOPMENT
EFFORTS TO DEVELOP COMPETING DRUGS.
Our commercial success will depend in part on obtaining patent protection
for our products and other technologies and successfully defending these patents
against third party challenges. Our patent position, like that of other
biotechnology and pharmaceutical companies, is highly uncertain. One uncertainty
is that the United States Patent and Trademark Office, or PTO, or the courts,
may deny or significantly narrow claims made under patents or patent
applications. This is particularly true for patent applications or patents that
concern biotechnology and pharmaceutical technologies, such as ours, since the
PTO and the courts often consider these technologies to involve unpredictable
sciences. Another uncertainty is that any patents that may be issued or licensed
to us may not provide any competitive advantage to us and they may be
successfully challenged, invalidated or circumvented in the future. In addition,
our competitors, many of which have substantial resources and have made
significant investments in competing technologies, may seek to apply for and
obtain patents that will prevent, limit or interfere with our ability to make,
use and sell our potential products either in the United States or in
international markets.
Our ability to develop and protect a competitive position based on our
biotechnological innovations, innovations involving genes, gene therapy, viruses
for delivering the genes to cells, formulations, gene therapy delivery systems
that do not involve viruses, and the like, is particularly uncertain. Due to the
unpredictability of the biotechnological sciences, the PTO, as well as patent
offices in other jurisdictions, has often required that patent applications
concerning biotechnology-related inventions be limited or narrowed substantially
to cover only the specific innovations exemplified in the patent application,
thereby limiting their scope of protection against competitive challenges.
Similarly, courts have invalidated or significantly narrowed many key patents in
the biotechnology industry. Thus, even if we are able to obtain patents that
cover commercially significant innovations, our patents may not be upheld or our
patents may be substantially narrowed.
16
Through our exclusive license from The University of Texas System for
technology developed at M. D. Anderson Cancer Center, we have obtained and are
currently seeking further patent protection for adenoviral p53, including
ADVEXIN gene therapy, and its use in cancer therapy. Further, the PTO issued us
a United States patent for our adenovirus production technology. We also
control, through licensing arrangements, three issued United States patents for
combination therapy involving the p53 gene and conventional chemotherapy or
radiation, one issued United States patent covering the use of adenoviral p53 in
cancer therapy and one issued United States patent covering adenoviral p53 as a
product. Our competitors may challenge the validity of one or more of our
combination therapy, our adenoviral process technology or our adenoviral p53
therapy and product patents in the courts or through an administrative procedure
known as an interference. The courts or the PTO may not uphold the validity of
our patents, we may not prevail in such interference proceedings regarding our
patents and none of our patents may give us a competitive advantage.
We have been notified by the European Patent Office, the EPO, that
Schering-Plough has filed an opposition against the issuance of our European
patent directed to combination therapy with p53 and conventional chemotherapy
and/or radiation. An opposition is an administrative proceeding instituted by a
third party and conducted by the EPO to determine whether a patent should be
maintained or revoked in part or in whole, based on evidence brought forth by
the party opposing the patent. We expect that the EPO will hold an initial oral
proceeding to determine whether the patent should be maintained in late 2003.
Resolution of any this opposition will require that we expend time, effort and
money. If the party opposing the patent ultimately prevails in having our
European patent revoked in whole or in part then the scope of our protection for
our product in Europe will be reduced, which we would not expect, however, to
have a significant impact on our commercialization efforts in Europe.
THIRD-PARTY CLAIMS OF INFRINGEMENT OF INTELLECTUAL PROPERTY COULD REQUIRE US
TO SPEND TIME AND MONEY TO ADDRESS THE CLAIMS AND COULD LIMIT OUR INTELLECTUAL
PROPERTY RIGHTS.
The biotechnology and pharmaceutical industry has been characterized by
extensive litigation regarding patents and other intellectual property rights,
and companies have employed intellectual property litigation to gain a
competitive advantage. We are aware of a number of issued patents and patent
applications that relate to gene therapy, the treatment of cancer and the use of
the p53 and other tumor suppressor genes. Schering-Plough Corporation, including
its subsidiary Canji, Inc., controls various United States patent applications
and a European patent and applications, some of which are directed to therapy
using the p53 gene, and others to adenoviruses that contain the p53 gene, or
adenoviral p53, and to methods for carrying out therapy using adenoviral p53. In
addition, Canji controls an issued United States patent and its international
counterparts, including a European patent, involving a method of treating
mammalian cancer cells lacking normal p53 protein by introducing a p53 gene into
the cancer cell.
While we believe that our potential products do not infringe any valid claim
of the Canji p53 patents, Canji or Schering-Plough could assert a claim against
us. We may also become subject to infringement claims or litigation arising out
of other patents and pending applications of our competitors, if they issue, or
additional interference proceedings declared by the PTO to determine the
priority of inventions. The defense and prosecution of intellectual property
suits, PTO interference proceedings and related legal and administrative
proceedings are costly and time-consuming to pursue, and their outcome is
uncertain. Litigation may be necessary to enforce our issued patents, to protect
our trade secrets and know-how or to determine the enforceability, scope and
validity of the proprietary rights of others. An adverse determination in
litigation or interference proceedings to which we may become a party could
subject us to significant liabilities, require us to obtain licenses from third
parties, or restrict or prevent us from selling our products in certain markets.
Although patent and intellectual property disputes are often settled through
licensing or similar arrangements, costs associated with such arrangements may
be substantial and could include ongoing royalties. Furthermore, the necessary
licenses may not be available to us on satisfactory terms, if at all. In
particular, if we were found to infringe a valid claim of the Canji p53 issued
United States patent, our business could be materially harmed.
We are currently involved in opposing three European patents in opposition
proceedings before the EPO, in which we are seeking to have the EPO revoke three
different European patents owned or controlled by Canji. These European patents
relate to the use of a p53 gene, or the use of tumor suppressor genes, in the
preparation of therapeutic products. In one opposition involving the use of a
p53 gene, the European patent at issue was upheld following an initial hearing.
A second hearing to determine whether this patent should be revoked will be
upcoming. In another opposition, involving a European patent directed to the use
of a tumor suppressor gene, the European Patent Office revoked the European
patent in its entirety. Canji has appealed this revocation. The third opposition
is in an earlier stage. If we do not ultimately prevail in one or more of these
oppositions, our competitors could seek to assert by means of litigation any
patent surviving opposition against European commercial activities involving our
potential products. If our competitors are successful in any such litigation, it
could have a significant detrimental effect on our ability to commercialize our
potential commercial products in Europe.
17
COMPETITION AND TECHNOLOGICAL CHANGE MAY MAKE OUR PRODUCT CANDIDATES AND
TECHNOLOGIES LESS ATTRACTIVE OR OBSOLETE.
We compete with pharmaceutical and biotechnology companies, including Canji,
Inc. (a subsidiary of Schering-Plough Corporation), Vical Incorporated and Onyx
Pharmaceuticals, Inc., which are pursuing other forms of treatment for the
diseases ADVEXIN gene therapy and our other product candidates target. We also
may face competition from companies that may develop internally or acquire
competing technology from universities and other research institutions. As these
companies develop their technologies, they may develop competitive positions
which may prevent or limit our product commercialization efforts.
Some of our competitors are established companies with greater financial and
other resources than ours. Other companies may succeed in developing products
earlier than we do, obtaining FDA approval for products more rapidly than we do
or developing products that are more effective than our product candidates.
While we will seek to expand our technological capabilities to remain
competitive, research and development by others may render our technology or
product candidates obsolete or non-competitive or result in treatments or cures
superior to any therapy developed by us.
EVEN IF WE RECEIVE REGULATORY APPROVAL TO MARKET ADVEXIN GENE THERAPY, INGN
241 OR OTHER PRODUCT CANDIDATES, WE MAY NOT BE ABLE TO COMMERCIALIZE THEM
PROFITABLY.
Our profitability will depend on the market's acceptance of ADVEXIN gene
therapy, INGN 241 and our other product candidates. The commercial success of
our product candidates will depend on whether:
o they are more effective than alternative treatments;
o their side effects are acceptable to patients and doctors;
o we produce and sell them at a profit; and
o we market ADVEXIN gene therapy, INGN 241 and other product candidates
effectively.
IF WE ARE UNABLE TO MANUFACTURE OUR PRODUCTS IN SUFFICIENT QUANTITIES OR
OBTAIN REGULATORY APPROVALS FOR OUR MANUFACTURING FACILITY, OR IF OUR
MANUFACTURING PROCESS IS FOUND TO INFRINGE A VALID PATENTED PROCESS OF ANOTHER
COMPANY, THEN WE MAY BE UNABLE TO MEET DEMAND FOR OUR PRODUCTS AND LOSE
POTENTIAL REVENUES.
The completion of our clinical trials and commercialization of our product
candidates requires access to, or development of, facilities to manufacture a
sufficient supply of our product candidates. We use a manufacturing facility in
Houston, Texas, which we constructed and own, to manufacture ADVEXIN gene
therapy, INGN 241 and other product candidates for currently planned clinical
trials. This facility will be used for the initial commercial launch of ADVEXIN
gene therapy. We have no experience manufacturing ADVEXIN gene therapy, INGN 241
or any other product candidates in the volumes that will be necessary to support
commercial sales. If we are unable to manufacture our product candidates in
clinical or, when necessary, commercial quantities, then we will need to rely on
third-party manufacturers to produce our products for clinical and commercial
purposes. These third-party manufacturers must receive FDA approval before they
can produce clinical material or commercial product. Our products may be in
competition with other products for access to these facilities and may be
subject to delays in manufacture if third parties give other products greater
priority than ours. In addition, we may not be able to enter into any necessary
third-party manufacturing arrangements on acceptable terms. There are very few
contract manufacturers who currently have the capability to produce ADVEXIN gene
therapy, INGN 241 or our other product candidates, and the inability of any of
these contract manufacturers to deliver our required quantities of product
candidates timely and at commercially reasonable prices would negatively affect
our operations.
Before we can begin commercially manufacturing ADVEXIN gene therapy, INGN
241 or any other product candidate, we must obtain regulatory approval of our
manufacturing facility and process. Manufacturing of our product candidates for
clinical and commercial purposes must comply with the FDA's current Good
Manufacturing Practices requirements, commonly known as CGMP, and foreign
regulatory requirements. The CGMP requirements govern quality control and
documentation policies and procedures. In complying with CGMP and foreign
regulatory requirements, we will be obligated to expend time, money and effort
in production, record keeping and quality control to assure that the product
meets applicable specifications and other requirements. We must also pass a
pre-approval inspection prior to FDA approval.
Our current manufacturing facilities have not yet been subject to an FDA or
other regulatory inspection. Failure to pass a pre-approval inspection may
significantly delay FDA approval of our products. If we fail to comply with
these requirements, we would be
18
subject to possible regulatory action and may be limited in the jurisdictions in
which we are permitted to sell our products. Further, the FDA and foreign
regulatory authorities have the authority to perform unannounced periodic
inspections of our manufacturing facility to ensure compliance with CGMP and
foreign regulatory requirements. Our facilities in Houston, Texas are our only
manufacturing facilities. If these facilities were to incur significant damage
or destruction, then our ability to manufacture ADVEXIN gene therapy or any
other product candidates would be significantly hampered, and we would incur
delays in our pre-clinical testing, clinical trials and commercialization
efforts.
Canji controls a United States patent and corresponding international
applications, including a European counterpart, relating to the purification of
viral or adenoviral compositions. While we believe that our manufacturing
process does not infringe upon this patent, Canji could still assert a claim
against us. We may also become subject to infringement claims or litigation if
our manufacturing process infringes upon other patents of our competitors. The
defense and prosecution of intellectual property suits and related legal and
administrative proceedings are costly and time-consuming to pursue, and their
outcome is uncertain.
WE RELY ON ONLY ONE SUPPLIER FOR SOME OF OUR MANUFACTURING MATERIALS. ANY
PROBLEMS EXPERIENCED BY ANY SUCH SUPPLIER COULD NEGATIVELY AFFECT OUR
OPERATIONS.
We rely on third-party suppliers for some of the materials used in the
manufacturing of ADVEXIN gene therapy, INGN 241 and our other product
candidates. Some of these materials are available from only one supplier or
vendor. Any significant problem that one of our sole source suppliers
experiences could result in a delay or interruption in the supply of materials
to us until that supplier cures the problem or until we locate an alternative
source of supply. Any delay or interruption would likely lead to a delay or
interruption in our manufacturing operations, which could negatively affect our
operations.
The CellCubeTM Module 100 bioreactor, which Corning (Acton, MA)
manufactures, and Benzonase(R), which EM Industries (Hawthorne, NY)
manufactures, are currently available only from these suppliers. Any significant
interruption in the supply of either of these items would require a material
change in our manufacturing process. We maintain inventories of these items, but
we do not have a supply agreement with either manufacturer.
IF PRODUCT LIABILITY LAWSUITS ARE SUCCESSFULLY BROUGHT AGAINST US, WE MAY
INCUR SUBSTANTIAL DAMAGES AND DEMAND FOR THE PRODUCTS MAY BE REDUCED.
The testing and marketing of medical products is subject to an inherent risk
of product liability claims. Regardless of their merit or eventual outcome,
product liability claims may result in:
o decreased demand for our product candidates;
o injury to our reputation and significant media attention;
o withdrawal of clinical trial volunteers;
o costs of litigation; and
o substantial monetary awards to plaintiffs.
We currently maintain product liability insurance with coverage of $5.0
million per occurrence with a $15.0 million annual limit. This coverage may not
be sufficient to protect us fully against product liability claims. We intend to
expand our product liability insurance coverage to include the sale of
commercial products if we obtain marketing approval for any of our product
candidates. Our inability to obtain sufficient product liability insurance at an
acceptable cost to protect against product liability claims could prevent or
limit the commercialization of our products.
19
WE USE HAZARDOUS MATERIALS IN OUR BUSINESS, AND ANY CLAIMS RELATING TO
IMPROPER HANDLING, STORAGE OR DISPOSAL OF THESE MATERIALS COULD HARM OUR
BUSINESS.
Our business involves the use of a broad range of hazardous chemicals and
materials. Environmental laws impose stringent civil and criminal penalties for
improper handling, disposal and storage of these materials. In addition, in the
event of an improper or unauthorized release of, or exposure of individuals to,
hazardous materials, we could be subject to civil damages due to personal injury
or property damage caused by the release or exposure. A failure to comply with
environmental laws could result in fines and the revocation of environmental
permits, which could prevent us from conducting our business.
OUR STOCK PRICE MAY FLUCTUATE SUBSTANTIALLY.
The market price for our common stock will be affected by a number of
factors, including:
o the announcement of new products or services by us or our competitors;
o quarterly variations in our or our competitors' results of operations;
o failure to achieve operating results projected by securities analysts;
o changes in earnings estimates or recommendations by securities analysts;
o developments in our industry; and
o general market conditions and other factors, including factors unrelated
to our operating performance or the operating performance of our
competitors.
In addition, stock prices for many companies in the technology and emerging
growth sectors have experienced wide fluctuations that have often been unrelated
to the operating performance of such companies. Many factors may have a
significant adverse effect on the market price of our common stock, including:
o results of our pre-clinical and clinical trials;
o announcement of technological innovations or new commercial products by
us or our competitors;
o developments concerning proprietary rights, including patent and
litigation matters;
o publicity regarding actual or potential results with respect to products
under development by us or by our competitors;
o regulatory developments; and
o quarterly fluctuations in our revenues and other financial results.
ANY ACQUISITION WE MIGHT MAKE MAY BE COSTLY AND DIFFICULT TO INTEGRATE, MAY
DIVERT MANAGEMENT RESOURCES OR DILUTE STOCKHOLDER VALUE.
As part of our business strategy, we may acquire assets or businesses
principally relating to or complementary to our current operations, and we have
in the past evaluated and discussed such opportunities with interested parties.
Any acquisitions that we undertake will be accompanied by the risks commonly
encountered in business acquisitions. These risks include, among other things:
o potential exposure to unknown liabilities of acquired companies;
o the difficulty and expense of assimilating the operations and personnel
of acquired businesses;
o diversion of management time and attention and other resources;
20
o loss of key employees and customers as a result of changes in
management;
o the incurrence of amortization expenses; and
o possible dilution to our stockholders.
In addition, geographic distances may make the integration of businesses
more difficult. We may not be successful in overcoming these risks or any other
problems encountered in connection with any acquisitions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our exposure to market risk for changes in interest rates relates primarily
to our fixed rate long-term debt and short-term investments in investment grade
securities, which consist primarily of federal and state government obligations,
commercial paper and corporate bonds. Investments are classified as
held-to-maturity and are carried at amortized costs. We do not hedge interest
rate exposure or invest in derivative securities.
At June 30, 2002, the fair value of our fixed-rate debt approximated its
carrying value based upon discounted future cash flows using current market
prices.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are involved from time to time in legal proceedings relating to claims
arising out of our operation in the ordinary course of business, including
actions relating to intellectual property rights.
On January 12, 2001, we received notice that we had been named as a
defendant in a first amended complaint filed on January 11, 2001 by Canji, Inc.
in an action entitled Canji, Inc. v. Sidney Kimmel Cancer Center, Introgen
Therapeutics, Inc., and Does 2 through 25 (Case No. GIC745643, in the California
Superior Court for the County of San Diego, Central District). Canji filed the
original complaint against the Sidney Kimmel Cancer Center, or SKCC, on March
24, 2000. On February 9, 2001, the action was removed to the United States
District Court for the Southern District of California. On August 29, 2001, the
case was remanded to California State Superior Court in San Diego County. The
claims against us in Canji's first amended complaint arose out of SKCC's grant
of an exclusive license to us to patent rights resulting from gene therapy
technology developed by SKCC under a sponsored research agreement between SKCC
and us. Canji contended that SKCC developed the technology using materials
provided by Canji to SKCC under a Material Transfer Agreement, or MTA. Canji
also contended that under the MTA, Canji had the right of first refusal to an
exclusive license to any patent rights arising out of the technology developed
by SKCC using these materials and that SKCC was prohibited from disclosing to us
the results of any research using Canji's materials. Canji also alleged that we
wrongfully obtained rights in intellectual property derived from SKCC's use of
Canji's materials and that we knew of, or consciously disregarded, the existence
of the MTA.
In its answer, SKCC, who was a party to the MTA, stated that Canji's
representations were false and made with the intent to defraud SKCC, and that
SKCC would not have given its consent to the contract had it not been for
Canji's fraudulent action. As relief against us, Canji sought (1) a declaratory
judgment that we are not entitled to the intellectual property rights conveyed
by SKCC to us, and that instead, those rights belong to Canji, (2) the
imposition of a constructive trust on the patent rights granted to us and (3)
injunctive relief to restore Canji to the position that it was in prior to
SKCC's grant of intellectual property rights to us. While Canji did not seek an
award of damages, it requested reasonable attorney fees and costs. In June 2002,
Canji, SKCC and we entered into an agreement to settle all claims to the
litigation. As part of the agreement, SKCC agreed to reimburse us for certain
costs and we granted to Canji a limited, non-exclusive sublicense under our
license from SKCC. The SKCC intellectual property is not material to our
business.
We do not believe that any unfavorable outcome of any present litigation, or
of all litigation in the aggregate, other than our opposition of three European
patents owned by Canji, will have a material effect on our business.
21
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Pursuant to a stock purchase agreement with Aventis executed on June 30,
2001, we issued 100,000 shares of Series A Non-Voting Convertible Preferred
Stock to Aventis in exchange for $25.0 million, the payment for which was
received on July 2, 2001. We relied on Rule 506 promulgated under Section 4(2)
of the Securities Act of 1933, as amended, as the exemption from registration,
as the sale was to a single accredited investor. Under the terms of the
Certificate of Designations filed in connection with the sale, the Series A
Non-Voting Convertible Preferred Stock is convertible into 2,343,721 shares of
our common stock at any time upon either party's election. We expect to use the
proceeds from this sale for research and development, including clinical trials,
the advancement of our process development and manufacturing capabilities, the
initiation of product marketing and commercialization programs, and for general
corporate purposes, including working capital.
We closed our initial public offering of common stock on October 17, 2000,
pursuant to a Registration Statement on Form S-1, which was declared effective
by the Securities and Exchange Commission on October 11, 2000. This sale of the
shares of common stock generated aggregate net proceeds of approximately $32.2
million. From October 17, 2000 through June 30, 2002, and for the six months
ended June 30, 2002, we used approximately $20.4 million and $12.0 million,
respectively, of these net proceeds for operating, investing and financing
activities. Pending these uses, the remaining $11.8 million of net proceeds of
the initial public offering are invested in interest-bearing, investment grade
securities. Other than the payment of salary to our officers and the
reimbursement of certain out-of-pocket expenses of our directors, we have not
made any payments out of these proceeds to our directors or officers, or any
person owning ten percent or more of our equity securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) We held our Annual Meeting of Stockholders (the "Annual Meeting") on May
1, 2002.
(b) At the Annual Meeting, our stockholders elected Charles E. Long and
Mahendra G. Shah, Ph.D. as Class II directors to serve for terms of three years.
In addition, the term of office continued after the meeting for the following
directors: William H. Cunningham, Ph.D. and Elise T. Wang as Class I directors
and John N. Kapoor, Ph.D. and David G. Nance as Class III directors.
(c) Our stockholders voted on the following matters at the Annual Meeting:
1. the election of two (2) Class II directors to our board of directors,
each to serve a term of three (3) years; and
2. the ratification of the appointment of Ernst & Young LLP as our
independent auditors for the fiscal year ending December 31, 2002.
(d) Votes were cast for the election of Charles E. Long and Mahendra G.
Shah, Ph.D. as Class II directors as follows:
Director: Votes For: Votes Withheld:
-------- --------- --------------
Charles E. Long 18,275,917 11,945
Mahendra G. Shah, Ph.D. 17,164,848 1,123,014
(e) The ratification of the appointment of Ernst & Young LLP as our
independent auditors for the fiscal year ending December 31, 2002 was approved
as follows:
18,280,627 votes for approval;
4,225 votes against; and
3,010 abstentions.
22
ITEM 5. OTHER INFORMATION.
Pursuant to Section 10A(i)(2) of the Securities Exchange Act of 1934, as
added by Section 202 of the Sarbanes-Oxley Act of 2002, we are responsible for
disclosing the approval of non-audit services approved by the audit committee of
our board of directors (the "Audit Committee") to be performed by Ernst & Young
LLP, our independent auditors. Non-audit services are defined as services other
than those provided in connection with an audit or a review of our financial
statements. Except as set forth below, the services approved by the Audit
Committee are each considered by the Audit Committee to be audit-related
services that are closely related to the financial audit process. Each of the
services was pre-approved by the Audit Committee.
The Audit Committee has also pre-approved additional engagements of Ernst &
Young for the non-audit services of preparation of state and federal tax
returns.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
99.1 Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
(b) REPORTS ON FORM 8-K
None.
23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTROGEN THERAPEUTICS, INC.
Date: August 14, 2002 By: /s/ JAMES W. ALBRECHT, JR.
------------------------------------------
James W. Albrecht, Jr.
On behalf of the Registrant and as Chief
Financial Officer (Principal Financial and
Accounting Officer)
24
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
99.1 Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002