ITEM 1. BUSINESS
FORWARD-LOOKING STATEMENTS
The information presented in this Annual Report on Form 10-K under the headings "Item 1. Business" and "Item 2.
ITEM 2. PROPERTIES
The Company leases approximately 5,500 square feet of administrative, laboratory, and manufacturing space at the Land O'Lakes corporate office located in Arden Hills, Minnesota. In addition, the Company rents, on an as-needed basis, public warehouse space to store inventory. Management believes that the Company's facilities are suitable and adequate for current office, research, manufacturing and storage requirements.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceeding.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM X. EXECUTIVE OFFICERS OF REGISTRANT
The executive officers of the Company are:
ROBERT A. HOERR, M.D., PH.D., was named President and Chief Operating Officer of the Company in February 1994, became President and Chief Executive Officer in September 1994 and became Chairman of the Board and Chief Executive Officer in November 1998. He served as Vice President, Medical and Regulatory Affairs of the Company from January 1993 to December 1993 and Senior Vice President from December 1993 to February 1994. Dr. Hoerr was Director of Medical Affairs for Sandoz Nutrition Corporation, a research-based nutrition company, from March 1990 to January 1993. From 1986 to 1990, Dr. Hoerr was Research Scientist and Assistant Program Director at the Clinical Research Center, Massachusetts Institute of Technology ("MIT"). Dr. Hoerr received his A.B. in Biology from Indiana University, his M.D. from Indiana University School of Medicine and his Ph.D. in Nutritional Biochemistry and Metabolism from MIT.
HENRY J. CARDELLO, has served as President since January 1999. Mr. Cardello has been advising the Company since April 1998 through Marketing Ventures of America, Inc. ("MVA"), a consumer-marketing firm that specializes in commercializing consumer-based products, of which he has been Chairman and President since July 1987. Prior to July 1987, Mr. Cardello was President of Sunkist Soft Drinks, Inc., a unit of Cadbury Schweppes, Vice President of Marketing for Cadbury's Canada Dry business and Director of Marketing for Coca-Cola USA. Additionally, Mr. Cardello has held several brand management positions with Anheuser-Busch and General Mills, Inc. Mr. Cardello received his B.S. degree in engineering from Lehigh University and his M.B.A. from The Wharton Graduate School of Business.
EILEEN F. BOSTWICK, PH.D., has served as Manager of Research and Development since July 1992, Director of Research and Development since September 1993 and Vice President of Research and Development since March 1997. Dr. Bostwick joined the Company's predecessor, Procor Technologies, Inc. ("Procor") in 1988 as Immunology Group Leader. Prior thereto, Dr. Bostwick was a Senior Immunologist in the Biotechnology Section at Minnesota Mining & Manufacturing. Dr. Bostwick received her B.S. and M.S. degrees from Michigan State University in Dairy Science, and her Ph.D. in immunology and physiology from the University of Minnesota.
MICHAEL E. CADY has served as Vice President, Manufacturing and Engineering of the Company since July 1992. From January 1988 to July 1992, Mr. Cady served as Director of Operations for Procor. From 1979 to 1988, Mr. Cady held engineering and planning positions within several operating groups at Land O'Lakes. Mr. Cady was a member of the Land O'Lakes group that evaluated and implemented the polyclonal antibody technology used as a basis for the Company's manufacturing process. Prior to joining Land O'Lakes Mr. Cady was an engineer at Swift & Company, a food processing company. Mr. Cady received his B.S. in Engineering from the University of Iowa and earned his M.B.A. from the University of St. Thomas in 1985.
GREGG A. WALDON served as Controller of the Company from April 1992 to September 1992, and was elected Treasurer in September 1992, Secretary in March 1993, Vice President in December 1993 and Chief Financial Officer in November 1994. From April 1989 to April 1992, Mr. Waldon served as an Audit Manager with Price Waterhouse LLP, a public accounting firm, in its Middle Market and Emerging Growth Practice in Minneapolis, Minnesota and from 1986 to 1989 was Senior/Staff accountant with Price Waterhouse. Mr. Waldon is resigning from the Company effective March 31, 1999.
Officers of the Company are chosen by and serve at the discretion of the Board of Directors. There are no family relationships among any of the directors, officers or key employees of the Company.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Incorporated herein by reference is the information appearing under the heading "Market For Registrant's Common Equity and Related Stockholder Matters" in the Company's Annual Report to Stockholders for the year ended December 31, 1998 (the "1998 Annual Report").
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference is the information appearing under the heading "Selected Financial Data" in the 1998 Annual Report.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Incorporated herein by reference is the information appearing under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 1998 Annual Report.
ITEM 7a.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated herein by reference is the information appearing under the heading "Quantitative and Qualitative Disclosures About Market Risk" in the 1998 Annual Report.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference is the information appearing under the headings "Balance Sheets", "Statements of Operations", "Statement of Changes in Stockholders' Equity", "Statements of Cash Flows", "Notes to Financial Statements" and "Report of Independent Auditors" in the 1998 Annual Report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference is the information appearing under the headings "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's definitive Proxy Statement for the annual meeting of stockholders to be held on May 12, 1999 (the "Proxy Statement"). See also Part I hereof under the heading "Item X. Executive Officers of Registrant".
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference is the information appearing under the headings "Report of the Compensation Committee", "Executive Compensation" and "Comparative Stock Performance" in the Company's Proxy Statement.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference is the information appearing under the heading "Security Ownership of Principal Stockholders and Management" in the Company's Proxy Statement.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference is the information appearing under the heading "Certain Relationships and Related Transactions" in the Company's Proxy Statement.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements:
The consolidated financial statements of the Company are incorporated herein by reference from the information appearing under the headings "Balance Sheets", "Statements of Operations", "Statement of Changes in Stockholders' Equity", "Statements of Cash Flows", "Notes to Financial Statements" and "Report of Independent Auditors" in the 1998 Annual Report.
2. Financial Statement Schedules:
The following consolidated financial statement schedules of the Company are included in Item 14(d):
Schedule II Valuation and Qualifying Accounts
(b) Reports on Form 8-K
The Company filed a report on 8K, dated December 23, 1998, relating to the purchase of certain critical care enteral products, related inventory and certain fixed assets from NMI.
(c) Exhibits:
The following exhibits are filed as part of this Annual Report on Form 10-K for the year ended December 31, 1998.
(1) Incorporated herein by reference to the same numbered Exhibit to the Company's Registration Statement on Form S-1 (Registration No. 333-1032).
(2) Incorporated herein by reference to the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996 (File No. 0-27976).
(3) Incorporated herein by reference to the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996 (File No. 0-27976).
(4) Incorporated herein by reference to the same numbered Exhibit to the Company's Annual Report on Form 10-K for the period ended December 31, 1996 (File No. 0-27976).
(5) Incorporated herein by reference to the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997 (File No. 0-27976).
(6) Incorporated herein by reference to Appendix A to the Company's 1997 Definitive Proxy Statement on Schedule 14A (File No. 0-27976).
(7) Incorporated herein by reference to the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997 (File No. 0-27976).
(8) Incorporated herein by reference to Exhibit No. 4.4 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(9) Incorporated herein by reference to Exhibit No. 4.5 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(10) Incorporated herein by reference to Exhibit No. 4.6 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(11) Incorporated herein by reference to Exhibit No. 4.7 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(12) Incorporated herein by reference to Exhibit No. 4.8 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(13) Incorporated herein by reference to Exhibit No. 4.9 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(14) Incorporated herein by reference to Exhibit No. 4.10 to the Company's Registration Statement on Form S-3(Registration No. 333-41151).
(15) Incorporated herein by reference to Exhibit No. 4.11 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(16) Incorporated herein by reference to Exhibit No. 4.12 to Amendment No. 1 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(17) Incorporated herein by reference to Exhibit No. 4.13 to Amendment No. 1 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(18) Incorporated herein by reference to Exhibit No. 4.14 to Amendment No. 1 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(19) Incorporated herein by reference to the same numbered Exhibit to the Company's Annual Report on Form 10-K for the period ended December 31, 1997 (File No. 0-27976).
(20) Incorporated herein by reference to the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1998 (File No. 0-27976).
(21) Incorporated herein by reference to the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1998 (File No. 0-27976).
(22) Incorporated herein by reference to Exhibit No. 2.2 to the Company's Report on Form 8-K, dated December 23, 1998 (File No. 0-27976).
(23) Incorporated herein by reference to Exhibit No. 2.3 to the Company's Report on Form 8-K, dated December 23, 1998 (File No. 0-27976).
* Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.
# Contains portions for which confidential treatment has been granted to the Company.
## Contains portions of which confidential treatment has been applied for by the Company.
(d) Valuation and Qualifying Accounts:
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on March 31, 1999.
GALAGEN INC.
By /s/ Robert A. Hoerr ----------------------------------- Robert A. Hoerr, M.D., Ph.D. Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 31, 1999.
/s/ Robert A. Hoerr ----------------------------------------------------- Robert A. Hoerr, Chairman and Chief Executive Officer (Principal Executive Officer) and Director
/s/ Gregg A. Waldon ----------------------------------------------------- Gregg A. Waldon, Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer)
/s/ Henry J. Cardello ----------------------------------------------------- Henry J. Cardello, President and Director
/s/ Ronald O. Ostby ----------------------------------------------------- Ronald O. Ostby, Director
/s/ R. David Spreng ----------------------------------------------------- R. David Spreng, Director
/s/ Winston R. Wallin ----------------------------------------------------- Winston R. Wallin, Director
EXHIBIT INDEX
(1) Incorporated herein by reference to the same numbered Exhibit to the Company's Registration Statement on Form S-1 (Registration No. 333-1032).
(2) Incorporated herein by reference to the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996 (File No. 0-27976).
(3) Incorporated herein by reference to the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996 (File No. 0-27976).
(4) Incorporated herein by reference to the same numbered Exhibit to the Company's Annual Report on Form 10-K for the period ended December 31, 1996 (File No. 0-27976).
(5) Incorporated herein by reference to the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997 (File No. 0-27976).
(6) Incorporated herein by reference to Appendix A to the Company's 1997 Definitive Proxy Statement on Schedule 14A (File No. 0-27976).
(7) Incorporated herein by reference to the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997 (File No. 0-27976).
(8) Incorporated herein by reference to Exhibit No. 4.4 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(9) Incorporated herein by reference to Exhibit No. 4.5 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(10) Incorporated herein by reference to Exhibit No. 4.6 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(11) Incorporated herein by reference to Exhibit No. 4.7 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(12) Incorporated herein by reference to Exhibit No. 4.8 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(13) Incorporated herein by reference to Exhibit No. 4.9 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(14) Incorporated herein by reference to Exhibit No. 4.10 to the Company's Registration Statement on Form S-3(Registration No. 333-41151).
(15) Incorporated herein by reference to Exhibit No. 4.11 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(16) Incorporated herein by reference to Exhibit No. 4.12 to Amendment No. 1 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(17) Incorporated herein by reference to Exhibit No. 4.13 to Amendment No. 1 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(18) Incorporated herein by reference to Exhibit No. 4.14 to Amendment No. 1 to the Company's Registration Statement on Form S-3 (Registration No. 333-41151).
(19) Incorporated herein by reference to the same numbered Exhibit to the Company's Annual Report on Form 10-K for the period ended December 31, 1997 (File No. 0-27976).
(20) Incorporated herein by reference to the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1998 (File No. 0-27976).
(21) Incorporated herein by reference to the same numbered Exhibit to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1998 (File No. 0-27976).
(22) Incorporated herein by reference to Exhibit No. 2.2 to the Company's Report on Form 8-K, dated December 23, 1998 (File No. 0-27976).
(23) Incorporated herein by reference to Exhibit No. 2.3 to the Company's Report on Form 8-K, dated December 23, 1998 (File No. 0-27976).
* Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.
# Contains portions for which confidential treatment has been granted to the Company.
## Contains portions of which confidential treatment has been applied for by the Company.