The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the condensed consolidated
financial statements and the related notes included elsewhere herein and in our
consolidated financial statements, accompanying notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in our Annual Report (as defined below).
Forward-Looking Statements
The statements contained in this Quarterly Report on Form 10-Q that are not
historical facts are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 and other federal securities
laws. Words such as "expects," "anticipates," "intends," "plans," "planned
expenditures," "believes," "seeks," "estimates" and similar expressions or
variations of such words are intended to identify forward-looking statements,
but are not deemed to represent an all-inclusive means of identifying
forward-looking statements as denoted in this Quarterly Report on Form
10-Q. Additionally, statements concerning future matters are forward-looking
statements. We remind readers that forward-looking statements are merely
predictions and therefore inherently subject to uncertainties and other factors
and involve known and unknown risks that could cause the actual results,
performance, levels of activity, or our achievements, or industry results, to be
materially different from any future results, performance, levels of activity,
or our achievements, or industry results, expressed or implied by such
forward-looking statements. Such forward-looking statements include, among other
statements, statements regarding the following:
? the expected development and potential benefits from our products in treating
diabetes;
? the prospects of entering into additional license agreements, or other
partnerships or forms of cooperation with other companies or medical
institutions;
? future milestones, conditions and royalties under the license agreement with
Hefei Tianhui Incubator of Technologies Co., Ltd., or HTIT, as well as our
disagreements with HTIT;
? our research and development plans, including pre-clinical and clinical trials
plans and the timing of enrollment, obtaining results and conclusion of trials,
and our expectation to file a Biologics License Application, or BLA thereafter;
? our belief that our technology has the potential to deliver medications and
vaccines orally that today can only be delivered via injection;
? the competitive ability of our technology based product efficacy, safety,
patient convenience, reliability, value and patent position;
? the potential market demand for our products;
? our expectation that in upcoming years our research and development expenses,
net, will continue to be our major expenditure;
? our expectations regarding our short- and long-term capital requirements;
? our outlook for the coming months and future periods, including but not limited
to our expectations regarding future revenue and expenses; and
? information with respect to any other plans and strategies for our business;
and
? our expectations regarding the impact of the coronavirus, or COVID-19,
pandemic, including on our clinical trials and operations.
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Although forward-looking statements in this Quarterly Report on Form 10-Q
reflect the good faith judgment of our management, such statements can only be
based on facts and factors currently known by us. Consequently, forward-looking
statements are inherently subject to risks and uncertainties and actual results
and outcomes may differ materially from the results and outcomes discussed in or
anticipated by the forward-looking statements. Factors that could cause or
contribute to such differences in results and outcomes include, without
limitation, those specifically addressed under the heading "Item 1A. Risk
Factors" in our Annual Report on Form 10-K for the fiscal year ended August 31,
2020, or our Annual Report, as filed with the Securities and Exchange
Commission, or the SEC, on November 24, 2020, as well as those discussed
elsewhere in our Annual Report and expressed from time to time in our other
filings with the SEC. In addition, historic results of scientific research,
clinical and preclinical trials do not guarantee that the conclusions of future
research or trials would not suggest different conclusions. Also, historic
results referred to in this Quarterly Report on Form 10-Q could be interpreted
differently in light of additional research, clinical and preclinical trials
results. Readers are urged not to place undue reliance on these forward-looking
statements, which speak only as of the date of this Quarterly Report on Form
10-Q. Except as required by law, we undertake no obligation to revise or update
any forward-looking statements in order to reflect any event or circumstance
that may arise after the date of this Quarterly Report on Form 10-Q. Readers are
urged to carefully review and consider the various disclosures made throughout
the entirety of this Quarterly Report on Form 10-Q which attempt to advise
interested parties of the risks and factors that may affect our business,
financial condition, results of operations and prospects.
Overview of Operations
We are a pharmaceutical company currently engaged in the research and
development of innovative pharmaceutical solutions, including an oral insulin
capsule to be used for the treatment of individuals with diabetes, and the use
of orally ingestible capsules for delivery of other polypeptides. We utilize
clinical research organizations, or CROs, to conduct our clinical studies.
Recent business developments
Product Candidates
Oral insulin: Our proprietary flagship product, an orally ingestible insulin
capsule, or ORMD-0801, allows insulin to travel from the gastrointestinal tract
via the portal vein to the bloodstream, revolutionizing the manner in which
insulin is delivered. It enables the passage in a more physiological manner than
current delivery methods of insulin.
FDA Guidance: In August 2017, the U.S. Food and Drug Administration, or FDA,
instructed us that the regulatory pathway for the submission of ORMD-0801 would
be a BLA. If approved the BLA pathway would grant us 12 years of marketing
exclusivity for ORMD-0801, from the approval date, and an additional six months
of exclusivity may be granted to us if the product also receives approval for
use in pediatric patients.
Phase IIb Trial: In May 2018, we initiated a three-month dose-ranging Phase IIb
clinical trial of ORMD-0801 (Cohort A). This placebo controlled, randomized,
90-day treatment clinical trial was conducted on 269 type 2 diabetic patients in
multiple centers throughout the United States pursuant to an Investigational New
Drug application, or IND, with the FDA. The primary endpoints of the trial were
to assess the safety and evaluate the effect of ORMD-0801 on HbA1c levels over a
90-day treatment period. Secondary endpoints of the trial included measurements
of fasting plasma glucose, or FPG, post-prandial glucose, or PPG levels, during
a mixed-meal tolerance test, or MMTT, and weight. In May 2019, we initiated an
extension of this protocol for approximately 75 type 2 diabetic patients, who
were dosed using a lower dosage of insulin (Cohort B).
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Cohort A: In November 2019, we announced positive results from the initial
cohort of the Phase IIb trial. Patients randomized in the trial to once-daily
ORMD-0801 achieved a statistically significant (p-value 0.036) reduction from
baseline in HbA1c of 0.60% (0.54% with placebo adjustment). This 0.54% reduction
in HbA1c is clinically meaningful. Treatment with ORMD-0801 demonstrated an
excellent safety profile, with no serious drug-related adverse events and with
no increased frequency of hypoglycemic episodes when compared to placebo. In
addition, during this 90-day trial, no weight gain was observed. In the initial
cohort, 269 U.S.-based patients were enrolled and treated with a dose-increasing
approach: 16 mg initial dose, titrated to 24 mg per dose, and then titrated to
32 mg per dose. Patients were randomized into three groups to assess dosing
frequency: once-daily (32 mg per day), twice-daily (64 mg per day), thrice daily
(96 mg per day). There was a corresponding placebo for each treatment arm. Two
hundred nine (209) patients completed treatment to the 12-week endpoint and were
included in the data analysis (24 subjects did not complete the full 12 weeks of
treatment). The twice-daily arms achieved statistically significant (p-value
0.042) reductions from baseline in HbA1C of 0.59% (0.53% with placebo
adjustment). The thrice-daily arm did not meet statistical significance (p-value
0.093). In addition, due to evidence of treatment-by-center interaction, two
sites (36 patients (13.4% of enrolled subjects)) were excluded from the
statistical analysis as they showed results opposite from the rest of the
statistically significant results. Our internal investigation as well as an
independent investigation did not find a cause for such discrepancy.
Cohort B: In February 2020, we announced positive topline data from the second
and final cohort of the Phase IIb trial with a different regimen across three
daily dose ranges (8 mg, 16 mg, 32 mg). Patients randomized in the trial treated
with 8 mg of ORMD-0801 once-daily achieved a statistically significant (p-value
0.028) observed mean reduction of 1.29% from baseline and a least square mean
reduction of 0.95% from baseline, or 0.81% adjusted for placebo. Patients who
had HbA1c readings above 9% at baseline and received 8 mg of oral insulin
once-daily experienced a 1.26% reduction in HbA1c by week 12. Treatment with
ORMD-0801 at all doses demonstrated an excellent safety profile, with no serious
drug-related adverse events and with no increased frequency of hypoglycemic
episodes or weight gain compared to placebo. The primary efficacy endpoint was a
reduction in HbA1c at week 12.
Phase III Trial: Based on guidance received from the FDA as part of the
End-of-Phase 2 meeting process for our oral insulin candidate, ORMD-0801, we
have submitted to the FDA the protocols for our pivotal Phase III studies. In
line with the FDA's expectations and recommendations, we intend to conduct two
Phase 3 studies in patients with type 2 diabetes, or T2D. These studies involve
about 1,125 patients to provide evidence of ORMD-0801's safety and efficacy in
T2D patients over a treatment period of 6 to 12 months. A geographically diverse
patient population will be recruited from multiple sites throughout the U.S.,
European Union countries, and Israel. Our phase III trial will be composed of 2
protocols:
ORA-D-013-1: This trial will treat T2D patients with inadequate glycemic control
who are currently on 1, 2, or 3 oral glucose-lowering agents. This U.S. trial
will recruit 675 patients from 75 clinical sites located throughout the U.S.
Patients will be randomized 1:1:1 in this double-dummy trial into cohorts of: 8
mg ORMD-0801 once-daily at night and placebo 45 minutes before breakfast; 8 mg
ORMD-0801 twice-daily, at night and 45 minutes before breakfast; and placebo
twice-daily, at night and 45 minutes before breakfast. The primary endpoint of
the trial is to evaluate the efficacy of ORMD-0801 compared to placebo in
improving glycemic control as assessed by HbA1c, with a secondary efficacy
endpoint of assessing the change from baseline in fasting plasma glucose at 26
weeks. We initiated this trial in the fourth quarter of 2020.
ORA-D-013-2: This trial will include T2D patients with inadequate glycemic
control who are manage their condition with either diet alone or with diet and
metformin monotherapy. A total of 450 patients will be recruited through 36
sites in the U.S. and 25 sites in Western Europe and Israel. Patients will be
randomized 1:1 into two cohorts dosed with 8 mg ORMD-0801 at night; and placebo
at night. The primary endpoint is to evaluate the efficacy of ORMD-0801 compared
to placebo in improving glycemic control as assessed by HbA1c over a 26-week
treatment period, with a secondary efficacy endpoint of assessing the change
from baseline in fasting plasma glucose at 26 weeks. We expect to initiate this
trial in the first half of 2021.
20
We expect to receive the efficacy data from the trials after patients have
completed the first 6-months of treatment. Safety will be further monitored as
patients will be exposed to the drug over an additional 6 months (total 12
months). The trial's topline results are expected in 2022 and we anticipate
filing a BLA with the FDA in 2023. A BLA would grant us 12 years of marketing
exclusivity from the date of approval in the U.S.
NASH trial: In June 2020, we presented topline data from an open-label trial of
8 patients that assessed the safety, tolerability, and early effects of 16 mg
ORMD-0801 (2x8 mg capsules) on liver fat in T2D patients with nonalcoholic
steatohepatitis, or NASH. The 12-week dosing had no serious adverse events and
it induced an observed mean 6.9±6.8% reduction in liver fat content (p-value:
0.035), and the relative reduction of 30%, as measured by MRI-derived proton
density fat fraction (MRI-PDFF). In parallel, concentrations of
gamma-glutamyltransferase (GGT), a key marker of chronic hepatitis, were
significantly lower after 12 weeks of treatment as compared to baseline
(-14.6±13.1 U/L; p value: 0.008).
In December 2020, based on the NASH trial results, we initiated a follow-on
clinical trial of our oral insulin capsule ORMD-0801 for the treatment of NASH.
This 40 patients multi-center trial will be comprised of eight clinical sites:
three in the EU, three in the U.S. and two in Israel. The follow-on clinical
trial will measure efficacy endpoints via MRI-PDFF for 12-week dosing.
Oral Glucagon-Like Peptide-1: GLP-1 is an incretin hormone, which stimulates the
secretion of insulin from the pancreas. In addition to our flagship product, the
ORMD-0801 insulin capsule, we use our technology for an orally ingestible GLP-1
capsule, or ORMD-0901.
In February 2019, we completed a Phase I pharmacokinetic trial to evaluate the
safety and pharmacokinetics of ORMD-0901 compared to placebo. We intend on
initiating a follow-on trial in T2D patients, which is expected to start during
the first half of 2021 in the U.S. under an IND submitted to the FDA.
Other products
We are developing a new drug candidate, a weight loss treatment in the form of
an oral leptin capsule. We anticipate initiating a proof of concept single-dose
trial for this candidate to evaluate its pharmacokinetics and pharmacodynamics
(glucagon reduction) in 10 type 1 adult diabetic patients. During the third
quarter of 2020, we finalized the trial without any safety issues. Patients who
received leptin on average had a decrease in glucose as compared to the placebo
group during the first 30-180 minutes following dosing. At different time
periods, the leptin treated patients on average had glucagon values that were
either lower than or similar to, those in the placebo group.
The table below gives an overview of our primary R&D pipeline:
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Out-Licensed Technology
On November 30, 2015, we, our Israeli subsidiary and HTIT entered into a
Technology License Agreement, or TLA, and on December 21, 2015 these parties
entered into an Amended and Restated Technology License Agreement that was
further amended by the parties on June 3, 2016 and July 24, 2016, or the License
Agreement. According to the License Agreement, we granted HTIT an exclusive
commercialization license in the territory of the People's Republic of China,
Macau and Hong Kong, or the Territory, related to our oral insulin capsule,
ORMD-0801, or the Product. Pursuant to the License Agreement, HTIT will conduct,
at its own expense, certain pre-commercialization and regulatory activities with
respect to our subsidiary's technology and ORMD-0801 capsule, and will pay (i)
royalties of 10% on net sales of the related commercialized products to be sold
by HTIT in the Territory, or Royalties, and (ii) an aggregate of $37.5 million,
of which $3 million was payable immediately, $8 million will be paid subject to
our entry into certain agreements with certain third parties, and $26.5 million
will be paid upon achievement of certain milestones and conditions. In the event
that we will not meet certain conditions, the Royalties rate may be reduced to a
minimum of 8%. Following the final expiration of our patents covering the
technology in the Territory in 2033, the Royalties rate may be reduced, under
certain circumstances, to 5%. The royalty payment obligation shall apply during
the period of time beginning upon the first commercial sale of the Product in
the Territory, and ending upon the later of (i) the expiration of the
last-to-expire licensed patents in the Territory; and (ii) 15 years after the
first commercial sale of the Product in the Territory, or the Royalty Term. The
License Agreement shall remain in effect until the expiration of the Royalty
Term. The License Agreement contains customary termination provisions. Through
November 30, 2020, we received aggregate milestone payments of $20.5 million out
of the aggregate amount of $37.5 million.
On August 21, 2020, we received a letter from HTIT, disputing certain pending
payment obligations of HTIT (we estimate this obligation between $2 million to
$6 million) under the TLA. We wholly dispute said claims and we are in
discussions with HTIT in an attempt to reach a mutually agreeable solution.
On November 30, 2015, we also entered into a separate Securities Purchase
Agreement with HTIT, or the SPA, pursuant to which, in December 2015, we issued
to HTIT 1,155,367 shares of our common stock for total consideration of $12
million. In connection with the License Agreement and the SPA, we received a
non-refundable payment of $500,000 as a no-shop fee.
Results of Operations
Comparison of three month periods ended November 30, 2020 and 2019
The following table summarizes certain statements of operations data of the
Company for the three month periods ended November 30, 2020 and 2019 (in
thousands of dollars except share and per share data):
Three months ended
November 30,
2020 2019
Revenues $ 674 $ 674
Cost of revenues - -
Research and development expenses 5,774 2,022
General and administrative expenses 727 1,081
Financial income (expenses), net 257 (114 )
Net loss for the period $ 5,570 $ 2,543Loss per common share - basic and diluted $ 0.23 $ 0.15
Weighted average common shares outstanding 23,754,980 17,472,315
22
Revenues
Revenues consist of proceeds related to the License Agreement that are
recognized on a cumulative basis when it is probable that a significant reversal
in the amount of cumulative revenue recognized will not occur, through the
expected product submission date of June 2023 using the input method.
Revenues for each of the three month periods ended November 30, 2020 and 2019
were $674,000.
Cost of revenues
Cost of revenues consists of royalties related to the License Agreement that
will be paid over the term of the License Agreement in accordance with revenue
recognition accounting and the Law for the Encouragement of Industrial Research,
Development and Technological Innovation, 1984, as amended, including any
regulations or tracks promulgated thereunder.
There was no cost of revenues for the three month period ended November 30, 2020
and November 30, 2019.
Research and development expenses
Research and development expenses include costs directly attributable to the
conduct of research and development programs, including the cost of salaries,
employee benefits, costs of materials, supplies, the cost of services provided
by outside contractors, including services related to our clinical trials,
clinical trial expenses, the full cost of manufacturing drugs for use in
research and preclinical development. All costs associated with research and
development are expensed as incurred.
Clinical trial costs are a significant component of research and development
expenses and include costs associated with third-party contractors. We outsource
a substantial portion of our clinical trial activities, utilizing external
entities such as CROs, independent clinical investigators and other third-party
service providers to assist us with the execution of our clinical studies.
Clinical activities, which relate principally to clinical sites and other
administrative functions managing our clinical trials, are performed primarily
by CROs. CROs typically perform most of the start-up activities for our trials,
including document preparation, site identification, screening and preparation,
pre-study visits, training, and program management.
Clinical trial and pre-clinical trial expenses include regulatory and scientific
consultants' compensation and fees, research expenses, purchase of materials,
cost of capsule manufacturing, payments for patient recruitment and treatment,
as well as salaries and related expenses of research and development staff.
Research and development expenses for the three month period ended November 30,
2020, increased by 186% to $5,774,000, from $2,022,000 for the three month
period ended November 30, 2019. The increase is primarily attributable to
expenses related to the initiation of our Phase III six-month treatment clinical
trial. Stock-based compensation costs for the three month period ended November
30, 2020 totaled $137,000, as compared to $95,000 during the three month period
ended November 30, 2019. The increase is mainly attributable to new award grants
in fiscal 2020.
Government grants
In the three month periods ended November 30, 2020 and 2019, we did not
recognize any research and development grants. As of November 30, 2020, we
incurred liabilities to pay royalties to the Israel Innovation Authority of the
Israeli Ministry of Economy & Industry of $317,000.
23
General and administrative expenses
General and administrative expenses include the salaries and related expenses of
our management, consulting costs, legal and professional fees, travel expenses,
business development costs, insurance expenses and other general costs.
General and administrative expenses for the three month period ended November
30, 2020 decreased by 33% to $727,000 from $1,081,000 for the three month period
ended November 30, 2019. The decrease in costs related to general and
administrative activities is primarily attributable to a decrease in legal
expenses, which was partially offset by an increase in expenses related to our
patents and our directors and officers insurance policy. Stock-based
compensation costs for the three month period ended November 30, 2020 totaled
$180,000, as compared to $184,000 during the three month period ended November
30, 2019.
Financial income (expenses), net
Net financial income increased from net expense of $114,000 for the three month
period ended November 30, 2019 to net income of $257,000 for the three month
period ended November 30, 2020. The increase is primarily attributable to an
increase in fair value of the ordinary shares of D.N.A Biomedical Solutions Ltd.
Liquidity and capital resources
From inception through November 30, 2020, we have incurred losses in an
aggregate amount of $98,184,000. During that period and through January 14,
2021, we have financed our operations through several private placements of our
common stock, as well as public offerings of our common stock, raising a total
of $114,540,000, net of transaction costs. During that period, we also received
cash consideration of $5,892,000 from the exercise of warrants and options. We
expect to seek to obtain additional financing through similar sources in the
future, as needed. As of November 30, 2020, we had $14,931,000 of available
cash, $10,592,000 of short-term bank deposits and $12,703,000 of marketable
securities.
Management continues to evaluate various financing alternatives for funding
future research and development activities and general and administrative
expenses through fundraising in the public or private equity markets. Although
there is no assurance that we will be successful with those initiatives,
management believes that it will be able to secure the necessary financing as a
result of future third party investments. Based on our current cash resources
and commitments, we believe we will be able to maintain our current planned
development activities and the corresponding level of expenditures for at least
the next 12 months.
As of November 30, 2020, our total current assets were $36,024,000 and our total
current liabilities were $5,742,000. On November 30, 2020, we had a working
capital surplus of $30,282,000 and an accumulated loss of $98,184,000. As of
August 31, 2020, our total current assets were $40,511,000 and our total current
liabilities were $4,536,000. On August 31, 2020, we had a working capital
surplus of $35,975,000 and an accumulated loss of $92,614,000. The decrease in
working capital from August 31, 2020 to November 30, 2020 was primarily due to
the cash used in operating activities.
During the three month period ended November 30, 2020, cash and cash equivalents
decreased to $14,931,000 from the $19,296,000 reported as of August 31, 2020,
which is due to the reasons described below.
Operating activities used cash of $6,152,000 in the three month period ended
November 30, 2020, as compared to $2,996,000 used in the three month period
ended November 30, 2019. Cash used in operating activities primarily consisted
of net loss resulting from research and development and general and
administrative expenses, as well as changes in deferred revenue due to the
License Agreement and is partially offset by changes in accounts payable and
accrued expenses.
24
Investing activities provided cash of $1,199,000 in the three month period ended
November 30, 2020, as compared to $2,825,000 provided in the three month period
ended November 30, 2019. Cash provided by investing activities consisted
primarily of the maturity of short-term deposits and held to maturity securities
and is partially offset by the purchase of short-term deposits.
Financing activities provided cash of $586,000 in the three month period ended
November 30, 2020, as compared to $13,000 provided in the three month period
ended November 30, 2019. Financing activities in the three month period ended
November 30, 2019 consisted of aggregate net proceeds of $12,253, from our
issuance of 12,253 shares of common stock as a result of exercise of options.
On February 27, 2020, we entered into an underwriting agreement with National
Securities Corporation, or the Underwriter, in connection with a public
offering, or the Offering, of 5,250,000 shares of our common stock, at an
offering price of $4.00 per share. We also granted the Underwriter a 45-day
option to purchase from us up to an additional 787,500 shares of common stock at
the public offering price, or the Over-Allotment Option. In connection with the
Offering, we also agreed to issue to the Underwriter, or its designees,
warrants, or the Underwriter's Warrants, to purchase up to an aggregate of 7% of
the shares of common stock sold in the Offering (including any additional shares
sold during the 45-day option period), at an exercise price of $4.80 per share.
The Underwriter's Warrants issued in the Offering will be exercisable at any
time and from time to time, in whole or in part, commencing six months from
issuance for a period of three years from the date of issuance. The closing of
the Offering occurred on March 2, 2020. On April 9, 2020, we issued 180,561
shares of our common stock and 12,640 Underwriter's Warrants pursuant to a
partial exercise by the Underwriter of the Over-Allotment Option, or the Partial
Over-Allotment Option Exercise. The net proceeds to us from the Offering,
including from the Partial Over-Allotment Option Exercise, after deducting the
underwriting discount and our Offering expenses, were $19,894,000.
On September 5, 2019, we entered into an equity distribution agreement, or the
Sales Agreement, pursuant to which we could, from time to time and at our
option, issue and sell shares of our common stock having an aggregate offering
price of up to $15,000,000, through a sales agent, subject to certain terms and
conditions. Any shares sold were sold pursuant to the Company's effective shelf
registration statement on Form S-3 including a prospectus and prospectus
supplement, each dated February 10, 2020 (which superseded a prior registration
statement, prospectus and prospectus supplement that related to shares sold
under the Sales Agreement). We paid the sales agent a cash commission of 3.0% of
the gross proceeds of the sale of any shares sold through the sales agent under
the Sales Agreement. As of November 30, 2020, 974,357 shares were issued under
the Sales Agreement for aggregate net proceeds of $4,508,000. As of January 14,
2021, 3,212,621 shares were issued under the Sales Agreement for aggregate net
proceeds of $14,397,000.
On December 1, 2020, we entered into an equity distribution agreement, or the
New Sales Agreement, pursuant to which we may, from time to time and at our
option, issue and sell shares of our common stock having an aggregate offering
price of up to $40,000,000, through a sales agent, subject to certain terms and
conditions. Any shares sold will be sold pursuant to the Company's effective
shelf registration statement on Form S-3 including a prospectus dated February
10, 2020 and prospectus supplement dated December 1, 2020. We will pay the sales
agent a cash commission of 3.0% of the gross proceeds of the sale of any shares
sold through the sales agent under the New Sales Agreement. As of January 14,
2021, 612,210 shares were issued under the New Sales Agreement for aggregate net
proceeds of $2,557,000.
Off-balance sheet arrangements
As of November 30, 2020 we had no off-balance sheet arrangements that have had
or that we expect would be reasonably likely to have a future material effect on
our financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.
25
Critical accounting policies and estimates
Our critical accounting policies are described in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in our
Annual Report.
Planned Expenditures
We invest heavily in research and development, and we expect that in the
upcoming years our research and development expenses will continue to be our
major operating expense.
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