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Biotech / Medical : Cistron Biotechnology(CIST)$.30 -- Ignore unavailable to you. Want to Upgrade?

To: James Silverman who wrote (910)	11/13/1997 4:10:00 PM
From: George Dysert	Read Replies (1) \| Respond to of 2742

James: I don't see any plan of action here. Item 2. Management's Discussion and Analysis of Results of -------------------------------------------------- Operations and Financial Condition ---------------------------------- The following discussion should be read in conjunction with and is qualified in its entirety by the accompanying financial information and notes thereto, and the financial information, notes thereto and management's discussion and analysis of results of operations and financial condition contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997. Certain statements in this discussion and analysis constitute forward- looking statements, are not historical facts, and involve risks and uncertainties that could cause actual results to differ from those expected and projected. Such risks and uncertainties include but are not limited to: (i) general economic conditions; (ii) conditions specific to the biotechnology industry; (iii) the Company's ability to develop or acquire new technology or products through licensing, merger or acquisition and to obtain regulatory approval to commercialize diagnostic or therapeutic products; (iv) the effectiveness and ultimate market acceptance of any such products; (v) limitations on third party reimbursements with respect to any such products; and (vi) competition. The Company does not undertake to update or revise any forward-looking statements contained herein whether as a result of new information, future events or otherwise. Results of Operations --------------------- The Company sells its products to the research market and has not generated significant revenues therefrom. None of its products have been submitted to or received approval from the Food and Drug Administration for the sale of such products to the diagnostic or therapeutic markets. Three Months Ended September 30, 1997 and ----------------------------------------- Three Months Ended September 30, 1996 ------------------------------------- Sales were unchanged in the quarter ended September 30, 1997 versus the same quarter of the prior year. In the quarter ended September 30, 1997, higher sales of bulk cytokine assays were made offset by lower sales of bulk proteins. This resulted in an increase in cost of sales versus the prior year period. During the periods ended September 30, 1997 and 1996, respectively, the Company received non-refundable research and development funding of $100,000, in each period representing the ninth and fifth, respectively, of 10 consecutive quarterly research and development payments of $100,000 which another company has agreed to make to Cistron. 7 Operating expenses increased $9,874 (2.2%) in the quarter ended September 30, 1997 as compared to the same quarter last year. Research and development expenses increased $74,350 (308.9%) due to increased external research funding of periodontal disease, vaccine adjuvant and IL-1 inhibition preclinical studies. Consulting expenses related to the preparation of the periodontal disease program also increased. Administrative and marketing expenses decreased $65,845 (17.1%) due to lower legal and consulting expenses in the quarter ended September 30, 1997 than in the same quarter of the prior year, in which higher legal and consulting expenses related to litigation were incurred. Higher salary and insurance expenses partially offset the decrease in legal and litigation related consulting. In the quarter ended September 30, 1997, the Company also recorded the initial cash fee of $50,000 and a charge of $65,000 for non-cash compensation related to the issuance of 400,000 warrants to the investment bankers retained by the Company in September 1997. Occupancy expenses were essentially unchanged. Interest income of $69,655 was earned on the investment of higher cash balances. In addition, net interest income of $68,627 was recognized on accounts receivable other and other non-current liabilities to reflect the increase in their present value. The Company had an operating loss of $269,960 in the quarter and expects research expenditures to increase. There can be no assurance that its operations will reach profitability. Liquidity and Capital Resources ------------------------------- At September 30, 1997, the Company had current assets of $8,662,875 including cash and cash equivalents of $5,616,185 and had current liabilities of $998,271. Cash used in the quarter ended September 30, 1997 was largely due to the payment of amounts due to the Institutions pursuant to litigation settlements. These amounts were shown as accrued payables at June 30, 1997. Management believes that it will have sufficient assets to fund the Company's current programs and plans through fiscal 1998 and beyond. The Company will be expending funds for research, including the initiation of periodontal disease clinical studies, throughout fiscal 1998 and fiscal 1999. Management believes that it will have sufficient assets to fund the Company's current programs through this period.

To: James Silverman who wrote (910)	11/16/1997 3:32:00 PM
From: Steve Harmon	Read Replies (1) \| Respond to of 2742

Jim, I agree with you on Bluestone. Only 3 1/2 months left on the Bluestone contract. I hear from a source at Bluestone that John Kluge is a silent partner there. Just stating that CIST's mgt. by initiating a small buyback could on their own eliminate MARK CAPITAL's remaining position of less than 500,000 shares which is keeping CIST at these SILLY levels. When Bluestone makes their move they will probably gobble up those shares on the cheap for their clients. (Probably negotiating a price for that remaining block now.)