SEC Filing | Celldex Therapeutics

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 0-15006 AVANT IMMUNOTHERAPEUTICS, INC. (Exact name of registrant as specified in its charter) DELAWARE NO. 13-3191702 (State of Incorporation) (I.R.S. Employer Identification No.) 119 FOURTH AVENUE, NEEDHAM, MASSACHUSETTS 02494-2725 (Address of principal executive offices) (781) 433-0771 (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 such 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 ___. --- State the number of shares outstanding of each of the registrant's classes of common equity, as of the latest practicable date: Shares Outstanding as Class of July 25, 2000 ----------------------------- ---------------- Common Stock, $.001 par value 54,957,684 Exhibit index located on page 16

AVANT IMMUNOTHERAPEUTICS, INC. FORM 10-Q QUARTER ENDED JUNE 30, 2000 TABLE OF CONTENTS Page PART I -- FINANCIAL INFORMATION Consolidated Balance Sheet at June 30, 2000 and December 31, 1999................................3 Consolidated Statement of Operations for the Three Months Ended June 30, 2000 and 1999......................................................................4 Consolidated Statement of Operations for the Six Months Ended June 30, 2000 and 1999......................................................................5 Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2000 and 1999......................................................................6 Notes to Consolidated Financial Statements.......................................................7 Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................................10 PART II -- OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders....................................14 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits..............................................................................14 (b) Reports on Form 8-K...................................................................14 Signatures......................................................................................16 Index to Exhibits...............................................................................16 2

PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AVANT IMMUNOTHERAPEUTICS, INC. CONSOLIDATED BALANCE SHEET JUNE 30, 2000 AND DECEMBER 31, 1999 JUNE 30, DECEMBER 31, 2000 1999 ============================================================================================================= ASSETS (unaudited) Current Assets: Cash and Cash Equivalents $ 16,058,500 $ 13,619,000 Current Portion Lease Receivable 431,700 431,700 Prepaid Expenses and Other Current Assets 455,800 439,000 - ------------------------------------------------------------------------------------------------------------- Total Current Assets 16,946,000 14,489,700 - ------------------------------------------------------------------------------------------------------------- Property and Equipment, Net 1,072,600 1,256,800 Restricted Cash -- 217,000 Long-Term Lease Receivable 179,900 395,700 Other Assets 3,319,100 3,523,500 - ------------------------------------------------------------------------------------------------------------- Total Assets $ 21,517,600 $ 19,882,700 ============================================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 256,400 $ 575,300 Accrued Expenses 813,500 1,331,500 Current Portion Deferred Revenue 615,400 -- Current Portion Lease Payable 293,700 293,700 - ------------------------------------------------------------------------------------------------------------- Total Current Liabilities 1,979,000 2,200,500 - ------------------------------------------------------------------------------------------------------------- Long-Term Deferred Revenue 2,769,200 -- Long-Term Lease Payable 118,900 269,200 Stockholders' Equity: Common Stock, $.001 Par Value; 75,000,000 Shares Authorized; 50,160,500 Issued and Outstanding at June 30, 2000 and 48,127,400 Issued and Outstanding at December 31, 1999 50,200 48,100 Additional Paid-In Capital 154,793,000 150,710,300 Accumulated Deficit (138,192,700) (133,345,400) - ------------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 16,650,500 17,413,000 - ------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $ 21,517,600 $ 19,882,700 ============================================================================================================= SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 3

AVANT IMMUNOTHERAPEUTICS, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED) JUNE 30, JUNE 30, 2000 1999 ============================================================================================================= OPERATING REVENUE: Product Development and Licensing Agreements $ 153,900 $ 847,900 - ------------------------------------------------------------------------------------------------------------- OPERATING EXPENSE: Research and Development 1,962,700 1,820,800 General and Administrative 1,041,900 1,100,900 Amortization of Goodwill 137,300 409,800 - ------------------------------------------------------------------------------------------------------------- Total Operating Expenses 3,141,900 3,331,500 - ------------------------------------------------------------------------------------------------------------- Operating Loss (2,988,000) (2,483,600) Non-Operating Income, Net 264,100 127,400 - ------------------------------------------------------------------------------------------------------------- Net Loss $ (2,723,900) $ (2,356,200) ============================================================================================================= Basic and Diluted Net Loss Per Common Share $ (0.05) $ (0.06) ============================================================================================================= Weighted Average Common Shares Outstanding 50,099,100 42,529,600 ============================================================================================================= SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 4

AVANT IMMUNOTHERAPEUTICS, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED) JUNE 30, JUNE 30, 2000 1999 ============================================================================================================= OPERATING REVENUE: Product Development and Licensing Agreements $ 307,700 $ 1,185,800 - ------------------------------------------------------------------------------------------------------------- OPERATING EXPENSE: Research and Development 3,780,000 3,619,600 General and Administrative 2,144,300 2,163,000 Legal Settlements (500,000) -- Amortization of Goodwill 274,600 819,600 - ------------------------------------------------------------------------------------------------------------- Total Operating Expenses 5,698,900 6,602,200 - ------------------------------------------------------------------------------------------------------------- Operating Loss (5,391,200) (5,416,400) Non-Operating Income, Net 543,900 318,400 - ------------------------------------------------------------------------------------------------------------- Net Loss $ (4,847,300) $ (5,098,000) ============================================================================================================= Basic and Diluted Net Loss Per Common Share $ (0.10) $ (0.12) ============================================================================================================= Weighted Average Common Shares Outstanding 49,949,100 42,528,000 ============================================================================================================= SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 5

AVANT IMMUNOTHERAPEUTICS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED) JUNE 30, JUNE 30, 2000 1999 ============================================================================================================= CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (4,847,300) $ (5,098,000) Adjustments to Reconcile Net Loss to Net Cash Used by Operating Activities: Depreciation and Amortization 621,300 1,072,000 Changes in Assets and Liabilities: Prepaid Expenses and Other Current Assets (16,800) 63,400 Accounts Payable and Accrued Expenses (836,900) (447,200) Deferred Revenue 3,384,600 (500,000) Lease Receivable 215,800 179,800 Lease Payable (150,300) (127,100) - ------------------------------------------------------------------------------------------------------------- Net Cash Used in Operating Activities (1,629,600) (4,857,100) - ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Property and Equipment (87,800) (580,400) Redemption of Marketable Securities -- 4,903,100 Decrease in Restricted Cash 217,000 40,000 Increase in Patents and Licenses (144,900) (99,600) - ------------------------------------------------------------------------------------------------------------- Net Cash Provided by (Used in) Investing Activities (15,700) 4,263,100 - ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the Exercise of Stock Options 1,535,700 17,200 Proceeds from the Exercise of Warrants 241,400 -- Net Proceeds from Stock Issuance 2,307,700 600 - ------------------------------------------------------------------------------------------------------------- Net Cash Provided by Financing Activities 4,084,800 17,800 - ------------------------------------------------------------------------------------------------------------- Increase (Decrease) in Cash and Cash Equivalents 2,439,500 (576,200) Cash and Cash Equivalents at Beginning of Period 13,619,000 8,937,200 - ------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Period $ 16,058,500 $ 8,361,000 ============================================================================================================= SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 6

AVANT IMMUNOTHERAPEUTICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2000 (1) NATURE OF BUSINESS AVANT Immunotherapeutics, Inc. ("AVANT") is a biopharmaceutical company engaged in the discovery, development and commercialization of products that harness the human immune response to prevent and treat disease. Our lead therapeutic program is focused on compounds that inhibit the inappropriate activity of the complement cascade, a vital part of the body's immune defense system. AVANT is also developing on its own a proprietary therapeutic vaccine for the management of atherosclerosis and Therapore(TM), a novel system for the delivery of immunotherapeutics for chronic viral infections and certain cancers. AVANT and its collaborators are developing vaccines using the proprietary adjuvants, Adjumer(R) and Micromer(R), for the prevention of respiratory syncytial virus (RSV), Lyme disease and several other vaccine targets. Through additional collaboration, we are also developing an oral human rotavirus vaccine and an oral cholera vaccine. The unaudited consolidated financial statements include the accounts of AVANT Immunotherapeutics, Inc. and its wholly owned subsidiary, Polmerix, Inc. All intercompany transactions have been eliminated. (2) INTERIM FINANCIAL STATEMENTS The accompanying unaudited consolidated financial statements for the three months and six months ended June 30, 2000 and 1999 include the consolidated accounts of AVANT and have been prepared in accordance with generally accepted accounting principles and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the information contained herein reflects all adjustments, consisting solely of normal recurring adjustments, that are necessary to present fairly the financial positions at June 30, 2000 and December 31, 1999, the results of operations for the quarters and six months ended June 30, 2000 and 1999, and the cash flows for the six months ended June 30, 2000 and 1999. The results of operations for the quarter and six months ended June 30, 2000 are not necessarily indicative of results for any future interim period or for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted, although we believe that the disclosures included are adequate to make the information presented not misleading. The unaudited consolidated financial statements and the notes included herein should be read in conjunction with footnotes contained in AVANT's Annual Report on Form 10-K for the year ended December 31, 1999. (3) NEW ACCOUNTING PRONOUNCEMENTS During April 2000, the Financial Accounting Standards Board issued Financial Interpretation ("FIN") No. 44, "Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of Accounting Principles Board ("APB") No. 25. Among other issues, FIN 44 clarifies (a) the definition of an employee, (b) criteria for determining whether a stock award plan qualifies as non-compensatory, and (c) the accounting consequences of various award modifications. This interpretation became effective July 1, 2000. We evaluated the effects of FIN 44 on our financial position and results of operations and have determined any such effects to be immaterial. During June 2000, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101B, an amendment to SAB 101, "Revenue Recognition in Financial Statements." SAB 101B defers the 7

required implementation of SAB 101 until the fiscal quarter ended December 31, 2000. We are currently evaluating the effects, if any, of SAB 101 on our financial position and results of operations. (4) PROPERTY AND EQUIPMENT Property and equipment includes the following: June 30, December 31, 2000 1999 =========================================== Laboratory Equipment $ 2,626,600 $ 2,595,400 Office Furniture and Equipment 1,232,500 1,176,800 Leasehold Improvements 939,000 938,100 ------------------------------------------- Property and Equipment, Total 4,798,100 4,710,300 Less Accumulated Depreciation and Amortization (3,725,500) (3,453,500) ------------------------------------------- $ 1,072,600 $ 1,256,800 =========================================== (5) OTHER ASSETS Other assets include the following: June 30, December 31, 2000 1999 ============================================ Capitalized Patent Costs $ 2,246,300 $ 2,101,300 Accumulated Amortization (790,000) (715,300) -------------------------------------------- Capitalized Patent Costs, Net 1,456,300 1,386,000 Goodwill and Other Intangible Assets, Net of Accumulated Amortization of $2,096,800 and $1,822,200 at June 30, 2000 and December 31, 1999, respectively 1,738,900 2,013,500 Other Non Current Assets 124,000 124,000 -------------------------------------------- $ 3,319,200 $ 3,523,500 ============================================ (6) COMMON STOCK In July 1999, Novartis exercised its option to license TP10 for use in the field of transplantation. The decision to license TP10 resulted in a $6 million payment by Novartis which was received by AVANT in January 2000. The payment included an equity investment of $2,307,700 for 1,439,496 shares of our common stock at $1.60 per share and a license fee of $3,692,300. We are amortizing the license fee over twenty-four quarters, the projected development period for the licensed field. (7) NET INCOME (LOSS) PER SHARE Consistent with SFAS 128, basic earnings (loss) per share amounts are based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share amounts are based on the weighted average number of shares of common stock and the potential common stock outstanding during the period. We have excluded all of the potential common stock shares from the calculation of diluted weighted average share amounts for the three-month and six-month periods ended June 30, 2000 and 1999 as its inclusion would have been anti-dilutive. 8

(8) SUBSEQUENT EVENT On July 17, 2000, AVANT completed a private placement of approximately 4,650,000 shares of common stock to institutional investors at $7.85 per share. Net proceeds from the offering totaled approximately $34,594,400 9

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: STATEMENTS CONTAINED IN THE FOLLOWING, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, THAT ARE NOT HISTORICAL FACTS MAY BE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO A VARIETY OF RISKS AND UNCERTAINTIES. THERE ARE A NUMBER OF IMPORTANT FACTORS THAT COULD CAUSE THE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY AVANT. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO: (i) OUR ABILITY TO SUCCESSFULLY COMPLETE PRODUCT RESEARCH AND DEVELOPMENT, INCLUDING PRE-CLINICAL AND CLINICAL STUDIES, AND COMMERCIALIZATION; (ii) OUR ABILITY TO OBTAIN SUBSTANTIAL ADDITIONAL FUNDING; (iii) OUR ABILITY TO OBTAIN REQUIRED GOVERNMENTAL APPROVALS; (iv) OUR ABILITY TO ATTRACT MANUFACTURING, SALES, DISTRIBUTION AND MARKETING PARTNERS AND OTHER STRATEGIC ALLIANCES; AND (v) OUR ABILITY TO DEVELOP AND COMMERCIALIZE OUR PRODUCTS BEFORE OUR COMPETITORS. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW We are engaged in the discovery, development and commercialization of products that harness the human immune response to prevent and treat disease. Our products derive from a broad set of complementary technologies with the ability to inhibit the complement system, regulate T and B cell activity, and enable the creation and delivery of preventative and therapeutic vaccines. We are using these technologies to develop vaccines and immunotherapeutics that prevent or treat disease caused by infectious organisms, and drugs and treatment vaccines that modify undesirable activity by the body's own proteins or cells. ACQUISITION On August 21, 1998, we acquired Virus Research Institute, Inc. ("VRI"), a company engaged in the discovery and development of systems for the delivery of vaccines and immunotherapeutics, and novel vaccines for adults and children. AVANT issued 14,036,400 shares and warrants to purchase 1,811,200 shares of its common stock in exchange for all of the outstanding common stock of VRI, on the basis of 1.55 shares and .20 of a warrant to purchase one share of AVANT's common stock for each share of VRI common stock. The acquisition has been accounted for as a purchase. Consequently, the purchase price was allocated to the acquired assets and assumed liabilities based upon their fair value at the date of acquisition. The excess of the purchase price over the tangible assets acquired was assigned to collaborative relationships, work force and goodwill and is being amortized on a straight line basis over 12 to 60 months. An allocation of $44,630,000 was made to in-process research and development ("IPR&D") which represented purchased in-process technology which had not yet reached technological feasibility and had no alternative future use. The amount was charged as an expense in our financial statements during the third quarter of 1998. NEW DEVELOPMENTS COMPLEMENT INHIBITORS: In 1997, we entered into an agreement with Novartis relating to the development of TP10 for use in xenotransplantation (animal organs into humans) and allotransplantation (human organs into humans). We granted Novartis a two-year option to license TP10 with exclusive worldwide marketing rights (except Japan) in the fields of xenotransplantation and allotransplantation. In July 1999, Novartis exercised its option to license TP10 for use in the field of transplantation. In December 1999, the Novartis agreement was amended to include marketing rights for Japan. The decision to license TP10 resulted in a $6 million equity investment and license payment by Novartis which was received by AVANT in January 2000. Under the agreement, we may receive additional milestone payments of up to $14 million upon attainment of certain development and regulatory goals. We will also be entitled to royalties on product sales under the agreement. We have elected to independently develop and commercialize TP10 for pediatric cardiac surgery. In September 1999, we initiated an open-label, Phase I/II trial of TP10 in infants undergoing cardiac surgery for congenital heart defects. The trial evaluated the ability of TP10 to mitigate the injury to the heart and other organs that occurs when patients are placed on cardiopulmonary bypass circuits. TP10 was 10

well tolerated in the study population and results of this Phase I/II trial were presented at the Society of Cardiovascular Anesthesiologists Annual Meeting in May 2000. In March 2000, we received orphan drug designation for TP10 in infants undergoing cardiac surgery. We currently expect to initiate a pivotal trial in this indication around the end of 2000. AVANT additionally plans to refine the TP10 dosing regimen in additional infants prior to starting this pivotal study. We also plan to initiate Phase II trials for adult cardiac surgery during the second half of 2000, with an expectation to partnering that program when additional clinical data are available. ATHEROSCLEROSIS TREATMENT VACCINE: We are developing a therapeutic vaccine against endogenous cholesteryl ester transfer protein ("CETP") which may be useful in reducing risks associated with atherosclerosis. CETP is a key intermediary in the balance of HDL and LDL. We are developing a vaccine (CETi-1) to stimulate an immune response against CETP which we believe may improve the ratio of HDL to LDL cholesterol and reduce the progression of atherosclerosis. We have conducted preliminary studies of rabbits which have demonstrated the ability of CETi-1 vaccine to elevate HDL and reduce the development of blood vessel lesions. In June 1999, we initiated a double-blind placebo controlled, Phase I clinical trial of our CETi-1 vaccine in adult volunteers. The object of the study is to demonstrate the safety of single administrations of the vaccine at four different dosage strengths. Patient enrollment in this Phase I trial was completed in February 2000 and we expect to announce trial results in the fourth quarter of 2000. We plan to initiate a Phase II study during the second half of 2000. As clinical data becomes available, we plan to seek a corporate partner to complete development and to commercialize the vaccine. ROTAVIRUS VACCINE: Rotavirus is a major cause of diarrhea and vomiting in infants and children. No vaccine against rotavirus is currently on the market. In 1997, we licensed our oral rotavirus vaccine to SmithKline Beecham plc ("SmithKline"). In 1999, after our Phase II study demonstrated 89% protection in a study involving 215 infants, SmithKline paid us an additional license fee and assumed full responsibility for funding and performing all remaining clinical development. SmithKline has initiated Phase I/II bridging studies in Europe using its newly manufactured rotavirus vaccine, called Rotarix(TM), and is now planning to start Phase III safety and efficacy studies in 2001 after review with health authorities. Assuming product development and commercialization continues satisfactorily, SmithKline will pay us additional milestones and a royalty based on sales. CHOLERA VACCINE: We are developing a single dose, oral cholera vaccine using a live, genetically attenuated cholera strain. Based on this technology, developed in academia, we have developed the vaccine through early Phase II trials. We then negotiated a collaboration agreement under which a Phase IIb trial will be performed and funded by the Walter Reed Army Institute of Research ("WRAIR") and the National Institutes of Health (the "NIH"). This trial, set to begin in the second half of 2000, will test the safety, immunogenecity and protective capacity of the vaccine against a challenge with live virulent cholera. We will then determine our commercialization strategy with respect to the cholera vaccine based on clinical data from the trial. RESULTS OF OPERATIONS Three-Month Period Ended June 30, 2000 as Compared with the Three-month Period Ended June 30, 1999 -------------------------------------------------- AVANT reported consolidated net loss of $2,723,900, or $.05 per share, for the second quarter ended June 30, 2000, compared with a net loss of $2,356,200, or $.06 per share, for the second quarter ended June 30, 1999. The weighted average common shares outstanding used to calculate net loss per common share was 50,099,100 in 2000 and 42,529,600 in 1999. OPERATING REVENUE: Total operating revenue decreased $694,000, or 81.8%, to $153,900 for the second quarter of 2000 compared to $847,900 for the second quarter of 1999. This decrease is due primarily to differences in amortization between quarterly periods of revenue recognized from license and option payments received from Novartis in 2000 and 1999, respectively. During the second quarter of 2000, AVANT recognized revenue from a Novartis license payment which is being amortized over the 11

projected development period of the licensed field or twenty-four quarters. During the second quarter of 1999, AVANT recognized revenue from a Novartis one-year option payment which was amortized over the option term and a milestone payment received from SmithKline Beecham. OPERATING EXPENSE: Total operating expense decreased $189,600, or 5.7%, to $3,141,900 for the second quarter of 2000 compared to $3,331,500 for the second quarter of 1999. The decrease in total operating expense is primarily due to the reduction of goodwill amortization by $272,500 in the second quarter of 2000 compared with the same period last year due to certain acquired assets having shorter useful lives. Research and development expense increased $141,900, or 7.8%, to $1,962,700 for the second quarter of 2000 compared to $1,820,800 for the second quarter of 1999. The increase in research and development expense is primarily due to increased costs for clinical materials, offset in part by lower consultant and personnel costs during the 2000 quarter. General and administrative expense decreased $59,000, or 5.4%, to $1,041,900 for the second quarter of 2000 compared to $1,100,900 for the second quarter of 1999. The decrease is primarily attributed to lower personnel costs in 2000. NON-OPERATING INCOME, NET: Non-operating income increased $136,700, or 107.3%, to $264,100 for the second quarter of 2000 compared to $127,400 for the second quarter of 1999. The increase is primarily due to an increase in interest income as a result of higher interest rates and higher average cash balances during the second quarter of 2000 compared to the second quarter of 1999. Six-Month Period Ended June 30, 2000 as Compared With the Six-month Period Ended June 30, 1999 ------------------------------------------------ AVANT reported consolidated net loss of $4,847,300, or $.10 per share, for the six months ended June 30, 2000, compared with a net loss of $5,098,000, or $.12 per share, for the six months ended June 30, 1999. The weighted average common shares outstanding used to calculate net loss per common share was 49,949,100 in 2000 and 42,528,000 in 1999. OPERATING REVENUE: Total operating revenue decreased $878,100, or 74.1%, to $307,700 for the first six months of 2000 compared to $1,185,800 for the first six months of 1999. This decrease is due primarily to differences in amortization of revenue recognized from license, option and milestone payments from our collaborators between the comparable six-month periods. During the first six months of 2000, AVANT recognized revenue from a Novartis license payment which is being recognized over the projected development period of the licensed field or twenty-four quarters. During the first six months of 1999, AVANT recognized revenue from a Novartis one-year option payment which was amortized over the option term and a milestone payment received from SmithKline Beecham. OPERATING EXPENSE: Total operating expense decreased $903,300, or 13.7%, to $5,698,900 for the first six months of 2000 compared to $6,602,200 for the first six months of 1999. The decrease in total operating expense is primarily due to the receipt of legal settlement payments totaling $500,000 in the first quarter of 2000 and the reduction of goodwill amortization by $545,000 in the first six months of 2000 compared with the same period last year due to certain acquired assets having shorter useful lives. Research and development expense increased $160,400, or 4.4%, to $3,780,000 for the first six months of 2000 compared to $3,619,600 for the first six months of 1999. The increase in research and development expense is due to higher costs for clinical materials and laboratory supplies, offset in part by lower consultant and personnel costs. General and administrative expense decreased $18,700, or 0.9%, to $2,144,300 for the first six months of 2000 compared to $2,163,000 for the first six months of 1999. The decrease is primarily attributed to lower personnel costs offset by increased general and patent legal expenses combined with increased corporate development and investor relations costs. NON-OPERATING INCOME, NET: Non-operating income increased $225,500, or 70.8%, to $543,900 for the first six months of 2000 compared to $318,400 for the first six months of 1999. The increase is primarily due to an increase in interest income as a result of higher interest rates and higher average cash balances during the first six months of 2000 compared to the first six months of 1999. 12

LIQUIDITY AND CAPITAL REOURCES AVANT ended the second quarter of 2000 with cash and cash equivalents of $16,058,500 compared to cash and cash equivalents of $13,619,000 at December 31, 1999. Cash used in operations was $1,629,600 in the first six months of 2000 compared to $4,857,100 used in operations in the first six months of 1999. In July 1999, Novartis exercised its option to license TP10 for use in the field of transplantation. The decision to license TP10 resulted in a $6 million payment by Novartis which was received by AVANT in January 2000. The payment included an equity investment of $2,307,700 and a license fee of $3,692,300. Also, during the first six months of 2000, AVANT raised approximately $1,535,700 and $241,400 in additional equity investment through the exercise of stock options and warrants, respectively. After the end of the second quarter of 2000, on July 17, 2000, AVANT completed a private placement of approximately 4,650,000 shares of common stock which generated net proceeds totaling approximately $34,594,400. AVANT believes that cash inflows from existing collaborations, interest income on invested funds and our current cash and cash equivalents together with the funds raised by the private placement completed in July 2000 will be sufficient to meet estimated working capital requirements and fund operations for the next two years. The working capital requirements of AVANT are dependent on several factors including, but not limited to, the costs associated with research and development programs, preclinical and clinical studies and the scope of collaborative arrangements. During 2000, we may take steps to raise additional capital including, but not limited to, licensing of technology programs with existing or new collaborative partners, possible business combinations, or issuance of common stock via private placement and public offering. YEAR 2000 THE STATEMENTS IN THIS SECTION INCLUDE THE "YEAR 2000 READINESS DISCLOSURE" WITHIN THE MEANING OF THE YEAR 2000 INFORMATION AND READINESS DISCLOSURE ACT. THIS SECTION CONTAINS CERTAIN STATEMENTS THAT ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. AVANT'S YEAR 2000 READINESS, AND THE EVENTUAL AFFECTS OF THE YEAR 2000 ON AVANT MAY BE MATERIALLY DIFFERENT THAN CURRENTLY PROJECTED. THIS MAY BE DUE TO, AMONG OTHER THINGS, THE INABILITY OF AVANT OR OF KEY THIRD PARTIES WITH WHOM WE HAVE A SIGNIFICANT BUSINESS RELATIONSHIP TO ACHIEVE OR MAINTAIN YEAR 2000 READINESS. The "Year 2000" issue affects computer systems that have date sensitive programs that may not properly recognize the year 2000. Systems that do not properly recognize such information could generate data or cause a system to fail, resulting in business interruption. Through the first six months of the year 2000, AVANT's operations are fully functioning and have not experienced any significant issues associated with the Year 2000 problem discussed above. Costs associated with modifications made by AVANT to be Year 2000 compliant were immaterial. There can be no assurance, however, that a failure by another company's system to be Year 2000 compliant would not have a material adverse affect on our business, operating results and financial condition. 13

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In January 1997, the Securities and Exchange Commission issued Financial Reporting Release No. 48, which expands the disclosure requirements for certain derivatives and other financial instruments. The Company does not utilize derivative financial instruments. PART II -- OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On May 8, 2000, the AVANT held its Annual Meeting of Stockholders at which the voters elected seven directors to its Board of Directors. At AVANT's Annual Meeting of Stockholders, the following votes were tabulated for the one proposal before AVANT's Stockholders: PROPOSAL I Election of Directors: NUMBER OF SHARES/VOTES -------------------------------------- For Authority Withheld ---------- ------------------ J. Barrie Ward 39,668,324 93,510 John W. Littlechild 39,668,088 93,746 Una S. Ryan 39,643,024 118,810 Thomas R. Ostermueller 39,668,845 92,989 Frederick W. Kyle 39,669,438 92,396 Harry H. Penner, Jr. 39,669,699 92,135 Peter Sears 39,669,838 91,996 The number of shares issued, outstanding and eligible to vote as of the record date of March 24, 2000 were 50,084,075. A quorum was present with 39,761,834 shares represented by 209 proxies or 79.39% of the eligible voting shares. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS 27.1 Financial Data Schedule (B) REPORTS ON FORM 8-K No reports on Form 8-K were filed by the Company during the quarter for which this report is filed. 14

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. AVANT IMMUNOTHERAPEUTICS, INC. BY: Dated: July 25, 2000 /s/ Una S. Ryan ----------------------------------- Una S. Ryan, Ph. D. President and Chief Executive Officer (Principal Executive Officer) Dated: July 25, 2000 /s/ Avery W. Catlin ----------------------------------- Avery W. Catlin Senior Vice President, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) 15

INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION 27.1 Financial Data Schedule. 16

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED FINANCIAL STATEMENTS OF AVANT IMMUNOTHERAPEUTICS, INC. FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. U.S. DOLLARS 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 1 16,058,500 0 0 0 0 16,946,000 4,798,100 (3,725,500) 21,517,600 1,979,000 0 0 0 50,200 16,600,300 21,517,600 0 307,700 0 5,698,800 0 0 0 (4,847,300) 0 (4,847,300) 0 0 0 (4,847,300) (0.10) (0.10)