1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 March 31, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from __________ to _________.
Commission File Number: 0-19290
[COR THERAPEUTICS, INC. LOGO]
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
94-3060271
(I.R.S. employer identification no.)
(650) 244-6800
(Registrant's telephone number, including area code)
256 EAST GRAND AVENUE, SOUTH SAN FRANCISCO, CALIFORNIA 94080
(Address of principal executive offices and zip 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 [ ]
As of March 31, 2000, the number of outstanding shares of the Registrant's
Common Stock was 26,421,088.
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COR THERAPEUTICS, INC.
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INDEX
Page
Section Contents No.
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PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements and Notes
Condensed Balance Sheets - March 31, 2000 and December 31, 1999 3
Condensed Statements of Operations - for the three months ended March 31, 2000 and 1999 4
Condensed Statements of Cash Flows - for the three months ended March 31, 2000 and 1999 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9
Item 3. Financial Market Risks 18
PART II OTHER INFORMATION
Item 2. Recent Sale of Unregistered Securities 18
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
INTEGRILIN(R) (eptifibatide) Injection, COR Therapeutics(R), and COR(R) are
registered trademarks of COR Therapeutics, Inc.
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COR THERAPEUTICS, INC.
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS AND NOTES
CONDENSED BALANCE SHEETS
(in thousands)
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 145,099 $ 12,780
Short-term investments 193,737 32,973
Contract receivables 9,184 5,751
Prepaid copromotion expenses 31,407 30,747
Other current assets 965 791
--------- ---------
Total current assets 380,392 83,042
Property and equipment, net 4,775 4,855
Other assets 10,416 --
--------- ---------
$ 395,583 $ 87,897
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,304 $ 11,020
Accrued interest payable 1,465 --
Accrued compensation 4,906 4,525
Accrued development costs 2,309 1,768
Accrued copromotion costs 1,348 1,291
Deferred revenue 30,574 27,480
Other accrued liabilities 503 511
Capital lease obligations--current portion 1,512 1,621
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Total current liabilities 52,921 48,216
Capital lease obligations--noncurrent portion 2,581 2,925
Convertible subordinated notes 300,000 --
Stockholders' equity 265,256 251,990
Accumulated deficit (225,175) (215,234)
--------- ---------
Total stockholders' equity 40,081 36,756
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$ 395,583 $ 87,897
========= =========
See accompanying notes
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COR THERAPEUTICS, INC.
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CONDENSED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
Three Months Ended
March 31,
-----------------------
2000 1999
-------- --------
Contract revenues:
Copromotion revenue $ 16,904 $ 5,668
Development and other contract revenue 992 1,853
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Total contract revenues 17,896 7,521
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Expenses:
Cost of copromotion revenue 10,947 3,917
Research and development 10,414 9,984
Marketing, general and administrative 7,180 6,196
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Total expenses 28,541 20,097
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Loss from operations (10,645) (12,576)
Interest income 2,392 857
Interest expense (1,688) (117)
-------- --------
Net loss $ (9,941) $(11,836)
======== ========
Basic and diluted net loss per share $ (0.38) $ (0.48)
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Shares used in computing basic and diluted net loss per share 25,888 24,471
======== ========
See accompanying notes
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COR THERAPEUTICS, INC.
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CONDENSED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(unaudited, in thousands)
Three Months Ended
March 31,
-------------------------
2000 1999
--------- ---------
Cash flows used in operating activities:
Net loss $ (9,941) $ (11,836)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 697 642
Amortization of deferred compensation 44 268
Changes in assets and liabilities:
Contract receivables (3,433) 866
Prepaid copromotion expenses (660) (3,899)
Other current assets (174) (1,390)
Accounts payable (716) (240)
Accrued interest payable 1,465 --
Accrued compensation 381 (1,115)
Accrued development costs 541 (955)
Accrued copromotion costs 57 456
Deferred revenue 3,094 2,827
Other accrued liabilities (8) (157)
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Total adjustments 1,288 (2,697)
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Net cash used in operating activities (8,653) (14,533)
--------- ---------
Cash flows provided by (used in) investing activities:
Purchases of short-term investments (168,987) (5,957)
Sales of short-term investments 1,662 25,162
Maturities of short-term investments 6,432 6,497
Additions to property and equipment (492) (524)
--------- ---------
Net cash provided by (used in) investing activities (161,385) 25,178
--------- ---------
Cash flows provided by (used in) financing activities:
Proceeds from capital lease obligations -- 479
Repayment of capital lease obligations (453) (594)
Proceeds from convertible subordinated notes, net of issuance costs 289,459 --
Issuance of common stock 13,351 334
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Net cash provided by financing activities 302,357 219
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Net increase in cash and cash equivalents 132,319 10,864
Cash and cash equivalents at the beginning of the period 12,780 10,532
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Cash and cash equivalents at the end of the period $ 145,099 $ 21,396
========= =========
See accompanying notes
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COR THERAPEUTICS, INC.
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NOTES TO CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COR Therapeutics, Inc. was incorporated in Delaware on February 4, 1988. COR
Therapeutics, Inc. is sometimes referred to in this Report as COR, COR
Therapeutics, the Company, we, our or us. COR is dedicated to the discovery,
development and commercialization of novel pharmaceutical products to establish
new standards of care for the treatment and prevention of severe cardiovascular
diseases. INTEGRILIN(R) (eptifibatide) Injection is the first product that COR
has taken from discovery to commercialization. Approved by the U.S. Food and
Drug Administration ("FDA") in May 1998, INTEGRILIN is indicated for the
treatment of patients with an acute coronary syndrome and patients who undergo
angioplasty procedures.
Interim financial information
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-Q and Article 10 of Regulation
S-X. In the Company's opinion, these condensed financial statements include all
adjustments, consisting only of normal recurring adjustments, which the Company
considers necessary to fairly state the Company's financial position and the
results of its operations and its cash flows. The balance sheet at December 31,
1999 has been derived from the audited financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
accompanying condensed financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999. The results of the
Company's operations for any interim period are not necessarily indicative of
the results of the Company's operations for any other interim period or for a
full fiscal year.
Contract Revenues
Contract revenues include copromotion revenue, milestone revenue, and
development and other contract revenue. Milestone revenue and development and
other contract revenue are recorded as earned based on the performance
requirements of the contract, while related costs are expensed as incurred.
Other contract revenue includes recognition of reimbursement to COR by
Schering-Plough Ltd. and Schering Corporation (collectively, "Schering") of
certain manufacturing-related expenses for materials used outside copromotion
territories at the time the reimbursement is realizable and earned. Copromotion
revenue is generally recognized at the time of shipment of the related product
by Schering to wholesalers and is recorded net of allowances, if any, that
management believes are necessary. The Company did not record milestone revenue
for the three months ended March 31, 2000 or for the three months ended March
31, 1999 as no milestones were achieved during these periods.
Copromotion revenue includes the Company's share of profits, as defined in the
agreement with Schering, from the sales of INTEGRILIN by Schering, as well as
the reimbursement by Schering of the Company's costs of copromotion revenue, at
the time the reimbursement is realizable and earned. The Company's costs of
copromotion revenue consists of certain manufacturing-related and marketing
expenses used within copromotion territories. Certain manufacturing-related
expenses are deferred until the time of shipment of related product by Schering
to its customers inside and outside copromotion territories. Deferred revenue
includes payments from Schering received prior to the period in which the
related contract revenues are earned. To the extent that costs of copromotion
revenue from prior periods have not been reimbursed to the Company, Schering
will make reimbursements from future sales of INTEGRILIN, if any.
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COR THERAPEUTICS, INC.
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Prepaid copromotion expenses
Prepaid copromotion expenses represent materials on-hand, valued at cost, and
prepayments to third-party suppliers associated with manufacturing-related
copromotion expenses. Prepaid copromotion expenses consist of the following (in
thousands):
March 31, December 31,
2000 1999
--------- ------------
Deposits and prepayments $ 5,500 $ 5,626
Bulk materials 12,587 13,169
Finished goods 13,320 11,952
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$31,407 $30,747
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Other assets
Other assets represent issuance costs, net of related amortization, associated
with the Company's sale of $300 million of convertible subordinated notes in
February 2000. These issuance costs are being amortized to interest expense over
the seven-year life of the notes.
Information concerning market and source of supply concentration
The Company and Schering copromote one product, INTEGRILIN(R) (eptifibatide)
Injection, in the United States. Schering also markets INTEGRILIN in Europe as
the Company's exclusive licensee on a royalty-bearing basis. The Company has
established long-term supply arrangements with two suppliers for the bulk
product and with another two suppliers for the filling and final packaging of
INTEGRILIN.
Advertising and promotion costs
Advertising and promotion costs are expensed in the period they are incurred.
Advertising and promotion costs totaled $3,288,000 and $3,037,000 for the three
months ended March 31, 2000 and 1999, respectively.
Reclassification
The Company has reclassified certain prior year balances to conform to the
current year presentation.
Comprehensive Income (Loss)
The Company applies Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 requires
unrealized gains and losses on the Company's available-for-sale securities to be
included in other comprehensive income (loss). For the three months ended March
31, 2000 and 1999, unrealized gains or losses were not material and total
comprehensive loss closely approximated net loss in each period.
Segment Information
The Company applies Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131"). SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. SFAS No. 131 also establishes
standards for related disclosures about products and services, geographic areas
and major customers.
The Company's business activities include the discovery, development and
commercialization of novel cardiovascular pharmaceutical products and have been
organized into one operating segment. All of the Company's operating assets are
located in the United States. All of the Company's revenues are derived from
within the United States, except for royalty revenue earned on sales of
INTEGRILIN by Schering outside of the United States.
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COR THERAPEUTICS, INC.
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Recent accounting pronouncements
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB
101 summarizes certain areas of the Staff's views in applying generally accepted
accounting principles to revenue in financial statements and specifically
addresses revenue recognition for non-refundable up-front fees received in
connection with collaboration agreements. The Company is currently evaluating
the impact of SAB 101 on its revenue recognition policy related to milestone and
license fees received from Schering.
2. FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount of cash and cash equivalents
reported on the balance sheet approximates its fair value.
Short-term investments: Short-term investments consist of marketable government
and other debt securities and are classified as available-for-sale. These
investments are carried at fair value and any unrealized gains and losses are
reported in a separate component of stockholders' equity. The fair values are
based upon quoted market prices.
The amortized cost and estimated fair value of short-term investments at March
31, 2000, classified by contractual maturity, were as follows (in thousands):
Amortized Estimated
Cost Fair Value
--------- ----------
Due in one year or less $ 98,163 $ 98,053
Due after one year and in less than three
years 95,816 95,684
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$193,979 $193,737
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During the three months ended March 31, 2000, the Company sold short-term
investments with a fair value of $1,662,000, resulting in gross realized gains
of $2,000 and gross realized losses of $0.
Long and short-term debt: The carrying amounts of the Company's borrowings under
its secured debt agreements approximate their fair values. The fair values are
estimated using a discounted cash flow analysis based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements.
3. NET LOSS PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"), basic and diluted net loss per share has
been computed using the weighted average number of shares of Common Stock
outstanding during the period. Had the Company been in a net income position,
diluted earnings per share would have included the shares used in the
computation of basic net income per share as well as the impact of the following
weighted average potential dilutive common shares (in thousands):
Three months ended March 31,
----------------------------
2000 1999
----- -----
Potential dilutive common shares:
Stock options 3,219 1,588
Convertible subordinated notes 1,765 --
----- -----
4,984 1,588
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COR THERAPEUTICS, INC.
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The impact of these potential dilutive common shares has been excluded from the
computation of diluted earnings per share because the impact is anti-dilutive
for all periods presented.
4. CONVERTIBLE SUBORDINATED NOTES
In February 2000 the Company completed a private placement of $300,000,000
aggregate principal amount of 5.0% convertible subordinated notes due March 1,
2007 (the "Notes"). The Notes are unsecured and subordinated in right of payment
to all of the Company's existing and future senior debt as defined in the
Indenture governing the Notes. Interest on the Notes is payable semi-annually on
March 1 and September 1 of each year, commencing September 1, 2000. The Notes
may be converted by the note holders into shares of COR common stock at a
conversion rate of 14.8028 shares per $1,000 principal amount of notes, which is
equivalent to a conversion price of $67.56 per share. The conversion rate is
subject to adjustment in certain events. The Company has reserved 4,441,000
shares of its authorized common stock for issuance upon conversion of the Notes.
The Company may redeem the Notes on or after March 1, 2003 and prior to
maturity, at a premium. The Company incurred issuance costs related to this
offering of approximately $10,800,000 (including aggregate underwriting
discounts and commissions) which are recorded in other assets and are being
amortized to interest expense over the seven-year life of the Notes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In addition to the historical information contained herein, this document
includes forward-looking statements which involve risks and uncertainties.
Actual results of the Company's activities may differ significantly from the
potential results discussed in such forward-looking statements. These
forward-looking statements are based on current expectations, and the Company
assumes no obligation to update this information. Risk factors that might cause
such differences include, but are not limited to, those factors identified below
and in the sections titled "Business" and "Business-Additional Risk Factors" in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999.
OVERVIEW
COR is dedicated to the discovery, development and commercialization of novel
pharmaceutical products to establish new standards of care for the treatment and
prevention of severe cardiovascular diseases. The Company has incurred a
cumulative net loss of $225,175,000 through March 31, 2000. The Company has
funded its operations primarily through public and private debt and equity
financings and proceeds from research and development and commercialization
collaboration agreements.
INTEGRILIN(R) (eptifibatide) Injection is the first product that the Company has
taken from discovery to commercialization. Approved by the FDA in May 1998,
INTEGRILIN is indicated for the treatment of patients with an acute coronary
syndrome and patients who undergo angioplasty procedures. The acute coronary
syndrome indication includes patients with unstable angina and non-Q-wave
myocardial infarction, whether they receive medical treatment or undergo
angioplasty. Launched in June 1998 in the United States in conjunction with
Schering, INTEGRILIN is the only drug in its class that is approved by the FDA
for use in both acute coronary syndromes and in angioplasty. COR and Schering
co-promote the drug in the United States and share any profits or losses.
Schering markets INTEGRILIN in Europe as the Company's exclusive licensee on a
royalty-bearing basis. INTEGRILIN has also received regulatory approval in a
number of countries outside the European Union and the United States and is
marketed in those countries by Schering as the Company's exclusive licensee on a
royalty-bearing basis.
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COR THERAPEUTICS, INC.
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Total sales of INTEGRILIN(R) (eptifibatide) Injection, as reported to COR by
Schering, were $27,600,000 and $11,300,000 for the three months ended March 31,
2000 and 1999, respectively. Product sales reported by Schering for either
period are not necessarily indicative of product sales for any future period.
The ESPRIT study of INTEGRILIN was a randomized, double-blind,
placebo-controlled trial, originally planned for 2,400 patients undergoing
non-urgent percutaneous coronary intervention involving placement of a stent. In
March 2000, COR and Schering announced that INTEGRILIN significantly reduced the
combined incidence of death, heart attack, need for urgent repeat intervention,
or the need for thrombotic bail-out therapy from 10.5 percent with placebo to
6.6 percent (P = 0.0015) over the 48 hours following non-urgent balloon
angioplasty combined with intracoronary stenting. This was the primary endpoint
of the ESPRIT study. In February 2000, an independent Data Safety Monitoring
Committee determined that enrollment in the study should be stopped early in the
ESPRIT study after an interim analysis of 1,758 patients revealed a highly
statistically significant reduction in death or heart attack combined at 48
hours with INTEGRILIN relative to placebo. Additional results of the ESPRIT
study of INTEGRILIN were presented in March 2000 at the 49th Scientific Sessions
of the American College of Cardiology in Anaheim, California.
COR and Schering are conducting or have conducted Phase II clinical trials of
INTEGRILIN with different fibrinolytics in the setting of acute myocardial
infarction. COR and Schering also sponsor additional clinical trials of
INTEGRILIN in a variety of clinical settings.
In addition to the Company's commercial and clinical activities, COR continues
to pursue a wide array of research and development programs. We have developed
an oral GP IIb-IIIa inhibitor, called cromafiban, to prevent platelet
aggregation. Results to date of Phase I and initial Phase II studies for
cromafiban show that it has high affinity and specificity for GP IIb-IIIa.
Inhibition of platelet aggregation by cromafiban has been shown to be dose- and
concentration-dependent. Plasma concentrations have indicated a sufficiently
long elimination half-life to allow for once-daily dosing with a low
peak-to-trough ratio. No food interactions have been observed. Minor bleeding
has been the most prevalent complication encountered during cromafiban therapy
in clinical trials. COR is also conducting preclinical research and development
in several other cardiovascular programs.
RESULTS OF OPERATIONS
Three months ended March 31, 2000 and 1999
Total contract revenues, which include copromotion and development and other
contract revenue, were $17,896,000 for the three months ended March 31, 2000
compared to $7,521,000 for the three months ended March 31, 1999. Copromotion
revenue related to the sales of INTEGRILIN by Schering was $16,904,000 for the
three months ended March 31, 2000 compared to $5,668,000 for the three months
ended March 31, 1999. Development and other contract revenue was $992,000 for
the three months ended March 31, 2000 compared to $1,853,000 for the three
months ended March 31, 1999. Development and other contract revenue varies due
to fluctuations in clinical trial and other development activities. The Company
expects total contract revenues to continue to fluctuate in the future.
Cost of copromotion revenue was $10,947,000 for the three months ended March 31,
2000 compared to $3,917,000 for the three months ended March 31, 1999,
consistent with increased sales of INTEGRILIN in 2000. Cost of copromotion
revenue includes certain manufacturing-related and marketing expenses incurred
in connection with the collaboration with Schering.
Research and development expenses were $10,414,000 for the three months ended
March 31, 2000 compared to $9,984,000 for the three months ended March 31, 1999.
The increase in 2000 compared to 1999 was due to the timing of clinical trial
activities and to increases in headcount and other research, development and
clinical activities associated with product candidates. The Company expects
research and development expenses to increase over the next several years,
although the timing of certain of these expenses may depend on the timing and
phase of, and indications pursued in, additional clinical trials of INTEGRILIN
and other product candidates in development.
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COR THERAPEUTICS, INC.
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Marketing, general and administrative expenses were $7,180,000 for the three
months ended March 31, 2000 compared to $6,196,000 for the three months ended
March 31, 1999. The increase in 2000 compared to 1999 was primarily due to the
addition of marketing and sales personnel for the commercialization of
INTEGRILIN(R) (eptifibatide) Injection, as well as increased staffing and
administrative expenses associated with general corporate activities. The
Company expects marketing, general and administrative costs to continue to
increase over the next several years.
Interest income (net) was $704,000 for the three months ended March 31, 2000
compared to $740,000 for the three months ended March 31, 1999. The decrease in
2000 compared to 1999 was primarily due to changes in average cash and
investment balances and average outstanding debt obligations.
LIQUIDITY AND CAPITAL RESOURCES
The Company had available cash, cash equivalents and short-term investments of
$338,836,000 at March 31, 2000. Cash in excess of immediate requirements is
invested according to the Company's investment policy. The primary objective of
the Company's investment activities is to preserve principal while at the same
time maximizing yields without significantly increasing risk. From inception,
the Company has funded its operations primarily through public and private debt
and equity financings and proceeds from collaboration agreements, including
proceeds related to the sales of INTEGRILIN by Schering. Additional funding has
come from grant revenues, interest income and property and equipment financings.
Net cash used in operating activities and additions to property and equipment
was $9,145,000 for the three months ended March 31, 2000, compared to
$15,057,000 for the three months ended March 31, 1999. The decrease in 2000
compared to 1999 was primarily due to the timing of activities related to the
agreement with Schering and to the effect of reduced losses from operations. The
Company's cash requirements for operating activities and additions to property
and equipment may increase in future periods. The timing of these cash
requirements may vary from period to period depending on the timing and phase
of, and indications pursued in, additional clinical trials of INTEGRILIN and
other product candidates in development.
Cash provided by financing activities was $302,357,000 for the three months
ended March 31, 2000 compared to $219,000 for the three months ended March 31,
1999. The amount for the three months ended March 31, 2000 results primarily
from the issuance of $300,000,000 aggregate principal amount of 5% convertible
subordinated notes in February 2000. The Notes are unsecured and mature on March
1, 2007. The Notes are subordinated in right of payment to all of the Company's
existing and future senior debt (as defined in the Indenture governing the
Notes) and do not restrict the Company from incurring additional senior debt.
See "Note 4 of Notes to Condensed Financial Statements".
The Company expects its cash requirements will increase in future periods due to
costs related to continuation and expansion of research and development,
including clinical trials, and increased marketing, sales, general and
administrative activities. The Company anticipates that its existing capital
resources and interest earned thereon will enable it to maintain its current
level of operations for the next several years. However, the Company's cash
requirements may change depending on numerous factors, including the progress of
the Company's research and development programs, the scope and results of
preclinical and clinical studies and the number and nature of the indications
the Company pursues in clinical studies. The Company's cash requirements may
also change due to the timing of regulatory approvals, technological advances,
determinations as to the commercial potential of the Company's future products
and the status of competitive products. In addition, expenditures may depend on
the establishment and maintenance of collaboration relationships with other
companies, the availability of financing, and other factors. The Company's
capital requirements may also change because of other unanticipated
circumstances. The Company may need to raise substantial additional funds in the
future. Such funds may not be available on favorable terms, if at all. If such
funds are unavailable, the Company may need to delay or curtail its research and
development activities to a significant extent.
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COR THERAPEUTICS, INC.
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RISK FACTORS
Stockholders, potential investors in shares of our stock and holders of our
convertible subordinated notes should carefully consider the following risk
factors, in addition to other information in this Report. We are identifying
these risk factors as important factors that could cause our actual results to
differ materially from those contained in any written or oral forward-looking
statements made by or on behalf of COR. We are relying upon the safe-harbor for
forward-looking statements and any such statements made by or on behalf of COR
are qualified by reference to the following cautionary statements, as well as to
those set forth elsewhere in this Report.
Future revenues from INTEGRILIN(R) (eptifibatide) Injection may be less than
expected.
Our prospects are highly dependent upon increasing the sales of our only
commercial product, INTEGRILIN. Our revenues to date have consisted largely of
contract revenue from development and milestone payments and co-promotion
revenue from product sales by Schering of INTEGRILIN. If sales of INTEGRILIN
fail to increase, it would have a material adverse effect on our business,
financial condition, and results of operations.
A number of factors may affect the rate and breadth of market acceptance of
INTEGRILIN, including:
- - The perception by physicians and other members of the health care community on
the safety and efficacy of INTEGRILIN
- - Acceptance of INTEGRILIN outside the United States
- - Our dependence upon Schering's commitment to market and sell INTEGRILIN
- - The price of INTEGRILIN relative to other drugs or competing treatment
modalities
- - The availability of third-party reimbursement
- - The effectiveness of our sales and marketing efforts with Schering-Plough
- - The need to increase usage of INTEGRILIN throughout the treatment process
- - Side effects or unfavorable publicity concerning INTEGRILIN or other drugs in
its class
We have a history of operating losses and are uncertain of future profitability.
Historically, our expenses have exceeded revenues. We incur significant expenses
in developing, training, maintaining, and managing our sales organization. The
cost of maintaining our sales force may exceed INTEGRILIN product revenues, and
our direct marketing and sales efforts may not be successful. We had an
accumulated deficit as of March 31, 2000, of approximately $225,000,000. These
losses may increase as we expand our commercialization and research and
development activities, and such losses may fluctuate significantly from quarter
to quarter. We may not sustain or increase our contract revenues derived from
product sales or achieve profitable operations.
We may not be able to compete effectively in the cardiovascular disease market.
Due to the incidence and severity of cardiovascular diseases, the market for
therapeutic products that address such diseases is large, and competition is
intense and expected to increase. Our most significant competitors are major
pharmaceutical companies and more established biotechnology companies, which
have significant resources and expertise in research and development,
manufacturing, testing, obtaining regulatory approvals and marketing. The two
products that compete with INTEGRILIN are abciximab, which is produced by
Johnson & Johnson and sold by Johnson & Johnson and Eli Lilly, & Co., and
tirofiban, which is produced and sold by Merck & Co., Inc. Emerging
pharmaceutical and biotechnology companies may also prove to be significant
competitors, particularly through
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collaboration arrangements with large pharmaceutical companies. Many of these
competitors have cardiovascular products approved or in development, and operate
large, well-funded cardiovascular research and development programs. We must
also compete with academic institutions, governmental agencies, and other public
and private research organizations that conduct research in the cardiovascular
field, seek patent protection for their discoveries and establish collaboration
arrangements for product and clinical development and marketing.
If our collaboration relationships are not successful, we may not be able to
effectively develop and market our products.
We are currently engaged in a number of strategic collaborations with other
companies, consultants, universities and medical centers. Our main collaboration
agreement is with Schering for the sale, marketing and additional development of
INTEGRILIN(R) (eptifibatide) Injection.
Our collaborative relationships may not be successful or lead to the development
or commercialization of any particular product or any product opportunity in the
ongoing development and marketing of INTEGRILIN. Although under our current
agreements we work exclusively with our collaborators within a defined field for
a defined period, a collaborator or collaborators may terminate its or their
agreement with us or separately pursue alternative products, therapeutic
approaches, or technologies as a means of developing treatments for the diseases
targeted by us or a collaboration. For these and other reasons, even if a
collaborator continues its contributions to the arrangement with us, it may
nevertheless determine not to actively pursue the development or
commercialization of any resulting products. In that event, our ability to
pursue potential products could be severely limited.
We evaluate, on an ongoing basis, potential collaborations where relationships
may complement and expand our research, development, sales, or marketing
capabilities. We anticipate that in the future we may need to enter into a new
collaborative relationship to jointly develop and market cromafiban and other
potential products. Any arrangements may limit our flexibility in pursuing
alternatives for the commercialization of our products. We may not be able to
establish any additional collaboration agreements. If established, such
arrangements may not be successful.
Our business may be harmed if our third-party manufacturers are not able to
provide us with adequate supplies of our products.
We currently have no manufacturing facilities and, accordingly, rely on third
parties for clinical and commercial production of INTEGRILIN and for clinical
production of product candidates. If the third-party manufacturers or suppliers
were to cease production or otherwise fail to supply us or we were unable to
contract on acceptable terms for manufacturing services with others, our ability
to produce INTEGRILIN and to conduct preclinical testing and clinical trials of
product candidates, would be adversely affected. This could potentially result
in product supply and distribution shortages of INTEGRILIN and delay of
regulatory approval and new development of product candidates. These results
could materially impair our competitive position and could have a material
adverse effect on our business, financial condition and results of operations.
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Our revenue may be affected negatively by reimbursement levels and pricing
limitations.
In both domestic and foreign markets, sales of our products may be affected by
the availability of reimbursement from third-party payors, including government
health administration authorities, managed care providers, private health
insurers and other organizations. In addition, third-party payors may challenge
the price and cost effectiveness of our products. In many major markets outside
of the United States, pricing approval is required before sales can commence.
Significant uncertainty exists as to the reimbursement status of approved health
care products.
We may not be able to obtain or maintain our desired price for our products. Our
products may not be considered cost effective. Also, adequate third-party
reimbursement may not be available to enable us to maintain price levels
sufficient to realize an appropriate return on our investment in product
development. Legislation and regulations affecting the pricing of
pharmaceuticals may change. If adequate coverage and reimbursement levels are
not provided by the government and third-party payors for our products, the
market acceptance of these products would be adversely affected, which would
have a material adverse effect on our business, financial condition and results
of operations.
We may be unable to obtain regulatory approval for our potential products.
We must obtain regulatory approval for the commercial sale of any our potential
products or to promote INTEGRILIN(R) (eptifibatide) Injection for expanded
indications. We must demonstrate through preclinical testing and clinical trials
and, to the FDA's satisfaction, that each product is safe and effective for use
in indications for which approval is requested. The results from preclinical
testing and early clinical trials may not be predictive of results obtained in
large clinical trials. Companies in the pharmaceutical and biotechnology
industries, including us, have suffered significant setbacks in various stages
of clinical trials, even in advanced clinical trials after promising results had
been obtained in earlier trials.
The development of safe and effective products is highly uncertain and subject
to numerous risks. Product candidates that may appear to be promising in
development may not reach the market for a number of reasons. Product candidates
may:
- - be found ineffective or cause harmful side effects during clinical trials
- - take longer to progress through clinical trials than had been anticipated
- - fail to receive necessary regulatory approvals
- - prove impracticable to manufacture in commercial quantities at reasonable cost
and with acceptable quality
- - fail to achieve market acceptance
Completion of research, preclinical testing and clinical trials may take many
years and the length of time varies substantially with the type, complexity,
novelty and intended use of the product. Delays or rejections may be encountered
based upon many factors. Our current development programs may not be
successfully completed. Our regulatory applications to conduct clinical trials
may not be allowed to proceed by the FDA or other regulatory authorities, or
clinical trials may not commence as planned.
In addition, due to the substantial demand for clinical trial sites in the
cardiovascular area, we may have difficulty obtaining sufficient patient
populations or clinician support to conduct our clinical trials as planned and
may have to expend substantial additional funds to obtain access to resources or
delay or modify our plans significantly.
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If we are unable to protect our patents and proprietary rights, we may not be
able to compete successfully.
We rely on patent and trade secret protection for significant new technologies,
products and processes because of the long development time, uncertainty and
high cost associated with bringing a new product to the marketplace. The
enforceability of patents issued to companies in this industry can be highly
uncertain and involve complex legal and technical questions for which the legal
principles are largely unresolved. Our success will depend in part on our
ability to obtain and enforce patent protection for our technology both in the
United States and other countries. While we are seeking and/or maintaining
patents for INTEGRILIN(R) (eptifibatide) Injection and our product candidates,
patents may not issue and issued patents may afford limited or no protection.
Additionally, we may not be successful in enforcing our patents and avoiding
infringement of patents granted to others.
We may be required to obtain licenses to patents or other proprietary rights
from third parties. Licenses required under any patents or proprietary rights
may not be made available on terms acceptable to us, if at all. If we do not
obtain required licenses, we may encounter delays in product development while
attempting to redesign products or methods or we could find the development,
manufacture or sale of such products requiring licenses to be foreclosed.
Further, we could incur substantial costs in defending any patent litigation
brought against us or in asserting our patent rights, including those rights
licensed to us by others.
Our common stock price is volatile and an investment in our stock could suffer a
decline in value.
The market prices for securities of pharmaceutical and biotechnology companies,
including our common stock, have historically been volatile. The market has from
time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies. The following
are some of the factors that may have a significant effect on the market price
of our common stock:
- - fluctuations in our operating results
- - announcements of technological innovations or new therapeutic products by us
or our competitors
- - announcements regarding collaborative agreements
- - governmental regulation
- - our clinical trial results
- - developments in patent or other proprietary rights
- - public concern as to the safety of drugs developed by us or others
- - comments and expectations of results made by securities analysts
- - general market conditions
In particular, the realization of any of the risks described in this Report
could have a significant and adverse impact on the market price of our common
stock.
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Substantial leverage may adversely affect our cash flow and ability to meet our
debt service obligations
In February 2000, we increased our outstanding debt by completing a private
placement of $300,000,000 aggregate principal amount of 5.0% convertible
subordinated notes due March 1, 2007. As a result, our principal and interest
payment obligations increased substantially. The Notes are unsecured and
subordinated in right of payment to all of our existing and future senior debt
and may be convertible under certain conditions. We expect from time to time to
enter into additional financing arrangements to finance capital expenditures and
as future needs arise.
If a change of control were to occur, holders of the Notes have the right to
require us to redeem all or a portion of the holder's Notes. Although the
Indenture governing the Notes allows us, subject to certain conditions, to pay
the redemption price in shares of our common stock, if a change of control were
to occur, we may not have sufficient funds to pay the redemption price for all
of the Notes tendered by the holders.
Our substantial leverage could have significant negative consequences,
including:
- - causing us to be unable to generate cash sufficient to pay the principal or
interest on our debt when due
- - increasing our vulnerability to general adverse economic and industry
conditions
- - limiting our ability to obtain additional financing
- - requiring the dedication of a substantial portion of our expected cash flow
from operations to service our indebtedness, thereby reducing the amount of
our expected cash flow available for other purposes, including capital
expenditures
- - limiting our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete
- - placing us at a possible competitive disadvantage to less leveraged
competitors
We may require additional funds, which may be difficult to obtain in order to
continue our business as planned.
We require substantial funds to market INTEGRILIN(R) (eptifibatide) Injection
and conduct the costly and time-consuming research, preclinical testing and
clinical trials necessary to develop and optimize our technology and potential
products, to establish manufacturing, marketing and sales capabilities for
product candidates and to bring any such products to market. Our future capital
requirements will depend on many factors, including:
- - product commercialization activities
- - continued scientific progress in the research and development of our
technology and drug programs
- - our ability to establish and maintain collaboration arrangements
- - progress with preclinical testing and clinical trials
- - the time and costs involved in obtaining regulatory approvals
- - the costs involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims or trade secrets
We may seek ongoing funding through collaboration arrangements and public or
private financings, including equity and debt financings. Additional funding may
not be available on favorable terms, if at all. In that event, we may need to
delay or curtail our research and development activities to a significant
extent.
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If we do not attract and retain key employees and consultants, our business
could be impaired.
We are highly dependent on the principal members of our scientific and
management staff. In addition, we rely on consultants to assist us in
formulating our research and development strategy. Attracting and retaining
qualified personnel and consultants are critical to our success. We face
competition for qualified individuals from numerous pharmaceutical and
biotechnology companies, universities and other research institutions. If we are
not able to attract and retain these individuals, our business could be
impaired.
We may be subject to product liability claims and our insurance coverage may not
be adequate to cover these claims.
The testing, marketing and sale of human pharmaceutical products expose us to
significant and unpredictable risks of product liability claims in the event
that the use of our technology or products is alleged to have resulted in
adverse effects. These risks will exist even with respect to any products that
receive regulatory approval for commercial sale. Although we have obtained
liability insurance for our products, there can be no assurance that it will be
sufficient to satisfy any liability that may arise. There also can be no
assurance that adequate insurance coverage will be available in the future at an
acceptable cost, if at all, or that a product liability claim would not
adversely affect our business, financial condition or results of operations.
Accidents resulting from the use of hazardous materials in our business may
result in liability.
Our research and development involves the controlled use of hazardous materials,
chemicals, and various radioactive substances. Although we believe that our
safety procedures for handling and disposing of such materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, we could be held liable for any damages that
result and any such liability could exceed our resources and have a material
adverse effect on our business, financial condition and results of operations.
Anti-Takeover Effects of Delaware Law and Certain Charter Provisions
Our Board of Directors has the authority to issue up to 5,000,000 shares of
Preferred Stock and to determine the price, rights, preferences and privileges
of those shares without any further vote or action by our stockholders. The
rights of the holders of Common Stock will be subject to and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future. While we have no present intention to issue shares of Preferred
Stock, such issuance, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of our
outstanding voting stock.
In addition, we are subject to the anti-takeover provisions of Section 203 of
the Delaware General Corporation Law, which prohibits us from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of Section 203 could have the effect of delaying or preventing a
change in our control.
In January 1995, our Board of Directors adopted a Preferred Share Purchase
Rights Plan, commonly referred to as a "poison pill." In addition, our Restated
Certificate of Incorporation (the "Restated Certificate") does not permit
cumulative voting. The Restated Certificate also includes a "Fair Price
Provision" that requires the approval of the holders of at least 66 2/3% of our
voting stock as a condition to a merger or certain other business transactions
with or proposed by, a holder of 15% or more of our voting stock, except where
disinterested Board or stockholder approval is obtained or certain minimum price
criteria and other procedural requirements are met. These provisions and other
provisions of the Restated Certificate, our Company bylaws and Delaware
corporate law, may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of COR, including transactions in
which stockholders might otherwise receive a premium for their shares over then
current market prices.
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ITEM 3. FINANCIAL MARKET RISKS
The Company is exposed to interest rate risk on its investments of excess cash.
The primary objective of the Company's investment activities is to preserve
principal while at the same time maximizing yields without significantly
increasing risk. To achieve this objective, the Company invests in highly liquid
and high quality government and other debt securities. To minimize the exposure
due to adverse shifts in interest rates, the Company invests in short-term
securities with maturities of less than three years. If a 10% change in interest
rates were to have occurred on March 31, 2000, such a change would not have had
a material effect on the fair value of the Company's investment portfolio as of
that date. Due to the short holding period of the Company's short-term
investments, the Company has concluded that it does not have a material
financial market risk exposure.
PART II. OTHER INFORMATION
ITEM 2. RECENT SALE OF UNREGISTERED SECURITIES
In February 2000 the Company completed a private placement of $300,000,000
aggregate principal amount of 5.0% convertible subordinated notes due March 1,
2007. The initial purchasers of the Notes were Goldman, Sachs & Co., Chase
Securities Inc., CIBC World Markets Corp., FleetBoston Robertson Stephens Inc.
and Warburg Dillon Read LLC (the "Initial Purchasers"). The offering price of
the Notes was 100% of the principal amount of the Notes. The Company incurred
issuance costs related to this offering of approximately $10,800,000 (including
aggregate underwriting discounts and commissions) which will be amortized to
interest expense over the life of the Notes. The sale of the Notes to the
Initial Purchasers was exempt from registration under the Securities Act of
1933, as amended, as a transaction not involving a public offering.
The Notes were re-offered by the Initial Purchasers in the United States to
qualified institutional buyers in reliance on Rule 144A under the Securities
Act. The Notes may not be re-offered or resold in the United States absent
registration under the Securities Act, and applicable state securities laws or
available exemptions from the registration requirements. The Notes and common
stock issuable upon conversation of the Notes are not transferable except in
accordance with certain restrictions.
The holders of the Notes may convert the Notes into shares of the Company's
common stock at a conversion rate of 14.8028 shares per $1,000 principal amount
of Notes, which is equivalent to a conversion price of $67.56 per share. The
conversion rate is subject to adjustment in certain events. The Company has
reserved 4,441,000 shares of its authorized common stock for issuance upon
conversion of the Notes. The Notes are convertible at any time before the close
of business on the maturity date, March 1, 2007, unless the Company has
previously redeemed or repurchased the Notes. Holders of notes called for
redemption or repurchase will be entitled to convert them up to and including,
but not after, the business day immediately preceding the date fixed for
redemption or repurchase, as the case may be.
The Company intends to use the proceeds from the Notes for marketing and selling
activities related to INTEGRILIN(R) (eptifibatide) Injection, research and
development activities and general corporate purposes. Pending such uses, the
proceeds from the Notes have been invested in highly liquid and high quality
government and other debt securities in accordance with the Company's investment
policy.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Number Description of Document
-------------- -----------------------
4.1 Indenture between the Registrant, as Issuer, and Firstar Bank, N.A., as Trustee,
dated February 24, 2000.
10.1 Purchase Agreement among the Registrant and Goldman, Sachs & Co., Chase H&Q, a
division of Chase Securities Inc., CIBC World Markets Corp., FleetBoston Robertson
Stephens Inc. and Warburg Dillon Read LLC, dated February 17, 2000.
10.2 Registration Rights Agreement among the Registrant and Goldman, Sachs & Co., Chase
H&Q, a division of Chase Securities Inc., CIBC World Markets Corp., FleetBoston
Robertson Stephens Inc. and Warburg Dillon Read LLC, dated February 24, 2000.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
On February 17, 2000 the Company filed a report on Form 8-K related to
the proposed sale of convertible subordinated notes.
On March 3, 2000 the Company filed a report on Form 8-K related to the
sale of $300,000,000 5% convertible subordinated notes.
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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.
Date: May 9, 2000
COR THERAPEUTICS, INC.
Signature Title
- --------------------------- -----------------------------------------------
/s/ VAUGHN M. KAILIAN President, Chief Executive Officer and Director
- --------------------------- (Principal Executive and Financial Officer)
Vaughn M. Kailian
/s/ PETER S. RODDY Vice President, Finance
- --------------------------- (Principal Accounting Officer)
Peter S. Roddy
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INDEX TO EXHIBITS
Exhibit Number Description of Document
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4.1 Indenture between the Registrant, as Issuer, and Firstar Bank, N.A., as Trustee,
dated February 24, 2000.
10.1 Purchase Agreement among the Registrant and Goldman, Sachs & Co., Chase H&Q, a
division of Chase Securities Inc., CIBC World Markets Corp., FleetBoston Robertson
Stephens Inc. and Warburg Dillon Read LLC, dated February 17, 2000.
10.2 Registration Rights Agreement among the Registrant and Goldman, Sachs & Co., Chase
H&Q, a division of Chase Securities Inc., CIBC World Markets Corp., FleetBoston
Robertson Stephens Inc. and Warburg Dillon Read LLC, dated February 24, 2000.
27.1 Financial Data Schedule.
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