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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 1996
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.
(Exact name of Registrant as specified in its charter)
Delaware 94-3060271
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
256 East Grand Avenue, South San Francisco,
California 94080 (Address of principal executive
offices and zip code)
(415) 244-6800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.0001 Par Value
Preferred Share
Purchase Rights
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ___
As of March 3, 1997, the aggregate market value of the voting stock
held by non-affiliates of the Registrant was $117,444,888(A) (based upon the
closing sales price of such stock as reported in the Nasdaq National Market on
such date).
As of March 3, 1997, the number of outstanding shares of the
Registrants' common stock was 20,044,607.
DOCUMENTS INCORPORATED BY REFERENCE:
Document Form 10-K
Reference
(1) Portions of the Registrant's definitive proxy
statement with respect to the Registrant's 1997
Annual Meeting of Stockholders, to be filed with the
Securities and Exchange Commission not later than 120
days after the close of the Registrant's fiscal year. III
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(A) Excludes 7,523,830 shares outstanding at March 3, 1997 of the Registrant's
Common Stock held by directors, officers, and holders of more than 5% of the
Company's Common Stock. Exclusion of shares held by any person should not be
construed to indicate that such person possesses the power, direct or indirect,
to direct or cause the direction of the management or policies of the
Registrant, or that such person is controlled by or under common control with
the Registrant.
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PART I
ITEM 1. BUSINESS
The following discussion contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed below and
in the sections entitled "Additional Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
COR Therapeutics, Inc. ("COR" or the "Company") is focused on the
discovery, development and commercialization of novel pharmaceutical products
that establish a new standard of care for the treatment and prevention of
severe cardiovascular diseases. The Company believes its understanding of the
molecular and cellular biology of these diseases has created opportunities for
new therapeutic approaches where current therapies are inadequate. The
Company's strategy is to combine its knowledge of the biology of cardiovascular
diseases with advanced drug discovery techniques to create a portfolio of
products. The Company believes that this approach may lead to multiple
complementary products that may be used alone or in combination to treat
particular cardiovascular diseases. In addition, the Company believes that
individual products it plans to develop may have applications in the treatment
of more than one disease. The Company's potential products are all currently
in research, development, or under regulatory review, and substantial time and
expense may be required before any product can be commercially introduced, if
ever.
The Company's first product candidate in clinical development is
INTEGRILIN(TM) (antithrombotic injection), a small synthetic peptide platelet
aggregation inhibitor intended for parenteral (injectable) administration in
acute indications. Based on preclinical studies and Phase I, II and III
clinical trials, the Company believes that the INTEGRILIN(TM) product acts as an
effective antithrombotic by inhibiting platelet aggregation, and also has a
favorable safety profile and rapid reversibility. INTEGRILIN(TM) is being
developed for the treatment of acute arterial thrombosis, including such
indications as complications following angioplasty, unstable angina, acute
myocardial infarction (used alone or as adjunctive therapy with thrombolytic
agents) and stroke.
BACKGROUND
Despite decades of extensive research and development and significant
advances in treatment, cardiovascular diseases are the leading cause of death
in the United States, resulting in approximately one million deaths annually
from heart attacks, strokes and related diseases. Coronary artery disease, the
form of cardiovascular disease responsible for the greatest number of deaths,
affects over six million people in the United States, with stroke affecting
another approximately three million people. Extremely complex and interrelated
biological processes cause these diseases.
Atherosclerosis, or hardening of the arteries, contributes to a
majority of cardiovascular deaths. Atherosclerosis is a degenerative process
that can occur over decades in which vessels become increasingly less elastic
and progressively narrowed due to the formation of plaque (fatty substances
lining the artery). This process is caused by aging as well as genetic
predisposition and is exacerbated by dietary and environmental factors.
A significant consequence of atherosclerosis is ischemia, or the
impairment of a vessel's ability to supply oxygen to the heart, brain and other
organs. In advanced cases of atherosclerosis, ruptures may occur in the plaque
that has built up inside the vessel wall, increasing the tendency of the blood
to form a thrombus. A thrombus occurring in an artery is a blockage composed
primarily of an aggregation of small cells known as platelets, stabilized by a
clot composed of the protein fibrin. This process, known as arterial
thrombosis, may completely occlude an atherosclerotic artery, leading to acute
myocardial infarction (heart attack) if the occlusion occurs in an artery
supplying the heart, or stroke if it occurs in an artery supplying the brain.
Thrombosis occurs not only in arteries, which supply oxygen-rich blood
to the heart and other organs, but also in veins, which return blood from
organs to the heart. A thrombus in a vein is composed primarily of a fibrin
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clot and, to a lesser extent, an aggregation of platelets and entrapped red
blood cells. Venous thrombosis generally occurs in the arms, hips or legs
(deep vein thrombosis). In some cases, a thrombus can cause pulmonary embolism
by migrating from the veins into the lungs.
Arterial thrombosis formation, often following atherosclerotic plaque
rupture, is primarily responsible for the vascular occlusion in coronary
arteries that contributes to the set of urgent clinical events comprising acute
ischemic coronary syndromes. Arteries narrowed by atherosclerosis may be
treated medically by invasive medical procedures designed to increase blood
flow, including coronary artery bypass surgery and coronary angioplasty.
Coronary artery bypass surgery is the construction of an alternative path
around an occluded artery using a vein graft. Coronary angioplasty, a less
invasive procedure, involves the dilation of the atherosclerotic artery with a
balloon catheter or other mechanical device. Angioplasty is generally
successful in immediately increasing blood flow, but still carries a short-term
risk of death and heart attack and may not have prolonged efficacy. Acute
ischemic coronary syndromes encompass unstable angina, acute myocardial
infarction, and the thrombotic complications that occur as a result of
percutaneous transluminal coronary angioplasty ("PTCA").
BUSINESS STRATEGY
The Company was founded to discover, develop and market novel
pharmaceutical products for the treatment and prevention of severe
cardiovascular diseases for which existing therapies are inadequate or
unavailable. The Company's long-term objective is to build a pharmaceutical
company focused on the cardiovascular market.
The Company believes that advances in the scientific understanding of
the molecular and cellular biology of cardiovascular diseases have created and
will continue to create opportunities for new approaches to the development of
therapeutic and preventative products for certain of these diseases. Moreover,
advanced drug discovery technologies have facilitated the discovery and
development of entirely new categories of cardiovascular drugs.
The Company's business strategy includes the following key elements:
- Conduct and sponsor research into novel molecular pathways that
are implicated in cardiovascular pathologies in order to identify
new therapeutic targets.
- Discover novel therapeutics by combining COR's extensive knowledge
in the molecular and cellular biology of cardiovascular diseases
with advanced drug discovery techniques.
- Develop drugs rapidly and efficiently through COR's internal
capabilities and through contract resources or partners.
- Establish a cardiovascular sales and marketing capability in the
United States, Canada and subsequently in Europe, focused on
hospital and specialist based markets.
- Implement strategic alliances with selected pharmaceutical and
biotechnology companies where such alliances may complement and
significantly expand the Company's research, development, sales
and marketing capabilities.
The Company believes that its strategy has a number of significant
potential benefits. First, as a result of the focused nature of its research
and development programs, the Company believes that it is well-positioned to
develop multiple complementary products that may be used alone or in
combination to treat particular cardiovascular diseases. Second, the Company
believes that the potential products developed may be effective at treating
more than one therapeutic indication. Third, because the Company's research is
focused on cardiovascular diseases, the expertise of the Company's scientists
and outside advisors can be applied across the range of the Company's research
programs. Finally, the Company intends to market and sell its potential
products efficiently because they will be targeted to aid cardiovascular
disease and urgent care specialists with whom the Company will seek to build
continuing relationships.
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BIOLOGY AND MARKETS
ARTERIAL THROMBOSIS
BIOLOGY. Thrombosis in arteries is a complex process involving the
coordinated activities of: (i) receptors located on cells; (ii) proteins in the
blood and vessel walls that bind to these receptors; and (iii) enzymes that
regulate fibrin clot formation.
Blood contains a variety of proteins and cells, including red blood
cells, which carry oxygen, white cells, which play a key role in the
inflammation process, and small cells known as platelets, which are primarily
responsible for the control of bleeding. Platelets normally circulate in a
resting or inactivated state but, in response to vascular injury, initiate a
series of events to control bleeding. One of these events, known as adhesion,
occurs when specific receptors on the surface of the platelet permit the
platelet to attach to the walls of a damaged blood vessel. Platelet
activation, which may result from platelet adhesion or the action of thrombin,
an enzyme synthesized on damaged blood vessels, can cause aggregation, the
formation of large platelet aggregates. The platelet receptor that mediates
aggregation is glycoprotein GP IIb-IIIa.
After initial platelet aggregation, fibrin, a protein in the blood,
accumulates on the aggregate forming a mesh, followed by additional platelet
aggregation, additional fibrin deposition and entrapment of circulating red
blood cells, creating a progressively enlarging thrombus. Thrombi are
constantly being formed and dissolved in normal arteries in response to minor
internal vessel injuries. However, an enlarged thrombus that is left unchecked,
or is formed as a result of a major vessel injury such as plaque rupture, can
occlude the artery and cause myocardial infarction, unstable angina, stroke or
abrupt closure following angioplasty.
According to current estimates, over 55 million Americans have one or
more forms of cardiovascular disease claiming almost 1 million lives in the
United States each year, accounting for approximately 40% of all deaths.
Vascular occlusion is a major cause of mortality associated with coronary heart
disease and can be largely attributed to arterial thrombosis mediated in part
by platelet aggregation. Arterial thrombosis is implicated in a variety of
acute and chronic clinical syndromes that require different treatment
alternatives.
MARKETS - ACUTE CARE.
THROMBOSIS OF CORONARY ARTERIES
Acute Ischemic Coronary Syndromes. Acute ischemic coronary
syndromes is a medical term encompassing the continuum of
life- threatening clinical situations that evolve immediately
following plaque rupture and thrombus formation in arteries
that feed the heart, as follows:
- Unstable Angina. Unstable angina is believed to be caused
by transient blockage of a coronary artery as a result
of thrombosis and/or spasm characterized by
unpredictable episodes of chest pain, particularly
episodes that occur while the patient is at rest.
Unstable angina requires hospitalization as the syndrome
is often the precursor of acute myocardial infarction.
Approximately one million people are diagnosed each year
in United States hospitals with unstable angina.
- Acute Myocardial Infarction ("AMI"). Sustained blockage
of a coronary artery as a result of thrombosis leads to
inadequate blood supply and death of heart tissue,
causing acute myocardial infarction (heart attack). In
the United States, approximately 1.5 million people
suffer from heart attacks annually, approximately
750,000 of whom are hospitalized for treatment.
Acute Ischemic Complications of Angioplasty. Angioplasty and
other invasive medical procedures intended to treat
atherosclerotic patients create the risk of acute ischemic
complications such as abrupt closure (complete occlusion,
typically within 24 hours of the procedure) of the treated
artery
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as a result of sudden thrombosis. Independent studies
indicate that approximately 8-9% of angioplasty patients die
or suffer a heart attack within 30 days of the procedure.
Approximately 400,000 coronary angioplasty procedures were
performed in the United States in 1994.
THROMBOSIS OF CEREBROVASCULAR ARTERIES
Thrombosis in cerebral arteries that deliver blood to the
brain has analogous consequences to vascular occlusions in
coronary arteries that feed the heart:
Transient Ischemic Attacks. A disorder known as transient
ischemic attack ("TIA") is believed to be a
thrombo-embolic event resulting from atherosclerotic
involvements of a cerebral artery blockage of a cerebral
artery caused by thrombosis and affects approximately
250,000 people in the United States each year.
Stroke. TIA frequently precedes a stroke. Stroke is an
acute neurologic disease commonly caused by prolonged
cerebral thrombosis. Approximately 800,000 were
diagnosed in United States hospitals having suffered a
stroke in 1994. Stroke is the leading cause of serious
disability in the United States.
MARKETS - CHRONIC CARE.
Survivors of arterial thrombotic events continue to be at risk
for further cardiovascular and cerebrovascular events. Over
six million Americans currently have a history of heart attack,
angina pectoris, or both. Similarly, there are currently over
three million survivors of stroke in the United States.
VENOUS THROMBOSIS
BIOLOGY. The composition of a thrombus in a vein differs from that of
a thrombus in an artery. Arterial thrombosis occurs in rapidly flowing blood
and tends to be initiated by platelets. By contrast, a thrombus in a vein is
composed primarily of fibrin and red blood cells in addition to platelets.
Fibrin is generated by thrombin synthesized as a result of restricted blood
flow through veins. The Company therefore believes that drugs which prevent
the formation of thrombin, or which otherwise inhibit coagulation, may
represent the most effective therapies for venous thrombosis.
The Company is pursuing several approaches for the treatment of venous
thrombosis. These approaches are designed to inhibit thrombin synthesis or to
inhibit other elements of the coagulation process that lead to thrombin
synthesis. The Company's programs in this area focus on identifying agents to
inhibit the activity of the prothrombinase complex, the enzyme responsible for
production of thrombin. Interrupting the activity of this complex may arrest
coagulation, thrombosis and other potentially pathological conditions caused by
thrombin. One of the critical components of the prothrombinase complex, factor
Xa, is the enzyme responsible for converting prothrombin into active thrombin.
The Company believes that compounds identified through such approaches may also
have applications in the treatment of acute arterial thrombosis and restenosis
and plans to evaluate certain of these compounds for such applications.
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MARKETS - ACUTE CARE. Diseases and disorders associated with venous
thrombosis include the following:
- Deep Vein Thrombosis. Over 250,000 hospitalized patients in
the United States are diagnosed with deep vein thrombosis
annually. Thrombosis in the veins of the arms or legs can
occur after surgery (particularly joint replacement surgery),
injury, immobilization or increased intra-abdominal pressure.
More than 350,000 joint replacements are performed annually in
the United States, the majority of which are hip replacements.
- Pulmonary Embolism. Fragments of blood clots from veins can
embolize (or migrate) to pulmonary arteries, leading to
destruction of portions of the lung. Approximately 100,000
are diagnosed in United States hospitals with pulmonary
embolism annually.
MARKETS - CHRONIC CARE.
- Estimates for the number of patients who are candidates for
prophylaxis against deep vein thrombosis and pulmonary
embolism exceed one million and 500,000 patients, respectively.
RESTENOSIS
BIOLOGY. Interventional procedures such as angioplasty disrupt the
endothelial cell lining of an artery and further damage the arterial wall. This
injury exposes atherosclerotic plaque and healthy arterial tissue to the
flowing blood, causing thrombosis at the site of injury. Platelets that have
adhered at this site, as well as white cells that are attracted to the site of
injury, secrete growth factors that promote cell growth and injury healing.
Smooth muscle cell migration into the intima mediated by growth factors such as
platelet-derived growth factor ("PDGF") is thought to play an important role in
the intimal proliferation that follows vascular injury such as that induced by
balloon angioplasty. Restenosis is a complex process of mechanical factors
including vasoconstriction and remodeling of the arterial wall which can also
contribute to lumen narrowing. Restenosis can occur when smooth muscle cells
migrate from the inner layers of the cell wall to the injured surface of the
artery and rapidly proliferate, causing the artery to narrow.
Several growth factors induce the migration and/or proliferation of
smooth muscle cells. Experiments in animal models have demonstrated that three
potential factors in mediating the growth and migration of smooth muscle cells
are PDGF, fibroblast growth factor ("FGF") and thrombin, and that antibodies
that block the action of PDGF and FGF can specifically inhibit the vascular
response to injury. Independent studies have demonstrated that the
growth-promoting effects of PDGF and FGF are mediated by receptors located on
smooth muscle cells. Studies have also demonstrated in animal models that
induced injury to arteries can significantly increase the number of PDGF
receptors on smooth muscle cells in the blood vessel wall. The Company has
exclusively licensed certain patent rights to PDGF and FGF receptors from the
Regents of the University of California, although there can be no assurance
that these licenses will provide effective protection against competitors. See
"Patents, Proprietary Rights and Licenses."
MARKET. Approximately 400,000 coronary angioplasty procedures were
performed in the United States in 1994. These procedures are generally
successful in immediately increasing blood flow, but may not have prolonged
efficacy. Independent studies indicate that approximately 20-30% of coronary
angioplasty patients suffer a significant renarrowing of the vessel within
three to six months of the procedure. Restenosis rates have declined recently
with the rapid acceptance of coronary stenting to accompany coronary
angioplasty, perhaps by preventing the mechanical factors which promote
restenosis. Interventional cardiologists are expected to continue to embrace
this relatively new technology. Since the occurrence of restenosis is
unpredictable, whether or not coronary stents are deployed, the Company
believes that if an effective treatment for restenosis were available, it might
be utilized on a prophylactic basis in substantially all coronary angioplasty
procedures.
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SELECTED PRODUCTS & PROGRAMS
Since its inception, COR has directed its R&D program toward the
development of both peptide and small molecule therapeutics for life-
threatening cardiovascular diseases. A list of many of the Company's programs
and potential products follows:
SELECTED PRODUCTS AND PROGRAMS
IN RESEARCH TYPE OF PRIMARY THERAPEUTIC INDICATIONS DEVELOPMENT
OR DEVELOPMENT COMPOUND STATUS
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GP IIb-IIIa INHIBITOR PROGRAM:
- INTEGRILIN(TM) Peptide Acute ischemic complications Regulatory
(a parenteral product) following coronary angioplasty Review
Unstable angina/Non-Q Wave MI Phase III
Acute myocardial infarction Phase II
- Oral Small Molecule Prevention of acute ischemic Phase I
coronary syndromes and stroke
FACTOR Xa INHIBITOR PROGRAM:
- Parenteral / Subcutaneous Small Molecule Venous thrombosis Preclinical
Development
- Oral Small Molecule Venous/arterial thrombosis Leads
Identified
GROWTH FACTOR RECEPTOR ANTAGONIST PROGRAM:
- Parenteral Therapeutic Restenosis Preclinical
Protein Development
- Oral Small Molecule Restenosis Leads
Identified
THROMBIN RECEPTOR INHIBITOR PROGRAM:
- Parenteral Peptide and Acute ischemic coronary Leads
Small Molecule syndromes and restenosis Identified
- Oral Small Molecule Prevention of acute ischemic Leads
coronary syndromes and stroke Identified
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INTEGRILIN(TM) GP IIb-IIIa INHIBITOR PROGRAM
The Company's first product candidate in clinical development is
INTEGRILIN(TM) (antithrombotic injection), a small synthetic peptide platelet
aggregation inhibitor intended for parenteral (injectable) administration in
acute indications. Based on preclinical studies and Phase I, II and III
clinical trials, the Company believes that the INTEGRILIN(TM) product acts as
an effective antithrombotic by inhibiting platelet aggregation, and also has a
favorable safety profile and rapid reversibility. INTEGRILIN(TM) is being
developed for the treatment of acute arterial thrombosis, including such
indications as complications following angioplasty, unstable angina, AMI (used
alone or as adjunctive therapy with thrombolytic agents), and stroke.
The mechanism of action of the INTEGRILIN(TM) product is to block the
integrin GP IIb-IIIa on platelets thereby preventing the crosslinking of
activated platelets via fibrinogen bridges. By competitively inhibiting
GPIIb-IIIa, the final common pathway of platelet aggregation, acute thrombus
formation and associated complications can be prevented.
In developing the INTEGRILIN(TM) product, the Company established four
key criteria. First, the product should be specifically targeted to inhibit
GP IIb-IIIa to avoid complications that could result from disruption of cellular
interactions that are mediated by other, closely related adhesion receptors.
Second, because the cardiovascular disorders that the Company is targeting with
this product are acute in nature, the product should be potent and act rapidly
upon administration. Third, in order to avoid prolonged impairment of normal
hemostasis, the effects of the product should be readily reversible after
administration is discontinued. Fourth, the product should be safe for repeat
usage considering that many patients with acute ischemic coronary syndromes are
treated more than once in the acute care setting.
Over the past five years, the INTEGRILIN(TM) product has been studied
in numerous completed clinical trials involving over 15,000 patients. These
trials have encompassed several indications and include a 4,000 patient,
multi-center Phase III trial, IMPACT II, for use of INTEGRILIN(TM) in
conjunction with coronary angioplasty, the results of which became available in
1995.
Based on the clinical results to date, the INTEGRILIN(TM) product has
established the following safety and efficacy profile:
SAFETY. INTEGRILIN(TM) has a favorable safety profile. Treatment with
INTEGRILIN(TM) does not increase the incidence of major bleeding
events. There is an increase in minor bleeding events, most commonly
at the arterial access site during angiography or angioplasty
procedures. Intracranial bleeding is an uncommon event in patients
undergoing PTCA and there has been no apparent increased rate of
intracranial bleeding in patients treated with INTEGRILIN(TM). In
addition, because no antibodies to INTEGRILIN(TM) were observed
following its administration, it is presumed that INTEGRILIN(TM) is not
immunogenic and that readministration of the medication to the same
patient can be carried out safely.
EFFICACY. As set forth in greater detail below, INTEGRILIN(TM)
demonstrated a reduction in acute ischemic complications associated
with coronary angioplasty in patients treated with the product in
IMPACT II. This clinical benefit was sustained at 30 days and six
months following patient enrollment. In Phase II clinical trials,
INTEGRILIN(TM) achieved desirable clinical activity in a variety of
acute coronary syndromes including unstable angina and AMI. Based on
these results, COR has proceeded with a range of clinical trials in
these and other indications.
In April 1995, the Company entered into a collaboration agreement with
Schering Corporation and Schering-Plough, Ltd. (collectively, "Schering") to
develop and commercialize the INTEGRILIN(TM) product on a worldwide basis. See
"Collaboration Agreements - Schering-Plough Corporation."
In April 1996, COR filed an application for marketing approval of the
INTEGRILIN(TM) product in the United States, and Schering filed an application
for marketing approval in Europe. COR and Schering are working
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together in the continued development of INTEGRILIN(TM) (antithrombotic
injection), including regulatory matters and planning for the marketing of the
product.
In February 1997, the United States Food and Drug Administration's
("FDA") Cardiovascular and Renal Drugs Advisory Committee (the "Committee")
considered the Company's filing in PTCA. The Committee concluded that the
IMPACT II trial of the INTEGRILIN(TM) product had shown positive results as an
adjunct therapy in helping to prevent acute cardiac ischemic complications in
patients undergoing PTCA. However, because the Committee also decided that the
results of the IMPACT II trial alone were not sufficient to forego the FDA's
customary requirement of two positive clinical trials prior to the approval of a
new drug, the Committee recommended against approval of INTEGRILIN(TM) at this
time. The Company has received an action letter from the FDA regarding the New
Drug Application ("NDA"). The not-approvable letter identifies clinical and
technical issues that need to be resolved, including the FDA's conclusion that
IMPACT II was not sufficiently robust as a single study to support approval. In
its letter, the FDA noted that a study in unstable angina is ongoing and that
the data should be provided which may add support to the findings of the IMPACT
II study. The Company has notified the FDA of the Company's intention to file
an amendment addressing the issues cited. An amendment to the NDA would need to
include data from PURSUIT, a Phase III trial of INTEGRILIN(TM) for use in
connection with unstable angina/non-Q wave MI. Enrollment in the PURSUIT trial
was completed in January 1997 and data are expected to be available later in
1997.
There is no assurance that marketing approval can be obtained on the
basis of clinical trials conducted to date, can be obtained if additional
clinical trials are conducted, or if obtained will not be substantially
delayed. If the INTEGRILIN(TM) product is approved for marketing in one
indication, there is no assurance that it will prove effective in any other
indication. The failure to obtain marketing approval for INTEGRILIN(TM) or a
significant delay in obtaining such approval would have a material, adverse
effect on the Company. See "Risk Factors."
THE INTEGRILIN(TM) PRODUCT - CLINICAL TRIALS
ANGIOPLASTY: PREVENTION OF ACUTE ISCHEMIC COMPLICATIONS
In late 1994, the Company completed patient enrollment in a Phase III
clinical trial, IMPACT II, to evaluate the safety and efficacy of the
INTEGRILIN(TM) product in reducing the acute complications of coronary
angioplasty. This study, conducted at 82 sites in the United States, evaluated
two different infusion rates with a common bolus of INTEGRILIN(TM) in patients
undergoing either elective or urgent coronary angioplasty.
Based on an analysis of all patients who received any study drug or
placebo, the INTEGRILIN(TM) product at the lower infusion rate reduced the
composite endpoint of death, myocardial infarction and emergency
revascularization by 31% at 24 hours (nominal p-value = 0.006) and 22% at 30
days (nominal p-value = 0.035), although the effect was less pronounced at the
higher infusion rate. The reduction in the clinical endpoint at all time
points was primarily due to a reduction in the more clinically serious
components of the endpoint: death and myocardial infarction. In addition, the
benefit of the reduction in death and myocardial infarction was sustained and
similar at both infusion rates at six months. The effect was less pronounced
under an analysis which includes all patients randomized in the study. The
safety data related to INTEGRILIN(TM) were favorable. Although the FDA
Advisory Committee did not recommend approval on the basis of this single
trial, it did conclude that the results were positive.
UNSTABLE ANGINA AND NON-Q WAVE MYOCARDIAL INFARCTION: PREVENTION OF
DEATH AND MYOCARDIAL INFARCTION
Multiple independent clinical studies have implicated the role of
platelet aggregation in unstable angina. Data indicate that the INTEGRILIN(TM)
product, by inhibiting platelet aggregation, promotes thrombus resolution, and
thereby enhances plaque healing and stabilization of the acute coronary
syndrome.
Patients presenting with chest pain of cardiac origin may be diagnosed
with acute ischemic coronary syndromes comprised of either unstable angina or
AMI. Prior to initiating Phase III clinical trials for
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INTEGRILIN(TM) (antithrombotic injection), the Company conducted three Phase
II studies in unstable angina. In 1995, the Company initiated PURSUIT, a large,
multi-national Phase III trial designed to assess the safety and efficacy of
the INTEGRILIN(TM) product in the management of patients with an initial
diagnosis of unstable angina or non-Q wave myocardial infarction, but
excluding patients presenting with AMI with ST segment elevation. In addition,
PURSUIT allows the evaluation of INTEGRILIN(TM) in the context of actual
clinical practice related to unstable angina and non-Q wave MI across a
wide variety of institutional settings.
The primary endpoint for this study is a composite of death and
myocardial infarction. This study included almost 11,000 patients and was
conducted in over 700 sites in over 25 countries. Enrollment was completed in
January 1997. In addition to the data in unstable angina and non-Q wave
myocardial infarction, the Company expects that clinical data from the PURSUIT
study will provide information concerning patients undergoing PTCA, because a
portion of the patients enrolled in the PURSUIT trial had a PTCA in the
ordinary course of their medical treatment.
ACUTE MYOCARDIAL INFARCTION: ENHANCEMENT OF CORONARY ARTERY
REPERFUSION AND PREVENTION OF REOCCLUSION
The Company has conducted a Phase II clinical trial of the
INTEGRILIN(TM) product with the thrombolytic tPA for the treatment of AMI. This
study of 180 patients demonstrated that INTEGRILIN(TM) could be combined with
tPA to enhance coronary artery reperfusion. Further Phase II studies have been
initiated to elucidate a dosing regimen of INTEGRILIN(TM) that could be used in
conjunction with thrombolytic products. Future studies will consider the
desirable combinations of INTEGRILIN(TM) and a thrombolytic product in terms of
both efficacy and safety, as these agents may synergistically promote an
anti-thrombotic effect but may also increase the risk of bleeding. Additional
Phase II studies are currently underway.
THE INTEGRILIN(TM) PRODUCT: COMMERCIAL OVERVIEW
The GP IIb-IIIa inhibitor marketplace is developing with the
introduction of the first product, abciximab, which has an initial indication
for use during high risk PTCA procedures. This product, developed by Centocor,
Inc. and marketed by Eli Lilly & Co. ("Lilly"), was launched in February 1995.
The INTEGRILIN(TM) product is the second agent in the GP IIb-IIIa class to be
submitted to the FDA for approval.
MARKETING AND SALES STRATEGY
As part of the COR and Schering collaboration agreement, the launch of
the INTEGRILIN(TM) product will be supported by both companies. Schering,
through its Key Pharmaceuticals Division, markets to the cardiology community
with established products. The Company believes Schering's commercial presence
with the clinical cardiologist will provide support to the commercialization of
INTEGRILIN(TM). See "Collaboration Agreement - Schering-Plough Corporation."
The primary target customer groups for the INTEGRILIN(TM) product will
be interventional cardiologists, clinical cardiologists and emergency room
physicians. Emergency room physicians will be important targets for the
unstable angina and AMI indications. In addition, hospital pharmacy directors
and other key hospital formulary members will be key as well as nurses and
nonmedical audiences who affect buying decisions.
COR is planning to hire and deploy a dedicated sales organization for
the launch of the INTEGRILIN(TM) product in the United States and Canada. This
sales force will be focused primarily at larger medical institutions. Through
its Key Pharmaceuticals Division, Schering also plans to deploy resources in the
hospital marketplace and provide significant additional sales force resources to
support PTCA, as well as future indications. The combined sales forces will be
competitive in size and will be scaled up as appropriate for additional
indications. The direct sales force selling effort will be supplemented by
educational, advertising and promotional platforms.
11
In addition, because COR has the option to co-promote a proprietary
Schering cardiovascular product in the United States, COR has the opportunity to
establish itself in the marketplace before INTEGRILIN(TM) (antithrombotic
injection) is able to be sold. This may also contribute to market readiness for
the launch of the INTEGRILIN(TM) product.
RELATIVE MARKET SIZE. The Company believes that the duration of
therapy with the INTEGRILIN(TM) product will be longer in unstable angina and
in myocardial infarction than in PTCA. Clinical trials in these indications
allow more than one day of therapy. This is in part due to the differences in
the underlying pathophysiology of these diseases. The potential market size
for INTEGRILIN(TM) would therefore be affected by both the number of patients
receiving therapy and the number of days the patients receive therapy. As a
result of the larger number of patients and longer duration of treatment, the
Company believes the markets for unstable angina and AMI are larger than the
market for PTCA.
The introduction of agents that effectively reduce death and
myocardial infarction in these multiple patient populations should present
growth opportunities for the GP IIb-IIIa category. The Company's comprehensive
clinical development plan for the INTEGRILIN(TM) product is aimed at
identifying the significant clinical benefit that can be derived from the
utilization of INTEGRILIN(TM) in these challenging and important diseases.
ORAL GP IIb-IIIa INHIBITOR PROGRAM
Aspirin and ticlopidine are the most commonly prescribed agents for
long-term prophylaxis in patients who are at risk for stroke or AMI or who have
suffered a stroke or AMI. The Company believes that these agents are not
optimal therapeutics as both are relatively weak inhibitors of platelet
function. Nevertheless, both agents have shown efficacy in reducing ischemic
cardiovascular events. Therefore, oral agents which are capable of blocking
the final common pathway of platelet aggregation by binding to the integrin
GP IIb-IIIa on platelets may yield greater benefit. In order for such agents to
be accepted for chronic use, they would have to demonstrate an acceptable
safety profile with respect to their long term risk of bleeding. Moreover, the
Company believes that an effective oral GP IIb-IIIa inhibitor could be a natural
follow-on agent for patients who have been treated with the INTEGRILIN(TM)
product or other parenteral GP IIb-IIIa inhibitors while hospitalized.
The Company believes the likely criteria of a successful drug in this
category will be (i) high-affinity inhibition of GP IIb-IIIa, (ii) specificity
for GP IIb-IIIa relative to other integrins (iii) an acceptable level of
bioavailability, (iv) acceptable half-life, and (v) an acceptable safety
profile. In the course of the Company's collaboration agreement with Eli Lilly
and Company ("Lilly"), multiple chemical classes of small molecule GP IIb-IIIa
inhibitors were identified which included compounds that have been found to be
orally active in a variety of animal models. See "Collaboration Agreements -
Relationship with Eli Lilly & Co."
A candidate compound has been chosen by the Company for preclinical
development, and a sufficient quantity has been synthesized to support the
Company's initial clinical development program. The Company filed an
Investigational New Drug ("IND") Application for this compound in late 1996 and
initiated Phase I clinical trials in February 1997. In addition to its clinical
development program, the Company is continuing its research efforts to identify
additional orally active GP IIb-IIIa compounds.
FACTOR Xa INHIBITOR PROGRAM
The Company has identified the factor Xa / prothrombinase complex as a
target for small molecule inhibitors. COR scientists have discovered novel
inhibitors with high potency and specificity which have been shown to block both
arterial and venous thrombosis effectively in various animal models. In these
models, the bleeding risk of these inhibitors compared favorably with agents
such as low molecular weight heparin and heparin. A clinical need exists in the
prophylaxis of venous thrombosis. This is particularly true in the setting of
hip and knee replacement surgery where there remains a greater than 15%
incidence of deep vein thrombosis despite current therapy of either heparin in
combination with coumadin, or low molecular weight heparin. A lead compound
that can be administered either intravenously or subcutaneously is currently in
preclinical development at COR.
12
In addition to its preclinical development compound, the Company is
continuing research to identify orally active factor Xa inhibitors. The
development of an orally active inhibitor in this class may offer significant
clinical advantages over presently available agents such as coumadin.
GROWTH FACTOR RECEPTOR ANTAGONIST PROGRAM
The Company's growth factor inhibitor program is directed toward the
discovery of protein and small molecule inhibitors of certain growth factor
receptor inhibitors in the tyrosine kinase family. In November 1992, the
Company entered into a collaboration agreement with Kyowa Hakko Kogyo Co., Ltd.
("Kyowa Hakko") focused on the discovery and development of small molecule
pharmaceuticals, primarily for the prevention of restenosis following
angioplasty. The collaboration targets a defined class of growth factor
inhibitors. In late 1995, this collaborative research program was extended for
a period of time continuing through late 1997. In December 1996, the
collaboration was expanded to include certain identified protein growth factor
inhibitors. See "Collaboration Agreements - Relationship with Kyowa Hakko."
The Company and Kyowa Hakko have identified multiple classes of small molecule
agents that specifically and with high potency inhibit growth factor signaling.
COR and Kyowa Hakko are evaluating lead compounds in animal models and are
pursuing the preclinical development of an identified protein growth factor
inhibitor.
THROMBIN RECEPTOR INHIBITOR PROGRAM
The Company's thrombin receptor inhibitor program is directed toward
the discovery of agents for the treatment of arterial thrombosis and restenosis
and may also address certain non-cardiovascular diseases.
Thrombin is an enzyme that has multiple effects on cells and proteins
within the vasculature and is the most potent activator of platelets. Thrombin
mediates cellular events through interactions with at least one protease
activated G protein-linked receptor found on platelets, as well as on most
vascular cells, including smooth muscle and endothelial cells. In December
1993, the Company and Ortho Pharmaceutical Corporation ("Ortho"), a subsidiary
of Johnson & Johnson, entered into a worldwide collaboration to research,
develop and commercialize thrombin receptor agonists and antagonists. In 1996,
Ortho exercised its options to extend the research term for an additional one or
two years, at the option of Ortho. In addition, Johnson & Johnson Development
Corporation purchased 399,106 shares of the Company's common stock for a price
of $4 million. See "Collaboration Agreements -- Relationship with Ortho
Pharmaceutical Corporation." The Company and Ortho are investigating a variety
of approaches to identify compounds that block the interaction of thrombin with
its receptor. The Company and Ortho have identified candidate inhibitors within
several different classes of compounds and are evaluating these inhibitors.
Recent data have demonstrated the potential existence of an alternate
thrombin-triggered platelet activation mechanism in mouse and human platelets.
Scientists at a number of independent institutions, as well as COR and Ortho,
are seeking to identify the nature of this second activation mechanism and to
assess its potential as a pharmaceutical target. The Company has an exclusive,
worldwide license from the Regents of the University of California to certain
patent rights relating to the thrombin receptor.
Outside the collaboration with Ortho, the Company is investigating a
novel member of the class of protease-activated G protein-linked receptors to
which it has obtained exclusive worldwide rights. See "Patents, Proprietary
Rights and Licenses."
NEW RESEARCH PROGRAMS
MYOCARDIAL SIGNAL TRANSDUCTION. The Company has initiated a new research
program directed toward the unmet clinical needs of patients with heart
failure. Heart failure is viewed as a progressive disease typically initiated
by a singular insult such as myocardial infarction. In the years thereafter,
cardiac dilatation representing dysfunction of the remaining normal myocardium
ensues. COR has focused on particular molecular targets in a specific
signaling pathway as a site for intervention.
13
INTEGRIN SIGNALING. The Company has initiated a new program to discover
mechanisms of integrin signal transduction. This effort is being conducted in
collaboration with investigators at the Scripps Research Foundation. Integrins
play a key role in modulating not only cell migration and shape but also growth
and differentiation, thus placing them at a central location in a variety of
disease processes. The Company believes that inhibitors of these integrin
signaling pathways may be useful for the treatment or prevention of a wide
variety of disorders including thrombosis, inflammation, atherosclerosis and
tumor metastasis.
OTHER COR RESEARCH
FACTOR Xai PROGRAM. The Company and its advisors have demonstrated that
inactivated forms of the enzyme factor Xa produce inactive prothrombinase
complexes and inhibit thrombosis in animal models. The Company has developed a
chemically inactivated form of human plasma-derived factor Xa, designated by
the Company as EGR-Xa, and a recombinant inactivated form of factor Xa,
designated rXai. In 1995, the Company filed an IND with the FDA for EGR-Xa and
conducted a Phase I clinical trial. As part of its Factor Xai program, the
Company has also identified a class of procoagulant compounds that may have
application in promoting normal clotting in certain individuals with hemophilia
and related genetic bleeding disorders. The Company is currently evaluating
its research and development alternatives with respect to its Factor Xai
program.
NON-CARDIOVASCULAR RESEARCH APPLICATIONS. The Company's research has resulted
in the identification of compounds with potential non-cardiovascular
applications. The Company believes certain of its growth factor inhibitors may
have applications in treating certain other disorders which involve cell
proliferation, such as cancer, glomerulonephritis, and pulmonary fibrosis. The
Company has identified other compounds with potential applications in the areas
of wound healing, tumor metastasis and osteoporosis. The Company intends to
pursue such opportunities and seek collaboration partners to develop and
commercialize any potential product opportunities where appropriate.
DRUG DISCOVERY CAPABILITIES
To achieve its drug discovery objectives, the Company has established
advanced capabilities in several key technology areas:
CARDIOVASCULAR BIOLOGY. The Company's scientists and advisors have contributed
to a number of the key advances in the scientific understanding of thrombosis,
restenosis and heart failure. The Company has applied this expertise in its
choice of specific disease targets and in the creation of its drug discovery
strategies. The Company believes that its focus and expertise in the molecular
and cellular biology of cardiovascular disease, combined with its advanced
technologies, may provide it with a potential competitive advantage in the
discovery and development of novel therapeutic products. Thus far, the
Company's major focus has been on thrombosis, the process underlying the
syndromes of acute myocardial infarction, unstable angina and restenosis,
the process of vascular smooth muscle cell proliferation following PTCA or
other vascular interventional procedures. COR scientists have targeted several
of the potential mechanisms which regulate intravascular thrombosis or
restenosis. These include the platelet, the coagulation factor cascade, and the
vascular wall itself. In each case, the aim has been to develop agents which,
because of their novel mechanism of action, offer significant therapeutic
benefit and a satisfactory safety profile. COR's approach has been to
understand the pathophysiology of the disease process itself, and then to
identify and characterize molecular targets for which an agonist or antagonist
might have a positive therapeutic impact. The scope of the research group
therefore includes not only individuals with skills in the areas of cellular
and molecular biology, but also scientists in the disciplines of pharmacology,
physiology and clinical cardiology.
HIGH THROUGHPUT SCREENING. The Company has applied its biological expertise to
develop a variety of novel molecular assays suitable for high throughput
screening. For each high throughput screening assay developed, numerous
secondary assays for confirming in vitro activity and specificity must also be
developed. In addition to the libraries of its corporate partners, the
Company's own screening library consists of compounds purchased from commercial
and academic groups. The Company uses computer-based algorithms to model
molecular diversity in order to maximize the overall diversity of its compound
library and new compound purchases. The size of this
14
library is projected to continue to grow over the next two years. High
throughput screening using multiple proprietary assays against the Company's
molecular targets is currently ongoing at the Company. Screening throughput is
assisted by the use of automated equipment.
MEDICINAL CHEMISTRY. The Company has established small organic molecule
synthesis capabilities. These capabilities use both "structure-based" design
principles and traditional analog synthetic approaches directed at small
molecules discovered through screening of organic molecule libraries in its
proprietary assays. The Company believes it has developed particular expertise
in "peptidomimetic" design, that is, the ability to develop small molecule
organic compounds that mimic the activity of peptide leads using
structure-based design approaches. This capability enables the Company to more
effectively generate compounds with appropriate pharmaceutical properties, such
as oral bioavailability and a prolonged half life.
ANIMAL MODEL STUDIES. The Company has established an important internal
capability in the area of animal models. The Company uses a variety of animal
models, including proprietary internally developed models, that are relevant to
the Company's disease targets. In addition, the Company works closely with
outside consultants and laboratories in other areas, such as the development of
knock-out and transgenic models, and the evaluation of compounds in primate
models. Using internal and external capabilities, compounds with therapeutic
potential can be rapidly evaluated in multiple complementary models to assess
their activity.
COLLABORATION AGREEMENTS
The Company evaluates, on an ongoing basis, potentials for
collaborations with other companies where such relationships may complement and
expand the Company's research, development, sales or marketing capabilities.
Any such arrangements would limit the Company's flexibility in pursuing
alternatives for the commercialization of its potential products subject to
collaboration.
The Company has ongoing collaborations with Schering, Ortho, and Kyowa
Hakko. In addition, the Company has an agreement with Lilly regarding a
research program which concluded in accordance with its term in April 1996.
RELATIONSHIP WITH SCHERING CORPORATION. In April 1995, the Company entered
into a collaboration agreement with Schering to develop and commercialize
INTEGRILIN(TM) (antithrombotic injection) on a worldwide basis. Schering paid
the Company a $20 million licensing fee upon signing the agreement. Schering
will also pay the Company milestone payments of up to approximately $100
million if specified development goals are achieved.
Under the agreement, decisions regarding the ongoing development and
marketing of the INTEGRILIN(TM) product are generally subject to the oversight
of a Joint Steering Committee with equal membership from the two companies,
although certain development decisions are allocated specifically to COR, and
in those markets where Schering has exclusive marketing rights, Schering has
decision-making authority with respect to marketing issues. Schering
participates in and shares the costs of developing INTEGRILIN(TM). The parties
work closely with each other in connection with regulatory matters, although
COR retains primary responsibility for such filings in the United States and
Canada, while Schering has primary responsibility for such filings elsewhere in
the world.
Both parties will have the right to co-promote the INTEGRILIN(TM)
product in the United States and Canada and share profits, if any, in these
countries. In Europe, Schering has the right to launch the product as an
exclusive licensee on a royalty-bearing basis for a period of time to be
determined under the agreement at a later date. Following this initial period,
COR has the right to co-promote the product in Europe and share profits. In
all co-promotion territories, the exact profit-sharing ratio between the
companies will depend on the amount of sales effort contributed by each
company. Outside of the United States, Canada and Europe, Schering is the
exclusive licensee on a royalty-bearing basis. As part of this overall
arrangement, Schering has granted an option to the Company to co-promote an
existing Schering cardiovascular product for a limited period of time as a
mechanism to help defray the costs of developing a new sales force and to help
integrate the COR and Schering sales forces.
15
Under the terms of the agreement, both parties have certain rights to
terminate. Until 30 days after certain key data are received from the PURSUIT
trial, Schering may elect to terminate the agreement. In the event of such
termination: (i) COR would reacquire all rights to all INTEGRILIN(TM) products
subject to a royalty to Schering, (ii) Schering would be relieved of its
obligation to pay development costs incurred after June 30, 1997 except for
certain specified development costs where Schering will have the continuing
obligation to pay ongoing costs incurred by COR (subject to the obligation of
COR to repay certain of such costs under certain circumstances), and (iii)
Schering could exercise an option to obtain certain rights to a specified COR
research program. The exercise by Schering of its rights to the specified
research program are subject to Schering's obligations to pay a specified
percentage of program development costs, as well as milestone payments and
product royalties to COR, and for COR to retain certain copromotion and other
rights with respect to products resulting from the program.
RELATIONSHIP WITH ORTHO PHARMACEUTICAL CORPORATION. In December 1993, the
Company entered into a collaboration agreement with Ortho, a subsidiary of
Johnson & Johnson, focusing on the joint discovery, development and
commercialization of novel pharmaceuticals that may result from collaborative
research on the thrombin receptor. The Company and Ortho each provided
specified levels of internal resources to the collaborative research over the
initial three-year research term. In 1996, Ortho exercised its options to
extend the research term for an additional one or two years, at the option of
Ortho.
If products arise from this collaboration, Ortho will make development
milestone payments to the Company. In addition, the Company and Ortho may each
(i) participate in development of products under the collaboration and share
equally in the development costs on a worldwide basis, (ii) participate equally
in the commercialization of co-developed products (with the Company's rights of
commercialization to be limited to specified countries, including the major
countries of Europe, and in North America, Japan and Australia), and (iii)
share equally in profits or losses from any co-developed products in those
countries where the parties jointly commercialize the products. If either
party decides not to participate in the development of a product under the
collaboration, or does not participate in the commercialization of such product
in one or more countries, that party would receive royalties based on product
sales.
In connection with the collaboration with Ortho, in January 1994, the
Company sold to Johnson & Johnson Development Corporation ("JJDC"), a
subsidiary of Johnson & Johnson, 533,333 shares of common stock at $15.00 per
share, for an aggregate purchase price of $8 million, in a private placement.
In October 1996, Ortho exercised its option to extend the term of the
agreement, and pursuant to the terms of the original agreement, the Company
sold JJDC an additional 399,106 shares of common stock at $10.02 per share for
an aggregate purchase price of $4 million, also in a private placement. In
connection with the extension of the agreement, Ortho paid the Company $2.4
million in 1996 for research to be performed during the remaining term of the
contract.
RELATIONSHIP WITH KYOWA HAKKO. In November 1992, the Company entered into a
collaboration agreement with Kyowa Hakko Kogyo Co., Ltd. ("Kyowa Hakko") focused
on the discovery and development of small molecule pharmaceuticals, primarily
for the prevention of restenosis following angioplasty. The collaboration
targets a defined class of growth factor inhibitors. In late 1995, this
collaborative research program was extended for a period of time continuing
through late 1997. In December 1996, the collaboration was expanded to include
certain identified protein growth factor inhibitors. Both companies have
committed significant internal resources to all phases of research. The Company
has exclusive development and marketing rights in the United States for any
products resulting from the collaboration, and Kyowa Hakko has exclusive
development and marketing rights in Asia for any such products. The two
companies have agreed to develop and commercialize jointly any such products on
a shared economic basis in the rest of the world. The agreement further
provides that Kyowa Hakko will have the exclusive right to develop and
commercialize products only for a single, defined non-cardiovascular disease
indication outside of the United States.
In addition, under the terms of the agreement, Kyowa Hakko has certain
rights to supply bulk material for the manufacture of any products resulting
from the collaboration, and the Company has agreed to purchase its requirements
for such material from Kyowa Hakko. If Kyowa Hakko is unable to provide the
Company with adequate supplies of any material, the Company is entitled to seek
alternate suppliers. However, there can be no assurance that alternative supply
arrangements can be established on a timely or commercially reasonable basis, if
at all.
RELATIONSHIP WITH ELI LILLY AND COMPANY. In May 1991, the Company entered into
a collaborative research agreement with Lilly in the field of platelet
aggregation inhibitors. This agreement was modified in May 1993 and the
research term expired at the end of April 1996. The research collaboration with
Lilly did not include the INTEGRILIN(TM) product. Under this collaboration, two
compounds were designated for development. A lead parenteral product had
entered Phase II clinical trials and a lead oral compound had entered
preclinical development in
16
anticipation of the filing of an IND. In 1995, Lilly advised the Company of its
desire, based on a review of its product development portfolio, to discontinue
its participation in the development of these compounds. Under the terms of a
November 1996 amendment, the Company now has the exclusive right to develop and
commercialize the two compounds referenced above, subject to a royalty to Lilly.
In addition, under the terms of the amendment, the Company has the exclusive
right to research, develop and commercialize certain potential oral compounds,
also subject to a royalty to Lilly. Under the original agreement and the
amendment between the parties, COR and Lilly have shared rights with respect to
all other compounds which were the subject of the collaborative research.
Research Collaborations. The Company is actively engaged in
collaborations with advisors and consultants at a number of universities and
medical centers in a number of areas including, but not limited to, integrin
signaling, myocardial signal transduction, animal models of thrombosis,
thrombolysis and restenosis, molecular biology of growth factor receptors and
x-ray crystallography.
While the Company believes its agreements with its ongoing
collaborators provide sufficient incentives to all parties, there can be no
assurance that the relationships will be successful. Although under its
current arrangements the Company and its collaborators will work exclusively
with each other within a defined field for a defined period, there can be no
assurance that a collaborator or collaborators will not terminate its agreement
with the Company or pursue alternative products, therapeutic approaches or
technologies as a means of developing treatments for the diseases targeted by
the Company or a collaboration. For these and other reasons, such as a change
in a collaborator's strategic direction, even if a collaborator continues its
participation in its program with the Company, it may nevertheless determine
not to actively pursue the development or commercialization of any particular
product or product opportunity. In such event, the Company's ability to pursue
such potential products could be severely limited.
For a discussion of research and development expenditures, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
COMPETITION
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. The Company's 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. Emerging pharmaceutical and biotechnology companies
may also prove to be significant competitors, particularly through
collaboration arrangements with large pharmaceutical companies. Many of these
competitors have significant cardiovascular products approved or in
development, and operate large, well-funded cardiovascular research and
development programs. Furthermore, academic institutions, governmental
agencies, and other public and private research organizations conduct research,
seek patent protection and establish collaboration arrangements for product and
clinical development and marketing in the cardiovascular disease field and
other areas being targeted by the Company.
The Company is aware of products in research or development by its
competitors that address all of the diseases and disorders being targeted by
the Company, and any of these products may compete directly with potential
products being developed by the Company. In particular, the Company is aware
that many of its competitors have programs specifically designed to develop
parenteral and oral GP IIb-IIIa inhibitors. One of these companies has a
monoclonal antibody-based parenteral GP IIb-IIIa inhibitor, abciximab, that has
received regulatory approval and is being sold commercially. In addition to
abciximab, at least one other parenteral GP IIb-IIIa antagonist is being studied
in clinical trials. Orally available GP IIb-IIIa inhibitors are being developed
by a number of pharmaceutical companies with agents at various stages of
clinical development. The Company believes these compounds are not likely to
represent direct competition for injectable products as they are being designed
for chronic therapies and are expected to be dosed to have a lesser
anti-platelet effect and to be designed to have a long biological half life.
There can be no assurance that these competitors will not succeed in developing
technologies and products that are more effective than those being developed by
the Company or that would render the Company's technology obsolete or
17
noncompetitive. In addition, these companies and institutions compete with the
Company in recruiting and retaining highly qualified scientific and management
personnel.
Any product which the Company succeeds in developing and for which it
gains regulatory approval must then compete for market acceptance and market
share. For certain of the Company's potential products, an important
competitive factor will be the timing of market introduction of competitive
products. Accordingly, the Company expects that important competitive factors
will be the relative speed with which companies can develop products, complete
the clinical testing and approval processes and supply commercial quantities of
the product to the market. With respect to clinical testing, competition may
also delay progress by limiting the number of clinical investigators and
patients available to test the Company's potential products.
In addition to the above factors, competition is based on product
efficacy, safety, the timing and scope of regulatory approvals, availability of
supply, marketing and sales capability, reimbursement coverage, price and
patent position.
MARKETING STRATEGY
The Company's strategy is to market products for which it obtains
approval either directly or through co-promotion arrangements or other
licensing arrangements with large pharmaceutical or biotechnology companies.
The Company's products under development are targeted towards the acute care as
well as the chronic care markets. The Company intends to retain selected North
American and European marketing rights for products where appropriate.
The Company has a collaboration agreement with Schering to develop and
commercialize INTEGRILIN(TM) (antithrombotic injection) on a worldwide basis.
Both parties have the right to co-promote and share profits, if any, in the
United States and Canada. Schering has the right to launch the INTEGRILIN(TM)
product in Europe and would pay the Company royalties for a specified initial
period, after which the Company would have the right to co-promote and share
profits, if any. See "Collaboration Agreements-Relationship with Schering
Corporation." The Company has not developed a specific commercialization plan
with respect to other of its potential products. Implementation will depend in
large part on the market potential of any products the Company develops as well
as on the Company's financial resources. The Company may establish
co-promotion, corporate partner or other arrangements for the marketing and sale
of certain of its products and in certain geographic markets. There can be no
assurance that the Company will be successful in establishing such arrangements,
or that these arrangements will result in the successful marketing and sales of
the Company's products.
Sales of the Company's products in development will be dependent in
part on the availability of reimbursement from third-party payers, such as
government and private insurance plans. The Company plans to meet with
administrators of these plans to discuss the potential medical benefits and
cost-effectiveness of its products. The Company believes this approach may
assist in obtaining reimbursement authorization for its products from these
third-party payers.
PROCESS DEVELOPMENT AND MANUFACTURING
The Company relies primarily on third-party manufacturers to produce
its compounds for preclinical and clinical purposes. Currently, the Company
has no manufacturing facilities for either the production of bulk drug
substances or the manufacture of final dosage forms. The Company believes that
all of its existing compounds can be produced using established manufacturing
methods, including cell culture, fermentation or traditional pharmaceutical
synthesis. The Company has established a quality control program, including a
set of standard operating procedures, intended to ensure that the Company's
compounds are manufactured in accordance with the Good Manufacturing Practices
("GMP"), established by the FDA, the requirements of the California State Board
of Pharmacy and other applicable regulations.
Production of the INTEGRILIN(TM) product, both for clinical trials and
for commercialization, is planned to be done through contract manufacturers.
The Company believes that material that has been produced by contract
18
manufacturers has been done in conformity with applicable regulatory
requirements. The Company believes the contracted supply of INTEGRILIN(TM)
(antithrombotic injection) is sufficient to conduct clinical trials and initial
commercial launch as currently planned. The Company has contracted with
third-party manufacturers to produce the INTEGRILIN(TM) product for subsequent
clinical trials and for commercial distribution, if applicable. If approved and
successfully launched for unstable angina, the Company may need to increase the
current manufacturing capacity. The Company is working with its vendors on
capacity forecasts and planning, with the objective of assuring adequate supply.
The Company has established long-term supply arrangements with a bulk product
supplier and with a supplier for the filling and final packaging of
INTEGRILIN(TM). The Company's manufacturing plans include the addition of
capacity both with its existing suppliers and with secondary manufacturers of
bulk and finished product. Successful technology transfer from the existing
bulk supplier is needed to ensure success with potential secondary suppliers.
The production of the Company's compounds is based in part on
technology that the Company believes to be proprietary. The Company may
license this technology to contract manufacturers to enable them to manufacture
compounds for the Company. There can be no assurance that such manufacturers
will abide by any limitations or confidentiality restrictions in licenses with
the Company. In addition, any such manufacturer may develop process technology
related to the manufacture of the Company's compounds that such manufacturer
owns either independently or jointly with the Company. This would increase the
Company's reliance on such manufacturer or require the Company to obtain a
license from such manufacturer in order to have its products manufactured.
There can be no assurance that any such license would be available on terms
acceptable to the Company, if at all. There can be no assurance that the
arrangements with third-party manufacturers will be successful. In connection
with the commercialization of its products, the Company may establish multiple
third-party manufacturing sources on commercially reasonable terms for its
products. There can be no assurance that the Company will be able to establish
such sources, or, if such sources are established, that the sources will be
successful.
PATENTS, PROPRIETARY RIGHTS AND LICENSES
The Company's policy is to file patent applications to protect
technology, inventions and improvements that are important to the development
of its business. The Company also relies upon trade secrets, know-how,
continuing technological innovations and licensing opportunities to develop and
maintain its competitive position. The Company plans to prosecute and defend
its patent applications aggressively, including any patents that may issue, as
well as its proprietary technology. The Company has filed, or has licensed
exclusively, a series of related patent applications with respect to each of
its products in development.
The Company's success will depend in part on its ability to obtain
patent protection for its products both in the United States and in other
countries. The Company has patents or has filed applications for patents
covering many of its products (including the INTEGRILIN(TM) product) and
processes, including patent applications covering various aspects of the
Company's platelet aggregation inhibitor, thrombin receptor and venous
thrombosis programs, as well as other programs. Many of the patents or
applications include composition of matter claims relating to a number of the
Company's compounds.
The patent positions of pharmaceutical and biotechnology firms,
including the Company, are uncertain and involve complex legal and factual
questions. In addition, the coverage claimed in a patent application can be
significantly reduced before the patent is issued. Consequently, the Company
does not know whether any of its applications will result in the issuance of
patents or, if any patents are issued, whether they will provide significant
proprietary protection or will be circumvented or invalidated. Since patent
applications in the United States are maintained in secrecy until patents
issue, and since publication of discoveries in the scientific or patent
literature often lags behind actual discoveries, the Company cannot be certain
that it was the first creator of inventions covered by its pending patent
applications or that it was the first to file patent applications for such
inventions. Moreover, the Company may have to participate in interference
proceedings declared by the United States Patent and Trademark Office to
determine priority of invention, which could result in substantial cost to the
Company, even if the eventual outcome is favorable to the Company. There can
be no assurance that the Company's patents, if issued, would be held valid by a
court of competent jurisdiction. An adverse outcome could subject the Company
to significant
19
liabilities to third parties, require disputed rights to be licensed from third
parties or require the Company to cease using such technology.
The development of therapeutic products for cardiovascular
applications is intensely competitive. A number of pharmaceutical companies,
biotechnology companies, universities and research institutions have filed
patent applications or received patents in this field. Some of these
applications or patents may be competitive with the Company's applications, or
conflict in certain respects with claims made under the Company's applications.
Such conflict could result in a significant reduction of the coverage of the
Company's patents, if issued. In addition, if patents are issued to other
companies that contain competitive or conflicting claims and such claims are
ultimately determined to be valid, no assurance can be given that the Company
would be able to obtain licenses to these patents at a reasonable cost, or
develop or obtain alternative technology.
The Company also relies upon trade secret protection for its
confidential and proprietary information. No assurance can be given that
others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to the Company's trade
secrets or disclose such technology, or that the Company can meaningfully
protect its trade secrets.
It is the Company's policy to require its employees, consultants,
outside scientific collaborators, sponsored researchers and other advisors to
execute confidentiality agreements upon the commencement of employment or
consulting relationships with the Company. These agreements provide that all
confidential information developed or made known to the individual during the
course of the individual's relationship with the Company is to be kept
confidential and not disclosed to third parties except in specific
circumstances. In the case of employees, the agreements provide that all
inventions conceived by the individual shall be the exclusive property of the
Company. There can be no assurance, however, that these agreements will
provide meaningful protection or adequate remedies for the Company's trade
secrets in the event of unauthorized use or disclosure of such information.
The Company has obtained licenses from a number of universities,
companies and research institutions to technologies, processes and compounds
that it believes may be important to the development of its products. These
agreements require the Company to pay license maintenance fees and, upon
commercial introduction of certain products, pay royalties. These include
exclusive license agreements with the Regents of the University of California
and the Oklahoma Medical Research Foundation, and a non-exclusive license
agreement with the Board of Trustees of Stanford University. The
above-mentioned exclusive licenses may be canceled or converted to
non-exclusive licenses if specified milestones are not achieved. There can be
no assurance that any of these licenses will provide effective protection
against the Company's competitors.
GOVERNMENT REGULATION
The manufacturing and marketing of the Company's products and its
research and development activities are subject to regulation for safety and
efficacy by numerous governmental authorities in the United States and other
countries. In the United States, drugs are subject to rigorous FDA regulation.
The Federal Food, Drug and Cosmetic Act and the Public Health Service Act
govern the testing, manufacture, safety, efficacy, labeling, storage, record
keeping, approval, advertising and promotion of the Company's products. In
addition to FDA regulations, the Company is also subject to other federal and
state regulations such as the Occupational Safety and Health Act and the
Environmental Protection Act. Product development and approval within this
regulatory framework takes a number of years and involves the expenditure of
substantial resources.
The steps required before a pharmaceutical agent may be marketed in the
United States include (i) preclinical laboratory and animal tests, (ii) the
submission to the FDA of an application for an IND, which must become effective
before clinical trials in the United States may commence, (iii) adequate and
well-controlled clinical trials to establish the safety and efficacy of the
drug, (iv) the submission of a NDA or Product License Application ("PLA") to
the FDA and (v) the FDA approval of the NDA or PLA prior to any commercial sale
or shipment of the drug. In addition to obtaining FDA approval for each
product, each domestic drug manufacturing establishment must be registered with,
and approved by, the FDA. Drug product
20
manufacturing establishments located in California also must be licensed by the
State of California in compliance with separate regulatory requirements.
Preclinical tests include laboratory evaluation of product chemistry
and animal studies to assess the potential safety and efficacy of the product
and its formulation. The results of the preclinical tests are submitted to the
FDA as part of an IND and, unless the FDA objects, the IND will become
effective 30 days following its receipt by the FDA.
Clinical trials are typically conducted in three sequential phases,
but the phases may overlap. In Phase I, the initial introduction of the drug
into human subjects, the drug is tested for safety (adverse effects), dosage
tolerance, metabolism, distribution, excretion and clinical pharmacology. Phase
II involves studies in a limited patient population to (i) determine the
efficacy of the drug for specific targeted indications, (ii) determine dosage
tolerance and optimal dosage and (iii) identify possible adverse effects and
safety risks. When a compound is found to be effective and to have an
acceptable safety profile in Phase II evaluations, Phase III trials are
undertaken to further evaluate clinical efficacy and to test further for safety
within an expanded patient population at multiple clinical study sites. The
FDA reviews both the clinical plans and the results of the trials and may
discontinue the trials at any time if there are significant safety issues.
The results of the preclinical studies and clinical studies are
submitted to the FDA in the form of an NDA or PLA for marketing approval. The
testing and approval process is likely to require substantial time and effort
and there can be no assurance that any approval will be granted on a timely
basis, if at all. The approval process is affected by a number of factors,
including the severity of the disease, the availability of alternative
treatments and the risks and benefits demonstrated in clinical trials. The FDA
may deny an NDA if applicable regulatory criteria are not satisfied or may
require submission of data from additional testing or additional information.
Notwithstanding such submission, the FDA may ultimately decide that the
application does not satisfy its regulatory criteria for approval. Moreover,
if regulatory approval of a drug is granted, such approval may entail
limitations on the indicated uses for which it may be marketed. Finally,
product approvals may be withdrawn if compliance with regulatory standards is
not maintained or if problems occur following initial marketing. After FDA
approval for the initial indications, further clinical trials may be necessary
to gain approval for the use of the product for additional indications. The FDA
may also require post-marketing testing to monitor for adverse effects, which
can involve significant expense.
Among the conditions for NDA or PLA approval is the requirement that
the prospective manufacturer's quality control and manufacturing procedures
conform to GMP. Domestic manufacturing facilities are subject to biennial FDA
inspections and foreign manufacturing facilities are subject to periodic FDA
inspections or inspections by the foreign regulatory authorities with
reciprocal inspection agreements with the FDA.
For marketing outside the United States, the Company also is subject to
foreign regulatory requirements governing clinical trials and marketing approval
for drugs. The requirements governing the conduct of clinical trials, product
licensing, pricing and reimbursement vary widely from country to country. In
the European Community, human pharmaceutical products are also subject to
extensive regulation. The European Community Pharmaceutical Directives govern,
among other things, the testing, manufacture, safety, efficacy, labeling,
storage, record keeping, advertising and promotion of human pharmaceutical
products. Effective in January 1995, the European Community enacted new
regulations providing for a centralized licensing procedure, which is mandatory
for certain kinds of products, and a decentralized (country by country)
procedure for all other products. A license granted under the centralized
procedure authorizes marketing of the product in all member states of the
European Community. Under the decentralized procedure, a license granted in one
member state can be extended to additional member states pursuant to a
simplified application process. In the centralized procedure, the European
Medicines Evaluation Agency coordinates a scientific review by one or more
rapporteurs chosen from among the membership of the Committee for Proprietary
Medicinal Products ("CPMP"), which represents the medicine authorities of the
member states. The final approval is granted by a decision of the Commission or
Council of the European Community, based on an opinion of the CPMP.
The Company's regulatory strategy is to pursue clinical development
and marketing approval of its products in the United States, Canada and Europe.
The Company intends to seek input from the FDA at each stage of the
21
clinical process to facilitate appropriate and timely clinical development,
focusing on issues such as trial design and clinical endpoints. The Company
anticipates that the clinical development of products in Europe and Asia may be
the responsibility of its corporate partners. Where appropriate, the Company
intends to pursue available opportunities for accelerated approval of products,
such as the FDA rules for conditional approval of drugs intended to treat fatal
or disabling diseases, although there can be no assurance that such accelerated
approval will be available.
INSURANCE
The testing, marketing and sale of human pharmaceuticals expose the
Company to significant and unpredictable risks of product liability claims in
the event that the use of its technology or products is alleged to have
resulted in adverse effects. Such risks will exist even with respect to any
products that receive regulatory approval for commercial sale. While the
Company has obtained liability insurance for its clinical trials for
INTEGRILIN(TM) (antithrombotic injection), there can be no assurance that it
will be sufficient to satisfy any liability that may arise. There can be no
assurance that adequate insurance coverage will be available in the future at
acceptable cost, if at all, or that a product liability claim would not
adversely affect the business or financial condition of the Company.
EMPLOYEES
As of February 1, 1997, the Company had 177 full-time employees, of
whom 132 were in research and development and 45 were in marketing, general and
administrative areas.
All employees are located at the Company's facility in South San
Francisco, California. None of the Company's employees is represented by a
collective bargaining agreement. The Company considers its employee relations
to be good. The Company's policy is to enter into confidentiality agreements
with its employees and consultants.
ADDITIONAL RISK FACTORS
Stockholders or investors in shares of the Company's Common Stock
should carefully consider the following additional risk factors, in addition to
the other information in this Report.
EARLY STAGE OF DEVELOPMENT
The Company was founded in 1988. All of the Company's potential
products are in research or development, and no revenues have been generated
from product sales. The Company's revenues to date have consisted of license
fees and contract revenue under collaboration research and development
agreements, government grants and interest income. To achieve profitable
operations, the Company, alone or with others, must successfully develop,
obtain regulatory approval for, introduce, market and sell products. No
assurance can be given that the Company's product development efforts will be
successfully completed or that required regulatory approvals will be obtained.
Moreover, there can be no assurance that providers, payers or patients will
accept the Company's products, even if the Company's products prove to be safe
and effective and are approved for marketing by the FDA and other regulatory
authorities. See "COR Products in Research or Development."
LOSS HISTORY AND ACCUMULATED DEFICIT; QUARTERLY FLUCTUATIONS
The Company had accumulated net losses as of December 31, 1996 of
$128,058,000. The Company expects to incur operating losses for the next
several years. These losses may increase as the Company expands its research
and development activities, and such losses may fluctuate significantly from
quarter to quarter. There can be no assurance that the Company will ever
successfully develop, receive regulatory approval for, commercialize,
manufacture, market or sell any product or achieve or sustain significant
revenues from product sales or profitable operations.
22
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The development of the Company's products will require a commitment of
substantial resources to conduct the time-consuming research, preclinical
development and clinical trials that are necessary to bring products to market
and to establish production and marketing capabilities. The Company
anticipates that its existing capital resources and interest earned thereon
will enable it to maintain its current and planned operations at least into
1998. The Company will need to raise substantial additional funds. The
Company intends to seek such additional funding through collaboration
arrangements and public or private financings, including equity financings. No
assurance can be given that such additional funding will be available on
favorable terms, if at all. In such event, the Company may need to delay or
curtail its research and development activities to a significant extent. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
TECHNOLOGICAL UNCERTAINTY AND CHANGE; NEED FOR ADDITIONAL RESEARCH AND
DEVELOPMENT
The Company uses multiple technologies in developing potential
products for targeted cardiovascular diseases. No assurance can be given that
problems will not develop with these technologies or that commercially feasible
products will ultimately be developed by the Company. The Company's potential
products will require significant additional research or development, including
process development and extensive clinical testing, prior to commercial use.
There can be no assurance that these potential products will be successfully
developed into drugs that can be administered to humans or that any such drugs
or related therapies will prove to be safe and effective in clinical trials or
cost-effective to manufacture. Further, these potential products may prove to
have undesirable and unintended side effects and, in some cases, may require
complex delivery systems that may prevent or limit their commercial use.
The fields of biotechnology and related pharmaceutical technologies
have undergone rapid and significant technological change. The Company expects
that the technologies associated with its research and development will
continue to develop rapidly, and the Company's future success will depend in
large part on its ability to maintain a competitive position with respect to
these technologies. Rapid technological development by the Company or others
may result in compounds, products or processes becoming obsolete before the
Company recovers a significant portion of the research, development and
commercialization expenses it has incurred. See "COR Products in Research or
Development" and "Competition."
NEED FOR EXTENSIVE CLINICAL TRIALS
In April 1996, COR filed an application for marketing approval of
INTEGRILIN(TM) (antithrombotic injection) in the United States, and Schering
filed an application for marketing approval in Europe. COR and Schering are
working together in the continued development of the INTEGRILIN(TM) product,
including regulatory matters and planning for the marketing of the product.
In February 1997, the FDA's Cardiovascular and Renal Drugs Advisory
Committee (the "Committee") considered the Company's filing in PTCA. The
Committee concluded that the IMPACT II trial of the INTEGRILIN(TM) product had
shown positive results as an adjunct therapy in helping to prevent acute
cardiac ischemic complications in patients undergoing PTCA. However, because
the Committee also decided that the results of the IMPACT II trial alone were
not sufficient to forego the FDA's customary requirement of two positive
clinical trials prior to the approval of a new drug, the Committee recommended
against approval of INTEGRILIN(TM) at this time. The Company has received an
action letter from the FDA regarding the NDA. The not-approvable letter
identifies clinical and technical issues that need to be resolved, including
the FDA's conclusion that IMPACT II was not sufficiently robust as a single
study to support approval. In its letter, the FDA noted that a study in
unstable angina is ongoing and that the data should be provided which may add
support to the findings of the IMPACT II study. The Company has notified the
FDA of the Company's intention to file an amendment addressing the issues
cited. An amendment to the NDA would need to include data from PURSUIT, a
Phase III trial of INTEGRILIN(TM) for use in connection with unstable
angina/non-Q wave MI. Enrollment in the PURSUIT trial was completed in January
1997 and data are expected to be available later in 1997.
23
Although the Company is conducting Phase II and Phase III studies of
INTEGRILIN(TM) (antithrombotic injection) for certain indications, further Phase
II studies and other large, time-consuming and more costly Phase III studies
will be required to demonstrate safety and efficacy in the treatment of other
indications. There can be no assurance that such clinical trials will be
successful or that safety or efficacy will be demonstrated, or that other
clinical trials will not be required. There can be no assurance that the
INTEGRILIN(TM) product or any of the Company's other products in development
will receive marketing approval in any country on a timely basis, or at all,
or, if such approval is received, that the Company will be successful in
commercializing INTEGRILIN(TM). If the Company is unable to demonstrate the
safety and efficacy of INTEGRILIN(TM) to the satisfaction of the FDA or other
regulatory authorities, the Company's business, financial condition and results
of operations could be materially and adversely affected.
The regulatory process, which includes preclinical studies and
clinical trials of each compound to establish its safety and efficacy, takes
many years and requires the expenditure of substantial resources. Moreover, if
regulatory approval of a drug is granted, such approval may entail limitations
on the indicated uses for which it may be marketed. Failure to comply with
applicable regulatory requirements can, among other things, result in fines,
suspension of regulatory approvals, product recalls, seizure of products,
operating restrictions and criminal prosecutions. Further, FDA policy may
change and additional government regulations may be established that could
prevent or delay regulatory approval of the Company's potential products. In
addition, a marketed drug and its manufacturer are subject to continual review,
and later discovery of previously unknown problems with a product or
manufacturer may result in restrictions on such product or manufacturer,
including withdrawal of the product form the market.
Data relating to preclinical and clinical studies of the Company's
potential products are published, presented or publicly released from time to
time by the Company, its consultants or clinical investigators conducting such
studies. Since data are subject to continuing evaluation and analysis, data
generated from any single study are not necessarily representative of the total
data currently available or that may be generated in the future regarding the
safety and efficacy of potential products.
All of the Company's potential products are subject to extensive
regulation and will require approval from the FDA and other regulatory agencies
prior to commercial sale. The cost to the Company of conducting clinical
trials for any potential product can vary dramatically based on a number of
factors, including the order and timing of clinical indications pursued and the
extent of development and financial support, if any, from corporate partners.
Because of the intense competition in the cardiovascular market, the Company
may have difficulty obtaining sufficient patient populations or clinician
support to conduct its clinical trials as planned and may have to expend
substantial additional funds to obtain access to such resources, or delay or
modify its plans significantly. See "COR Products in Research or Development,"
"Competition" and "Government Regulation."
DEPENDENCE ON COLLABORATIVE RELATIONSHIPS
The Company evaluates, on an ongoing basis, potential collaboration
agreements with other companies where such relationships may complement and
expand the Company's research, development, sales or marketing capabilities.
Any such arrangements will limit the Company's flexibility in pursuing
alternatives for the commercialization of its products. There can be no
assurance that the Company will establish any additional collaboration
arrangements or that, if established, such relationships will be successful.
See "Business Strategy."
The Company has established collaboration arrangements with Schering,
Ortho and Kyowa Hakko. While the Company believes its agreements with these
companies provide sufficient incentives to all parties, there can be no
assurance that the relationships will be successful. Although under its
current arrangements, the Company and its collaborators will work exclusively
with each other within a defined field for a defined period, there can be no
assurance that a collaborator or collaborators will not terminate its agreement
with the Company or pursue alternative products, therapeutic approaches or
technologies as a means of developing treatments for the diseases targeted by
the Company or a collaboration. For these or other reasons, such as a change
in a collaborator's strategic direction, even if a collaborator continues its
contributions to the arrangement, it may nevertheless determine not to
24
actively pursue the development or commercialization of any resulting products.
In such event, the Company's ability to pursue such potential products could be
severely limited. See "Collaboration Agreements."
The Company recognized $18,635,000 and $11,750,000 in contract revenue
in 1996 and 1995, respectively, under the arrangement with Schering,
representing 99% and 95% of contract revenues in 1996 and 1995, respectively.
If these revenues were discontinued, the Company's ability to pursue the
development or commercialization of INTEGRILIN(TM) (antithrombotic injection)
could be severely limited. See "Collaboration Agreements - Relationship with
Schering Corporation."
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY TECHNOLOGY
The Company's success will depend in part on its ability to obtain
patent protection for its products both in the United States and in other
countries. The Company has filed, or has licensed exclusively, a series of
related patent applications with respect to each of its products in
development. The Company intends to file additional applications as
appropriate. No assurance can be given that patents will issue from any
applications filed by the Company or that, if patents do issue, the claims
allowed will be sufficiently broad to protect the Company's technology. In
addition, no assurance can be given that any patents issued to the Company will
not be challenged, invalidated or circumvented or that the rights granted
thereunder will provide competitive advantages to the Company.
The Company's success will also depend in part upon its ability to
develop commercially viable products without infringing patents or proprietary
rights of others. A number of pharmaceutical, biotechnology and other
companies, universities and research institutions have filed patent
applications or received patents in the cardiovascular field. Some of these
applications or patents may be competitive with the Company's applications or
conflict in certain respects with claims made under the Company's applications.
Such conflicts could result in a significant reduction of the coverage of the
Company's patents, if issued. In addition, if patents are issued to other
companies that contain competitive or conflicting claims, no assurance can be
given that the Company would be able to obtain licenses to these patents at a
reasonable cost or develop or obtain alternative technology. Failure by the
Company to obtain a license to any technology that it may require to
commercialize its products would have a material adverse effect on the Company.
The Company also relies on trade secrets and proprietary know-how.
The Company has been and will continue to be required to disclose its trade
secrets and proprietary know-how not only to employees and consultants but also
to actual or potential corporate partners, collaborators and contract
manufacturers, many of which may be competitors of the Company. Although the
Company seeks to protect its trade secrets and proprietary know-how, in part by
entering into confidentiality agreements with such persons, there can be no
assurance that these agreements will not be breached, that the Company would
have adequate remedies for any breach, or that the Company's trade secrets will
not otherwise become known or be independently discovered by competitors.
Litigation, which could result in substantial cost to and diversion of
effort by the Company, may be necessary to enforce any patents issued to the
Company, to protect trade secrets or know-how owned by the Company or to
determine the scope and validity of the proprietary rights of others. In
addition, the Company may have to participate in interference proceedings
declared by the U.S. Patent and Trademark Office to determine the priority of
inventions, which could result in substantial cost to the Company. See
"Patents, Proprietary Rights and Licenses."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends in large part upon its ability to
attract and retain highly qualified scientific and management personnel and
consultants. The Company faces competition for such individuals from other
companies, academic institutions, government entities and other organizations.
See "Competition" and "Executive Officers and Directors."
25
NEED FOR IMPROVEMENTS IN PROCESS DEVELOPMENT; RELIANCE ON THIRD-PARTY
MANUFACTURERS
The Company currently does not have the capacity to manufacture its
potential products, is dependent on contract manufacturers or collaboration
partners for the production of its potential products for preclinical research
and clinical trial purposes and expects to be dependent on such manufacturers
or collaboration partners for commercial production. In the event that the
Company is unable to obtain contract manufacturing, or obtain such
manufacturing on commercially acceptable terms, it may not be able to
commercialize its products as planned. The Company's dependence upon third
parties for the manufacture of its potential products may adversely affect the
Company's profit margins, if any, and its ability to develop and manufacture
products on a timely and competitive basis. The Company's long-range objective
is to establish internal manufacturing capabilities for certain of its
potential products. However, the Company is not yet able to determine which of
its potential products, if any, are appropriate for internal manufacturing.
The primary factors the Company will consider in making this determination
include the availability and cost of third-party sources, the expertise
required to manufacture the product and the anticipated manufacturing volume.
The Company has no experience, however, in manufacturing pharmaceutical or
other products or in conducting manufacturing testing programs required to
obtain FDA and other regulatory approvals, and there can be no assurance that
the Company will successfully develop such capabilities.
For the Company's potential products which are at an early stage of
development, the Company expects that it will need to improve or modify its
existing process technologies and manufacturing capabilities. The Company
cannot quantify the time or expense that may ultimately be required to improve
or modify its existing process technologies, but it is possible that such time
or expense could be substantial. Moreover, there can be no assurance that the
Company will be able to implement any of these improvements or modifications
successfully.
The production of the Company's compounds is based in part on
technology that the Company believes to be proprietary. The Company may
license this technology to contract manufacturers to enable them to manufacture
compounds for the Company. There can be no assurance that such manufacturers
will abide by any use limitations or confidentiality restrictions in licenses
with the Company. In addition, any such manufacturer may develop process
technology related to the manufacture of the Company's compounds which it owns
independently or jointly with the Company, which would increase the Company's
reliance on such manufacturer or require the Company to obtain a license from
such manufacturer in order to have its products manufactured. There can be no
assurance that such license, if required, would be available on terms
acceptable to the Company, if at all. See "Process Development and
Manufacturing."
ABSENCE OF SALES AND MARKETING EXPERIENCE
The Company has no experience in sales, marketing or distribution. The
Company's strategy is to market and sell certain products directly in the United
States and Canada and, to do so, the Company must develop a substantial
marketing staff and sales force with technical expertise. The Company has
entered into a collaboration agreement with Schering for the development and
commercialization of INTEGRILIN(TM) (antithrombotic injection) on a worldwide
basis. However, specific plans for implementation of this strategy with respect
to the INTEGRILIN(TM) product are under development. The Company has not
established specific plans for implementation of the Company's commercial
strategy with respect to any of its other potential products. Implementation
will depend in part on the market potential of any products the Company develops
as well as on the Company's financial resources. There can be no assurance that
the Company will be able to build such a marketing staff or sales force, that
the cost of establishing such a marketing staff or sales force will not exceed
any product revenues, or that the Company's direct sales and marketing efforts
will be successful. In addition, the Company competes with many other companies
that currently have extensive and well-funded marketing and sales operations.
There can be no assurance that the Company's marketing and sales efforts will
compete successfully against such other companies. The Company intends to rely
on co-promotion, corporate partner or other licensing arrangements for the
marketing and sale of certain of its products and in certain geographic markets.
There can be no assurance that the Company will be successful in establishing
such arrangements, or that its licensees in these arrangements will result in
the successful marketing and sales of the Company's products. See "Business
Strategy" and "Competition."
26
RISK OF PRODUCT LIABILITY; ADEQUACY OF INSURANCE
The testing, marketing and sale of human pharmaceutical products expose
the Company to significant and unpredictable risks of product liability claims
in the event that the use of its technology or products is alleged to have
resulted in adverse effects. Such risks will exist even with respect to any
products that receive regulatory approval for commercial sale. While the
Company has obtained liability insurance for its products in clinical trials,
there can be no assurance that it will be sufficient to satisfy any liability
that may arise. There can be no assurance that adequate insurance coverage will
be available in the future at acceptable cost, if at all, or that a product
liability claim would not adversely affect the business or financial condition
of the Company. See "Insurance."
VOLATILITY OF STOCK PRICE
The market prices for securities of biopharmaceutical companies,
including the Company, have historically been highly volatile and the market
has from time to time experienced significant price and volume fluctuations
that are unrelated to the operating performance of particular companies.
Factors such as fluctuations in the Company's operating results, announcements
of technological innovations or new therapeutic products by the Company or its
competitors, governmental regulation, clinical trial results, developments in
patent or other proprietary rights, public concern as to the safety of drugs
developed by the Company or others and general market conditions may have a
significant effect on the market price of the Common Stock. The Company's
securities are subject to a high degree of risk and volatility. In the past,
following periods of volatility in the market price for a company's securities,
securities class action litigation has often been instituted. Such litigation
could result in substantial costs and a diversion of management attention and
resources, which could have a material adverse effect on the Company's
business, financial condition or results of operations. Investors should be
aware that other investment opportunities, such as interest-bearing
obligations, may result in a higher yield on investment and be less subject to
fluctuation and risk of loss than an investment in the Company's Common Stock.
ANTITAKEOVER PROVISIONS
The Company has a number of provisions in its charter documents that
could have antitakeover effects. In January 1995, the Company's Board of
Directors adopted a Preferred Share Purchase Rights Plan, commonly referred to
as a "poison pill." In addition, the Company's 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 66 2/3% of the Company's voting stock as a
condition to a merger or certain other business transactions with, or proposed
by, a holder of 15% or more of the Company's voting stock, except where
disinterested Board or stockholder approval is obtained or certain minimum
price criteria and other procedural requirements are met. In addition, the
Board of Directors has the authority, without further action by the
stockholders, to fix the rights and preferences of, and issue shares of,
Preferred Stock. These provisions, and other provisions of the Restated
Certificate, the Company's bylaws and Delaware corporate law, may have the
effect of deterring hostile takeovers or delaying or preventing changes in
control or management of the Company, including transactions in which
stockholders might otherwise receive a premium for their shares over then
current market prices.
27
EXECUTIVE OFFICERS OF THE COMPANY
The names of COR's executive officers as of March 1, 1997 and certain
information about them is set forth below:
NAME AGE POSITION
- ---- --- --------
Vaughn M. Kailian 52 President, Chief Executive Officer, and Director
Laura A. Brege 39 Vice President, Finance and Chief Financial Officer
R. Lee Douglas, Jr. 45 Vice President, Corporate Development and Secretary
Charles J. Homcy, M.D. 48 Executive Vice President, Research and Development
Mark D. Perrin 40 Executive Vice President, Commercial Operations
Vaughn M. Kailian has served as President, Chief Executive Officer and
a director of the Company since March 1990. From 1967 to 1990, Mr. Kailian was
employed by Marion Merrell Dow, Inc., a pharmaceutical company, and its
predecessor companies, in various general management, product development,
marketing and sales positions. Mr. Kailian served as Corporate Vice President
of Global Commercial Development, Marion Merrell Dow, Inc.; President and
General Manager, Merrell Dow USA; Vice President, Marketing and Sales, Merrell
Dow USA; and Vice President, Marketing and Sales of Merrell Dow, Europe, Africa
and the Middle East. Mr. Kailian holds a B.A. from Tufts University.
Laura A. Brege has served as Vice President, Finance and Chief
Financial Officer of the Company since January 1992. During 1991, Mrs. Brege
was Vice President, Finance and Chief Financial Officer of Computer Aided
Service, Inc., a manufacturer and marketer of computer systems. From 1988 to
1990, she was Vice President, Finance and Chief Financial Officer of
Flextronics, Inc., an electronics manufacturer. From 1982 to 1988, Mrs. Brege
held various financial positions at The Cooper Companies, Inc., a multinational
pharmaceutical and medical products company, last serving as Treasurer. She
holds a B.S. from Ohio University and an M.B.A. from the University of Chicago.
R. Lee Douglas, Jr., has served as Vice President, Corporate
Development of the Company since March 1990, Chief Financial Officer from June
1990 to December 1991 and as Treasurer from March 1988 to May 1991. He became
Secretary in May 1991. From the Company's inception until March 1990, Mr.
Douglas served as President and a director of the Company. He holds a B.A.
from the University of North Carolina at Charlotte and two masters degrees from
Harvard University, including an M.B.A.
Charles J. Homcy, M.D. has served as Executive Vice President, Research
and Development of the Company since March 1995. From 1994 until he joined the
Company, Dr. Homcy was President of the Medical Research Division of American
Cyanamid-Lederle Laboratories, a pharmaceutical company. From 1990 until 1994,
Dr. Homcy was Executive Director of the Cardiovascular and Central Nervous
System Research Section at Lederle Laboratories, a pharmaceutical company. From
1991 to 1995, Dr. Homcy also served as an attending physician at The
Presbyterian Hospital, College of Physicians and Surgeons, at Columbia
University in New York. From 1979 to 1990, he was an attending physician at
Massachusetts General Hospital and an Associate Professor of Medicine at Harvard
Medical School. He received his B.A. and M.D. degrees from the Johns Hopkins
University in Baltimore.
Mark D. Perrin joined the Company as Executive Vice President,
Commercial Operations in November 1995. From 1992 until he joined the Company,
Mr. Perrin was Vice President, Marketing and Sales, of Burroughs Wellcome
Company, a pharmaceutical company. From 1979 to 1992, Mr. Perrin held various
sales and marketing positions at Lederle Laboratories/American Cyanamid
Company, a pharmaceutical company, last serving as Vice
28
President and General Manager of Lederle Pharmaceuticals. He received his B.S.
from Fordham University and a Masters of Management from Northwestern
University.
ITEM 2. PROPERTIES
The Company leases facilities consisting of approximately 100,000
square feet of research laboratory and office space located in South San
Francisco, California. The lease expires in 1999 and contains provisions for
one five-year renewal option. The Company expects that its facilities will be
adequate to serve its needs for the foreseeable future. The Company currently
has no manufacturing facilities.
ITEM 3. LEGAL PROCEEDINGS
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
29
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock (Nasdaq symbol "CORR") is traded in the
over-the-counter market through the Nasdaq National Market. The following table
presents quarterly information on the price range of the Company's Common Stock,
indicating the high and low sale prices reported by the Nasdaq National Market.
These prices do not include retail markups, markdowns or commissions.
HIGH LOW
---- ---
1995
First Quarter $13.88 $ 9.50
Second Quarter $19.50 $ 8.13
Third Quarter $13.63 $ 8.63
Fourth Quarter $12.50 $ 7.75
1996
First Quarter $12.50 $ 8.38
Second Quarter $11.88 $ 8.50
Third Quarter $11.50 $ 7.00
Fourth Quarter $11.63 $ 8.75
As of March 3, 1997 there were approximately 345 holders of record of
the Company's Common Stock. On March 3, 1997, the last sale price reported on
the Nasdaq National Market for the Company's Common Stock was $9.38 per share.
Dividend Policy
The Company has not paid any dividends since its inception and does not
intend to pay any dividends on its Common Stock in the foreseeable future.
Recent Sales of Unregistered Securities
In October 1996, in connection with the extension of the agreement
with Ortho, the Company sold 399,106 shares of common stock at $10.02 per share
for an aggregate purchase price of $4,000,000 in a private placement to JJDC.
See "Item 1. Business -- Relationship with Ortho Pharmaceutical Corporation."
Such issuance was made without registration in reliance upon Section 4(2) of
the Securities Act of 1933, as amended.
30
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below are derived from the
audited financial statements of the Company, and are qualified by reference to
such financial statements and the notes related thereto. The Company has not
paid any dividends since its inception. The data set forth below should be read
in conjunction with the financial statements and the notes related thereto.
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
STATEMENT OF OPERATIONS DATA:
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Total revenues $ 18,755 $ 31,850 $ 522 $ 2,545 $ 1,667
Expenses:
Research and development 50,791 37,392 40,185 20,932 10,615
Marketing, general
and administrative 7,303 6,029 4,589 4,453 3,577
-------- -------- -------- -------- --------
Total expenses 58,094 43,421 44,774 25,385 14,192
-------- -------- -------- -------- --------
Loss from operations (39,339) (11,571) (44,252) (22,840) (12,525)
Interest income 3,552 4,876 5,188 3,470 2,507
Interest expense (759) (836) (473) (298) (186)
-------- -------- -------- -------- --------
Net loss $(36,546) $ (7,531) $(39,537) $(19,668) $(10,204)
======== ======== ======== ======== ========
Net loss per share $ (1.86) $ (0.39) $ (2.07) $ (1.27) $ (0.86)
======== ======== ======== ======== ========
Shares used in computing
net loss per share 19,636 19,360 19,091 15,480 11,816
DECEMBER 31,
-------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
BALANCE SHEET DATA:
(IN THOUSANDS)
Cash, cash equivalents
and short-term investments $ 53,134 $ 84,834 $ 94,432 $ 122,197 $ 49,097
Total assets 71,245 100,906 106,367 130,356 53,841
Long-term obligations 3,365 4,574 4,669 3,108 826
Total liabilities 20,803 18,669 19,636 11,192 5,247
Accumulated deficit (128,058) (91,512) (83,981) (44,444) (24,776)
Stockholders' equity 50,442 82,237 86,731 119,164 48,594
31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
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. Factors that might cause such differences include,
but are not limited to, those factors previously identified under the caption
"Additional Risk Factors."
Since its inception, COR has focused on the discovery and
development of novel pharmaceutical products for the treatment and prevention of
severe cardiovascular diseases. The Company has not generated any product
revenues to date. The Company has been unprofitable since inception and has
incurred a cumulative net loss of $128,058,000 during the period from inception
to December 31, 1996. The Company expects to continue to incur substantial
losses over the next several years. COR's principal sources of working capital
have been primarily public equity financings and proceeds from collaboration
research and development agreements, as well as private equity financings, grant
revenues, interest income and property and equipment financings.
The Company's most advanced product in clinical development
is INTEGRILIN(TM) (antithrombotic injection). In April 1996, the Company
submitted a New Drug Application ("NDA") to the United States Food and Drug
Administration (the "FDA") seeking approval to market the INTEGRILIN(TM)
product for use in helping to prevent acute cardiac ischemic complications in
patients undergoing percutaneous transluminal coronary angioplasty ("PTCA").
INTEGRILIN(TM) was studied in this setting in IMPACT II, a large, multi-center
Phase III clinical trial. The Company's worldwide partner for INTEGRILIN(TM),
Schering-Plough Corporation ("Schering"), submitted a filing for this
indication in Europe.
In February 1997, the FDA Cardiovascular and Renal Drugs
Advisory Committee (the "Committee") considered the Company's filing in PTCA.
The Committee concluded that the IMPACT II trial of the INTEGRILIN(TM) product
had shown positive results as an adjunct therapy in helping to prevent acute
cardiac ischemic complications in patients undergoing PTCA. However, because the
Committee also decided that the results of the IMPACT II trial alone were not
sufficient to forego the FDA's customary requirement of two positive clinical
trials prior to the approval of a new drug, the Committee recommended against
approval of INTEGRILIN(TM) at this time. The Company has received an action
letter from the FDA regarding the NDA. The not-approvable letter identifies
clinical and technical issues that need to be resolved, including the FDA's
conclusion that IMPACT II was not sufficiently robust as a single study to
support approval. In its letter, the FDA noted that a study in unstable angina
is ongoing and that the data should be provided which may add support to the
findings of the IMPACT II study. The Company has notified the FDA of the
Company's intention to file an amendment addressing the issues cited. An
amendment to the NDA would need to include data from PURSUIT, a Phase III trial
of INTEGRILIN(TM) for use in connection with unstable angina/non-Q wave MI.
Enrollment in the PURSUIT trial was completed in January 1997 and data are
expected to be available later in 1997. There can be no assurance that
INTEGRILIN(TM) or any of the Company's other products in development will
receive marketing approval in any country on a timely basis or at all. If the
Company is unable to demonstrate the safety or efficacy of INTEGRILIN(TM) to the
satisfaction of the FDA or other regulatory authorities, the Company's business,
financial condition and results of operations would be materially adversely
affected.
The Company also has collaboration agreements with Ortho
Pharmaceutical Corporation ("Ortho"), a subsidiary of Johnson & Johnson, and
Kyowa Hakko Kogyo, Co., Ltd. In late 1996, the Company and Ortho extended the
collaboration agreement for one or two years. Collaborative research under a
collaboration agreement with Eli Lilly and Company ("Lilly") ended in April 1996
and in late 1996, the Company and Lilly amended the agreement related to
transfer of certain rights and aspects of the collaboration that continue after
completion of the collaborative research.
32
RESULTS OF OPERATIONS
Total revenues have fluctuated significantly during the three
years ended December 31, 1996. Total revenues decreased to $18,755,000 in 1996
from $31,850,000 in 1995. Revenues for 1995 included $19,500,000 of a one-time
license fee relating to the Company's agreement with Schering. Contract revenues
in 1996 and 1995 resulted primarily from research and development activities
associated with the agreement with Schering, including safety-related milestone
payments pertaining to the conduct of clinical studies of INTEGRILIN(TM)
(antithrombotic injection) of $9,000,000 and $6,000,000, respectively. Contract
revenues in 1996 also included a milestone payment of $3,000,000 from Schering
in connection with the European regulatory filing of the INTEGRILIN(TM) product.
Contract revenues of $522,000 in 1994 were recognized in connection with the
Company's collaboration with Ortho. Contract revenues fluctuate based on the
timing and performance requirements of the contracts. The Company expects
contract revenues to continue to fluctuate in the future.
Research and development expenses were $50,791,000 in 1996 as
compared to $37,392,000 in 1995 and $40,185,000 in 1994. The increase in 1996 as
compared to 1995 resulted from the continuing activities of the PURSUIT trial,
as well as from higher staffing levels and increased research activities.
Research and development expenses decreased in 1995 as compared to 1994
primarily due to the timing of costs associated with the IMPACT II trial, as
well as, to a lesser extent, additional Phase II clinical trials for the
INTEGRILIN(TM) product. The Company expects that research and development
expenses may 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, clinical trials of potential products, including INTEGRILIN(TM).
Marketing, general and administrative expenses increased by
$1,274,000, or 21%, in 1996 as compared to 1995 and $1,440,000, or 31%, in 1995
as compared to 1994, primarily due to increases in staffing and administrative
expenses related to general corporate activities. The Company expects marketing,
general and administrative costs to continue to increase significantly over the
next several years.
Interest income decreased by $1,324,000 in 1996 as compared to
1995 and by $312,000 in 1995 as compared to 1994, primarily due to decreased
average cash and investment balances in 1996 as compared to 1995 and 1995 as
compared to 1994. Interest expense decreased by $77,000 in 1996 as compared to
1995 and increased by $363,000 in 1995 as compared to 1994 reflecting the change
in the average balance of property and equipment financings outstanding.
The Company incurred a net operating loss of $36,546,000 in
1996 and, accordingly, no provision for federal or state income taxes was
recorded. At December 31, 1996, COR had federal net operating tax loss
carryforwards of approximately $119,000,000. The Company's ability to use its
net operating loss carryforwards may be subject to an annual limitation in
future periods. The Company believes, however, that this limitation will not
have a material impact on its future operating results.
33
LIQUIDITY AND CAPITAL RESOURCES
The Company had available cash, cash equivalents and
short-term investments of $53,134,000 at December 31, 1996. Cash in excess of
immediate requirements is invested according to the Company's investment policy,
which provides guidelines with regard to liquidity and return and, wherever
possible, seeks to minimize the potential effects of concentration and credit
risk. At December 31, 1996, the Company had approximately $1,100,000 available
under a capital lease line. The Company has funded its operations primarily
through public equity financings and proceeds from collaboration research and
development agreements, as well as private equity financings, grant revenues,
interest income and property and equipment financings.
Net cash used for operating activities and additions to
capital equipment increased to $35,413,000 in 1996 from $12,850,000 in 1995,
reflecting the receipt in 1995 of a $20,000,000 one-time license fee in
connection with the Company's collaboration agreement with Schering. The Company
anticipates that its expenditures for operating activities and additions to
capital equipment will increase in future periods. The timing of these
expenditures may vary from period to period depending on the timing and phase
of, and indications pursued in, clinical trials of potential products, including
INTEGRILIN(TM) (antithrombotic injection). Cash provided by financing activities
of $3,927,000, $1,091,000 and $10,715,000 in 1996, 1995 and 1994, respectively,
resulted primarily from the issuance of common stock pursuant to the
collaboration agreement with Ortho and the net effect of property and equipment
financing.
The Company expects its cash requirements will increase in
future years due to costs related to continuation and expansion of research and
development, including clinical trials, and increased marketing, general and
administrative activities. The Company anticipates that its existing capital
resources and interest earned thereon will enable it to maintain its current and
planned operations at least into 1998. However, the Company's capital
requirements may change depending on numerous factors including, but not limited
to, the progress of the Company's research and development programs, the scope
and results of preclinical and clinical studies, the number and nature of the
indications the Company pursues in clinical studies, the timing of regulatory
approvals, technological advances, determinations as to the commercial potential
of the Company's products and the status of competitive products. In addition,
expenditures may be dependent on the establishment and maintenance of
collaboration relationships with other companies, the availability of financing
and other factors. The Company will need to raise substantial additional funds
in the future, and there can be no assurance that such funds will be available
on favorable terms, if at all. In such event, the Company may need to delay or
curtail its research and development activities to a significant extent.
The Company's business is subject to significant risks
including, but not limited to, the success of its research and development
efforts, obtaining and enforcing patents important to the Company's business,
the lengthy and expensive regulatory approval process and possible competition
from other products. Even if the Company's potential products appear promising
at various stages of development, they may not reach the market for a number of
reasons. Such reasons include, but are not limited to, the possibilities that
the potential products will be found ineffective during clinical trials, fail to
receive necessary regulatory approvals, be difficult to manufacture on a large
scale, be uneconomical to market or be precluded from commercialization by
proprietary rights of third parties. Additional expenses, delays and losses of
opportunities that may arise out of these and other risks could have a material
adverse impact on the Company's financial condition and results of operations.
34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Stockholders
COR Therapeutics, Inc.
We have audited the accompanying balance sheets of COR
Therapeutics, Inc. as of December 31, 1996 and 1995, and the related statements
of operations, stockholders' equity and cash flows for each of the three years
in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of COR
Therapeutics, Inc. at December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Palo Alto, California
January 23, 1997
35
COR THERAPEUTICS, INC.
BALANCE SHEETS
(in thousands, except share amounts)
ASSETS
December 31,
----------------------------
1996 1995
---------- -----------
Current assets:
Cash and cash equivalents $ 2,615 $ 5,463
Short-term investments 50,519 79,371
Contract receivables 7,644 4,374
Other current assets 3,420 3,621
--------- ------------
Total current assets 64,198 92,829
Property and equipment, net 7,047 8,077
--------- ------------
$ 71,245 $ 100,906
========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,398 $ 1,555
Accrued compensation 1,495 1,928
Accrued development costs 7,830 5,759
Deferred revenue 2,900 500
Other accrued liabilities 994 1,986
Long-term debt--current portion 1,157 1,321
Capital lease obligations--current portion 1,664 1,046
--------- ------------
Total current liabilities 17,438 14,095
Long-term debt--noncurrent portion 644 1,801
Capital lease obligations--noncurrent portion 2,721 2,773
Commitments
Stockholders' equity:
Preferred stock, $.001 par value; 5,000,000 shares -- --
authorized
Common stock, $.0001 par value; 40,000,000 shares authorized;
shares issued and outstanding: 20,009,918
and 19,428,749 at December 31, 1996 and 1995
respectively 2 2
Additional paid-in capital 178,680 173,728
Deferred compensation (249) (262)
Unrealized gains on short-term investments 67 281
Accumulated deficit (128,058) (91,512)
--------- ------------
Total stockholders' equity 50,442 82,237
--------- ------------
$ 71,245 $ 100,906
========= ============
See accompanying notes.
36
COR THERAPEUTICS, INC.
STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
Year Ended December 31,
--------------------------------------
1996 1995 1994
-------- -------- --------
Revenues
License fee $ -- $ 19,500 $ --
Contract revenues 18,755 12,350 522
-------- -------- --------
Total revenues 18,755 31,850 522
Expenses
Research and development 50,791 37,392 40,185
Marketing, general and administrative 7,303 6,029 4,589
-------- -------- --------
Total expenses 58,094 43,421 44,774
-------- -------- --------
Loss from operations (39,339) (11,571) (44,252)
Interest income 3,552 4,876 5,188
Interest expense (759) (836) (473)
-------- -------- --------
Net loss $(36,546) $ (7,531) $(39,537)
======== ======== ========
Net loss per share $ (1.86) $ (0.39) $ (2.07)
======== ======== ========
Shares used in computing
net loss per share 19,636 19,360 19,091
======== ======== ========
See accompanying notes.
37
COR THERAPEUTICS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
(in thousands, except share amounts)
Unrealized
Additional Gains (Losses) Total
Common Paid-in Deferred On Short-term Accumulated Stockholders'
Stock Capital Compensation Investments Deficit Equity
---------- ----------- ------------- -------------- ------------- -------------
Balances at December 31, 1993 $ 2 $164,086 $(480) $ -- $ (44,444) $ 119,164
Issuance of 533,333 shares of common
stock, net of issuance costs of $23,000 -- 7,977 -- -- -- 7,977
Issuance of 179,039 shares of common
stock upon exercise of stock options and
pursuant to the Employee Stock Purchase Plan -- 669 -- -- -- 669
Deferred compensation related to stock
awards of 12,900 shares of common
stock, net of amortization -- 211 (113) -- -- 98
Amortization of deferred compensation
related to grant of stock options -- -- 240 -- -- 240
Unrealized losses on available-for-sale
short-term investments -- -- -- (1,880) -- (1,880)
Net loss -- -- -- -- (39,537) (39,537)
-- -------- ----- ------- --------- ---------
Balances at December 31, 1994 2 172,943 (353) (1,880) (83,981) 86,731
Issuance of 169,838 shares of common
stock upon exercise of stock options and
pursuant, net, to the Employee Stock Purchase
Plan -- 531 -- -- -- 531
Deferred compensation related to stock
awards of 23,292 shares of common
stock, net of amortization -- 254 (89) -- -- 165
Amortization of deferred compensation
related to grant of stock options -- -- 180 -- -- 180
Unrealized gains on available-for-sale
short-term investments -- -- -- 2,161 -- 2,161
Net loss -- -- -- -- (7,531) (7,531)
-- -------- ----- ------- --------- ---------
Balances at December 31, 1995 2 173,728 (262) 281 (91,512) 82,237
Issuance of 156,876 shares of common
stock, net, upon exercise of stock options and
pursuant to the Employee Stock Purchase Plan -- 682 -- -- -- 682
Deferred compensation related to stock
awards of 25,187 shares of common
stock, net of cancellations and amortization -- 270 13 -- -- 283
Unrealized losses on available-for-sale
short-term investments -- -- -- (214) -- (214)
Issuance of 399,106 shares of common stock -- 4,000 -- -- -- 4,000
Net loss -- -- -- -- (36,546) (36,546)
== ======== ===== ======= ========= =========
Balances at December 31, 1996 $ 2 $178,680 $(249) $ 67 $(128,058) $ 50,442
== ======== ===== ======= ========= =========
See accompanying notes.
38
COR THERAPEUTICS, INC.
STATEMENT OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(in thousands)
Year Ended December 31,
-----------------------------------------
1996 1995 1994
--------- --------- ---------
Cash flows provided by (used in) operating activities:
Net loss $ (36,546) $ (7,531) $ (39,537)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 3,593 3,546 2,119
Amortization of deferred compensation 283 345 338
Changes in assets and liabilities:
Contract receivables (3,270) (4,374) --
Other current assets 201 (601) (1,168)
Other assets -- -- 13
Accounts payable (157) 188 726
Accrued compensation (433) 716 290
Accrued development costs 2,071 (3,155) 5,173
Deferred revenue 2,400 500 --
Other accrued liabilities (992) 224 186
--------- --------- ---------
Total adjustments 3,696 (2,611) 7,677
--------- --------- ---------
Net cash used in operating (32,850) (10,142) (31,860)
activities
--------- --------- ---------
Cash flows provided by (used in) investing activities:
Purchases of short-term investments (39,725) (81,594) (55,504)
Sales of short-term investments 48,963 70,178 47,675
Maturities of short-term investments 19,400 26,000 20,000
Additions to property and equipment (2,563) (2,708) (4,740)
--------- --------- ---------
Net cash provided by investing 26,075 11,876 7,431
activities
--------- --------- ---------
Cash flows provided by (used in) financing activities:
Proceeds from long-term debt -- -- 2,239
Principal payments on long-term debt (1,321) (1,199) (946)
Proceeds from capital lease obligations 1,854 2,463 1,134
Principal payments under capital lease (1,288) (704) (358)
obligations
Issuance of common stock 4,682 531 8,646
--------- --------- ---------
Net cash provided by financing 3,927 1,091 10,715
activities
--------- --------- ---------
Net increase (decrease) in cash and cash (2,848) 2,825 (13,714)
equivalents
Cash and cash equivalents at beginning of the 5,463 2,638 16,352
period
--------- --------- ---------
Cash and cash equivalents at end of the period $ 2,615 $ 5,463 $ 2,638
========= ========= =========
Supplemental schedule of non-cash financing activities:
Cash paid during the year for interest $ 759 $ 836 $ 4 73
========= ========= =========
See accompanying notes.
39
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COR Therapeutics, Inc. (the "Company") was incorporated in
Delaware on February 4, 1988. The Company was organized to engage in the
discovery, development and commercialization of novel pharmaceutical products
for the treatment and prevention of severe cardiovascular diseases.
Cash, investments and credit risk
Cash and cash equivalents consist of cash held in U.S. banks,
time deposits and other highly liquid investments with maturities of 90 days or
less. Cash equivalents are readily convertible into cash and have insignificant
interest rate risk. The Company's investment policy stipulates that a
diversified portfolio be maintained and invested in a manner appropriate for the
Company's primary business operations. The policy defines investment objectives
to provide optimal investment return within constraints to optimize safety and
liquidity.
Securities available-for-sale
Management determines the appropriate classification of debt
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. Debt securities have been classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses reported in a separate component of stockholders' equity. The
amortized cost of debt securities in this category is adjusted for amortization
of premiums and accretion of discounts to maturity. Such amortization is
included in interest income. Realized gains and losses and declines in value
judged to be other than temporary on available-for-sale securities are included
in interest income. The cost of securities sold is based on the specific
identification method. Interest and dividends on securities classified as
available for sale are included in interest income.
Property and equipment
Property and equipment is stated at cost and depreciated over
the estimated useful lives of the assets, generally three to four years, using
the straight-line method. Assets under capitalized leases are amortized over the
shorter of the lease term or life of the asset. Property and equipment consists
of the following:
December 31,
------------------------
(in thousands) 1996 1995
- -------------- -------- --------
Machinery and equipment $ 10,379 $ 8,699
Office furniture and fixtures 738 706
Leasehold improvements 9,753 8,902
-------- --------
20,870 18,307
Less accumulated depreciation and amortization (13,823) (10,230)
-------- --------
Property and equipment, net $ 7,047 $ 8,077
======== ========
40
Revenues
Revenues consist of license fees and contract revenues,
including grants. Grant and contract revenues are recorded as earned based on
the performance requirements of the contracts, while related costs are expensed
as incurred. Payments received in advance are recorded as deferred revenue until
earned. For the years ended December 31, 1996, 1995 and 1994, grant-related
revenues were approximately $85,000, $100,000 and $22,000, respectively, and
grant-related costs, which are included in research and development expenses,
were approximately $174,000, $165,000 and $43,000, respectively.
Net loss per share
Net loss per share is computed using the weighted average
number of shares of common stock outstanding. Common equivalent shares from
stock options are excluded from the computation as their effect is antidilutive.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Accounting for stock-based compensation
The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed in Note 6 below, the alternative fair value accounting provided for
under Financial Accounting Standards Board Statement No. 123, "Accounting for
Stock-Based Compensation," requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of the Company's stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Reclassification
The Company has reclassified certain prior year balances to
conform to current year presentation.
2. COLLABORATION AGREEMENTS
Collaboration agreement with Schering-Plough Corporation
In April 1995, the Company entered into a collaboration
agreement with Schering Corporation and Schering-Plough Corporation
(collectively, "Schering") to develop and commercialize INTEGRILIN(TM)
(antithrombotic injection) on a worldwide basis. Under the terms of the
agreement, COR received a one-time license fee of $20,000,000 in 1995 and will
receive approximately $100,000,000 in milestone payments if specified
development goals are achieved. The Company recorded $3,000,000 of such
milestone payments were in 1996. In addition, contract revenues in 1996 and 1995
included safety-related milestone payments pertaining to the conduct of clinical
studies of the INTEGRILIN(TM) product of $9,000,000 and $6,000,000,
respectively. Schering participates in and shares the costs of developing
INTEGRILIN(TM). Both parties have the right to co-promote and share profits, if
any, in the United States and Canada. Schering has the right to launch
INTEGRILIN(TM) in Europe and would pay the Company royalties for a specified
initial period, after which the Company would have the right to co-promote and
share profits, if any. Schering also will assist the Company in developing,
training and providing experience for a United States cardiovascular sales
force. Under the terms of the agreement, both parties have certain rights to
terminate. Until 30 days after certain key data are received from the PURSUIT
trial, Schering may elect to terminate the agreement. In the event of such
termination: (i) COR would reacquire all rights to all INTEGRILIN(TM) products
subject to a royalty to Schering, (ii) Schering would be relieved of its
obligation to pay development costs incurred after June 30, 1997 except for
certain specified development costs where Schering will have the continuing
obligation to pay ongoing costs incurred by COR (subject to the obligation of
COR to repay certain of such costs under certain circumstances), and (iii)
Schering could exercise an option to obtain certain rights to a specified COR
41
2. COLLABORATION AGREEMENTS (CONTINUED)
research program. COR recognized 18,635,000 in contract revenue in 1996
($11,750,000 in 1995) under this agreement with Schering, representing 99% and
95% of total contract revenues in 1996 and 1995, respectively. If these revenues
were discontinued, the Company's ability to pursue the development or
commercialization of INTEGRILIN(TM) (antithrombotic injection) could be severely
limited. Expenses incurred under the agreement, including Company-sponsored
development costs, were approximately $29,950,000 in 1996 ($11,400,000 in 1995).
Collaboration agreement with Ortho Pharmaceutical Corporation
In December 1993, the Company and Ortho Pharmaceutical
Corporation ("Ortho"), a subsidiary of Johnson & Johnson, entered into a
collaboration agreement focusing on the joint development and commercialization
of novel pharmaceuticals that may result from certain collaboration research.
The Company and Ortho each provided a significant level of specified internal
resources to the collaboration research over the initial three-year research
term. In late 1996, Ortho exercised its option to extend the research term for
one or two years.
If products result from the research, Ortho will make
development milestone payments to the Company. Both the Company and Ortho may
participate in development of products under the collaboration, share equally in
the development costs, participate in the commercialization of co-developed
products and share equally in worldwide profits or losses from such co-developed
products. If either party decides not to participate in the development of a
product under the collaboration, that party would receive royalties based on
product sales.
In connection with the collaboration with Ortho, in January
1994, the Company sold to Johnson & Johnson Development Corporation ("JJDC"), a
subsidiary of Johnson & Johnson, 533,333 shares of common stock at $15.00 per
share for an aggregate purchase price of $8,000,000 in a private placement. In
October 1996, Ortho exercised its option to extend the term of the agreement,
and pursuant to the terms of the original agreement, the Company sold JJDC an
additional 399,106 shares of common stock at $10.02 per share for an aggregate
purchase price of $4,000,000, also in a private placement. In connection with
the extension of the agreement, Ortho paid the Company $2,400,000 in 1996 for
research to be performed during the remaining term of the contract.
The Company recognized $35,000, $500,000 and $500,000 in
revenues under this agreement during the years ended December 31, 1996, 1995 and
1994, respectively, representing approximately 1%, 2% and 96% of total revenue
in those years.
Collaboration agreement with Kyowa Hakko Kogyo Co., Ltd.
In 1992, the Company entered into a collaboration agreement
with Kyowa Hakko Kogyo Co., Ltd. ("Kyowa Hakko"), a Japanese pharmaceutical
company. During the three-year research phase of the agreement, the Company and
Kyowa Hakko collaborated on the discovery and development of potential leads and
committed significant internal resources to all phases of research. The
companies have also agreed to share specific future development and
commercialization rights and responsibilities. In late 1995, this agreement was
extended for another two years.
Collaboration agreement with Eli Lilly and Company
Collaborative research under a collaboration agreement with
Eli Lilly and Company ("Lilly") ended by the terms of the agreement in April
1996. Under the terms of a November 1996 amendment, the Company now has the
exclusive right to develop and commercialize certain compounds, subject to a
royalty to Lilly. In addition, under the terms of the amendment, the Company has
the exclusive right to research, develop and commercialize certain potential
oral compounds, also subject to a royalty to Lilly. Under the original agreement
and the amendment between the parties, COR and Lilly have shared rights with
respect to all other compounds which were the subject to the collaborative
research.
3. 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 reported in the
balance sheet for cash and cash equivalents approximates its fair value.
Short-term investments: Available-for-sale securities consist
of marketable debt securities and are carried at fair value, with the unrealized
gains and losses reported in a separate component of stockholders' equity. The
fair values are based on quoted market prices.
42
3. FINANCIAL INSTRUMENTS (CONTINUED)
At December 31, 1996, available-for-sale securities, which include cash
equivalents with an amortized cost and estimated fair value of $2,053,000, were
as follows:
Amortized Unrealized Unrealized Estimated
(in thousands) Cost Gains Losses Fair Value
- -------------------------------------------------------------------------------------------
U.S. Government Securities $29,411 $ 63 $(12) $29,462
Corporate Debt Securities 23,094 38 (22) 23,110
------- ---- ---- -------
$52,505 $101 $(34) $52,572
======= ==== ==== =======
During the year ended December 31, 1996, the Company sold
available-for-sale investments with a fair value of $48,963,000, resulting in
gross realized gains of $38,000 and gross realized losses of $232,000.
The amortized cost and estimated fair value of available-for-sale
securities held as available for sale at December 31, 1996, by contractual
maturity, were as follows:
Amortized Estimated
(in thousands) Cost Fair Value
- ----------------------------------------------------------------
Due in one year or less $15,171 $15,196
Due after one year through three years 37,334 37,376
------- -------
$52,505 $52,572
======= =======
At December 31, 1995, available-for-sale securities, which include cash
equivalents with an amortized cost and estimated fair value of $5,987,000, were
as follows:
Amortized Unrealized Unrealized Estimated
(in thousands) Cost Gains Losses Fair Value
- ------------------------------------------------------------------------------------------
U.S. Government Securities $36,299 $324 $ -- $36,623
Corporate Debt Securities 48,778 121 (164) 48,735
------- ---- ----- -------
$85,077 $445 $(164) $85,358
======= ==== ===== =======
During the year ended December 31, 1995, the Company sold
available-for-sale investments with a fair value of $70,178,000, resulting in
gross realized gains of $283,000 and gross realized losses of $584,000.
Long and short-term debt: The carrying amounts of the Company's
borrowings under its secured debt agreements approximate their fair value. The
fair values of the Company's debt are estimated using discounted cash flow
analysis, based on the Company's current incremental borrowing rates for similar
types of borrowing arrangements.
4. LONG-TERM DEBT
Long-term debt consists of various secured obligations relating to the
purchase of property and equipment. Such notes are secured by the underlying
property and equipment and bear interest at approximately 10.5% to 13.5% per
annum and are payable in monthly installments over 48 months.
At December 31, 1996, the aggregate long-term debt maturities were
$1,157,000 and $644,000 in 1997 and 1998, respectively.
43
5. LEASE OBLIGATIONS
The Company leases office and laboratory facilities and equipment. Rent
expense for operating leases was approximately $1,212,000 in 1996, $1,012,000 in
1995, and $859,000 in 1994. Future minimum lease payments under noncancelable
leases are as follows:
Capital Operating
Leases Leases
------- ---------
(in thousands)
1997 $ 2,062 $ 1,022
1998 1,668 1,037
1999 1,068 864
2000 322 --
------- ---------
Total minimum lease payments 5,120 $ 2,923
---------
Less amount representing interest (735)
-------
Present value of future lease payments 4,385
Less current portion (1,664)
--------
Noncurrent portion of capital lease obligations $ 2,721
========
At December 31, 1996, approximately $1,100,000 was available to the
Company under equipment financing lease lines which expire in July 1997.
At December 31, 1996 and 1995, the aggregate cost of property and
equipment under capital leases totaled $5,035,000 and $5,855,000, with
accumulated amortization of $2,777,000 and $2,437,000, respectively.
6. STOCKHOLDERS' EQUITY
Stock option plans
During 1988, the Company adopted an Employee Stock Option Plan and a
Consultant Stock Option Plan (the "1988 Plans"). In 1991, these Plans were
terminated and the Board of Directors adopted the 1991 Equity Incentive Plan
(the "1991 Plan"). Under these Plans, incentive and non-qualified options were
granted to employees and consultants at exercise prices not less than the fair
market value of the Company's common stock on the date of grant. All options
granted under these Plans become exercisable pursuant to the applicable terms of
the grant.
In 1991, the Board of Directors adopted the 1991 Equity Incentive Plan
under which stock options and stock awards may be granted to employees or
consultants of the Company. Options generally vest over 60 months and are
exercisable to the extent vested. As of December 31, 1996, options to purchase
approximately 2,152,720 shares were vested and exercisable, aggregating
approximately $18,199,000 (options to purchase 923,000 shares aggregating
approximately $11,805,000 in 1995) under these Plans.
44
6. STOCKHOLDERS' EQUITY (CONTINUED)
In 1994, the Board of Directors adopted the 1994 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"), which provides for the
non-discretionary grant of non-qualified options to those members of the Board
of Directors who are neither employees nor consultants to the Company. An
aggregate of 200,000 shares of common stock was authorized for issuance under
the Directors' Plan. Options granted under the Directors' Plan vest over a
period of 60 months. At December 31, 1996, 58,749 shares were vested and
exercisable (33,749 shares at December 31, 1995) and 75,000 remained available
for future grant under the Directors' Plan. No options were granted under this
Plan in 1996.
Activity under these plans is as follows:
Options Outstanding
Options ----------------------------------------------------------------
Available Weighted
For Number of Average Price Per
Grant Shares Exercise Price Share Aggregate
--------- --------- -------------- ------------ -----------
Balance at 12/31/93 376,105 2,296,631 $ 7.01 $ .10-$16.25 $16,136,000
Stock awards (12,900) -- -- -- --
Additional shares authorized 800,000 -- -- -- --
Options granted (492,200) 492,200 13.07 9.75- 15.88 6,613,000
Options forfeited 42,384 (56,510) 10.36 .30- 15.00 (593,000)
Options exercised -- (128,892) 1.33 .10- 13.25 (175,000)
--------- --------- ------ ------------ -----------
Balance at 12/31/94 713,389 2,603,429 8.39 .10- 16.25 21,981,000
Stock awards (23,292) -- -- -- --
Additional shares authorized 500,000 -- -- -- --
Options granted (993,500) 993,500 12.27 9.19- 15.38 12,190,000
Options forfeited 53,275 (73,226) 10.28 .30- 15.88 (753,000)
Options exercised -- (110,612) 0.35 .10- 9.75 (41,000)
--------- --------- ------ ------------ -----------
Balance at 12/31/95 249,872 3,413,091 9.68 .10- 16.25 33,377,000
Stock awards (25,678) -- -- -- --
Additional shares authorized 1,500,000 -- -- -- --
Options granted (857,000) 857,000 9.22 8.56- 11.38 7,901,000
Options forfeited 303,856 (303,856) 13.28 5.25- 15.88 (4,072,000)
Options exercised -- (77,600) 0.41 .10- 8.25 (37,000)
--------- --------- ------ ------------ -----------
Balance at 12/31/96 1,171,050 3,888,635 $ 9.45 $ .10-$16.25 $37,169,000
========= ========= ====== ============ ===========
The Company recorded $270,000, $254,000, and $211,000 in deferred
compensation for stock awards of 25,678, 23,292 and 12,900 shares of common
stock for years ended December 31, 1996, 1995 and 1994, respectively. The
weighted average fair market value of these stock awards on the date of grant
was $8.56 in 1996 and $12.38 in 1995.
Stock purchase plan
In 1991, the Board of Directors adopted the 1991 Employee Stock
Purchase Plan (the "SPP") providing for the issuance of up to 25,000 shares of
common stock pursuant to the SPP. Essentially all employees may participate and
contribute up to 15% of compensation to purchase common stock at 85% of its fair
market value at certain specified dates. During 1996, 1995 and 1993, an
additional 300,000, 200,000 and 75,000 shares of common stock were authorized,
respectively, for issuance pursuant to the SPP. During the three years ended
December 31, 1996, 1995 and 1994, 80,276 shares, 59,226 shares, and 50,147
shares of common stock, respectively, were issued pursuant to the SPP, at prices
ranging between $7.28 and $12.75.
45
6. STOCKHOLDERS' EQUITY (CONTINUED)
Pro forma valuation of options
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employee" (APB 25) and related
Interpretations in accounting for its employee stock options (see Note 1). Under
APB 25, because the exercise price of the Company's stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Pro forma information regarding net loss and loss per share is required
by Statement 123, and has been determined as if the Company had accounted for
its employee stock options granted after December 31, 1994 under the fair value
method of that Statement. The fair value of these options was estimated at the
date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions for 1996 and 1995, respectively; risk-free interest
rates of 6.63% and 6.06%; no dividends paid; volatility factors of the expected
market price of the Company's common stock of 0.79 and 0.73; and a
weighted-average expected life of the option of 5 years. The effects of applying
FAS 123 for the recognition of compensation expense and provision of pro forma
disclosures in 1996 and 1995 are not likely to be representative of the effects
on reported and pro forma net income in future years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing model does not necessarily provide a
reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The Company's
pro forma information follows (in thousands except for the earnings per share
information):
1996 1995
-------- --------
Pro forma net loss $(40,967) $(10,585)
Pro forma loss per share $ (2.09) $ (0.55)
The following table summarizes information about stock options
outstanding at December 31, 1996:
Options Outstanding Options Exercisable
------------------------------------------------------- -------------------------------------
Weighted
Number of Options Average Weighted Number of Options Weighted
Range of Outstanding as of Remaining Average Exercisable as of Average
Exercise Prices December 31, 1996 Contractual Life Exercise Price December 31, 1996 Exercise Price
- ---------------- ----------------- ---------------- -------------- ----------------- --------------
$00.00 -- $ 5.25 746,216 3.06 $ 0.68 748,216 $ 0.68
$ 8.56 -- $ 9.91 819,768 8.92 9.06 125,260 9.38
$10.00 -- $12.00 1,056,868 7.36 11.26 559,891 11.49
$12.06 -- $14.50 815,584 7.53 12.82 404,683 13.00
$14.75 -- $16.25 450,200 6.47 15.28 316,670 15.24
--------- ---- ------ --------- ------
3,888,635 6.82 $ 9.45 2,152,720 $ 8.46
========= ==== ====== ========= ======
46
6. STOCKHOLDERS' EQUITY (CONTINUED)
Common shares reserved for future issuance
As of December 31, 1996, 5,151,633 common shares were reserved for
future issuance under the option and stock purchase plans.
7. INCOME TAXES
At December 31, 1996, the Company had available net operating loss
carryforwards for federal income tax purposes of approximately $119,000,000. The
tax loss carryforwards, if not utilized to offset taxable income in future
periods, expire between the years 2003 and 2011.
Significant components of the Company's deferred tax assets and
liabilities for federal income taxes as of December 31, 1996, 1995, and 1994,
were as follows:
Deferred tax assets:
1996 1995 1994
---- ---- ----
Net operating loss carryforwards $ 40,800,000 $ 30,200,000 $ 28,000,000
Capitalized research and development 6,900,000 5,600,000 4,900,000
Research and development credits
(expiring between 2003 and 2011) 5,700,000 4,600,000 4,200,000
Other, net 4,500,000 4,400,000 2,300,000
------------ ------------ ------------
Net deferred tax assets 57,900,000 44,800,000 39,400,000
Valuation allowance for deferred tax assets (57,900,000) (44,800,000) (39,400,000)
------------ ------------ ------------
Deferred tax assets $ -- $ -- $ --
============ ============ ============
The valuation allowance for deferred tax assets increased by
$20,850,000 during the year ended December 31, 1994. Approximately $1,700,000 of
the valuation allowance for deferred tax assets relates to benefits of stock
option deductions which, when recognized, will be allocated directly to
contributed capital.
Because of "change of ownership" provisions of the Tax Reform Act of
1986, the Company's net operating loss and credit carryforwards may be subject
to an annual limitation regarding utilization against taxable income in future
periods.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
47
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
IDENTIFICATION OF DIRECTORS
The information required by this Item concerning the Company's directors
is incorporated by reference from the sections captioned "Proposal 1: Election
of Directors" contained in the Company's Definitive Proxy Statement related to
the Annual Meeting of Stockholders to be held May 20, 1997 (the "Proxy
Statement"), to be filed by the Company with the Securities and Exchange
Commission.
IDENTIFICATION OF EXECUTIVE OFFICERS
The information required by this Item concerning the Company's
executive officers is set forth in Part I of this Report.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this Item is incorporated by reference from
the section captioned "Compliance with Section 16(a) of the Securities Exchange
Act of 1934" contained in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from
the section captioned "Executive Compensation" contained in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference from
the section captioned "Security Ownership of Certain Beneficial Owners and
Management" contained in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference from
the sections captioned "Certain Transactions" and "Executive Compensation"
contained in the Proxy Statement.
48
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. INDEX TO FINANCIAL STATEMENTS
Page in
Form 10-K
---------
Report of Ernst & Young LLP, Independent Auditors 34
Balance Sheets at December 31, 1996 and 1995 35
Statement of Operations for the years ended
December 31, 1996, 1995 and 1994 36
Statement of Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994 37
Statement of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 38
Notes to Financial Statements 39
All schedules are omitted because they are not applicable, or not
required, or because the required information is included in the
financial statements or notes thereto.
2. EXHIBITS
Number
------
3.1 (14) Restated Certificate of Incorporation of the
Registrant.
3.2 (2) By-laws of the Registrant.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 (2) Information, Registration Rights and Right of
First Refusal Agreement among the Registrant and
other parties named therein, as amended as of May
15, 1991.
4.3 (2) Side by Side Agreement among the Registrant and
the other parties named therein.
4.4 (11) Registrant's Preferred Share Purchase Rights
Agreement, dated as of January 23, 1995, between
the Registrant and Chemical Trust Company of
California.
*10.1 (2) Form of Indemnification Agreement between the
Registrant and its directors, executive officers
and officers.
*10.2 (2) Registrant's 1988 Employee Stock Option Plan and
related agreements.
*10.3 (2) Registrant's 1988 Consultant Stock Option Plan
and related agreements.
++10.4 (2) License Agreement, dated February 3, 1989,
between the Registrant and the Regents of the
University of California.
++10.5 (2) Exclusive License Agreement and Bailment between
the Registrant and the Regents of the University
of California, dated May 14, 1991.
++10.6 (2) License Agreement, dated November 1, 1989,
between the Registrant and the Oklahoma Medical
Research Foundation.
++10.7 (2) Research, Option and License Agreement between
the Registrant and Eli Lilly and Company.
10.8 (2) Lease Agreement, dated September 23, 1988, as
amended August 30, 1989 and Lease Rider, dated
September 23, 1988, between the Registrant and NC
Land Associates Limited Partnership.
49
Number
------
10.9 (2) Form of Patent, Copyright and Nondisclosure
Agreement entered into by the Registrant with
each of its officers and certain employees.
10.10 (2) Form of Consultants and Advisors Proprietary
Information and Inventions Agreement entered into
by the Registrant with certain scientific
consultants to the Registrant.
10.11 (1) Form of Scientific Advisor Agreement between the
Registrant and certain scientific advisors to the
Registrant.
10.12 (2) Form of Materials Transfer agreement used by the
Registrant in connection with collaboration
research projects.
10.13 (2) Form of Mutual Confidentiality Agreement used by
the Registrant in connection with potential
business partners.
10.14 (2) Form of Consulting Agreement used by the
Registrant with certain consultants.
10.15 (2) Form of Consulting Agreement for Clinical
Advisors used by the Registrant with certain
clinical advisors to the Registrant.
10.16 (2) Form of Visitor Non-Disclosure Agreement used by
the Registrant and certain visitors to the
Registrant.
*10.17 (1) Forms of option agreements used under the
Registrant's 1991 Equity Incentive Plan.
*10.18 (3) Form of offering document used under the
Registrant's 1991 Employee Stock Purchase Plan.
*10.19 (9) Description of 1993 Incentive Pay Program.
*10.20 (7) Consulting Agreement, dated January 1, 1993,
between the Registrant and Lloyd Hollingsworth
Smith, Jr.
++10.21 (7) Collaboration Research Agreement between the
Registrant and Kyowa Hakko Kogyo, Co., Ltd.
++10.22 (8) Collaboration Agreement between Eli Lilly and
Company and the Registrant, dated May 28, 1993.
++10.23 (6) Exclusive License between the Registrant and the
Regents of the University of California, dated
June 10, 1992.
++10.24 (9) Collaboration Agreement between Ortho
Pharmaceutical Corporation and the Registrant,
dated December 21, 1993.
++10.25 (12) Clinical Trial Research Agreement between the
Registrant and The Johns Hopkins University.
*10.26 Registrant's 1994 Non-employee Directors' Stock
Option Plan.
10.27 (10) Put and Stock Purchase Agreement between the
Registrant and Johnson & Johnson Development
Corporation, dated December 21, 1993.
10.28 (12) Consulting Agreement, dated March 17, 1988, as
amended effective September 28, 1994 between the
Registrant and Shaun R. Coughlin.
*10.29 Registrant's 1991 Stock Purchase Plan, as
amended.
*10.30 Registrant's 1991 Equity Incentive Plan, as
amended.
*10.31 (12)* Description of Registrant's 1994 Incentive Pay
Plan.
++10.32 (13) Collaboration Agreement between Schering-Plough
Corporation and the Registrant, dated April 10,
1995.
17
50
Number
------
*10.33 (14) Description of Registrant's 1995 Incentive Pay
Plan.
++10.34 (14) Amendment No. 4 to Collaboration Agreement
between the Registrant and Kyowa Hakko Kogyo,
Co., Ltd., dated November 10, 1995.
+10.35 Amendment No. 1 to Collaboration Agreement
between Ortho Pharmaceutical Corporation and the
Registrant, dated September 27, 1996.
+10.36 Amendment No. 1 to Collaboration Agreement
between Eli Lilly and Company and the Registrant,
dated November 1996.
+10.37 (i) Amendment No. 1 to Collaboration Agreement
between Kyowa Hakko Kogyo, Co., Ltd., dated
May 9, 1994.
+10.37 (ii) Amendment No. 2 to Collaboration Agreement
between Kyowa Hakko Kogyo, Co., Ltd., dated
July 13, 1995.
+10.37 (iii) Amendment No. 3 to Collaboration Agreement
between Kyowa Hakko Kogyo, Co., Ltd., dated
August 1, 1995.
+10.37 (iv) Amendment No. 5 to Collaboration Agreement
between Kyowa Hakko Kogyo, Co., Ltd., dated
December 17, 1995.
*10.38 Description of Registrant's 1996 Incentive Pay
Plan.
23.1 Consent of Ernst & Young LLP, Independent
Auditors.
24.1 Power of Attorney, Reference is made to the
signature page.
27.1 Financial Data Schedule.
- --------------------------------------------------------------------------------
* Indicates management contracts or compensatory plans or arrangements
filed pursuant to Item 601(b)(10) of Regulation S-K.
++ Confidential treatment granted.
+ Confidential treatment requested.
(1) Filed as an exhibit to the Registrant's Registration Statement on Form
S-8 (Reg. No. 33-42912) and incorporated herein by reference.
(2) Filed as an exhibit to the Registrant's Registration Statement on Form
S-1 (Reg. No. 33-40627) or amendments thereto and incorporated herein
by reference.
(3) Filed as an exhibit to the Registrant's Registration Statement on Form
S-1 (Reg. No. 33-43181) or amendments thereto and incorporated herein
by reference.
(4) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended September 30, 1991 and incorporated herein by
reference.
(5) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the period ended December 31, 1991 and incorporated herein by
reference.
(6) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended June 30, 1992 and incorporated herein by
reference.
(7) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the period ended December 31, 1992 and incorporated by reference
herein.
(8) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended June 30, 1993 and incorporated by reference
herein.
(9) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the period ended December 31, 1993 and incorporated by reference
herein.
(10) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended March 31, 1994 and incorporated by reference
herein.
(11) Filed as part of a report on Form 8-K dated January 23, 1995.
(12) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the period ended December 31, 1994 and incorporated by reference
herein.
(13) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended June 30, 1995 and incorporated by reference
herein.
(14) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the period ended December 31, 1995 and incorporated by reference
herein.
18
51
(b) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed for the quarter ended
December 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of South San
Francisco, County of San Mateo, State of California, on the 28th day of March,
1997.
COR THERAPEUTICS, INC.
By /s/ PETER S. RODDY
-------------------------------
Peter S. Roddy
Director, Finance and Controller
(Principal Accounting Officer)
POWER OF ATTORNEY
KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Peter S. Roddy and Laura A. Brege, and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution for him, and in his name in any and all capacities, to
sign any and all amendments to this report, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ VAUGHN M. KAILIAN
- ---------------------
Vaughn M. Kailian President, Chief Executive Officer
and Director (Principal Executive Officer) March 28, 1997
/s/ LAURA A. BREGE
- ---------------------
Laura A. Brege Vice President, Finance and Chief Financial
Officer (Principal Financial Officer) March 28, 1997
/s/ PETER S. RODDY
- ---------------------
Peter S. Roddy Director, Finance and Controller
(Principal Accounting Officer) March 28, 1997
19
52
POWER OF ATTORNEY (CONTINUED)
SIGNATURE TITLE DATE
--------- ----- ----
/s/ SHAUN R. COUGHLIN
- ----------------------------------
Shaun R. Coughlin Director March 28, 1997
/s/ JAMES T. DOLUISIO
- ----------------------------------
James T. Doluisio Director March 28, 1997
/s/ JERRY T. JACKSON
- ----------------------------------
Jerry T. Jackson Director March 28, 1997
/s/ ERNEST MARIO
- ----------------------------------
Ernest Mario Director March 28, 1997
/s/ ROBERT R. MOMSEN
- ----------------------------------
Robert R. Momsen Director March 28, 1997
/s/ LLOYD HOLLINGSWORTH SMITH, JR.
- ----------------------------------
Lloyd Hollingsworth Smith, Jr. Director March 28, 1997
/s/ WILLIAM H. YOUNGER, JR.
- ----------------------------------
William H. Younger, Jr. Director March 28, 1997
20
53
EXHIBIT INDEX
Number
------
3.1 (14) Restated Certificate of Incorporation of the
Registrant.
3.2 (2) By-laws of the Registrant.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 (2) Information, Registration Rights and Right of
First Refusal Agreement among the Registrant and
other parties named therein, as amended as of May
15, 1991.
4.3 (2) Side by Side Agreement among the Registrant and
the other parties named therein.
4.4 (11) Registrant's Preferred Share Purchase Rights
Agreement, dated as of January 23, 1995, between
the Registrant and Chemical Trust Company of
California.
*10.1 (2) Form of Indemnification Agreement between the
Registrant and its directors, executive officers
and officers.
*10.2 (2) Registrant's 1988 Employee Stock Option Plan and
related agreements.
*10.3 (2) Registrant's 1988 Consultant Stock Option Plan
and related agreements.
++10.4 (2) License Agreement, dated February 3, 1989,
between the Registrant and the Regents of the
University of California.
++10.5 (2) Exclusive License Agreement and Bailment between
the Registrant and the Regents of the University
of California, dated May 14, 1991.
++10.6 (2) License Agreement, dated November 1, 1989,
between the Registrant and the Oklahoma Medical
Research Foundation.
++10.7 (2) Research, Option and License Agreement between
the Registrant and Eli Lilly and Company.
10.8 (2) Lease Agreement, dated September 23, 1988, as
amended August 30, 1989 and Lease Rider, dated
September 23, 1988, between the Registrant and NC
Land Associates Limited Partnership.
54
Number
------
10.9 (2) Form of Patent, Copyright and Nondisclosure
Agreement entered into by the Registrant with
each of its officers and certain employees.
10.10 (2) Form of Consultants and Advisors Proprietary
Information and Inventions Agreement entered into
by the Registrant with certain scientific
consultants to the Registrant.
10.11 (1) Form of Scientific Advisor Agreement between the
Registrant and certain scientific advisors to the
Registrant.
10.12 (2) Form of Materials Transfer agreement used by the
Registrant in connection with collaboration
research projects.
10.13 (2) Form of Mutual Confidentiality Agreement used by
the Registrant in connection with potential
business partners.
10.14 (2) Form of Consulting Agreement used by the
Registrant with certain consultants.
10.15 (2) Form of Consulting Agreement for Clinical
Advisors used by the Registrant with certain
clinical advisors to the Registrant.
10.16 (2) Form of Visitor Non-Disclosure Agreement used by
the Registrant and certain visitors to the
Registrant.
*10.17 (1) Forms of option agreements used under the
Registrant's 1991 Equity Incentive Plan.
*10.18 (3) Form of offering document used under the
Registrant's 1991 Employee Stock Purchase Plan.
*10.19 (9) Description of 1993 Incentive Pay Program.
*10.20 (7) Consulting Agreement, dated January 1, 1993,
between the Registrant and Lloyd Hollingsworth
Smith, Jr.
++10.21 (7) Collaboration Research Agreement between the
Registrant and Kyowa Hakko Kogyo, Co., Ltd.
++10.22 (8) Collaboration Agreement between Eli Lilly and
Company and the Registrant, dated May 28, 1993.
++10.23 (6) Exclusive License between the Registrant and the
Regents of the University of California, dated
June 10, 1992.
++10.24 (9) Collaboration Agreement between Ortho
Pharmaceutical Corporation and the Registrant,
dated December 21, 1993.
++10.25 (12) Clinical Trial Research Agreement between the
Registrant and The Johns Hopkins University.
*10.26 Registrant's 1994 Non-employee Directors' Stock
Option Plan.
10.27 (10) Put and Stock Purchase Agreement between the
Registrant and Johnson & Johnson Development
Corporation, dated December 21, 1993.
10.28 (12) Consulting Agreement, dated March 17, 1988, as
amended effective September 28, 1994 between the
Registrant and Shaun R. Coughlin.
*10.29 Registrant's 1991 Stock Purchase Plan, as
amended.
*10.30 Registrant's 1991 Equity Incentive Plan, as
amended.
*10.31 (12)* Description of Registrant's 1994 Incentive Pay
Plan.
++10.32 (13) Collaboration Agreement between Schering-Plough
Corporation and the Registrant, dated April 10,
1995.
55
Number
------
*10.33 (14) Description of Registrant's 1995 Incentive Pay
Plan.
++10.34 (14) Amendment No. 4 to Collaboration Agreement
between the Registrant and Kyowa Hakko Kogyo,
Co., Ltd., dated November 10, 1995.
+10.35 Amendment No. 1 to Collaboration Agreement
between Ortho Pharmaceutical Corporation and the
Registrant, dated September 27, 1996.
+10.36 Amendment No. 1 to Collaboration Agreement
between Eli Lilly and Company and the Registrant,
dated November 1996.
+10.37 (i) Amendment No. 1 to Collaboration Agreement
between Kyowa Hakko Kogyo, Co., Ltd., dated
May 9, 1994.
+10.37 (ii) Amendment No. 2 to Collaboration Agreement
between Kyowa Hakko Kogyo, Co., Ltd., dated
July 13, 1995.
+10.37 (iii) Amendment No. 3 to Collaboration Agreement
between Kyowa Hakko Kogyo, Co., Ltd., dated
August 1, 1995.
+10.37 (iv) Amendment No. 5 to Collaboration Agreement
between Kyowa Hakko Kogyo, Co., Ltd., dated
December 17, 1995.
*10.38 Description of Registrant's 1996 Incentive Pay
Plan.
23.1 Consent of Ernst & Young LLP, Independent
Auditors.
24.1 Power of Attorney, Reference is made to the
signature page.
27.1 Financial Data Schedule.
- --------------------------------------------------------------------------------
* Indicates management contracts or compensatory plans or arrangements
filed pursuant to Item 601(b)(10) of Regulation S-K.
++ Confidential treatment granted.
+ Confidential treatment requested.
(1) Filed as an exhibit to the Registrant's Registration Statement on Form
S-8 (Reg. No. 33-42912) and incorporated herein by reference.
(2) Filed as an exhibit to the Registrant's Registration Statement on Form
S-1 (Reg. No. 33-40627) or amendments thereto and incorporated herein
by reference.
(3) Filed as an exhibit to the Registrant's Registration Statement on Form
S-1 (Reg. No. 33-43181) or amendments thereto and incorporated herein
by reference.
(4) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended September 30, 1991 and incorporated herein by
reference.
(5) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the period ended December 31, 1991 and incorporated herein by
reference.
(6) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended June 30, 1992 and incorporated herein by
reference.
(7) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the period ended December 31, 1992 and incorporated by reference
herein.
(8) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended June 30, 1993 and incorporated by reference
herein.
(9) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the period ended December 31, 1993 and incorporated by reference
herein.
(10) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended March 31, 1994 and incorporated by reference
herein.
(11) Filed as part of a report on Form 8-K dated January 23, 1995.
(12) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the period ended December 31, 1994 and incorporated by reference
herein.
(13) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q
for the period ended June 30, 1995 and incorporated by reference
herein.
(14) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for
the period ended December 31, 1995 and incorporated by reference
herein.