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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
COR Therapeutics, Inc.
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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COR THERAPEUTICS, INC.
256 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CA 94080
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1997
To the Stockholders of COR Therapeutics, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of COR
THERAPEUTICS, INC., a Delaware corporation (the "Company"), will be held on
Tuesday, May 20, 1997 at 9:00 a.m. local time at the Embassy Suites Hotel, 250
Gateway Boulevard, South San Francisco, California for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve the Company's 1991 Equity Incentive Plan, as amended, to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 600,000 shares.
3. To approve the Company's 1991 Employee Stock Purchase Plan, as
amended, to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 300,000 shares.
4. To ratify the selection of Ernst & Young LLP as independent
auditors of the Company for its fiscal year ending December 31, 1997.
5. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on Friday, March 28,
1997, as the record date for the determination of stockholders entitled to
notice of and to vote at this Annual Meeting and at any adjournment or
postponement thereof.
By Order of the Board of Directors
LOGO
R. Lee Douglas, Jr.
Secretary
South San Francisco, California
April 18, 1997
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
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COR THERAPEUTICS, INC.
256 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CA 94080
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PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of COR
Therapeutics, Inc., a Delaware corporation (the "Company") for use at the Annual
Meeting of Stockholders to be held on May 20, 1997, at 9:00 a.m. local time (the
"Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting. The
Annual Meeting will be held at the Embassy Suites Hotel, 250 Gateway Boulevard,
South San Francisco, California. The Company intends to mail this proxy
statement and accompanying proxy card on or about April 18, 1997, to all
stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers, other regular employees of the Company or,
at the Company's request, D.F. King & Co. No additional compensation will be
paid to directors, officers or other regular employees for such services, but
D.F. King & Co. will be paid its customary fee, estimated to be approximately
$4,000, if it renders solicitation services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on Friday,
March 28, 1997 (the "Record Date") will be entitled to notice of and to vote at
the Annual Meeting. At the close of business on the Record Date, the Company had
outstanding and entitled to vote 20,057,007 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 256 East
Grand Avenue, South San Francisco, California 94080, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
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STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the Company
not later than December 19, 1997 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
There are eight nominees for the eight Board positions presently authorized
in the Company's By-laws. Each director to be elected will hold office until the
next annual meeting of stockholders and until his successor is elected and has
qualified, or until such director's earlier death, resignation or removal. Each
of the nominees listed below is currently a director of the Company, all having
been elected by the stockholders.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the eight nominees named below. In the
event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as management may propose. Each person nominated for election
has agreed to serve if elected, and management has no reason to believe that any
nominee will be unable to serve.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
PRINCIPAL OCCUPATION/
NAME AGE POSITION HELD WITH THE COMPANY
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Vaughn M. Kailian..................... 52 President and Chief Executive Officer
Shaun R. Coughlin, M.D., Ph.D. ....... 42 Professor, School of Medicine,
University of California, San Francisco
James T. Doluisio, Ph.D. ............. 61 Dean and Hoechst-Roussel Professor of Pharmacy
at the University of Texas at Austin
Jerry T. Jackson(1)(2)................ 55 Retired Executive Vice President, Merck & Co., Inc.
Ernest Mario, Ph.D.(2)................ 58 Co-Chairman and Chief Executive Officer,
ALZA Corporation
Robert R. Momsen(1)(2)................ 50 General Partner, InterWest Partners
Lloyd Hollingsworth Smith, Jr., 73
M.D. ............................... Associate Dean, School of Medicine, University
of California, San Francisco
William H. Younger, Jr.(1)............ 47 General Partner, Sutter Hill Ventures
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(1) Member of the Audit Committee
(2) Member of the Compensation Committee
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. Most recently, Mr. Kailian served as Corporate
Vice President of Global Commercial Development, Marion Merrell Dow, Inc. Prior
to serving in that position, Mr. Kailian served as President and General
Manager, Merrell Dow USA; Vice President, Marketing and Sales, Merrell Dow USA;
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and Vice President, Marketing and Sales of Merrell Dow, Europe, Africa and the
Middle East. Mr. Kailian is also a director of Amylin Pharmaceuticals and Arris
Pharmaceutical Corporation.
SHAUN R. COUGHLIN, a co-founder of the Company, has been a director of the
Company since September 1994. Dr. Coughlin is a Professor of Medicine at the
University of California, San Francisco ("UCSF"), and Director of the
Cardiovascular Research Institute at UCSF, where he was an Associate Professor
of Medicine from 1992 through 1996. Dr. Coughlin has acted as a consultant to
the Company since its inception. Dr. Coughlin is also a member of the editorial
boards of Trends in Cardiovascular Medicine and Molecular Medicine.
JAMES T. DOLUISIO has been a director of the Company since January 1994.
Dr. Doluisio has been Dean and Hoechst-Roussel Professor of Pharmacy at the
University of Texas at Austin since 1973. From 1990 to 1995, Dr. Doluisio served
as Chairman of the United States Pharmacopeial Convention Board of Trustees.
From 1967 to 1973, Dr. Doluisio was Professor and Assistant Dean of the College
of Pharmacy at the University of Kentucky.
JERRY T. JACKSON has been a director of the Company since March 1995. Mr.
Jackson was employed by Merck & Co., Inc., a pharmaceutical company, from 1965
until his retirement in 1995. From 1993 until his retirement, he served as
Executive Vice President of Merck & Co., Inc. During this time, Mr. Jackson had
responsibility (1994) for Merck's International Human Health, Worldwide Human
Vaccines, the AgVet Division, Astra/Merck U.S. Operations, as well as worldwide
marketing. During 1993, he also was President of the Worldwide Human Health
Division. Mr. Jackson served as Senior Vice President of Merck & Co., Inc. from
1991 to 1992, and previously was President of Merck Sharp & Dohme International.
Mr. Jackson is also a director of SunPharm Corporation, Molecular Biosystems,
Inc. and Transcend Therapeutics, Inc.
ERNEST MARIO has been a director of the Company since September 1995. Dr.
Mario has been Co-Chairman and Chief Executive Officer of ALZA Corporation since
July 1993. From 1989 to 1993, he was President, Deputy Chairman and Chief
Executive Officer of Glaxo Holdings in London. Prior to 1989, Dr. Mario served
as President of Glaxo, Inc. in the United States. Dr. Mario is also chairman of
Pharmaceutical Product Development, Inc.
ROBERT R. MOMSEN has been a director of the Company since April 1989. Since
1982, Mr. Momsen has been a general partner of InterWest Partners, a venture
capital management firm. Mr. Momsen is also a director of Ventritex, Inc. and
Arthrocare, Inc.
LLOYD HOLLINGSWORTH SMITH, JR. has been a director of the Company since
January 1993. Dr. Smith has been Associate Dean of the School of Medicine at
UCSF since 1985. From 1964 to 1985, he was a Professor of Medicine and Chairman
of the UCSF Department of Medicine.
WILLIAM H. YOUNGER, JR. has been a director of the Company since March
1988. He has been a general partner of Sutter Hill Ventures, a venture capital
management company, since 1983. Mr. Younger is also a director of Celeritek,
Inc., Forte Software, Inc. and Oacis Healthcare Holdings Corp.
BOARD COMMITTEES AND MEETINGS
The Company currently has authorized eight directors. All directors hold
office until the next annual meeting of stockholders of the Company and until
their successors have been duly elected and qualified. During the fiscal year
ended December 31, 1996, the Board of Directors held six meetings. The Board has
an Audit Committee and a Compensation Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the auditors' comments as to financial controls, adequacy
of staff, and management performance and procedures in connection with the
annual audit and financial controls. The Audit Committee, which is composed of
Messrs. Jackson, Momsen and Younger, held one meeting during fiscal 1996.
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The Compensation Committee makes recommendations concerning salaries and
incentive compensation, grants stock options and stock awards to employees and
consultants under the Company's stock option and award plans and otherwise
determines compensation levels, and performs such other functions regarding
compensation as the Board may delegate. The Compensation Committee, which is
composed of Messrs. Jackson and Momsen and Dr. Mario, held six meetings during
fiscal 1996.
During the fiscal year ended December 31, 1996, each director attended 100%
of the aggregate of the meetings of the Board and of the committees on which he
served, except for Dr. Smith, who attended all but one of such meetings.
PROPOSAL 2
APPROVAL OF THE 1991 EQUITY INCENTIVE PLAN, AS AMENDED
In May 1991, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1991 Equity Incentive Plan (the "1991
Plan"). As a result of a series of amendments, at December 31, 1996, 4,200,000
shares of the Company's Common Stock were authorized for issuance under the 1991
Plan.
At December 31, 1996, options (net of canceled or expired options) covering
an aggregate of 3,036,115 shares of the Company's Common Stock had been granted,
and 1,163,885 shares (plus any shares that might in the future be returned to
the Plan as a result of cancellation or expiration of options) remained
available for future grant under the 1991 Plan. The Plan requires that the
exercise price of all options be not less than the fair market value at the date
of the grant. In January 1997, the Board amended the 1991 Plan, subject to
stockholder approval, to increase the aggregate number of shares authorized for
issuance under the 1991 Plan from 4,200,000 to 4,800,000 and to conform the 1991
Plan to comply with the current requirements of Section 16 of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"). Among other
administrative changes resulting from these changes to the 1991 Plan, these
changes permit directors to participate in the 1991 Plan and also permit the
transferability of nonqualified stock options. These amendments were designed to
enhance the flexibility of the Board and the Compensation Committee in granting
stock options and stock rights to the Company's employees and consultants and to
ensure that the Company can continue to grant stock options and stock rights to
such persons at levels determined appropriate by the Board.
Stockholders are requested in this Proposal 2 to approve the 1991 Plan, as
amended to increase the authorized shares available for issuance under the 1991
Plan by 600,000 shares. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy and entitled to vote on the
proposal at the meeting will be required to approve the proposal. Abstentions
will be counted toward the tabulation of votes cast on the proposal and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether this matter
has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the 1991 Plan are outlined below.
GENERAL
The 1991 Plan provides for the grant of "Stock Awards," which may be either
(i) incentive stock options, (ii) nonqualified stock options, or (iii) stock
bonuses or rights to purchase restricted stock. Incentive stock options granted
under the 1991 Plan are intended to qualify as "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). Nonqualified stock options granted under the 1991 Plan are intended not
to qualify as incentive stock options under the Code. See
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"Federal Income Tax Information" for a discussion of the tax treatment of
incentive and nonqualified stock options.
PURPOSE
The 1991 Plan was adopted (i) to provide a means by which selected officers
and employees of and consultants to the Company and its affiliates (defined in
the 1991 Plan to mean any parent or subsidiary of the Company) could be given an
opportunity to purchase stock of the Company, (ii) to assist in securing and
retaining the services of persons capable of filling such positions, and (iii)
to provide incentives for such persons to exert maximum efforts for the success
of the Company. As a result of recent changes to Section 16 of the Exchange Act,
the 1991 Plan was amended by the Board in January 1997 to allow for the
participation in the plan by directors of the Company. To date, no director of
the Company has been granted options under the 1991 Plan.
ADMINISTRATION
The 1991 Plan is administered by the Board of Directors of the Company. The
Board has the power to construe and interpret the 1991 Plan and, subject to the
provisions of the 1991 Plan, to determine the persons to whom and the dates on
which Stock Awards will be granted, whether a Stock Award will be an incentive
stock option, a nonqualified stock option, a stock bonus, a right to purchase
stock, or a combination of the foregoing, the number of shares to be subject to
each Stock Award, the time or times when a person shall be permitted to purchase
or receive stock pursuant to a Stock Award, the exercise or purchase price, the
type of consideration and other terms of Stock Awards. Under the 1991 Plan, the
Board of Directors is authorized to delegate administration of the 1991 Plan to
a committee composed of two or more members of the Board. The Board has
delegated administration of the 1991 Plan to the Compensation Committee of the
Board. As used herein with respect to the 1991 Plan, the "Board" refers to the
Compensation Committee as well as to the Board of Directors itself.
In order to preserve certain tax deductions for the Company, the
regulations under Section 162(m) of the Code require that the directors who
administer options with respect to certain officers must be "outside directors."
The 1991 Plan provides that, in the Board's discretion, directors serving on the
Compensation Committee will be "outside directors" within the meaning of Section
162(m) of the Code. This limitation would exclude from the Compensation
Committee (i) current employees of the Company, (ii) former employees of the
Company receiving compensation for past services (other than benefits under a
tax-qualified retirement plan), (iii) current and former officers of the
Company, and (iv) directors currently receiving remuneration from the Company
for personal services (other than as a director) or the sale of goods. The
Company will determine at the appropriate time whether to make any changes to
the composition of its Compensation Committee, if any would be required by the
regulations.
ELIGIBILITY
Employees (including officers and directors) of the Company and its
affiliates may be granted incentive stock options and other Stock Awards under
the 1991 Plan. Directors and consultants are eligible to receive Stock Awards
other than incentive stock options under the 1991 Plan. At March 31, 1997, all
of the Company's 174 employees, as well as its directors and consultants, were
eligible to participate in the 1991 Plan.
No incentive stock option may be granted under the 1991 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the option exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant, and the
term of the option does not exceed five years from the date of grant. For
incentive stock options, the aggregate fair market value, determined at the time
of grant, of the shares of Common Stock with respect to which such options are
exercisable for the first time by an optionee during any calendar year (under
all such plans of the Company and its affiliates) may not exceed $100,000.
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In addition, under the 1991 Plan, no employee may be granted a Stock Award
to acquire in excess of 500,000 shares of Common Stock in any calendar year. The
purpose of this limitation is generally to permit the Company to exclude the
compensation attributable to the exercise of options granted under the 1991 Plan
from being counted towards the limitation imposed by Section 162(m) of the Code
on deductible compensation and thus, the Company will continue to be able to
deduct such compensation.
STOCK SUBJECT TO THE 1991 PLAN
Subject to stockholder approval of this Proposal 2, an aggregate of
4,800,000 shares of Common Stock is authorized for issuance under the 1991 Plan,
as amended. If Stock Awards granted under the 1991 Plan expire or otherwise
terminate without being exercised, the shares of Common Stock not purchased
pursuant to such awards again become available for issuance under the 1991 Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under
the 1991 Plan. Individual option grants may be more restrictive as to any or all
of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
under the 1991 Plan may not be less than the fair market value of the Common
Stock subject to the option on the date of the option grant, and in some cases
(see "Eligibility" above), may not be less than 110% of such fair market value.
The exercise price of nonqualified options under the 1991 Plan may not be less
than 100% of the fair market value of the Common Stock subject to the option on
the date of the option grant. However, if options with exercise prices below
market value are granted, deductions attributable to such options could be
limited by Section 162(m). See "Federal Income Tax Information." At March 31,
1997, the closing sale price of a share of the Company's Common Stock as
reported on the Nasdaq National Market was $9.50 per share.
In the event of a decline in the fair market value of the Company's Common
Stock, the Board has the authority under the 1991 Plan, to offer option holders
the opportunity to replace outstanding higher priced options, whether incentive
or nonqualified, with new, lower priced options. To the extent required by
Section 162(m) of the Code, both the replaced option and the new option will be
counted against the 500,000 per-employee, per-calendar year share limitation.
The exercise price of options granted under the 1991 Plan must be paid
either: (i) in cash at the time the option is exercised; or (ii) at the
discretion of the Board, (a) by delivery of other shares of Common Stock of the
Company, or (b) pursuant to a deferred payment arrangement; or (iii) in any
other form of legal consideration acceptable to the Board.
Option Exercise. Options granted under the 1991 Plan may become exercisable
in cumulative increments ("vest") as determined by the Board. The Board has the
power to accelerate the time during which an option may be exercised. Shares
covered by currently outstanding options under the 1991 Plan typically vest at a
rate of 1/60th per month during the optionee's employment or services as a
consultant. Shares covered by options granted in the future under the 1991 Plan
may be subject to different vesting schedules. The 1991 Plan authorizes the
grant of options that may be exercised prior to full vesting, subject to a right
of repurchase in favor of the Company. However, no currently outstanding options
under the 1991 Plan permit such early exercise. To the extent provided by the
terms of an option, an optionee may satisfy any federal, state or local tax
withholding obligation relating to the exercise of such option by a cash payment
upon exercise, by authorizing the Company to withhold a portion of the stock
otherwise issuable to the optionee, by delivering already-owned stock of the
Company or by a combination of these means.
Term. The maximum term of options under the 1991 Plan is ten years, except
that in certain cases (see "Eligibility"), the maximum term is five years.
Options under the 1991 Plan generally terminate three months after the optionee
ceases to be employed by (or serve as a consultant to) the Company or any
affiliate of the Company, unless (i) the termination of employment is due to
such person's permanent and total disability (as defined in the Code), in which
case the option may, but need not, provide that it may be exercised at any time
within one year of such termination; (ii) the optionee dies while employed by
the Company or any affiliate of
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the Company, or within three months after termination of such employment, in
which case the option may, but need not, provide that it may be exercised (to
the extent the option was exercisable at the time of the optionee's death)
within 18 months of the optionee's death by the person or persons to whom the
rights to such option pass by will or by the laws of descent and distribution;
or (iii) the option by its terms specifically provides otherwise. Individual
options by their terms may provide for exercise within a longer period of time
following termination of employment or the consulting relationship. The option
term may also be extended in the event that exercise of the option within these
periods is prevented for specified reasons.
TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
Purchase Price; Payment. The purchase price under each stock purchase
agreement will be determined by the Board. The purchase price of stock acquired
pursuant to a stock purchase agreement must be paid either: (i) in cash at the
time of purchase; (ii) at the discretion of the Board, according to a deferred
payment or other arrangement with the person to whom the Common Stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board in its discretion. Eligible participants may be awarded stock pursuant to
a stock bonus agreement in consideration of past services actually rendered to
the Company or for its benefit.
Repurchase. Shares of Common Stock sold or awarded under the 1991 Plan may,
but need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule determined by the Board. In the event a
person ceases to be an employee of or ceases to serve as a director of or
consultant to the Company or an affiliate of the Company, the Company may
repurchase or otherwise reacquire any or all of the shares of Common Stock held
by that person that have not vested as of the date of termination under the
terms of the stock bonus or restricted stock purchase agreement between the
Company and such person.
Incentive Pay Program. In January 1996, the Compensation Committee approved
an informal incentive bonus program consisting of a restricted stock bonus
component implemented under the 1991 Plan as well as a cash bonus component,
similar to the informal bonus program implemented in 1993, 1994 and 1995 (the
"1996 Incentive Pay Program"). Grants of stock bonuses (as well as cash bonuses)
were conditioned upon attainment, in the discretion of the Compensation
Committee, of certain corporate goals set by the Committee as well as on
individual performance. Under the stock component, certain senior level
employees were eligible to receive restricted stock bonus awards granted under
the 1991 Plan based on a percentage of such employee's base salary, with the
number of shares issued based on the market value of the Company's Common Stock
at the beginning or end of the applicable period, whichever is lower. Stock
bonus awards granted under the 1996 Incentive Pay Program vest ratably over
three years, with one-third vesting at the end of each year. For 1996, an
aggregate of 29,234 shares were issued as restricted stock bonus awards pursuant
to the 1996 Incentive Pay Program under the 1991 Plan. A similar informal
program has been approved by the Committee for 1997, although the form of the
equity component of the program has not been determined.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1991 Plan or subject to
any Stock Award granted under the 1991 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the 1991 Plan and Stock
Awards outstanding thereunder will be appropriately adjusted as to the class and
the maximum number of shares subject to such plan and as to the class, number of
shares and price per share of stock subject to such outstanding Stock Awards.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1991 Plan provides that, in the event of a "change of control," which
term includes (i) the dissolution or liquidation of the Company and specified
types of merger, acquisition or other corporate reorganization, (ii) a change in
the Board of Directors whereby the members who constituted the Board as of May
14, 1991 cease for any reason to constitute at least a majority of the Board,
then, at the sole discretion of the Board and to the extent permitted by law,
and (iii) other events determined by the Board to constitute a
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change in control: (a) any surviving corporation will be required to either
assume Stock Awards outstanding under the 1991 Plan or substitute similar Stock
Awards for those outstanding under such plan, (b) the time during which such
Stock Awards become vested or may be exercised will be accelerated and any
outstanding unexercised rights under any Stock Awards will be terminated if not
exercised prior to such event, or (c) such Stock Awards will continue in full
force and effect. The acceleration of vesting of a Stock Award in the event of
an acquisition or other change in control or similar corporate event may be
viewed as an anti-takeover provision, which may have the effect of discouraging
a proposal to acquire or otherwise obtain control of the Company.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1991 Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1991 Plan will terminate on May 13, 2001.
The Board may also amend the 1991 Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within 12 months before or after its adoption by the Board to the
extent such amendment requires stockholder approval in order for the 1991 Plan
to satisfy Section 422(b) of the Code, if applicable, or to comply with Rule
16b-3 ("Rule 16b-3") of the Exchange Act or to satisfy the requirements of any
Nasdaq or securities exchange listing requirements. The Board may in its sole
discretion submit any other amendment to the 1991 Plan for stockholder approval,
including, but not limited to, amendments to the 1991 Plan intended to satisfy
the requirements of Section 162(m) of the Code and the regulations promulgated
thereunder.
RESTRICTIONS ON TRANSFER
Under the 1991 Plan, an incentive stock option may not be transferred by
the optionee otherwise than by will or by the laws of descent and distribution.
A nonqualified stock option may be transferred only as specified in the option
agreement; however, in all events such nonqualified stock options shall be
transferable by will or the laws of descent or distribution. Under the 1991
Plan, no rights under a stock bonus or restricted stock purchase agreement will
be transferable except by will or by the laws of descent and distribution so
long as stock awarded under such agreement remains subject to the terms of the
agreement.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive stock options under the 1991 Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for more than two years from the date on which the option is granted and
more than one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be a long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition the optionee will
recognize taxable ordinary income equal to the lesser of (i) the excess of the
stock's fair market value on the date of exercise over the exercise price or
(ii) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain, or any loss upon the disqualifying disposition, will
be a capital gain or loss which will be long-term or short-term depending on
whether the stock was held for more than one year. Slightly different rules may
apply to optionees who acquire stock subject to certain repurchase options or
who acquire stock that is subject to forfeiture pursuant to Section 16(b) of the
Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the application of certain
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provisions of Section 162(m) of the Code and the satisfaction of a tax reporting
obligation) to a corresponding business expense deduction in the tax year in
which the disqualifying disposition occurs.
Nonqualified Stock Options. Nonqualified stock options granted under the
1991 Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonqualified stock option. Upon exercise of a nonqualified stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the application of certain provisions of Section 162(m) of the
Code and the satisfaction of a tax reporting obligation, the Company will
generally be entitled to a business expense deduction equal to the taxable
ordinary income recognized by the optionee. Upon disposition of the stock, the
optionee will recognize a capital gain or loss equal to the difference between
the selling price and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of the option. Such gain or loss
will be long-term or short-term depending on whether the stock was held for more
than one year. Slightly different rules apply to optionees who acquire stock
subject to certain repurchase options or who acquire stock that is subject to
forfeiture pursuant to Section 16(b) of the Exchange Act.
Restricted Stock and Stock Bonuses. Restricted stock and stock bonuses
granted under the 1991 Plan generally have the following federal income tax
consequences:
Upon acquisition of stock under a restricted stock or stock bonus award,
the recipient normally will recognize taxable ordinary income equal to the
excess of the stock's fair market value over the purchase price, if any.
However, to the extent the stock is subject to certain types of vesting
restrictions, the taxable event will be delayed until the vesting restrictions
lapse unless the recipient elects to be taxed on receipt of the stock.
Generally, with respect to employees, the Company is required to withhold from
regular wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness, the application
of Section 162(m) of the Code and the satisfaction of a tax reporting
obligation, the Company generally will be entitled to a business expense
deduction equal to the taxable ordinary income recognized by the recipient. Upon
disposition of the stock, the recipient will recognize a capital gain or loss
equal to the difference between the selling price and the sum of the amount paid
for such stock, if any, plus any amount recognized as ordinary income upon
acquisition (or vesting) of the stock. Such gain or loss will be long-term or
short-term depending on whether the stock was held for more than one year from
the date ordinary income is measured. Slightly different rules apply to persons
who acquire stock subject to forfeiture pursuant to Section 16(b) of the
Exchange Act.
Potential Limitation on Company Deductions. As part of the Omnibus Budget
Reconciliation Act of 1993, the United States Congress amended the Code to add
Section 162(m), which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1,000,000 for a covered employee. It is possible that
compensation attributable to awards under the Plan, when combined with all other
types of compensation received by a covered employee from the Company, may cause
this limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m) of the Code,
compensation attributable to stock options rights will qualify as
performance-based compensation, provided that: (i) the stock award plan contains
a per-employee limitation on the number of shares for which stock options may be
granted during a specified period; (ii) the per-employee limitation is approved
by the stockholders; (iii) the stock options are granted by a compensation
committee comprised solely of "outside directors;" and (iv) the exercise price
of each stock option is no less than the fair market value of the stock on the
date of grant. Restricted stock and stock bonuses qualify as performance-based
compensation under these Treasury regulations only if: (i) the award is granted
by a compensation committee comprised solely of "outside directors;" (ii) the
award is granted (or exercisable) only upon the achievement of an objective
performance goal established in writing by the compensation committee while the
outcome is
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substantially uncertain; (iii) the compensation committee certifies in writing
prior to the granting (or exercisability) of the award that the performance goal
has been satisfied; and (iv) prior to the granting (or exercisability) of the
award, stockholders have approved the material terms of the award (including the
class of employees eligible for such award, the business criteria on which the
performance goal is based, and the maximum amount (or formula used to calculate
the amount) payable upon attainment of the performance goal).
PLAN BENEFITS TABLE
The following table presents certain information with respect to stock
awards granted under the 1991 Plan for the fiscal year ended December 31, 1996
to (i) each of the executive officers named in the Summary Compensation Table,
(ii) all executive officers as a group, (iii) all non-executive officer
directors as a group, and (iv) all non-executive officer employees as a group.
NUMBER OF SHARES
SUBJECT TO STOCK
AWARDS GRANTED
DOLLAR VALUE(1) IN FISCAL 1996
--------------- ----------------
Vaughn M. Kailian............................................. 872,880 101,972
President and Chief Executive Officer
Charles J. Homcy, M.D......................................... 183,210 21,403
Executive Vice President, Research and Development
Mark D. Perrin................................................ 87,072 10,172
Executive Vice President, Commercial Operations
Michael M. Kitt, M.D.......................................... 181,292 21,179
Vice President, Clinical Research
Laura A. Brege................................................ 523,153 61,116
Vice President, Finance and Chief Financial Officer
All Executive Officers as a Group (6 persons)................. 2,370,288 276,822
All Non-Executive Officer Directors as a Group................ -- --
All Non-Executive Officer Employees as a Group................ 5,775,086 608,684
- - ---------------
(1) Exercise price multiplied by number of shares underlying the options or fair
market value multiplied by number of shares subject to the restricted stock
bonus grants, as appropriate.
PROPOSAL 3
APPROVAL OF THE 1991 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
In May 1991, the Board of Directors adopted, and the stockholders
subsequently approved, the 1991 Employee Stock Purchase Plan (the "Purchase
Plan"). Following amendments to the Purchase Plan, at December 31, 1996, there
were 350,000 shares of the Company's Common Stock authorized for issuance under
the Purchase Plan, of which 92,033 shares remained available for future
issuances. In November 1996, the Board of Directors adopted an amendment to the
Purchase Plan, subject to stockholder approval, to increase the number of shares
authorized for issuance under the Purchase Plan from 350,000 to 650,000 shares.
This amendment is intended to afford the Company greater flexibility in
providing employees with stock incentives and to ensure that the Company can
continue to provide such incentives at levels determined appropriate by the
Board. In January 1997, the Board of Directors amended the Purchase Plan to
conform to Section 16 of the Exchange Act.
Stockholders are requested in this Proposal 3 to approve the Purchase Plan,
as amended, to increase the authorized shares available for issuance under the
Purchase Plan by 300,000 shares. The affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled to
vote on the proposal at the meeting will be required to approve the proposal.
Abstentions will be counted toward the tabulation of votes cast on the proposal
and will have the same effect as negative votes. Broker non-votes are
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counted towards a quorum but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
The essential features of the Purchase Plan are outlined below.
PURPOSE
The purpose of the Purchase Plan is (i) to provide a means by which
employees of the Company (and any parent or subsidiary of the Company designated
by the Board of Directors to participate in the Purchase Plan) may be given an
opportunity to purchase Common Stock of the Company through payroll deductions,
and (ii) to assist the Company in (a) securing the services of new employees,
(b) retaining the services of existing employees, and (c) providing incentives
for such persons to exert maximum efforts for the success of the Company. The
rights to purchase Common Stock granted under the Purchase Plan are intended to
qualify as options issued under an "employee stock purchase plan" as that term
is defined in Section 423(b) of the Code.
ADMINISTRATION
The Purchase Plan is administered by the Board of Directors, which has the
final power to construe and interpret the Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the Purchase
Plan, to determine when and how rights to purchase Common Stock of the Company
will be granted, the provisions of each offering of such rights (which need not
be identical), and whether employees of any affiliate (defined in the Purchase
Plan to mean any parent or subsidiary of the Company) shall be eligible to
participate in such plan. Under the Purchase Plan, the Board has the power to
delegate administration of such plan to a committee of two or more Board
members. The Board may abolish any such committee at any time and revest in the
Board the administration of the Purchase Plan. As used herein with respect to
the Purchase Plan, the "Board" refers to such committee as well as to the Board
of Directors itself.
OFFERINGS
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. Such offerings have a duration not
exceeding 27 months and may contain multiple purchase periods. As of December
31, 1996, a total of 231,900 shares of the Company's Common Stock had been
purchased under the Purchase Plan by eligible employees at a weighted average
purchase price of $8.96 per share.
STOCK SUBJECT TO PURCHASE PLAN
Subject to stockholder approval of this Proposal 3, an aggregate of 650,000
shares of Common Stock is authorized for issuance under the Purchase Plan, as
amended. If rights granted under the Purchase Plan expire, lapse or otherwise
terminate without being exercised, the shares of Common Stock not purchased
under such rights again become available for issuance under such plan.
ELIGIBILITY
Any person who is customarily employed at least 20 hours per week and five
months per calendar year by the Company (or by any affiliate designated from
time to time by the Board) on the first day of an offering period is eligible to
participate in that offering under the Purchase Plan, provided such employee has
been in the continuous employ of the Company for such period of time preceding
the first day of the offering period as shall be determined by the Board, which
period must be in all cases less than two years. If, during the course of an
offering, an employee satisfies the foregoing eligibility requirements, the
Board may provide that such employee may participate in that offering.
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Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
affiliate (including any stock which such employee may purchase under all
outstanding rights and options), nor will any employee be granted rights to buy
more than $25,000 worth of stock (determined at the fair market value of the
shares at the time such rights are granted) under all employee stock purchase
plans of the Company in any calendar year. At March 31, 1997, 171 employees were
eligible to participate in the Purchase Plan.
PARTICIPATION IN THE PLAN
An eligible employee becomes a participant in the Purchase Plan by
delivering to the Company, in the time set forth in the offering, an agreement
authorizing payroll deductions of up to 15% (or such lower percentage as the
Board may determine for a particular offering) of such employee's base
compensation during the offering.
PURCHASE PRICE
The purchase price per share at which shares are sold in an offering under
the Purchase Plan cannot be less than the lower of (i) 85% of the fair market
value of a share of Common Stock on the date of commencement of the offering, or
(ii) 85% of the fair market value of a share of Common Stock on the date of
purchase.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the purchase period. A participant may reduce, increase, or begin such payroll
deductions after the beginning of any purchase period only as provided for in
the offering. All payroll deductions made for a participant are credited to his
or her account under the Purchase Plan and deposited with the general funds of
the Company. A participant may make additional payments into such account only
if specifically provided for in the offering, and only if the participant has
not had the maximum allowable amount withheld during the offering.
PURCHASE OF STOCK
By executing an agreement to participate, an employee is entitled to
purchase shares under the Purchase Plan. In connection with offerings made under
the Purchase Plan, the Board specifies a maximum number of shares any employee
may be granted the right to purchase and the maximum aggregate number of shares
which may be purchased pursuant to such offering by all participants. If the
aggregate number of shares to be purchased upon exercise of rights granted in
the offering were to exceed the maximum aggregate number, the Board would make a
pro rata allocation of shares available in a uniform and equitable manner.
Unless the employee's participation is discontinued, his or her right to
purchase shares is exercised automatically at the end of the purchase period at
the applicable price. See "Withdrawal" below.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign an
agreement authorizing payroll deductions, the participant may withdraw from a
given offering by delivering to the Company a notice of withdrawal from the
Purchase Plan, which will terminate his or her payroll deductions. Such
withdrawal may be elected at any time prior to the end of the applicable
purchase period.
Upon any withdrawal from an offering by the employee, at the election of
such employee the Company will distribute to the employee his or her accumulated
payroll deductions without interest, and such employee's interest in the
offering will be automatically terminated. An employee's withdrawal from an
offering will not have any effect upon such employee's eligibility to
participate in subsequent offerings under the Purchase Plan.
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TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to the employee all of his or her accumulated payroll
deductions, (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the offering, without interest
unless the terms of the offering specifically so provide.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time. Unless
terminated earlier, such plan will terminate on May 14, 2001.
The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the stockholders within 12 months of its
adoption by the Board to the extent such amendment requires stockholder approval
in order for the Purchase Plan to obtain employee stock purchase plan treatment
under Section 423 of the Code or to comply with the requirements of Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
Rights granted before amendment or termination of the Purchase Plan will
not be altered or impaired by any amendment or termination of the Purchase Plan
without consent of the person to whom such rights were granted.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution, liquidation or specified type of merger of
the Company, then, as determined by the Board in its sole discretion (i) any
surviving corporation may assume outstanding rights or substitute similar rights
for those outstanding under the Purchase Plan, (ii) such rights may continue in
full force and effect or (iii) participants' accumulated payroll deductions may
be used to purchase Common Stock immediately prior to the transaction described
above and the participants' rights under the ongoing offering terminated.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for
favorable federal income tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under the provisions of Section 423
of the Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. No other income will be taxable to a
participant until disposition of the shares acquired, and the method of taxation
will depend upon the holding period of the purchased shares.
If the stock purchased in an offering is sold (or otherwise disposed of)
more than two years after the beginning of the offering and more than one year
after the stock is transferred to the participant, then the lesser of (i) the
excess of the fair market value of the stock at the time of such disposition
over the purchase price or (ii) the excess of the fair market value of the stock
as of the beginning of the offering over the purchase price (determined as of
the beginning of the offering) will be treated as ordinary income. Any further
gain or any loss will be taxed as a long-term capital gain or loss.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the purchase date over the purchase price will be treated as ordinary
income at the time of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary income from other
payments made to the participant. The
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balance of any gain will be treated as capital gain. Even if the stock is later
disposed of for less than its fair market value on the purchase date, the same
amount of ordinary income is attributed to the participant, and a capital loss
is recognized equal to the difference between the sales price and the fair
market value of the stock on such purchase date. Any capital gain or loss will
be long-term or short-term depending on whether the stock has been held for more
than one year.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights (i.e., purchase of stock) under the Purchase
Plan. The Company is entitled to a deduction to the extent amounts are taxed as
ordinary income to a participant by reason of a disposition before the
expiration of the holding periods described above (subject to the requirement of
reasonableness and a tax reporting obligation).
1991 EMPLOYEE STOCK PURCHASE PLAN
The following table presents certain information with respect to shares
purchased under the Purchase Plan for the fiscal year ended December 31, 1996 to
(i) each of the executive officers named in the Summary Compensation Table, (ii)
all executive officers as a group, (iii) all non-executive officer directors as
a group and (iv) all non-executive officer employees as a group.
NUMBER OF SHARES
DOLLAR VALUE(1) PURCHASED IN FISCAL 1996
--------------- ------------------------
Vaughn M. Kailian.......................................... 5,109 490
President and Chief Executive Officer
Charles J. Homcy, M.D...................................... 4,320 405
Executive Vice President, Research and Development
Mark D. Perrin............................................. 32,865 2,919
Executive Vice President, Commercial Operations
Michael M. Kitt, M.D....................................... 8,460 814
Vice President, Clinical Research
Laura A. Brege............................................. 2,646 252
Vice President, Finance and Chief Financial Officer
All Executive Officers as a Group (6 persons).............. 65,865 6,407
All Non-Executive Officer Directors as a Group............. -- --
All Non-Executive Officer Employees as a Group............. 734,041 73,869
- - ---------------
(1) Fair market value on the date of purchase multiplied by the number of shares
purchased.
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since its inception in 1988.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
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The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote on the proposal at the
meeting will be required to ratify the selection of Ernst & Young LLP.
Abstentions will be counted toward the tabulation of votes cast on the proposal
and will have the same effect as negative votes. Broker non-votes are counted
towards a quorum, but are not counted for any purpose in determining whether
this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 1, 1997 by: (i) each nominee for
director; (ii) each of the executive officers named in the Summary Compensation
Table; (iii) all executive officers and directors of the Company as a group; and
(iv) all those known by the Company to be beneficial owners of more than five
percent of its Common Stock.
BENEFICIAL
OWNERSHIP(1)(2)
------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
------------------------------------------------------- --------- ----------
The Capital Group(3)................................... 2,284,600 11.40%
333 South Hope Street
Los Angeles, CA 90071
FMR Corporation(4)..................................... 2,123,600 10.59%
82 Devonshire Street
Boston, MA 02109
Wisconsin (State of) Investment Board(5)............... 1,584,000 7.90%
P. O. Box 7842
Madison, WI 53707
T. Rowe Price Associates, Inc.(6)...................... 1,237,231 6.17%
100 East Pratt Street
Baltimore, MD 21202
Vaughn M. Kailian...................................... 450,225 2.20%
Laura A. Brege......................................... 118,737 *
Charles J. Homcy....................................... 78,202 *
Michael M. Kitt........................................ 96,590 *
Mark D. Perrin......................................... 52,736 *
Shaun R. Coughlin...................................... 74,920 *
James T. Doluisio...................................... 17,350 *
Jerry T. Jackson....................................... 15,416 *
Ernest Mario........................................... 7,916 *
Robert R. Momsen....................................... 52,018 *
Lloyd Hollingsworth Smith, Jr.......................... 21,254 *
William H. Younger, Jr................................. 83,048 *
All executive officers and directors
as a group (13 people)(7)............................ 1,335,280 6.34%
- - ---------------
* Less than one percent.
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(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G, if any, filed with the
Securities and Exchange Commission ("the SEC"). Unless otherwise indicated
in the footnotes to this table and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting and
investment power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 20,044,607 shares outstanding on March
1, 1997, adjusted as required by rules promulgated by the SEC.
(2) Includes shares that certain officers and directors of the Company have the
right to acquire within 60 days after the date of this table pursuant to
outstanding options, as follows: Vaughn M. Kailian, 417,260 shares; Laura A.
Brege, 115,151 shares; Charles J. Homcy, 76,306 shares; Michael M. Kitt,
91,045 shares; Mark D. Perrin, 49,645 shares; James T. Doluisio, 16,250
shares; Jerry T. Jackson, 10,416 shares; Ernest Mario, 7,916 shares; Robert
R. Momsen, 16,250 shares; Lloyd Hollingsworth Smith, Jr., 21,254 shares;
William H. Younger, Jr., 16,250 shares; and all executive officers and
directors as a group, 1,007,204 shares.
(3) Based on a Schedule 13G filed with the SEC on February 11, 1997, includes
2,284,600 shares (11.40%) beneficially owned by The Capital Group Companies,
Inc., of which 1,367,600 shares (6.82%) are beneficially owned by Capital
Guardian Trust Company, a wholly-owned subsidiary of The Capital Group
Companies, Inc. The Capital Group Companies, Inc., has sole dispositive
power over 2,284,600 shares, sole power to direct the voting of 889,000
shares and no power to vote or direct the voting of 1,395,600 shares.
(4) Based on a Schedule 13G filed with the SEC on February 14, 1997, includes
1,796,700 shares (8.96%) beneficially owned by Fidelity Management &
Research Company, a wholly-owned subsidiary of FMR Corporation, as a result
of acting as investment advisor to several investment companies registered
under Section 8 of the Investment Company Act of 1940. Also includes 326,900
shares (1.63%) beneficially owned by Fidelity Management Trust Company, a
wholly-owned subsidiary of FMR Corporation, as a result of serving as
investment manager of institutional accounts. FMR Corporation, through its
control of Fidelity Management Trust Company, has sole dispositive power
over 2,123,600 shares, sole power to direct the voting of 282,900 shares and
no power to vote or to direct the voting of 44,000 shares.
(5) Based on a Schedule 13G filed with the SEC on January 16, 1997. The State of
Wisconsin Investment Board has sole power to dispose or direct the
disposition of and sole voting power over the shares.
(6) Based on a Schedule 13G filed the with SEC on February 14, 1997, includes
1,237,231 shares beneficially owned by T. Rowe Price Associates, Inc. as a
result of acting as investment advisor with power to direct and/or sole
power to vote the securities on behalf of various individual and
institutional investors. T. Rowe Price Associates, Inc. disclaims beneficial
ownership of these shares.
(7) Includes the shares described in the notes above, where applicable.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than 10% stockholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with, except that one
report, covering one transaction, was filed late by Dr. Smith.
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EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors who are neither employees of nor consultants to the Company
("non-employee directors") receive an annual directors' fee of $10,000, paid on
a quarterly basis. In accordance with Company policy, directors may also be
reimbursed for certain expenses in connection with attendance at Board and
committee meetings. An aggregate of $70,000 was paid to non-employee directors
during 1996 for services as directors of the Company.
Under the 1994 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan") each non-employee director of the Company was automatically granted a
nonqualified option to purchase 25,000 shares of the Company's Common Stock on
the date of adoption of the Directors' Plan or, if later, the date of such
non-employee director's election to the Board. The exercise price of options
granted under the Directors' Plan is 100% of the fair market value of the Common
Stock subject to the option on the date of the option grant. Options granted
under the Directors' Plan vest ratably over 60 months and have a term of 10
years. During 1996, no options to purchase shares were granted to non-employee
directors under the Directors' Plan.
In 1988, the Company and Dr. Coughlin entered into a consulting agreement
which provided that, among other things, Dr. Coughlin would perform consulting
services for the Company. In October 1994, the consulting agreement was amended
to provide that Dr. Coughlin will receive $1,666 per month for his services as a
consultant to the Company. The Company pays Dr. Coughlin's consulting fee
directly to UCSF on behalf of Dr. Coughlin. During 1996, UCSF received payments
totalling $20,000 on behalf of Dr. Coughlin.
In January 1993, the Company and Dr. Smith entered into a consulting
agreement which provides, among other things, that Dr. Smith will perform
consulting services for the Company for 10 days each year during the five-year
term of the consulting agreement. In consideration of such services, the Company
is to pay Dr. Smith $1,000 per consulting day, which amount is to be paid in
arrears on the last day of each calendar quarter. Dr. Smith received payments
totalling $10,000 for services rendered during 1996.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows, for the fiscal years ended December 31, 1996,
1995 and 1994, compensation awarded or paid to, or earned by the Company's Chief
Executive Officer and its four other most highly compensated executive officers
(the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
SECURITIES
RESTRICTED UNDERLYING ALL
OTHER ANNUAL STOCK OPTIONS/ OTHER
SALARY BONUS COMPENSATION AWARDS SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) (3)($) ($)(4) (#)(5) ($)(6)
- - --------------------------------- ---- -------- ------- ------------ ---------- ---------- ------------
Vaughn M. Kailian................ 1996 $394,167 $ -- $ -- $ -- 100,000 $1,440
President and Chief Executive 1995 327,917 26,233 -- 17,255 40,000 3,082
Officer 1994 303,333 32,275 -- 22,956 30,000 3,294
Charles J. Homcy, M.D.(8)........ 1996 302,917 -- 21,966(9) -- 20,000 209
Executive Vice President, 1995 233,333 18,667 16,502(9) 12,276 175,000 1,979
Research and Development
Mark Perrin(10).................. 1996 270,000 -- 29,959(11) -- 10,000 1,020
Executive Vice President, 1995 31,846 2,293 -- 1,473 175,000 108
Commercial Operations
Michael M. Kitt, M.D............. 1996 211,447 -- -- -- 20,000 1,307
Vice President, Clinical
Research 1995 196,167 15,693 -- 10,316 -- 1,548
1994 186,000 19,790 -- 14,083 -- 1,161
Laura A. Brege................... 1996 198,917 -- -- -- 60,000 962
Vice President, Finance and
Chief 1995 185,583 14,847 -- 9,765 20,000 1,060
Financial Officer 1994 167,917 18,807 -- 13,365 -- 1,015
- - ---------------
(1) Includes amounts earned but deferred at the election of the named executive
officer.
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(2) Includes amounts equal to between 7% and 8% in 1995 and approximately 11%
in 1994 of the executive's eligible annual compensation earned pursuant to
the Company's 1995 and 1994 Incentive Pay Programs and paid in 1996 and
1995, respectively. Does not include the value of restricted stock bonus
awards granted in 1996 and 1995, under the 1991 Plan pursuant to such
Programs, which awards are included under the heading "Restricted Stock
Awards" in this table.
(3) As permitted by rules promulgated by the SEC, no amounts shown with respect
to "perquisites" under "Other Annual Compensation" where such amounts for
each Named Executive Officer do not exceed the lesser of 10% of such
executive's bonus plus salary or $50,000.
(4) Represents the dollar value of the shares awarded calculated by multiplying
the market value on the date of grant ($8.75 and $12.37 per share in 1995
and 1994, respectively, based on the closing sales price as reported on the
Nasdaq National Market) by the number of shares awarded. Restricted shares
vest annually over three years from the date of grant. At the end of fiscal
1996, the aggregate restricted stock holdings of the Named Executive
Officers and the value thereof at year end based on the then-current market
value ($9.875, based on the closing sales price reported on the Nasdaq
National Market) without giving effect to the diminution of value
attributable to the restrictions on such stock, were as follows: $36,261
for Mr. Kailian (3,672 shares), $13,855 for Dr. Homcy (1,403 shares),
$1,698 for Mr. Perrin (172 shares), $21,745 for Dr. Kitt (2,202 shares) and
$20,589 for Mrs. Brege (2,085 shares). Dividends on these shares of
restricted stock will be paid when, as, and if declared by the Company's
Board of Directors. To date, the Company has not paid any dividends and
does not anticipate paying any dividends on its Common Stock in the
foreseeable future.
(5) The Company has not issued any SARs.
(6) Includes premiums on life insurance payable to the each named executive
officer. Also, includes, in 1996, $500 for Mr. Perrin and Mrs. Brege; in
1995, $500 for Dr. Homcy and Mrs. Brege and in 1994, $500 for Mr. Kailian,
Dr. Kitt and Mrs. Brege in matching contributions by the Company to its
tax-qualified employee savings and retirement plans (the "401(k) Plan").
(8) Dr. Homcy joined the Company in March 1995.
(9) Includes $21,966 in 1996 and $16,502 in 1995 as reimbursement of expenses
in connection with Dr. Homcy's relocation.
(10) Mr. Perrin joined the Company in November 1995.
(11) Includes $29,959 in reimbursement of expenses in connection with Mr.
Perrin's relocation. The Company has made an interest-bearing short-term
bridge loan of $40,000, which is due in June 1997, to Mr. Perrin in
connection with his relocation.
STOCK OPTION GRANTS AND EXERCISES
The Company has granted options to its executive officers and employees
under its 1988 Employee Stock Option Plan (the "1988 Employee Plan"), its 1988
Consultant Stock Option Plan (the "1988 Consultant Plan") and its 1991 Plan. As
of March 15, 1997, options to purchase 652,049 shares were outstanding under the
1988 Employee Plan and options to purchase 78,167 shares were outstanding under
the 1988 Consultant Plan. Both of these plans were terminated in 1991. As of
March 15, 1997, options to purchase a total of 3,296,308 shares were outstanding
under the 1991 Plan, and 874,168 shares remained available for future grants
under the 1991 Plan, as amended.
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The following tables show, for the fiscal year ended December 31, 1996,
certain information regarding options granted to, exercised by, and held at year
end by, the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE AT
----------------------------------------------------------- ASSUMED ANNUAL
NUMBER OF % OF OPTIONS RATES OF STOCK PRICE
SECURITIES TOTAL GRANTED APPRECIATION FOR OPTION
UNDERLYING TO EMPLOYEES TERM(3)
OPTIONS IN FISCAL EXERCISE EXPIRATION -----------------------
NAME GRANTED(#)(1) YEAR(2) ($/SH) DATE 5% 10%
- - -------------------- ------------- ------------- -------- ---------- -------- ----------
Vaughn M. Kailian... 100,000 11.67% $8.563 1/19/06 $538,491 $1,364,642
Charles J. Homcy.... 20,000 2.33 8.563 1/19/06 107,698 272,928
Mark D. Perrin...... 10,000 1.17 8.563 1/19/06 53,849 136,464
Michael M. Kitt..... 20,000 2.33 8.563 1/19/06 107,698 272,928
Laura A. Brege...... 60,000 7.00 8.563 1/19/06 323,095 818,785
- - ---------------
(1) Reflects options granted by the Company to its executive officers under the
1991 Plan in 1996. The terms of these options are generally consistent with
those options granted to other employees under the Company's 1991 Plan,
except for the vesting term for Mr. Kailian, Dr. Homcy, Mr. Perrin and Mrs.
Brege, whose options vest in their entirety on January 31, 1999. Options
granted to Dr. Kitt vest in equal monthly installments over a five-year
period following the date of grant. See "Proposal 2: Approval of the 1991
Equity Incentive Plan, as Amended" for further information regarding the
terms of options granted under the 1991 Plan.
(2) Based on options to purchase 857,000 shares of common stock granted to
employees, including executive officers, in fiscal 1996.
(3) The potential realizable value is based on the term of the option at the
date of the grant (ten years). It is calculated by assuming that the stock
price on the date of grant appreciates at the indicated annual rate,
compounded annually for the entire term and that the option is exercised and
sold on the last day of the option term for the appreciated stock price.
These amounts represent certain assumed rates of appreciation only and do
not reflect the Company's estimate or projection of future stock price
performance. Actual gains, if any, are dependent on the actual future
performance of the Company's Common Stock. There can be no assurance that
the amounts reflected in this table will be achieved.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR,
AND FY-END OPTION VALUES
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FY-END(#) AT FY-ENDS($)
ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) ($)(1) UNEXERCISABLE(2) UNEXERCISABLE(2)(3)
- - ------------------------- -------------- -------------- ------------------- --------------------
Vaughn M. Kailian........ -- -- 400,851/174,149 $2,432,625/$131,250
Charles J. Homcy......... -- -- 64,170/130,830 -- / 26,250
Mark D. Perrin........... -- -- 37,818/147,081 -- / 13,125
Michael M. Kitt.......... -- -- 82,008/ 37,992 4,814/ 21,436
Laura A. Brege........... -- -- 111,170/ 78,830 -- / 78,750
- - ---------------
(1) Fair market value of the Company's Common stock on the date of exercise
(based on the closing sales price reported on the Nasdaq National Market or
the actual sales price if the shares were sold by the optionee) less the
exercise price.
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22
(2) Includes both "in-the-money" and "out-of-the-money" options. "In-the-money"
options are options with exercise prices below the market price of the
Company's Common Stock at December 31, 1996.
(3) Fair market value of the Company's Common Stock at December 29, 1996
($9.875, based on the closing sales price reported on the Nasdaq National
Market), less the exercise price.
COMPENSATION COMMITTEE REPORT(1)
The Compensation Committee (the "Committee") consists of Jerry T. Jackson,
Robert R. Momsen and Ernest Mario, Ph.D., none of whom is an employee of the
Company. The Committee is responsible for setting the Company's policies
regarding compensation and for administering the Company's 1988 Employee Stock
Option Plan, 1988 Consultant Stock Option Plan, 1991 Equity Incentive Plan and
1991 Stock Purchase Plan. In particular, the Committee evaluates the performance
of management and determines the compensation of executive officers.
The Company's executive compensation philosophy is to attract and retain
executive officers capable of leading the Company to fulfillment of its business
objectives by offering competitive compensation opportunities that reward
individual contributions as well as corporate performance. Accordingly, the
Company's executive compensation policies include:
- competitive pay practices, taking into account the pay practices of life
science and pharmaceutical companies with which the Company competes for
talented executives, with special weight given to California companies of
comparable size;
- annual incentive programs which are designed to encourage executives to
focus on the achievement of specific short-term strategic goals as well
as longer-term corporate objectives;
- equity-based incentives designed to motivate executives over the long
term, to align the interests of management and the stockholders and to
ensure that management is appropriately rewarded for benefits which they
achieve for the Company's stockholders.
Total compensation for the Company's executive officers includes a base
salary component and may include two other components: annual incentives and
long-term incentives. Annual incentive compensation may consist of cash
incentive bonuses and stock bonus or restricted stock bonus awards, or other
equity components, each based on satisfying corporate goals established for the
year by the Committee as well as on meeting individual performance objectives.
In addition, executive officers of the Company may receive long-term incentive
compensation in the form of grants of options to purchase shares of the
Company's Common Stock, with exercise prices typically set at fair market value
on the date of grant. Restricted stock bonus awards may also provide long-term
incentives for executives.
In the biopharmaceutical industry, traditional measures of corporate
performance, such as earnings per share or sales growth, may not readily apply
in reviewing performance of executives. Rather, at the Company's current stage
of development, in determining the compensation of the Company's executives, the
Committee looks to other indicia of performance, such as the progress of the
Company's research and development programs, regulatory developments and
corporate development activities, as well as the Company's success in securing
capital sufficient to assist the Company in completing product development and
achieving product revenues.
As a result, in many instances these qualitative factors necessarily
involve a subjective assessment by the Committee of corporate performance.
Moreover, the Committee does not base its considerations on any single
performance factor nor does it specifically assign relative weights to factors,
but rather considers a mix of factors and evaluates Company and individual
performance against that mix.
- - ---------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act or the Exchange Act, whether made before or after
the date hereof and irrespective of any general incorporation language in
any such filing.
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23
In addition, total compensation paid by the Company to its executive
officers is designed to be comparable to compensation packages paid to the
management of other companies of comparable size in the biopharmaceutical
industry. Toward that end, the Committee may review both independent survey data
as well as data gathered internally.
In January 1996, the Committee met to consider the compensation of the
Company's executive officers for fiscal 1996. The Committee considered a variety
of factors, both individual and corporate, in evaluating the performance of the
Company's executive officers. The Committee reviewed an analysis of compensation
done by an independent compensation consulting group with regard to
compensation, including equity-based incentives, at a select group of companies.
In addition, the Committee reviewed the results of other independent surveys
that provided information regarding management compensation for approximately
200 companies in the biopharmaceutical industry, categorized by geographic area
and management position. The analyses and surveys include a broader group of
companies than those companies included in the American Stock Exchange
Biotechnology Index used in the performance measurement comparison graph
included in this proxy statement. The Committee also reviewed other publicly
available information, gathered informally, pertaining to compensation of
executive officers in the biopharmaceutical industry.
For 1996, the Committee increased the salary of Mr. Kailian by
approximately 21% reflecting, in part, the Committee's evaluation of Mr.
Kailian's contribution to the performance of the Company in 1995 as well as
competitive compensation. In particular the Committee took into account progress
made in the continued development of INTEGRILIN(TM) (antithrombotic injection)
and with the Company's collaborative agreements, as well as Mr. Kailian's
achievements in recruiting individuals to serve in key positions at the Company.
Mr. Kailian's salary was also reviewed in comparison to compensation paid to
chief executive officers of companies in the biopharmaceutical industry.
Generally, the Committee targeted compensation to result in base salaries that
were at the mid-range of competitive salary levels. Similar factors accounted
for the increases in base salaries of the other executive officers for 1996.
The Company has used the grant of options under its 1991 Plan to underscore
the common interests of stockholders and management. Options granted to
executive officers are intended to provide a continuing financial incentive to
maximize long-term value to stockholders and to help make the executive's total
compensation opportunity competitive. In addition, because stock options
generally become exercisable over a period of several years, options encourage
executives to remain in the long-term employ of the Company. In determining the
size of an option grant to be made to an executive officer, the Committee takes
into account an executive officer's position and level of responsibility within
the Company, the executive officer's existing stock holdings in the Company and
unvested option holdings, and the potential reward to the officer if the stock
price appreciates in the public market. For 1996, the Committee granted options
which do not vest until January 31, 1999 to each member of the executive
committee. Applying the factors described above, the Committee granted to Mr.
Kailian an option to purchase 100,000 shares of Common Stock at an exercise
price of $8.56 per share, the fair market value of the Common Stock on the date
of the grant. The Committee granted to other executive officers options to
purchase Common Stock at levels ranging from 10,000 to 60,000 shares each.
The Committee also approved a 1996 Incentive Pay Program, which provides
for the payment to all employees of cash bonuses of up to 16% of eligible 1996
compensation and, for certain senior level employees, the grant of restricted
stock bonus awards under the 1991 Plan with a value of up to 10% of eligible
1996 compensation. Determinations of the amount of cash bonus and restricted
stock to be awarded under the Incentive Pay Program were based on the extent of
achievement of certain corporate goals established by the Board for 1996 and on
individual performance objectives. The goals established for the 1996 Incentive
Pay Program were: (i) progress toward clinical, regulatory and commercial goals
in development programs; (ii) progress in connection with collaborative
relationships; (iii) effective implementation of the planned growth of the
Company; (iv) continued advances toward project goals in research and
development programs; and (v) expansion of technological capabilities.
In January 1997, the Committee met to evaluate, performance against the
goals established for the 1996 Incentive Pay Program. The Committee determined
that, while the Company had success in achieving many
21
24
of its objectives, there would be no cash payment or grant of restricted stock
bonus award to executive officers pursuant to the 1996 Incentive Pay Program.
The Committee has not adopted a policy with respect to the application of
Section 162(m) of the Code, which generally imposes an annual corporate
deduction limitation of $1,000,000 on the compensation of certain executive
officers. However, pursuant to Section 162(m), the Company's 1991 Plan has been
amended to permit compensation from options granted thereunder at no less than
100% of fair market value to be excluded from the Section 162(m) limitations.
Jerry T. Jackson Robert R. Momsen Ernest Mario, Ph.D.
22
25
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows total stockholder return of the CRSP Total Return
Index for the Nasdaq Stock Market (United States Companies) ("Nasdaq Index"),
the American Stock Exchange ("AMEX") Biotechnology Index and for the Company,
beginning June 27, 1991, when the Company's Common Stock commenced public
trading:
COMPARISON OF TOTAL CUMULATIVE RETURN ON INVESTMENT(2)
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) COR AMEX NASDAQ
6/27/91 100 100 100
135 115 105
188 131 110
9/30/91 200 146 111
258 190 114
157 159 110
12/31/91 185 195 123
188 193 130
183 171 133
3/31/92 175 156 127
129 123 122
138 138 123
6/30/92 138 125 118
151 138 122
154 124 118
9/30/92 152 124 123
151 125 127
198 152 137
12/31/92 185 147 142
197 129 146
137 102 141
3/31/93 132 99 145
175 99 139
191 102 147
6/30/93 163 100 148
157 92 148
160 98 156
9/30/93 169 96 160
205 109 164
169 105 159
12/31/93 186 100 163
194 104 168
166 94 167
3/31/94 146 79 156
151 75 154
115 81 154
6/30/94 145 69 148
151 68 152
182 83 161
9/30/94 188 78 161
160 72 163
165 73 158
12/30/94 135 71 158
160 70 159
166 71 167
3/31/95 160 67 172
203 69 177
191 67 182
6/30/95 110 77 196
125 84 210
143 95 214
9/30/95 137 98 219
128 90 218
135 94 223
12/29/95 103 115 221
128 124 223
128 119 231
3/29/96 144 116 231
131 129 250
125 134 261
6/28/96 140 121 249
94 100 227
121 111 240
9/30/96 123 121 258
111 114 257
131 116 272
12/31/96 122 124 271
0 143 290
- - ---------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act or the Exchange Act, whether made before or after
the date hereof and irrespective of any general incorporation language in
any such filing.
(2) The total return on investment (change in stock price plus reinvested
dividends) for the Company and the Nasdaq Index, based on June 27,
1991 = 100 and, for the AMEX Biotechnology Index, based on June 28,
1991 = 100. The AMEX Biotechnology Index is calculated using an equal-dollar
weighing methodology.
23
26
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements he or she may
be required to pay in actions or proceedings to which he or she is or may be
made a party by reason of his or her position as a director, officer or other
agent of the Company, and otherwise to the fullest extent permitted under
Delaware law and the Company's By-laws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
LOGO
R. LEE DOUGLAS, JR.
Secretary
April 18, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SEC ON FORM 10-K FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1996 IS AVAILABLE WITHOUT CHARGE UPON WRITTEN
REQUEST TO: INVESTOR RELATIONS, COR THERAPEUTICS, INC., 256 EAST GRAND AVENUE,
SOUTH SAN FRANCISCO, CA 94080.
24
27
LOGO
28
PROXY
COR THERAPEUTICS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1997
The undersigned hereby appoints Vaughn M. Kailian and Laura A. Brege, and each
of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of COR Therapeutics, Inc.
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of COR Therapeutics, Inc. to be held at the Embassy Suites Hotel,
250 Gateway Boulevard, South San Francisco, California on Tuesday, May 20,
1997, at 9:00 a.m. local time, and at any and all postponements, continuations
and adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4 AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
(Continued and to be signed on other side)
- - --------------------------------------------------------------------------------
FOLD AND DETACH HERE
29
Please mark
your vote as
indicated in
this example /X/
The Board of Directors recommends a vote for the nominees for director listed
below.
Proposal 1: To elect directors to hold office until the next Annual Meeting
of Stockholders and until their successors are elected.
For all nominees listed WITHHOLD AUTHORITY
(except as marked to to vote for all
the contrary below): nominees listed below:
/ / / /
Nominees: Vaughn M. Kailian, Shawn R. Corghlin, James T.
Deluisio, Jerry T. Jackson, Ernest Mario, Robert R. Nomsen,
Lloyd Hollingsworth Smith, Jr., and William H. Younger, Jr.
To withhold authority to vote for any nominee(s), write such
nominee(s) name(s) below:
--------------------------------------------------------------
The Board of Directors recommends a vote for Proposals 2, 3 and 4.
Proposal 2: To approve the Company's 1997 Equity Incentive Plan, as
amended, to increase the aggregate number of shares of Common
Stock authorized for issuance under such plan by 600,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
Proposal 3: To approve the Company's 1997 Employee Stock Purchase Plan, as
amended, to increase the aggregate number of shares of Common
Stock authorized for issuance under such plan by 300,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
Proposal 4: To ratify the selection of Ernst & Young LLP as independent
auditors of the Company for its fiscal year ending December 31,
1997.
FOR AGAINST ABSTAIN
/ / / / / /
DATED , 1997
- - ----------------------------------------------
- - ----------------------------------------------
- - ----------------------------------------------
SIGNATURE(S)
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If signer is
a corporation please give full corporate name and have a duly authorized
officer sign, stating title. If signer is a partnership, please sign in
partnership name by authorized person.
Please vote, date and promptly return this proxy in the enclosed return
envelope which is postage prepaid if mailed in the United States.
- - -------------------------------------------------------------------------------
FOLD AND DETACH HERE
30
[COR THERAPEUTICS, INC. LOGO]
CORPORATE INFORMATION
BOARD OF DIRECTORS
VAUGHN M. KAILIAN
President, Chief Executive Officer and Director, COR Therapeutics, Inc.
SHAUN R. COUGHLIN, MD, PHD
Professor of Medicine and Director of the Cardiovascular Research Institute,
University of California, San Francisco
JAMES T. DOLUISIO, PHD
Dean and Hoechst-Roussel Professor of Pharmacy, University of Texas at Austin
JERRY T. JACKSON
Retired Executive Vice President, Merek & Co., Inc.
ERNEST MARIO, PHD
Cochairman and Chief Executive Officer, ALZA Corporation
ROBERT R. MOMSEN
General Partner, InterWest Partners
LLOYD HOLLINGSWORTH SMITH, JR, MD
Associate Dean of the School of Medicine, University of California, San
Francisco
WILLIAM H. YOUNGER, JR
General Partner, Sutter Hill Ventures
OFFICERS
VAUGHN M. KAILIAN
President, Chief Executive Officer and Director
LAURA A. BREGE
Vice President, Finance and Chief Financial Officer
R. LEE DOUGLAS, JR
Vice President, Corporate Development and Secretary
CHARLES J. HOMCY, MD
Executive Vice President, Research and Development
MICHAEL M. KITT, MD
Vice President, Clinical Research
MARK D. PERRIN
Executive Vice President, Commercial Operations
WILLIAM R. POOL, PHD
Vice President, Development
ROBERT J. TERIFAY
Vice President, Global Marketing
BONNIE D. ZELL
Vice President, Sales -- North America
CORPORATE HEADQUARTERS
256 East Grand Avenue
South San Francisco, CA 94080
Telephone: 415/244-6800
Facsimile: 415/244-9208
INDEPENDENT AUDITORS
Ernst & Young LLP
Palo Alto, CA
GENERAL COUNSEL
Cooley Godward LLP
San Francisco, CA
TRADEMARKS
COR(TM) and INTEGRILIN(TM) are trademarks of COR Therapeutics, Inc.
TRANSFER AGENT & REGISTRAR
ChaseMellon Shareholder Services, LLC
50 California Street, 10th Floor
San Francisco, CA 94111
Telephone: 800/356-2017
ANNUAL MEETING
The Annual Meeting of Stockholders will be held at 9:00 am, Tuesday, May 20,
1997 at:
Embassy Suites
250 Gateway Boulevard
South San Francisco, CA 94080
SEC FORM 10-K
A copy of the Company's annual report on Form 10-K as filed with the Securities
and Exchange Commission is available without charge upon written request to:
Investor Relations
COR Therapeutics, Inc.
256 East Grand Avenue
South San Francisco, CA 94080
Telephone: 415/244-6893
MARKET FOR COMMON STOCK
The common stock of the Company is traded on the Nasdaq National Market under
the symbol CORR.
STOCK PROFILE
As of March 3, 1997, there were approximately 345 stockholders of record of the
Company's common stock with 20,044,607 shares outstanding. No dividends have
been paid on the common stock since the Company's inception.
PRICE RANGE OF COMMON STOCK
The following table sets forth, for the periods indicated, the high and low
reported sale prices of the Company's common stock.
HIGH LOW
------- ------
1996
First Quarter............. $12.50 $8.375
Second Quarter............ $11.875 $8.50
Third Quarter............. $11.50 $7.00
Fourth Quarter............ $11.625 $8.75
1995
First Quarter............. $13.875 $9.50
Second Quarter............ $19.50 $8.125
Third Quarter............. $13.625 $8.625
Fourth Quarter............ $12.50 $7.75
31
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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
- - --------------------------------------------------------------------------------
(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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32
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
33
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.
34
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
35
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.
36
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.
37
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
- - ------------------------------------------------------------------------------------------------------------------------------
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
38
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
39
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
40
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.
41
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.
42
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.
43
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
44
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.
45
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
46
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
47
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
48
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
49
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
50
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
51
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.
52
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.
53
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
54
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."
55
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."
56
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.
57
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
58
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
59
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.
60
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
61
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.
62
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.
63
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.
64
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
65
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.
66
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.
67
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.
68
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.
69
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
======== ========
70
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
71
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.
72
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.
73
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.
74
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.
75
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
========= ==== ====== ========= ======
76
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
77
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.
78
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.
79
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
80
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
81
(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
82
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
83
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.
84
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.
85
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.
86
COR THERAPEUTICS, INC.
1991 EMPLOYEE STOCK PURCHASE PLAN
(ADOPTED MAY 14, 1991)
(AMENDED JANUARY 6, 1995)
(AMENDED NOVEMBER 15, 1996)
(AMENDED JANUARY 24, 1997)
1. PURPOSE.
(a) The purpose of the 1991 Employee Stock Purchase Plan ("the
Plan") is to provide a means by which employees of COR Therapeutics, Inc., a
Delaware corporation (the "Company"), and its Affiliates, as defined in
subparagraph 1(b), which are designated as provided in subparagraph 2(b), may
be given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are
defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code
of 1986, as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the
services of its employees, to secure and retain the services of new employees,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to
a Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of
the Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of
the Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the
1.
87
exercise of this power, may correct any defect, omission or inconsistency in
the Plan, in a manner and to the extent it shall deem necessary or expedient to
make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote the best
interests of the Company.
(c) The Board may delegate administration of the Plan to a
Committee composed of not fewer than two (2) members of the Board (the
"Committee"). If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate six hundred fifty thousand (650,000)
shares of the Company's $0.0001 par value common stock (the "Common Stock").
If any right under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.
4. GRANT OF RIGHTS: OFFERING.
The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form
and shall contain such terms and conditions as the Board or the Committee shall
deem appropriate. If an employee has more than one right outstanding under the
Plan, unless he or she otherwise indicates in agreements or notices delivered
hereunder (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right
with a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
Offering or otherwise) the substance of the provisions contained in paragraphs
5 through 8, inclusive.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as
the Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any
2.
88
Affiliate shall not be eligible to be granted rights under the Plan, unless, on
the Offering Date, such employee has been in the employ of the Company or any
Affiliate for such continuous period preceding such grant as the Board or the
Committee may require, but in no event shall the required period of continuous
employment be equal to or greater than two (2) years. In addition, unless
otherwise determined by the Board or the Committee and set forth in the terms
of the applicable Offering, no employee of the Company or any Affiliate shall
be eligible to be granted rights under the Plan, unless, on the Offering Date,
such employee's customary employment with the Company or such Affiliate is at
least twenty (20) hours per week and at least five (5) months per calendar
year.
(b) The Board or the Committee may provide that, each person who,
during the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in the
Offering which coincides with the day on which such person becomes an eligible
employee or occurs thereafter, receive a right under that Offering, which right
shall thereafter be deemed to be a part of that Offering. Such right shall
have the same characteristics as any rights originally granted under that
Offering, as described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
(ii) the Purchase Period (as defined below) for such right
shall begin on its Offering Date and end coincident with the end of such
Offering; and
(iii) the Board or the Committee may provide that if such
person first becomes an eligible employee within a specified period of time
before the end of the Purchase Period (as defined below) for such Offering, he
or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights
under the Plan if, immediately after any such rights are granted, such employee
owns stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or of any Affiliate. For
purposes of this subparagraph 5(c), the rules of Section 424(d) of the Code
shall apply in determining the stock ownership of any employee, and stock which
such employee may purchase under all outstanding rights and options shall be
treated as stock owned by such employee.
(d) An eligible employee may be granted rights under the Plan only
if such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock
of the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at
the time such rights are granted) for each calendar year in which such rights
are outstanding at any time.
6. RIGHTS: PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase the number
of shares of Common Stock
3.
89
of the Company purchasable with up to fifteen percent (15%) (or such lower
percentage as the Board determines for a particular Offering) of such
employee's Earnings (as defined in Section 7(a)) during the period which begins
on the Offering Date (or such later date as the Board determines for a
particular Offering) and ends on the date stated in the Offering, which date
shall be no more than twenty-seven (27) months after the Offering Date (the
Purchase Period"). In connection with each Offering made under this Plan, the
Board or the Committee shall specify a maximum number of shares which may be
purchased by any employee as well as a maximum aggregate number of shares which
may be purchased by all eligible employees pursuant to such Offering. In
addition, in connection with each Offering which contains more than one
Exercise Date (as defined in the Offering), the Board or the Committee may
specify a maximum aggregate number of shares which may be purchased by all
eligible employees on any given Exercise Date under the Offering. If the
aggregate purchase of shares upon exercise of rights granted under the Offering
would exceed any such maximum aggregate number, the Board or the Committee
shall make a pro rata allocation of the shares available in as nearly a uniform
manner as shall be practicable and as it shall deem to be equitable.
(b) The purchase price of stock acquired pursuant to rights
granted under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the
fair market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the
fair market value of the stock on the Exercise Date.
7. PARTICIPATION: WITHDRAWAL: TERMINATION.
(a) An eligible employee may become a participant in an Offering
by delivering a participation agreement to the Company within the time
specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to fifteen percent (15%) (or
such lower percentage as the Board determines for a particular Offering) of
such employee's Earnings during the Purchase Period. "Earnings" is defined as
an employee's total compensation, including all salary, wages and other
remuneration paid to an employee (including amounts elected to be deferred by
the employee, that would otherwise have been paid, under any cash or deferred
arrangement established by the Company), overtime pay, commissions, bonuses,
profit sharing, any special payments for extraordinary services, provided,
however, that the Board in its sole discretion may limit the above definition
from time to time with respect to each Offering. The payroll deductions made
for each participant shall be credited to an account for such participant under
the Plan and shall be deposited with the general funds of the Company. A
participant may reduce, increase or begin such payroll deductions after the
beginning of any Purchase Period only as provided for in the Offering. A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Purchase Period.
(b) At any time during a Purchase Period a participant may
terminate his or her payroll deductions under the Plan and withdraw from the
Offering by delivering to the Company
4.
90
a notice of withdrawal in such form as the Company provides. Such withdrawal
may be elected at any time prior to the end of the Purchase Period. Upon such
withdrawal from the Offering by a participant, the Company shall distribute to
such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest unless the terms of the
Offering specifically so provide, and such participant's interest in that
Offering shall be automatically terminated. A participant's withdrawal from an
Offering will have no effect upon such participant's eligibility to participate
in any other Offerings under the Plan but such participant will be required to
deliver a new participation agreement in order to participate in subsequent
Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company or an Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the Offering, without
interest unless the terms of the Offering specifically so provide.
(d) Rights granted under the Plan shall not be transferable, and
shall be exercisable only by the person to whom such rights are granted.
8. EXERCISE.
(a) On each exercise date as defined in the relevant Offering (an
"Exercise Date"), each participant's accumulated payroll deductions (without
any increase for interest unless the terms of the Offering specifically so
provide) will be applied to the purchase of whole shares of stock of the
Company, up to the maximum number of shares permitted pursuant to the terms of
the Plan and the applicable Offering, at the purchase price specified in the
Offering. No fractional shares shall be issued upon the exercise of rights
granted under the Plan. The amount, if any, of accumulated payroll deductions
remaining in each participant's account after the purchase of shares which is
less than the amount required to purchase one share of stock on the final
Exercise Date of an Offering shall be held in each such participant's account
for the purchase of shares under the next Offering under the Plan, unless such
participant withdraws from such next Offering, as provided in subparagraph
7(b), or is no longer eligible to be granted rights under the Plan, as provided
in paragraph 5, in which case such amount shall be distributed to the
participant after said final Exercise Date, without interest unless the terms
of the Offering specifically so provide. The amount, if any, of accumulated
payroll deductions remaining in any participant's account after the purchase of
shares which is equal to the amount required to purchase whole shares of stock
on the final Exercise Date of an Offering shall be distributed in full to the
participant after such Exercise Date, without interest unless the terms of the
Offering specifically so provide.
(b) No rights granted under the Plan may be exercised to any
extent unless the Plan (including rights granted thereunder) is covered by an
effective registration statement pursuant to the Securities Act of 1933, as
amended (the "Securities Act"). If on an Exercise Date of any Offering
hereunder the Plan is not so registered, no rights granted under the Plan or
any Offering shall be exercised on said Exercise Date and all payroll
deductions accumulated during
5.
91
the purchase period (reduced to the extent, if any, such deductions have been
used to acquire stock) shall be distributed to the participants, without
interest unless the terms of the Offering specifically so provide.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the
Company shall keep available at all times the number of shares of stock
required to satisfy such rights.
(b) The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares of stock upon exercise of the rights granted
under the Plan. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such rights unless and until such authority is
obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until certificates representing such shares shall
have been issued.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or otherwise), the Plan and
outstanding rights will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the class(es) and number of shares and
price per share of stock subject to outstanding rights.
(b) In the event of: (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company is not the
surviving corporation; (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (4)
any other capital reorganization in which more than fifty percent (50%) of the
shares of the Company entitled to vote are exchanged, then, as determined by
the Board in its sole discretion (i) any surviving corporation may assume
outstanding rights or substitute similar rights for those under the Plan, (ii)
such rights may continue in full force and effect, or (iii) participants'
accumulated payroll
6.
92
deductions may be used to purchase Common Stock immediately prior to the
transaction described above and the participants' rights under the ongoing
Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in paragraph 12 relating to adjustments upon
changes in stock, no amendment shall be effective if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the requirements
of Rule 16b-3 promulgated under the Exchange Act or any Nasdaq or securities
exchange listing requirements. It is expressly contemplated that the Board may
amend the Plan in any respect the Board deems necessary or advisable to provide
eligible employees with the maximum benefits provided or to be provided under
the provisions of the Code and the regulations promulgated thereunder relating
to employee stock purchase plans and/or to bring the Plan and/or rights granted
under it into compliance therewith.
(b) Rights and obligations under any rights granted before
amendment of the Plan shall not be altered or impaired by any amendment of the
Plan, except with the consent of the person to whom such rights were granted.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate ten (10) years from the date
the Plan is adopted by the Board or approved by the stockholders of the
Company, whichever is earlier. No rights may be granted under the Plan while
the Plan is suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan
is in effect shall not be altered or impaired by suspension or termination of
the Plan, except with the consent of the person to whom such rights were
granted.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
rights granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company.
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COR THERAPEUTICS, INC.
1991 EQUITY INCENTIVE PLAN
(ADOPTED BY BOARD OF DIRECTORS MAY 14, 1991)
(AMENDED JANUARY 21, 1994)
(AMENDED JANUARY 6, 1995)
(AMENDED JANUARY 19, 1996)
(AMENDED JANUARY 24, 1997)
1. PURPOSE.
(a) The purpose of the 1991 Equity Incentive Plan (the
"Plan") is to provide a means by which employees, directors and consultants of
COR Therapeutics, Inc., a Delaware corporation (the "Company"), and its
Affiliates, as defined in subparagraph 1(b), may be given an opportunity to
benefit from increases in value of the stock of the Company through the
granting of (i) incentive stock options, (ii) nonqualified stock options, (iii)
stock bonuses, and (iv) rights to purchase restricted stock, all as defined
below.
(b) "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are
defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code
of 1986, as amended (the "Code").
(c) "Covered Executive" as used in the Plan means each
employee of or consultant to the Company or an Affiliate subject to Section 16
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
respect to the Company or an Affiliate.
(d) The Company, by means of the Plan, seeks to retain
the services of persons now employed by or serving as consultants to the
Company, to secure and retain the services of persons capable of filling such
positions, and to provide incentives for such persons to exert maximum efforts
for the success of the Company.
(e) The Company intends that the rights issued under the
Plan ("Stock Awards") shall, in the discretion of the Board of Directors of the
Company (the "Board") or any committee to which responsibility for
administration of the Plan has been delegated pursuant to subparagraph 2(c), be
either (i) stock options granted pursuant to paragraph 5 hereof, including
incentive stock options as that term is used in Section 422 of the Code
("Incentive Stock Options"), or options which do not qualify as Incentive Stock
Options ("Nonqualified Stock Options") (together hereinafter referred to as
"Options"), or (ii) stock bonuses or rights to purchase restricted stock
granted pursuant to paragraph 6 hereof.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless
and until the Board delegates administration to a committee, as provided in
subparagraph 2(c).
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(b) The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the
persons eligible under the Plan shall be granted Stock Awards; when and how
Stock Awards shall be granted; whether a Stock Award will be an Incentive Stock
Option, a Nonqualified Stock Option, a stock bonus, a right to purchase
restricted stock, or a combination of the foregoing; the provisions of each
Stock Award granted (which need not be identical), including the time or times
when a person shall be permitted to purchase or receive stock pursuant to a
Stock Award; and the number of shares with respect to which Stock Awards shall
be granted to each such person.
(2) To construe and interpret the Plan and Stock
Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any Stock
Award, in a manner and to the extent it shall deem necessary or expedient to
make the Plan fully effective.
(3) To amend the Plan as provided in paragraph 13.
(4) Generally, to exercise such powers and to
perform such acts as the Board deems necessary or expedient to promote the best
interests of the Company.
(c) The Board may delegate administration of the Plan to
a committee composed of two (2) or more members of the Board (the "Committee"),
all of the members of which Committee may (but need not) be, in the discretion
of the Board, non-employee directors and/or outside directors. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore
possessed by the Board, subject, however, to such resolutions, not inconsistent
with the provisions of the Plan, as may be adopted from time to time by the
Board. Notwithstanding any provision in this paragraph 2 to the contrary, the
Board or the Committee may delegate to a committee of one or more members of
the Board the authority to grant options to eligible persons who are not then
Covered Executives.
(d) (1) The term "non-employee director", as used in
this Plan, shall mean a member of the Board who either (i) is not a current
employee or officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K ("Regulation S-K") promulgated
pursuant to the Securities Act of 1933 (the "Securities Act")), does not
possess an interest in any other transaction as to which disclosure would be
required under Item 404(a) of Regulation S-K, and is not engaged in a business
relationship as to which disclosure would be required under Item 404(b) of
Regulation S-K; or (ii) is otherwise considered a "non-employee director" for
purposes of Rule 16b-3 promulgated under the Exchange Act.
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(2) The term "outside director", as used in this
Plan shall mean a director who either (i) is not a current employee of the
Company or an "affiliated corporation", is not a former employee of the Company
or an affiliated corporation receiving compensation for prior services (other
than benefits under a tax qualified pension plan), was not an officer of the
Company or an affiliated corporation at any time, and is not currently
receiving compensation for personal services in any capacity other than as a
director, or (ii) is otherwise considered an "outside director" for purposes of
Section 162(m) of the Code.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 11 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards granted under the Plan shall not exceed in the aggregate four
million eight hundred thousand (4,800,000) shares of the Company's $0.0001 par
value common stock (the "Common Stock"). If any Stock Award granted under the
Plan shall for any reason expire or otherwise terminate without having been
exercised in full, the Common Stock not acquired under such Stock Award shall
again become available for the Plan. Shares repurchased by the Company
pursuant to any repurchase rights reserved by the Company pursuant to the Plan
shall not be available for subsequent issuance under the Plan.
(b) The Common Stock subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise.
4. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to
employees (including officers) of the Company or its Affiliates. A director of
the Company shall not be eligible to receive Incentive Stock Options unless
such director is also an employee of the Company or any Affiliate. Stock
Awards other than Incentive Stock Options may be granted only to employees
(including officers), directors of and consultants to the Company or any
Affiliate.
(b) No person shall be eligible for the grant of an
Incentive Stock Option under the Plan if, at the time of grant, such persons
owns (or is deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or of any of its Affiliates unless the
exercise price of such Incentive Stock Option is at least one hundred and ten
percent (110%) of the fair market value of the Common Stock at the date of
grant and the Incentive Stock Option is not exercisable after the expiration of
five (5) years from the date of grant.
(c) No person shall be eligible to be granted Stock
Awards under the Plan covering more than five hundred thousand (500,000) shares
of the Company's Common Stock in any calendar year.
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5. TERMS OF STOCK OPTIONS.
Each Option shall be in such form and shall contain such terms
and conditions as the Board or the Committee shall deem appropriate. The
provisions of separate Options need not be identical, but each Option shall
include (through incorporation of provisions hereof by reference in the Option
or otherwise) the substance of each of the following provisions:
(a) No Option shall be exercisable after the expiration
of ten (10) years from the date it was granted.
(b) The exercise price of each Incentive Stock Option
shall be not less than one hundred percent (100%) of the fair market value of
the Common Stock subject to the Option on the date the Option is granted. The
exercise price of each Nonqualified Stock Option shall be not less than one
hundred percent (100%) of the fair market value of the Common Stock subject to
the Option on the date the Option is granted.
(c) The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either: (i) in cash at the time the Option is exercised; or (ii)
at the discretion of the Board or the Committee, either at the time of grant or
exercise of the Option (A) by delivery to the Company of shares of Common Stock
of the Company that have been held for the period required to avoid a charge to
the Company's reported earnings and valued at the fair market value on the date
of exercise, (B) according to a deferred payment or other arrangement (which
may include, without limiting the generality of the foregoing, the use of other
Common Stock of the Company) with the person to whom the Option is granted or
to whom the Option is transferred pursuant to subparagraph 5(d), or (C) in any
other form of legal consideration that may be acceptable to the Board or the
Committee in their discretion.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at not less than the minimum
rate of interest necessary to avoid the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts stated to
be interest under the deferred payment arrangement.
(d) An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the optionee to whom the Option is granted
only by such optionee. A Nonqualified Stock Option may be transferable to the
extent provided in the Option Agreement; provided, however, that if the Option
Agreement does not specifically provide for transferability, then such
Nonqualified Stock Option shall not be transferable except by will or by the
laws of descent and distribution or pursuant to a domestic relations order.
Notwithstanding the foregoing, the person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.
(e) The total number of shares of Common Stock subject to
an Option may, but need not, be allotted in periodic installments (which may,
but need not, be equal). From
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time to time during each of such installment periods, the Option may become
exercisable ("vest") with respect to some or all of the shares allotted to that
period, and may be exercised with respect to some or all of the shares allotted
to such period and/or any prior period as to which the Option was not fully
exercised. During the remainder of the term of the Option (if its term extends
beyond the end of the installment periods), the Option may be exercised from
time to time with respect to any shares then remaining subject to the Option.
The provisions of this subparagraph 5(e) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(f) The Company may require any optionee, or any person
to whom an Option is transferred under subparagraph 5(d), as a condition of
exercising any such Option: (i) to give written assurances satisfactory to the
Company as to the optionee's knowledge and experience in financial and business
matters and/or to employ a purchaser representative who has such knowledge and
experience in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser's representative, the merits
and risks of exercising the Option; and (ii) to give written assurances
satisfactory to the Company stating that such person is acquiring the Common
Stock subject to the Option for such person's own account and not with any
present intention of selling or otherwise distributing the Common Stock. These
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if: (x) the issuance of the shares upon the exercise of the Option
has been registered under a then currently effective registration statement
under the Securities Act; or (y) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities law.
(g) An Option shall terminate three (3) months after
termination of the optionee's employment or relationship as a consultant or
director with the Company or an Affiliate, unless: (i) such termination is due
to such person's permanent and total disability, within the meaning of Section
422(c)(6) of the Code, in which case the Option may, but need not, provide that
it may be exercised at any time within one (1) year following such termination
of employment or relationship as a consultant or director; (ii) the optionee
dies while in the employ of or while serving as a consultant or director to the
Company or an Affiliate, or within not more than three (3) months after
termination of such employment or relationship as a consultant or director, in
which case the Option may, but need not, provide that it may be exercised at
any time within eighteen (18) months following the death of the optionee by the
person or persons to whom the optionee's rights under such Option pass by will
or by the laws of descent and distribution; or (iii) the Option by its term
specifies either (A) that it shall terminate sooner than three (3) months after
termination of the optionee's employment or relationship as a consultant or
director with the Company or an Affiliate; or (B) that it may be exercised more
than three (3) months after termination of the optionee's employment or
relationship as a consultant or director with the Company or an Affiliate.
This subparagraph 5(g) shall not be construed to extend the term of any Option
or to permit anyone to exercise the Option after expiration of its term, nor
shall it be construed to increase the number of shares as to which any Option
is exercisable from the amount exercisable on the date of termination of the
optionee's employment or relationship as a consultant or director.
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(h) The Option may, but need not, include a provision
whereby the optionee may elect at any time during the term of his or her
employment or relationship as a consultant or director with the Company or any
Affiliate to exercise the Option as to any part or all of the shares subject to
the Option prior to the stated vesting dates of the Option. Any shares so
purchased from any unvested installment or Option may be subject to a
repurchase right in favor of the Company or to any other restriction the Board
or the Committee determines to be appropriate.
(i) To the extent provided by the terms of an Option,
each optionee may satisfy, in whole or in part, any federal, state or local tax
withholding obligation relating to the exercise of such Option by any of the
following means or by a combination of such means: (i) tendering a cash
payment; (ii) authorizing the Company to withhold from the shares of the Common
Stock otherwise issuable to the optionee as a result of the exercise of the
Option a number of shares having a fair market value less than or equal to the
amount of the withholding tax obligation; or (iii) delivering to the Company
owned and unencumbered shares of the Common Stock having a fair market value
less than or equal to the amount of the withholding tax obligation.
6. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall
be in such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the
terms and conditions of separate agreements need not be identical, but each
stock bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
(a) The purchase price under each stock purchase
agreement shall be such amount as the Board or Committee shall determine and
designate in such agreement. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.
(b) No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or by the laws of
descent and distribution so long as stock awarded under such agreement remains
subject to the terms of the agreement.
(c) The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the Common Stock
is sold; or (iii) in any other form of legal consideration that may be
acceptable to the Board or the Committee in their discretion.
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(d) Shares of Common Stock sold or awarded under the Plan
may, but need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) In the event a person ceases to be an employee of or
ceases to serve as a director of or consultant to the Company or an Affiliate,
the Company may repurchase or otherwise reacquire any or all of the shares of
Common Stock held by that person which have not vested as of the date of
termination under the terms of the stock bonus or restricted stock purchase
agreement between the Company and such person.
7. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority
to effect, at any time and from time to time, with the consent of the affected
holders of Options, (i) the repricing of any outstanding Options under the Plan
and/or (ii) the cancellation of any outstanding Options and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of Common Stock, but having an exercise price per
share not less than one hundred percent (100%) of the fair market
value or, in the case of a 10% stockholder (as defined in subparagraph 4(b),
not less than one hundred and ten percent (110%) of the fair market value) per
share of Common Stock on the new grant date.
(b) Shares subject to an option canceled under this
Section 7 shall continue to be counted against the maximum award of options
permitted to be granted to any person pursuant to subsection 4(c) of the Plan.
The repricing of an option under this Section 7, resulting in a reduction of
the exercise price, shall be deemed to be a cancellation of the original option
and the grant of a substitute option; in the event of such repricing, both the
original and the substituted options shall be counted against the maximum
awards of options permitted to be granted to any person pursuant to subsection
4(c) of the Plan. The provisions of this subsection 7(b) shall be applicable
only to the extent required by Section 162(m) of the Code.
8. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards granted under
the Plan, the Company shall keep available at all times the number of shares of
Common Stock required to satisfy such Stock Awards up to the number of shares
of Common Stock authorized under the Plan.
(b) The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares of Common Stock under the Stock Awards
granted under the Plan; provided, however, that this undertaking shall not
require the Company to register under the Securities Act either the Plan, any
Stock Award granted under the Plan or any Common Stock issued or issuable
pursuant to any such Stock Award. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
that counsel for the Company deems necessary for the lawful issuance and sale
of Common Stock under the Plan, the
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Company shall be relieved from any liability for failure to issue and sell
Common Stock upon exercise of such Stock Awards unless and until such authority
is obtained.
9. USE OF PROCEEDS FROM COMMON STOCK.
Proceeds from the sale of Common Stock pursuant to Stock
Awards granted under the Plan shall constitute general funds of the Company.
10. MISCELLANEOUS.
(a) The Board or Committee shall have the power to
accelerate the time during which a Stock Award may be exercised or the time
during which a Stock Award or any part thereof will vest, notwithstanding the
provisions in the Stock Award stating the time during which it may be exercised
or the time during which it will vest.
(b) Neither an optionee, Option holder nor any person to
whom an Option is transferred under the provisions of the Plan shall be deemed
to be the holder of, or to have any of the rights of a holder with respect to,
any shares subject to such Option unless and until such person has satisfied
all requirements for exercise of the Option pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or
Stock Award granted pursuant thereto shall confer upon any eligible employee,
consultant, director, optionee or holder of Stock Awards under the Plan any
right to continue in the employ of the Company or any Affiliate or to continue
acting as a consultant or director or shall affect the right of the Company or
any Affiliate to terminate the employment or consulting relationship or
directorship of any eligible employee, consultant, director, optionee or holder
of Stock Awards under the Plan with or without cause. In the event that a
holder of Stock Awards under the Plan is permitted or otherwise entitled to
take a leave of absence, the Company shall have the unilateral right to (i)
determine whether such leave of absence will be treated as a termination of
employment or relationship as consultant or director for purposes hereof, and
(ii) suspend or otherwise delay the time or times at which exercisability or
vesting would otherwise occur with respect to any outstanding Stock Awards, or
related repurchase rights thereunder, under the Plan.
(d) To the extent that the aggregate fair market value
(determined at the time of grant) of stock with respect to which incentive
stock options (as defined in the Code) are exercisable for the first time by
any optionee during any calendar year under all plans of the Company and its
Affiliates exceeds one hundred thousand dollars ($100,000), the options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonqualified Stock Options.
11. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.
If any change is made in the Common Stock subject to the Plan,
or subject to any Stock Award granted under the Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or
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otherwise), the Plan and outstanding Stock Awards will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan and
the class(es) and number of shares and price per share of stock subject to
outstanding Stock Awards.
12. CHANGE OF CONTROL.
(a) Notwithstanding anything to the contrary in this
Plan, in the event of a Change of Control (as hereinafter defined), then, at
the sole discretion of the Board and to the extent permitted by applicable law:
(i) any surviving corporation shall assume the rights and obligations of the
Company under any Stock Awards outstanding under the Plan or shall substitute
similar Stock Awards for those outstanding under the Plan; (ii) the time during
which such Stock Awards become vested or may be exercised shall be accelerated
and any outstanding unexercised rights under any Stock Awards terminated if not
exercised prior to such event; or (iii) such Stock Awards shall continue in
full force and effect.
(b) For purposes of the Plan, a "Change of Control" shall
be deemed to have occurred at any of the following times:
(i) Upon the acquisition (other than from the
Company) by any person, entity or "group," within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act (excluding, for this purpose, the
Company or its affiliates, or any employee benefit plan of the Company or its
affiliates which acquires beneficial ownership of voting securities of the
Company), of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of fifty percent (50%) or more of either the then
outstanding shares of common stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally in the
election of directors; or
(ii) At the time individuals who, as of May 14,
1991, constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming
a director subsequent to May 14, 1991, whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
the Plan, considered as though such person were a member of the Incumbent
Board; or
(iii) Immediately prior to the consummation by the
Company of a reorganization, merger, consolidation, (in each case, with respect
to which persons who were the stockholders of the Company immediately prior to
such reorganization, merger or consolidation do not, immediately thereafter,
own more than fifty percent (50%) of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities) or a liquidation or
dissolution of the Company or of the sale of all or substantially all of the
assets of the Company; or
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(iv) The occurrence of any other event which the
Incumbent Board in its sole discretion determines constitutes a Change of
Control.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may
amend the Plan. However, except as provided in paragraph 11 relating to
adjustments upon changes in the Common Stock, no amendment shall be effective
unless approved by the stockholders of the Company to the extent stockholder
approval is necessary for the Plan to satisfy the requirements of Section 422
of the Code, Rule 16b-3 under the Exchange Act or any Nasdaq or securities
exchange listing requirements.
(b) The Board may in its sole discretion submit any other
amendment to the Plan for stockholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the requirements of Section 162(m)
of the Code and the regulations promulgated thereunder regarding the exclusion
of performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend
the Plan in any respect the Board deems necessary or advisable to provide
optionees with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder relating to
employee Incentive Stock Options and/or to bring the Plan and/or Options
granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted
before amendment of the Plan shall not be altered or impaired by any amendment
of the Plan, unless: (i) the Company requests the consent of the person to
whom the Stock Award was granted; and (ii) such person consents in writing.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on May 13, 2001. No
Stock Awards may be granted under the Plan while the Plan is suspended or after
it is terminated.
(b) Rights and obligations under any Stock Awards granted
while the Plan is in effect shall not be altered or impaired by suspension or
termination of the Plan, except with the consent of the person to whom the
Stock Award was granted.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board,
but no Stock Awards granted under the Plan shall be exercised unless and until
the Plan has been approved by the stockholders of the Company and, if required,
an appropriate permit has been issued by the Commissioner of Corporations of
the State of California.
10.