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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1997
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number: 0-19756
PROTEIN DESIGN LABS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3023969
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2375 Garcia Avenue
Mountain View, CA 94043
(Address of principal executive offices)
Telephone Number (415) 903-3700
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and, (2) has been subject to such filing
requirements for the past 90 days:
Yes [ X ] No [ ]
As of June 30, 1997, there were 18,134,038 shares of the
Registrant's Common Stock outstanding.
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PROTEIN DESIGN LABS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
ITEM 1. FINANCIAL STATEMENTS
Statements of Operations 3
Three months ended June 30, 1997 and 1996
Six months ended June 30, 1997 and 1996
Balance Sheets 4
June 30, 1997 and December 31, 1996
Statements of Cash Flows 5
Six months ended June 30, 1997 and 1996
Notes to Unaudited Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 9
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION - RISK FACTORS 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22
Signatures 23
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PROTEIN DESIGN LABS, INC.
STATEMENTS OF OPERATIONS
(unaudited)
Three months ended June 30, Six months ended June 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
Revenues:
Research and development revenue under
agreements with third parties
($0.0M for the three and six month periods ended
June 30, 1997, and $3.0M and $7.0M for the three
and six months periods ended June 30, 1996,
from a related party) $ 2,500,000 $ 3,500,000 $ 4,791,074 $ 7,500,000
Interest and other income 2,528,260 1,527,741 4,122,124 3,076,162
------------ ------------ ------------ ------------
Total revenues 5,028,260 5,027,741 8,913,198 10,576,162
Costs and expenses:
Research and development 6,308,931 7,155,596 12,812,546 13,626,943
General and administrative 1,550,541 1,349,721 3,021,326 2,626,324
------------ ------------ ------------ ------------
Total costs and expenses 7,859,472 8,505,317 15,833,872 16,253,267
------------ ------------ ------------ ------------
Net loss $ (2,831,212) $ (3,477,576) $ (6,920,674) $ (5,677,105)
============ ============ ============ ============
Net loss per share $ (0.16) $ (0.22) $ (0.41) $ (0.37)
============ ============ ============ ============
Weighted average common shares outstanding 18,128,000 15,597,000 17,064,000 15,552,000
============ ============ ============ ============
See accompanying notes
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PROTEIN DESIGN LABS, INC.
BALANCE SHEETS
June 30, December 31,
1997 1996
------------- -------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 28,960,083 $ 14,141,184
Short-term investments 44,045,740 64,050,165
Other current assets 1,130,440 1,249,772
------------- -------------
Total current assets 74,136,263 79,441,121
Property and equipment, net 8,988,620 8,589,555
Long-term investments 88,822,212 21,475,483
Other assets 1,017,861 825,246
------------- -------------
$ 172,964,956 $ 110,331,405
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 475,954 $ 1,029,157
Accrued compensation 630,725 635,729
Accrued clinical trials 1,729,310 1,843,206
Other accrued liabilities 1,963,740 1,711,663
------------- -------------
Total current liabilities 4,799,729 5,219,755
Stockholders' equity:
Preferred stock, par value $0.01 per share, 10,000,000 shares authorized; no
shares issued and outstanding -- --
Common stock, par value $0.01 per share, 40,000,000 shares authorized;
18,134,038 and 15,759,089 issued and outstanding at June 30, 1997, and
December 31, 1996, respectively 181,343 157,591
Additional paid-in capital 210,022,779 140,328,297
Accumulated deficit (42,427,828) (35,507,154)
Unrealized loss on investments 388,933 132,916
------------- -------------
Total stockholders' equity 168,165,227 105,111,650
------------- -------------
$ 172,964,956 $ 110,331,405
============= =============
See accompanying notes
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PROTEIN DESIGN LABS, INC.
STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(unaudited)
Six months ended June 30,
1997 1996
------------- -------------
Cash flows from operating activities:
Net loss $ (6,920,674) $ (5,677,105)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,567,162 1,568,703
Other (983,925) 28,509
Changes in assets and liabilities:
Other current assets 139,332 (277,561)
Accounts payable (553,203) (932)
Accrued liabilities 133,179 548
------------- -------------
Total adjustments 302,545 1,319,267
------------- -------------
Net cash used in operating activities (6,618,129) (4,357,838)
Cash flows from investing activities:
Purchases of short and long term investments (182,219,026) (20,965,288)
Maturities of short and long term investments 136,050,000 25,000,000
Capital expenditures (1,899,565) (1,413,446)
Increase in other assets (212,615) (80,000)
------------- -------------
Net cash provided by (used in) investing activities (48,281,206) 2,541,266
Cash flows from financing activities:
Net proceeds from issuance of common stock 69,718,234 2,475,440
------------- -------------
Net cash provided by financing activities 69,718,234 2,475,440
Net increase in cash and cash equivalents 14,818,899 658,868
Cash and cash equivalents at beginning of period 14,141,184 4,686,259
------------- -------------
Cash and cash equivalents at end of period $ 28,960,083 $ 5,345,127
============= =============
See accompanying notes
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PROTEIN DESIGN LABS, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1997
1. Summary of Significant Accounting Policies
Organization and Business
Since the Company's founding in 1986, a primary focus of its operations has
been research and development. Achievement of successful research and
development and commercialization of products derived from such efforts is
subject to high levels of risk and significant resource commitments. The
Company has a history of operating losses and expects to incur substantial
additional expenses over at least the next few years, as it continues to
develop its proprietary products and devote significant resources to
preclinical studies, clinical trials, and manufacturing. The Company's
revenues to date have consisted, and for the near future are expected to
consist, principally of research and development funding, signing and
licensing fees and milestone payments from pharmaceutical companies under
collaborative research and development agreements and patent licensing
agreements. These revenues may vary considerably from quarter to quarter and
from year to year. Revenues in any period may not be predictive of revenues
in any subsequent period, and variations may be significant depending on the
terms of the particular agreements. For example, revenues for the first six
months of 1997, which included several non-recurring payments in connection
with new humanization and patent licensing agreements, may not be indicative
of revenues in future periods.
While the Company historically has received significant revenue pursuant to
certain of its research and development agreements, the Company has
recognized substantially all of the research and development and milestone
revenue due under these agreements. Although the Company anticipates entering
into new relationships from time to time, the Company presently does not
anticipate realizing non-royalty revenue from its new and proposed
collaborations at levels commensurate with the non-royalty revenue
historically recognized under its older collaborations. Moreover, the Company
anticipates that its operating expenses will continue to increase
significantly as the Company increases its research and development,
manufacturing, preclinical and clinical activities, and administrative and
patent activities. Accordingly, in the absence of substantial revenues from
new corporate collaborations or licensing arrangements, royalties on
Zenapax(R) sales or sales of other licensed products under the Company's
patents, if any, or other sources, the Company expects to incur substantial
and increased operating losses in the foreseeable future as certain of its
earlier stage potential products move into later stage clinical development,
as additional potential products are selected as clinical candidates for
further development, as the Company invests in new research programs, new
headquarters and additional laboratory and manufacturing facilities or
capacity, as the Company defends or prosecutes its patents and patent
applications and as the Company invests in continuing research or acquires
additional technologies, product candidates or businesses.
Basis of Presentation and Responsibility for Interim Financial Statements
The balance sheet as of June 30, 1997 and the statements of operations and
cash flows for the six month periods ended June 30, 1997 and 1996 are
unaudited but include all adjustments (consisting of normal recurring
adjustments) which the Company considers necessary for a fair presentation of
the financial position at such dates and the operating results and cash flows
for those periods. Although the Company believes that the disclosures in
these financial statements are adequate to make the information presented not
misleading, certain information and footnote information normally included
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in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission. The accompanying
financial statements should be read in conjunction with the Company's Annual
Report on Form 10-K, filed with the Securities and Exchange Commission for
the year ended December 31, 1996. Results for any interim period are not
necessarily indicative of results for any other interim period or for the
entire year.
Cash Equivalents, Investments and Concentration of Credit Risk
The Company considers all highly liquid investments purchased with a maturity
of three months or less at the date of acquisition to be cash equivalents.
The Company places its cash and short-term and long-term investments with
high-credit-quality financial institutions and in securities of the U.S.
government and U.S. government agencies, and by policy, limits the amount of
credit exposure in any one financial instrument. To date, the Company has not
experienced credit losses on investments in these instruments.
Revenue Recognition Under Development Contracts
Nonrefundable signing or licensing fee payments that are not dependent on
future performance under agreements with third parties are recognized as
revenue when received. Payments for research and development performed by the
Company under contractual arrangements are recognized as revenue ratably over
the quarter in which the related work is performed. Revenue from achievement
of milestone events is recognized when the funding party agrees that the
scientific or clinical results stipulated in the agreement have been met.
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 options are included
in the computation (using the treasury stock method) when their effect is
dilutive.
New Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the old and new requirements, there would be no change with
respect to primary earnings per share and fully diluted earnings per share
for the quarters ended June 30, 1997 and June 30, 1996 since the Company had
losses in those periods and the dilutive effects of stock options under these
methods do not apply.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of management's estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. For example, the Company has a policy of recording
expenses for clinical trials based upon pro rating estimated total costs of a
clinical trial over the estimated length of the clinical trial and the number
of patients anticipated to be enrolled in the trial. Expenses related to each
patient are recognized ratably beginning upon entry into the trial and over
the course of the trial. In the event of early termination of a clinical
trial, management accrues an amount
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based on its estimate of the remaining non-cancelable obligations associated
with the winding down of the clinical trial. These estimates and assumptions
could differ significantly from the amounts which may actually be realized.
Pursuant to its agreement with Boehringer Mannheim GmbH ("Boehringer
Mannheim"), the Company may be required to reimburse Boehringer Mannheim up
to $2.0 million for certain Phase II studies of OST 577 in the event that
certain conditions are met. The Company has estimated and recorded a
liability related to this agreement.
2. Subsequent Event
In July 1997, the Company entered into a lease agreement for a term of
approximately twelve years to lease approximately 90,000 square feet of
research and development and general office space in Fremont, California. The
Company plans to relocate its California headquarters to this facility in
1998.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report contains forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to
those discussed in "Risk Factors" as well as those discussed elsewhere in
this document and the Company's Annual Report on Form 10-K, as amended for
the year ended December 31, 1996.
OVERVIEW
Since the Company's founding in 1986, a primary focus of its operations
has been research and development. Achievement of successful research and
development and commercialization of products derived from such efforts is
subject to high levels of risk and significant resource commitments. The
Company has a history of operating losses and expects to incur substantial
additional expenses over at least the next few years, as it continues to
develop its proprietary products and devote significant resources to
preclinical studies, clinical trials, and manufacturing. The Company's
revenues to date have consisted, and for the near future are expected to
consist, principally of research and development funding, licensing and
signing fees and milestone payments from pharmaceutical companies under
collaborative research and development and licensing agreements. These
revenues may vary considerably from quarter to quarter and from year to year.
Revenues in any period may not be predictive of revenues in any subsequent
period, and variations may be significant depending on the terms of the
particular agreements. For example, revenues for the first six months of
1997, which included several non-recurring payments in connection with new
licensing agreements, may not be indicative of revenues in future periods.
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
The Company's total revenues for the three months ended June 30, 1997 were
$5.0 million compared with total revenues of $5.0 million for the three
months ending June 30, 1996. Research and development revenues from milestone
payments were $2.5 million in the second quarter in 1997. In the comparable
period of 1996, the Company received research and development reimbursement
funding and a milestone payment totaling $3.5 million. In the second quarter
of 1997 no research and development reimbursement funding was received.
Interest and other income for the second quarter of 1997 were $2.5 million
compared to $1.5 million in the comparable period in 1996. This increase is
primarily attributable to the increased interest earned on the Company's
cash, cash equivalents and investment balances as a result of the Company's
public offering which was completed during the first quarter of 1997.
The Company's research and development revenues under agreements with
third parties consisted of research and development reimbursement funding,
licensing and signing fees and milestone payments. Research and development
revenues from unrelated parties of $2.5 million for the three months ended
June 30, 1997 consisted of milestone payments earned under licensing
agreements compared to a $0.5 million milestone payment received from an
unrelated party in the same period in 1996. In the second quarter of 1996,
research and development revenues from related parties consisted of $3.0
million solely from Boehringer Mannheim GmbH ("Boehringer Mannheim") under a
research and development funding commitment that expired as scheduled in
October 1996.
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Total costs and expenses for the three months ended June 30, 1997
decreased to $7.9 million from $8.5 million in the comparable period in 1996.
The decrease in costs and expenses was primarily due to reduced clinical
trial expenses associated with PROTOVIR(TM), a product candidate.
Research and development expenses for the three months ended June 30, 1997
decreased to $6.3 million from $7.2 million in the comparable period of 1996.
Excluding clinical trial costs for PROTOVIR, the Company's 1997 ongoing
expenses increased as a result of the addition of staff, the continuation of
other clinical trials, costs of conducting preclinical tests, expansion of
pharmaceutical development capabilities, including support for both clinical
development and manufacturing process development, and increased
manufacturing operations.
General and administrative expenses for the three months ended June 30,
1997 increased to $1.6 million from $1.3 million in the comparable period in
1996. These increases were primarily the result of increased staffing and
associated expenses necessary to manage and support the Company's expanding
operations.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
The Company's total revenues for the six months ended June 30, 1997 were
$8.9 million compared to $10.6 million in the same period in 1996. Research
and development revenues from licensing and signing fees and milestone
payments were $4.8 million for the six months ended June 30, 1997. In the
comparable period of 1996, the Company received research and development
reimbursement funding and milestone payments totaling $7.5 million. Interest
and other income for the six months ended June 1997 were $4.1 million
compared to $3.1 million in the comparable period in 1996. This increase is
primarily attributable to the increased interest earned on the Company's cash
and cash equivalents balances as a result of the Company's public offering
which was completed during the first quarter of 1997.
The Company's research and development revenues under agreements with
third parties consisted of research and development reimbursement funding,
licensing and signing fees and milestone payments. Research and development
revenues from unrelated parties of $4.8 million for the six months ended June
30, 1997 consisted of licensing and signing fees and milestone payments
earned under licensing agreements compared to $0.5 million from a milestone
payment received from an unrelated party in the same period in 1996. In the
comparable period of 1996, research and development revenues from related
parties consisted of $7.0 million solely from Boehringer Mannheim under a
research and development funding commitment that expired as scheduled in
October 1996 and a milestone payment.
Total costs and expenses for the six months ended June 30, 1997 decreased
to $15.8 million from $16.3 million in the comparable period in 1996. The
decrease in costs and expenses was primarily due to reduced clinical trial
expenses associated with PROTOVIR, a product candidate.
Research and development expenses for the six months ended June 30, 1997
decreased to $12.8 million from $13.6 million in the comparable period in
1996. Excluding clinical trial costs for PROTOVIR, the Company's 1997 ongoing
expenses increased as a result of the addition of staff, the continuation of
other clinical trials, costs of conducting preclinical tests, expansion of
pharmaceutical development capabilities, including support for both clinical
development and manufacturing process development, and increased
manufacturing operations.
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General and administrative expenses for the six months ended June 30, 1997
increased to $3.0 million from $2.6 million in the comparable period in 1996.
These increases were primarily the result of increased staffing and
associated expenses necessary to manage and support the Company's expanding
operations.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has financed its operations primarily through public
and private placements of equity, research and development revenue and
interest income on invested capital. At June 30, 1997, the Company had cash,
cash equivalents and investments in the aggregate of $161.8 million, compared
to $163.9 million and $99.7 million at March 31, 1997 and December 31, 1996,
respectively. This increase in cash resources in 1997 primarily reflects the
completion of a public offering of 2.275 million shares of the Company's
common stock in the first quarter of 1997. The net proceeds of this offering
to the Company were approximately $68.2 million.
Pursuant to its agreement with Boehringer Mannheim, the Company may be
required to reimburse Boehringer Mannheim up to $2.0 million for Phase II
studies and up to $8.8 million for Phase III studies of OST 577 in the event
certain conditions are met.
Net cash used in operating activities was approximately $6.6 million for
the six months ended June 30, 1997 compared to approximately $4.4 million in
the comparable period in 1996. The Company's future capital requirements will
depend on numerous factors, including, among others, the progress of the
Company's product candidates in clinical trials; the ability of the Company's
collaborative partners to obtain regulatory approval and successfully
manufacture and market the Company's products; the continued or additional
support by collaborative partners or other third parties of research and
clinical trials; enhancement of existing and investment in new research and
development programs; the time required to gain regulatory approvals; the
resources the Company devotes to self-funded products, manufacturing methods
and advanced technologies; third party manufacturing commitments; the ability
of the Company to obtain and retain funding from third parties under
collaborative agreements; the development of internal marketing and sales
capabilities; the demand for the Company's potential products, if and when
approved; potential acquisitions of technology, product candidates or
businesses by the Company; and the costs of defending or prosecuting any
patent opposition or litigation necessary to protect the Company's
proprietary technology. In order to develop and commercialize its potential
products the Company may need to raise substantial additional funds through
equity or debt financings, collaborative arrangements, the use of sponsored
research efforts or other means. No assurance can be given that such
additional financing will be available on acceptable terms, if at all, and
such financing may only be available on terms dilutive to existing
stockholders. The Company believes that existing capital resources will be
adequate to satisfy its capital needs through at least 2000.
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PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION - RISK FACTORS
This Quarterly Report contains, in addition to historical information,
forward-looking statements which involve risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in
forward-looking statements. Factors that may cause such a difference include
those discussed in the material set forth under "Risk Factors" and elsewhere in
this document and the Company's Annual Report on Form 10-K, as amended for the
year ended December 31, 1996.
HISTORY OF LOSSES; FUTURE PROFITABILITY UNCERTAIN. The Company has a
history of operating losses and expects to incur substantial additional expenses
with resulting quarterly losses over at least the next several years as it
continues to develop its potential products, to invest in new research areas and
to devote significant resources to preclinical studies, clinical trials and
manufacturing. As of June 30, 1997, the Company had an accumulated deficit
of approximately $42.4 million. To date, the Company has not received
regulatory approval to distribute any products. The time and resource commitment
required to achieve market success for any individual product is extensive and
uncertain and in some cases controlled by the Company's collaborators. No
assurance can be given that the Company's, or any of its collaborative
partners', product development efforts will be successful, that required
regulatory approvals can be obtained, that potential products can be
manufactured at an acceptable cost and with appropriate quality, or that any
approved products can be successfully marketed.
The Company has not generated any material revenues from product sales or
royalties from licenses to the Company's technology, and potential products that
may be marketed by the Company, if any, are not expected to be approved for
marketing for at least the next several years. The Company's revenues to date
have consisted, and for the near future are expected to consist, principally of
research and development funding, licensing and signing fees and milestone
payments from pharmaceutical and other biotechnology companies under
collaborative research and development and patent licensing agreements. These
revenues may vary considerably from quarter to quarter and from year to year,
and revenues in any period may not be predictive of revenues in any subsequent
period, and variations may be significant depending on the terms of the
particular agreements. For example, revenues in each of the first two quarters
of 1997, which included several non-recurring payments in connection with new
humanization and patent licensing agreements, may not be indicative of revenues
in future quarters. While the Company historically has received significant
revenue pursuant to certain of its research and development agreements, the
Company has recognized substantially all of the research and development and
milestone revenues due under these collaborations. Although the Company
anticipates entering into new collaborations from time to time, the Company
presently does not anticipate realizing non-royalty revenue from its new and
proposed collaborations at levels commensurate with the revenue historically
recognized under its older collaborations. Moreover, the Company anticipates
that its operating expenses will continue to increase significantly as the
Company increases its research and development, manufacturing, preclinical,
clinical and administrative and patent activities. Accordingly, in the absence
of substantial revenues from new corporate collaborations or licensing
arrangements, royalties on sales of Zenapax(R) or other products covered by
licenses under the Company's patents, if any, or other sources, the Company
expects to incur substantial and increased operating losses in the foreseeable
future as certain of its earlier stage potential products move into later stage
clinical development, as additional potential products are selected as clinical
candidates for further development, as the Company invests in new headquarters
and additional laboratory and manufacturing facilities or capacity, as the
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Company defends or prosecutes its patents and patent applications, and as the
Company invests in continuing and new research programs or acquires additional
technologies, product candidates or businesses. The amount of net losses and the
time required to reach sustained profitability are highly uncertain. To achieve
sustained profitable operations, the Company, alone or with its collaborative
partners, must successfully discover, develop, manufacture, obtain regulatory
approvals for and market its potential products. No assurances can be given that
the Company will be able to achieve or sustain profitability, and results are
expected to fluctuate from quarter to quarter.
UNCERTAINTY OF CLINICAL TRIAL RESULTS. Before obtaining regulatory approval
for the commercial sale of any of its potential products, the Company must
demonstrate through preclinical studies and clinical trials that the product is
safe and efficacious for use in the clinical indication for which approval is
sought. There can be no assurance that the Company will be permitted to
undertake or continue clinical trials for any of its potential products or, if
permitted, that such products will be demonstrated to be safe and efficacious.
Moreover, the results from preclinical studies and early clinical trials may not
be predictive of results that will be obtained in later-stage clinical trials.
Thus, there can be no assurance that the Company's present or future clinical
trials will demonstrate the safety and efficacy of any potential products or
will result in approval to market products.
In advanced clinical development, numerous factors may be involved that may
lead to different results in larger, later-stage trials from those obtained in
earlier stage trials. For example, early stage trials usually involve a small
number of patients and thus may not accurately predict the actual results
regarding safety and efficacy that may be demonstrated with a large number of
patients in a later-stage trial. Also, differences in the clinical trial design
between an early-stage and late-stage trial may cause different results
regarding the safety and efficacy of a product to be obtained. In addition, many
early stage trials are unblinded and based on qualitative evaluations by
clinicians involved in the performance of the trial, whereas later stage trials
are generally required to be blinded in order to provide more objective data for
assessing the safety and efficacy of the product. The Company may at times elect
to aggressively enter potential products into Phase I/II trials to determine
preliminary efficacy in specific indications. In addition, in certain cases the
Company has commenced clinical trials without conducting preclinical animal
testing where an appropriate animal model does not exist. Similarly, the Company
or its partners at times will conduct potentially pivotal Phase II/III or Phase
III trials based on limited Phase I or Phase I/II data. As a result of these and
other factors, the Company anticipates that only some of its potential products
will show safety and efficacy in clinical trials and that the number of products
that fail to show safety and efficacy may be significant.
The Company has completed a Phase II trial evaluating PROTOVIR(TM) for the
prevention of CMV infection, death or disease relapse in bone marrow transplant
recipients. The clinical trial showed PROTOVIR to be well-tolerated and a
preliminary analysis of data indicates that patients who did not have a CMV
infection prior to transplant and received a graft from a CMV-positive donor
showed a statistically significantly lower incidence of the primary endpoint
(CMV infection, death, or disease relapse) in the PROTOVIR treatment group
versus the control group at 98 days post-transplant. The Company is evaluating
whether to pursue additional clinical trials involving PROTOVIR and there can be
no assurance that further development will be pursued or be successful if
pursued.
The Company and a number of other companies in the biotechnology industry
have suffered significant setbacks in advanced clinical trials, even after
promising results in earlier-stage trials. For example, in June 1995,
Hoffmann-La Roche Inc. ("Roche") and the Company announced the results of a
Phase II/III clinical trial using the Company's SMART Anti-Tac Antibody,
Zenapax, for the prevention of graft-versus-host disease ("GvHD"). The analysis
of this data
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led Roche to conclude that Zenapax was not effective in reducing the incidence
of GvHD in the patient population studied. In addition, in August 1996, the
Company announced the halt of a Phase II/III clinical trial using PROTOVIR for
treatment of CMV retinitis in AIDS patients conducted by the National Eye
Institute ("NEI SOCA") due to lack of evidence of efficacy. Based on the
findings and actions in the above study, enrollment in a Phase II clinical trial
for treatment of CMV retinitis in AIDS patients conducted by the National
Institute of Allergy and Infectious Disease was suspended, and the trial was
subsequently terminated.
DEPENDENCE ON COLLABORATIVE PARTNERS. The Company has collaborative
agreements with several pharmaceutical companies to develop, manufacture and
market certain potential products, which include the most advanced products
under development by the Company. The Company granted to its collaborative
partners certain exclusive rights to commercialize the products covered by these
collaborative agreements. In some cases, the Company is relying on its
collaborative partners to conduct clinical trials, to compile and analyze the
data received from such trials, to obtain regulatory approvals and, if approved,
to manufacture and market these licensed products, including Zenapax and the
Company's Human Anti-Hepatitis B Virus Antibody (OST 577). As a result, the
Company often has little or no control over the development of these potential
products and little or no opportunity to review clinical data prior to or
following public announcement.
The Company's collaborative research agreements are generally terminable by
its partners on short notice. Suspension or termination of certain of the
Company's current collaborative research agreements could have a material
adverse effect on the Company's operations and could significantly delay the
development of the affected products. Continued funding and participation by
collaborative partners will depend not only on the timely achievement of
research and development objectives by the Company and the successful
achievement of clinical trial goals, neither of which can be assured, but also
on each collaborative partner's own financial, competitive, marketing and
strategic considerations. Such considerations include, among other things, the
commitment of management of the collaborative partners to the continued
development of the licensed products, the relationships among the individuals
responsible for the implementation and maintenance of the collaborative efforts,
the relative advantages of alternative products being marketed or developed by
the collaborators or by others, including their relative patent and proprietary
technology positions, and their ability to manufacture potential products
successfully. In this regard, the Company has, at times, experienced difficulty
in its continuing relationship with Boehringer Mannheim GmbH ("Boehringer
Mannheim") due to a number of factors, including disagreements regarding
reimbursement for certain costs related to and the timing of the initiation and
design of certain proposed clinical trials involving the development of certain
products licensed to Boehringer Mannheim, particularly OST 577. Moreover, Roche
has recently announced an agreement to acquire Boehringer Mannheim and the
Company is unable to predict the impact of the acquisition on the Company's
current relationship with Boehringer Mannheim, including whether or not Roche
will terminate or further develop any of the Company's products licensed to
Boehringer Mannheim.
In addition, certain collaborative partners have developed and may be
developing competitive products that may result in delay or a relatively smaller
resource commitment to product launch and support efforts than might otherwise
be obtained if the potentially competitive product were not under development or
being marketed. For example, Roche controls the development of Zenapax, the most
advanced of the Company's products in development, and the Company is dependent
upon the resources and activities of Roche to pursue commercialization of
Zenapax in order for the Company to achieve milestones or royalties from the
development of this product. There can be no assurance that Roche will proceed
to bring this product to market in a rapid and timely manner, if at all, or if
marketed, that other
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independently developed products of Roche (including CellCept(R)) or others will
not compete with or prevent Zenapax from achieving meaningful sales. Also, Roche
has stated that it plans to conduct or support other clinical trials of Zenapax
in autoimmune indications. There can be no assurance that Roche will continue or
pursue additional clinical trials in these indications or that, even if the
additional clinical trials are completed, Zenapax will be shown to be safe and
efficacious, or that the trials will result in approval to market Zenapax in
these indications. Any adverse event or announcement related to Zenapax would
have a material adverse effect on the business and financial condition of the
Company.
Further, because the Company expects, in some cases, to rely on its
contractual rights to access data collected by its collaborative partners in
various phases of its clinical development efforts, the Company is dependent on
the continued satisfaction by such parties of their contractual obligations to
provide such access and cooperate with the Company in the preparation and
submission of appropriate filings with the FDA and equivalent foreign government
regulatory agencies. The Company currently relies on Boehringer Mannheim for the
manufacturing and clinical development of OST 577. Boehringer Mannheim has
marketing rights to this antibody in countries outside of North America. There
can be no assurance that Boehringer Mannheim will provide timely access to the
manufacturing and clinical data, that the U.S. Food and Drug Administration
("FDA") will permit the Company to rely on that data or that the trials
conducted by Boehringer Mannheim will produce data appropriate for approval by
the FDA. If the Company were unable to rely on the clinical data collected by
Boehringer Mannheim or its other collaborative partners, the Company may be
required to repeat clinical trials or perform supplemental clinical trials in
order to achieve regulatory approval in North America. Compliance with these
requirements could significantly delay commercialization efforts and require
substantially greater investment by the Company, either of which would have a
material adverse effect on the business and financial condition of the Company.
The Company's ability to enter into new collaborations and the willingness
of the Company's existing collaborators to continue development of the Company's
potential products is dependent upon, among other things, the Company's patent
position with respect to such products. In this regard, the Company was issued
patents by the U.S. Patent and Trademark Office ("PTO") and European Patent
Office ("EPO") with claims that the Company believes, based on its survey of the
scientific literature, cover most humanized antibodies. Eighteen notices of
opposition to the European patent have been filed with the EPO, and either or
both patents may be further challenged through administrative or judicial
proceedings. The Company has applied for similar patents in Japan and other
countries. The Company has entered into several collaborations related to both
the humanization and patent licensing of certain antibodies whereby it granted
nonexclusive licenses to its patent rights relating to such antibodies, and the
Company anticipates entering into additional collaborations and patent licensing
agreements partially as a result of the Company's patent and patent applications
with respect to humanized antibodies. As a result, the inability of the Company
to successfully defend the opposition proceeding before the EPO or, if
necessary, to defend patents granted by the PTO or EPO or to successfully
prosecute the corresponding patent applications in Japan or other countries
could adversely affect the ability of the Company to enter into additional
collaborations or patent licensing agreements and could therefore have a
material adverse effect on the Company's business or financial condition.
LIMITED EXPERIENCE WITH CLINICAL TRIALS; RISK OF DELAY. The Company has
conducted only a limited number of clinical trials to date. There can be no
assurance that the Company will be able to successfully commence and complete
all of its planned clinical trials without significant additional resources and
expertise. In addition, there can be no assurance that the Company will meet its
contemplated development schedule for any of its potential products. The
inability of the Company or its collaborative partners to commence or continue
clinical trials as currently planned, to complete the
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clinical trials on a timely basis or to demonstrate the safety and efficacy of
its potential products, would have a material adverse effect on the business and
financial condition of the Company.
The rate of completion of the Company's or its collaborators' clinical
trials is significantly dependent upon, among other factors, the rate of patient
enrollment. Patient enrollment is a function of many factors, including, among
others, the size of the patient population, perceived risks and benefits of the
drug under study, availability of competing therapies, access to reimbursement
from insurance companies or government sources, design of the protocol,
proximity of and access by patients to clinical sites, patient referral
practices, eligibility criteria for the study in question and efforts of the
sponsor of and clinical sites involved in the trial to facilitate timely
enrollment in the trial. Delays in the planned rate of patient enrollment may
result in increased costs and expenses in completion of the trial or may require
the Company to undertake additional studies in order to obtain regulatory
approval if the applicable standard of care changes in the therapeutic
indication under study. For example, patient accrual in the Company's ongoing
Phase II/III trial of the SMART M195 Antibody in myeloid leukemia has been
negatively affected by changes in referral patterns, with such patients now more
commonly being treated in local hospitals rather than being referred to tertiary
care hospitals where the Company's trial is being conducted. There can be no
assurance that any actions by the Company to accelerate accrual in this trial
will be successful or, to the extent that they involve modifications in the
design of the trial, will not cause that trial to be considered a Phase II
clinical trial and thereby require one or more additional potentially pivotal
trials to be conducted.
UNCERTAINTY OF PATENTS AND PROPRIETARY TECHNOLOGY; OPPOSITION PROCEEDINGS.
The Company's success is significantly dependent on its ability to obtain patent
protection for its products and technologies and to preserve its trade secrets
and operate without infringing on the proprietary rights of third parties. PDL
files and prosecutes patent applications to protect its inventions. No assurance
can be given that the Company's pending patent applications will result in the
issuance of patents or that any patents will provide competitive advantages or
will not be invalidated or circumvented by its competitors. Moreover, no
assurance can be given that patents are not issued to, or patent applications
have not been filed by, other companies which would have an adverse effect on
the Company's ability to use, manufacture or market its products or maintain its
competitive position with respect to its products. Other companies obtaining
patents claiming products or processes useful to the Company may bring
infringement actions against the Company. As a result, the Company may be
required to obtain licenses from others or not be able to use, manufacture or
market its products. Such licenses may not be available on commercially
reasonable terms, if at all.
Patents in the U.S. are issued to the party that is first to invent the
claimed invention. Since patent applications in the U.S. are maintained in
secrecy until patents issue, PDL cannot be certain that it was the first
inventor of the inventions covered by its pending patent applications or that it
was the first to file patent applications for such inventions. The patent
positions of biotechnology firms generally are highly uncertain and involve
complex legal and factual questions. No consistent policy has emerged regarding
the breadth of claims in biotechnology patents, and patents of biotechnology
products are uncertain so that even issued patents may later be modified or
revoked by the PTO or the courts in proceedings instituted by third parties.
Moreover, the issuance of a patent in one country does not assure the issuance
of a patent with similar claims in another country and claim interpretation and
infringement laws vary among countries, so the extent of any patent protection
may vary in different territories.
PDL has several patents and exclusive licenses covering its humanized and
human antibody technology, respectively. With respect to its human antibody
technology and antibodies, PDL has exclusively licensed certain patents from
Novartis Pharmaceuticals Corporation ("Novartis") (formerly
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known as Sandoz Pharmaceuticals Corporation). With respect to its SMART antibody
technology and antibodies, in January and December 1996, PDL was issued
fundamental patents by the EPO and PTO. In addition, in June 1996 PDL was issued
a U.S. patent covering Zenapax and certain related antibodies against the IL-2
receptor. PDL is also currently prosecuting other patent applications with the
PTO and in other countries, including members of the European Patent Convention,
Canada, Japan and Australia. The patent applications are directed to various
aspects of PDL's SMART and human antibodies, antibody technology and other
programs, and include claims relating to compositions of matter, methods of
preparation and use of a number of PDL's compounds. However, PDL does not know
whether any pending applications will result in the issuance of patents or
whether such patents will provide protection of commercial significance.
Further, there can be no assurance that PDL's patents will prevent others from
developing competitive products using related technology.
With respect to its issued antibody humanization patents, PDL believes the
patent claims cover Zenapax and, based on its review of the scientific
literature, most humanized antibodies. The EPO (but not PTO) procedures provide
for a nine-month opposition period in which other parties may submit arguments
as to why the patent was incorrectly granted and should be withdrawn or limited.
The entire opposition process, including appeals, may take several years to
complete, and during this lengthy process, the validity of the EPO patent will
be at issue, which may limit the Company's ability to negotiate or collect
royalties or to negotiate future collaborative research and development
agreements based on this patent. Eighteen notices of opposition to PDL's
European patent were filed during the opposition period, including oppositions
by major pharmaceutical and biotechnology companies, which cited references and
made arguments not considered by the EPO and PTO before grant of the respective
patents. PDL intends to vigorously defend the European and, if necessary, the
U.S. patent; however, there can be no assurance that the Company will prevail in
the opposition proceedings or any litigation contesting the validity or scope of
these patents. In addition, such proceedings or litigation, or any other
proceedings or litigation to protect the Company's intellectual property rights
or defend against infringement claims by others, could result in substantial
costs and a diversion of management's time and attention, which could have a
material adverse effect on the business and financial condition of the Company.
A number of companies, universities and research institutions have filed
patent applications or received patents in the areas of antibodies and other
fields relating to PDL's programs. Some of these applications or patents may be
competitive with PDL's applications or contain claims that conflict with those
made under PDL's patent applications or patents. Such conflict could prevent
issuance of patents to PDL, provoke an interference with PDL's patents or result
in a significant reduction in the scope or invalidation of PDL's patents, if
issued. An interference is an administrative proceeding conducted by the PTO to
determine the priority of invention and other matters relating to the decision
to grant patents. Moreover, if patents are held by or issued to other parties
that contain claims relating to PDL's products or processes, and such claims are
ultimately determined to be valid, no assurance can be given that PDL would be
able to obtain licenses to these patents at a reasonable cost, if at all, or to
develop or obtain alternative technology.
The Company is aware that Celltech Limited ("Celltech") has been granted a
patent by the EPO covering certain humanized antibodies, which PDL has opposed,
and Celltech announced in September 1996 that it had received a notice of
allowance of a corresponding U.S. patent (the "U.S. Adair Patent"). There can be
no assurance that the claims in the European patent or, if issued, the U.S.
patent would not be interpreted to cover any or all of PDL's SMART
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antibodies or be competitive with or conflict with claims in PDL's patents or
patent applications. If the U.S. Adair Patent issues and if it or any
corresponding international patent is determined to be valid and to cover any of
PDL's SMART antibodies, there can be no assurance that PDL would be able to
obtain a license on commercially reasonable terms, if at all. If the claims of
the U.S. Adair Patent conflict with claims in PDL's patents or patent
applications, there can be no assurance that an interference would not be
declared by the PTO, which could take several years to resolve and could involve
significant expense to the Company. Also, such conflict could prevent issuance
of patents to PDL relating to humanization of antibodies or result in a
significant reduction in the scope or invalidation of PDL's patents, if issued.
Moreover, uncertainty as to the validity or scope of patents issued to PDL
relating generally to humanization of antibodies may limit the Company's ability
to negotiate or collect royalties or to negotiate future collaborative research
and development agreements based on these patents.
PDL has obtained a nonexclusive license under a patent held by Celltech (the
"Boss Patent") relating to PDL's current process for producing SMART and human
antibodies. An interference proceeding was declared in early 1991 by the PTO
between the Boss Patent and a patent application filed by Genentech, Inc.
("Genentech") to which PDL does not have a license. PDL is not a party to this
proceeding, and the timing and outcome of the proceeding or the scope of any
patent that may be subsequently issued cannot be predicted. If the Genentech
patent application were held to have priority over the Boss Patent, and if it
were determined that PDL's processes and products were covered by a patent
issuing from such patent application, PDL may be required to obtain a license
under such patent or to significantly alter its processes or products. There can
be no assurance that PDL would be able to successfully alter its processes or
products to avoid infringing such patent or to obtain such a license on
commercially reasonable terms, if at all, and the failure to do so could have a
material adverse effect on PDL.
The Company is aware that Lonza Biologics, Inc. has a patent issued in
Europe to which PDL does not have a license (although Roche has advised the
Company that it has a license covering Zenapax), which may cover the process the
Company uses to produce its potential products. If it were determined that PDL's
processes were covered by such patent, PDL may be required to obtain a license
under such patent or to significantly alter its processes or products, if
necessary to manufacture or import its products in Europe. There can be no
assurance that PDL would be able to successfully alter its processes or products
to avoid infringing such patent or to obtain such a license on commercially
reasonable terms, if at all, and the failure to do so could have a material
adverse effect on the business and financial condition of the Company.
Also, Genentech has patents in the U.S. and Europe that relate to chimeric
antibodies. Such European patent was revoked in May 1997 in connection with
European opposition proceedings. Genentech may choose to appeal that ruling and,
if so, revocation of the European patent would be stayed pending resolution of
the appeal. If Genentech were to assert that the Company's SMART antibodies
infringe these patents, PDL may have to choose whether to seek a license or to
challenge in court the validity of such patents or Genentech's claim of
infringement. There can be no assurance that PDL would be successful in either
obtaining such a license on commercially reasonable terms, if at all, or that it
would be successful in such a challenge of the Genentech patents, and the
failure to do so would have a material adverse effect on the business and
financial condition of the Company.
In addition to seeking the protection of patents and licenses, PDL also
relies upon trade secrets, know-how and continuing technological innovation
which it seeks to protect, in part, by confidentiality agreements with
employees, consultants, suppliers and licensees. There can be no assurance that
these agreements will not be breached, that PDL would have adequate remedies for
any breach or that PDL's trade secrets will not otherwise become known or
independently developed by competitors.
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ABSENCE OF MANUFACTURING EXPERIENCE; DEPENDENCE ON MANUFACTURING BY
BOEHRINGER MANNHEIM. Of the products developed by the Company which are
currently in clinical development, Roche is responsible for manufacturing
Zenapax and Boehringer Mannheim is responsible for manufacturing OST 577. If
further development occurs, the Company intends to continue to manufacture the
SMART M195 Antibody and PROTOVIR as well as some of its other products in
preclinical development. PDL currently leases approximately 45,000 square feet
housing its manufacturing facility in Plymouth, Minnesota. PDL intends to
continue to manufacture potential products for use in preclinical and clinical
trials using this manufacturing facility in accordance with standard procedures
that comply with current Good Manufacturing Practices ("cGMP") and appropriate
regulatory standards. The manufacture of sufficient quantities of antibody
products in accordance with such standards is an expensive, time-consuming and
complex process and is subject to a number of risks that could result in delays.
For example, PDL has experienced some difficulties in the past in manufacturing
certain potential products on a consistent basis. Production interruptions, if
they occur, could significantly delay clinical development of potential
products, reduce third party or clinical researcher interest and support of
proposed clinical trials, and possibly delay commercialization of such products
and impair their competitive position, which would have a material adverse
effect on the business and financial condition of the Company.
PDL has no experience in manufacturing commercial quantities of its
potential products and currently does not have sufficient capacity to
manufacture its potential products on a commercial scale. In order to obtain
regulatory approvals and to expand its capacity to produce its products for
commercial sale at an acceptable cost, PDL will need to improve and expand its
existing manufacturing capabilities, including demonstration to the FDA of its
ability to manufacture its products using controlled, reproducible processes.
Accordingly, the Company is evaluating plans to improve and expand the capacity
of its current manufacturing facility. Such plans, if instituted, would result
in substantial costs to the Company and may require a suspension of
manufacturing operations during construction. There can be no assurance that
construction delays would not occur, and any such delays could impair the
Company's ability to produce adequate supplies of its potential products for
clinical use or commercial sale on a timely basis. There can be no assurance
that PDL will successfully improve and expand its manufacturing capability
sufficiently to obtain necessary regulatory approvals and to produce adequate
commercial supplies of its potential products on a timely basis. Failure to do
so could delay commercialization of such products and impair their competitive
position, which could have a material adverse effect on the business or
financial condition of the Company.
In addition, PDL and Boehringer Mannheim have agreed to negotiate
additional agreements under which each company could manufacture and supply the
other with certain of the antibodies covered by the agreement. There can be no
assurance that the parties will enter into an agreement that will provide for
the Company's potential product requirements to be met in a consistent, timely
and cost effective manner. Specifically, with respect to OST 577, the Company
currently does not manufacture this product and has no alternative manufacturing
sources for this product. In the event that Boehringer Mannheim and the Company
are unable to reach an acceptable agreement, or if material is not supplied in
accordance with such an agreement, there can be no assurance that the Company
could make alternative manufacturing arrangements on a timely basis, if at all,
and the inability to do so could have a material adverse effect on the business
and financial condition of the Company.
UNCERTAINTIES RESULTING FROM MANUFACTURING CHANGES. Manufacturing of
antibodies for use as therapeutics in compliance with regulatory requirements is
complex, time-consuming and expensive. When certain changes are made in the
manufacturing process, it is necessary to demonstrate to the FDA that the
changes have not caused the resulting drug material to differ significantly from
the drug material
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previously produced, if results of prior preclinical studies and clinical trials
performed using the previously produced drug material are to be relied upon in
regulatory filings. Such changes could include, for example, changing the cell
line used to produce the antibody, changing the fermentation or purification
process or moving the production process to a new manufacturing plant. Depending
upon the type and degree of differences between the newer and older drug
material, various studies could be required to demonstrate that the newly
produced drug material is sufficiently similar to the previously produced drug
material, possibly requiring additional animal studies or human clinical trials.
Manufacturing changes have been made or are likely to be made for the production
of PDL's products currently in clinical development. There can be no assurance
that such changes will not result in delays in development or regulatory
approvals or, if occurring after regulatory approval, in reduction or
interruption of commercial sales. Such delays could have an adverse effect on
the competitive position of those products and could have a material adverse
effect on the business and financial condition of the Company.
Roche has equipped a manufacturing facility that is expected to be used to
produce Zenapax. Successful Phase III trials of Zenapax in kidney
transplantation were conducted using material produced for Roche by a third
party contract manufacturer at a different facility using a different cell line
and a different manufacturing process. Roche has produced Zenapax at its
facility using the new cell line and process and has produced data indicating
that the newly produced material is substantially similar to the material used
in the Phase III clinical trials. However, there can be no assurance that
changes in the manufacturing site or any other manufacturing changes by Roche
will not cause delays in the development or commercialization of Zenapax. Such
delays could have an adverse effect on the competitive position of Zenapax and
could have a material adverse effect on the business and financial condition of
the Company.
DEPENDENCE ON SUPPLIERS. The Company is dependent on outside vendors for the
supply of raw materials used to produce its product candidates. The Company
currently qualifies only one or a few vendors for its source of certain raw
materials. Therefore, once a supplier's materials have been selected for use in
the Company's manufacturing process, the supplier in effect becomes a sole or
limited source of such raw materials to the Company due to the extensive
regulatory compliance procedures governing changes in manufacturing processes.
Although the Company believes it could qualify alternative suppliers, there can
be no assurance that the Company would not experience a disruption in
manufacturing if it experienced a disruption in supply from any of these
sources. Any significant interruption in the supply of any of the raw materials
currently obtained from such sources, or the time and expense necessary to
transition a replacement supplier's product into the Company's manufacturing
process, could disrupt its operations and have a material adverse effect on the
business and financial condition of the Company. A problem or suspected problem
with the quality of raw materials supplied could result in a suspension of
clinical trials, notification of patients treated with products or product
candidates produced using such materials, potential product liability claims, a
recall of products or product candidates produced using such materials, and an
interruption of supplies, any of which could have a material adverse effect on
the business or financial condition of the Company.
DEPENDENCE ON KEY PERSONNEL. The Company's success is dependent to a
significant degree on its key management personnel. To be successful, the
Company will have to retain its qualified clinical, manufacturing, scientific
and management personnel. The Company faces competition for personnel from other
companies, academic institutions, government entities and other organizations.
There can be no assurance that the Company will be successful in hiring or
retaining qualified personnel, and its failure to do so could have a material
adverse effect on the business and financial condition of the Company.
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POTENTIAL VOLATILITY OF STOCK PRICE. The market for the Company's securities
is volatile and investment in these securities involves substantial risk. The
market prices for securities of biotechnology companies (including the Company)
have been highly volatile, and the stock market from time to time has
experienced significant price and volume fluctuations that may be unrelated to
the operating performance of particular companies. Factors such as results of
clinical trials, delays in manufacturing or clinical trial plans, fluctuations
in the Company's operating results, disputes or disagreements with collaborative
partners, market reaction to announcements by other biotechnology or
pharmaceutical companies, announcements of technological innovations or new
commercial therapeutic products by the Company or its competitors, initiation,
termination or modification of agreements with collaborative partners, failures
or unexpected delays in manufacturing or in obtaining regulatory approvals or
FDA advisory panel recommendations, developments or disputes as to patent or
other proprietary rights, loss of key personnel, litigation, public concern as
to the safety of drugs developed by the Company, regulatory developments in
either the U.S. or foreign countries (such as opinions, recommendations or
statements by the FDA or FDA advisory panels, health care reform measures or
proposals), market acceptance of products developed and marketed by the
Company's collaborators, and general market conditions could result in the
Company's failure to meet the expectations of securities analysts or investors.
In such event, or in the event that adverse conditions prevail or are perceived
to prevail with respect to the Company's business, the price of PDL's common
stock would likely drop significantly. In the past, following significant drops
in the price of a company's common stock, securities class action litigation has
often been instituted against such a company. Such litigation against the
Company could result in substantial costs and a diversion of management's
attention and resources, which would have a material adverse effect on the
Company's business and financial condition.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number
10.40 Industrial Lease Agreement between the Company and
and Ardenstone LLC, effective as of July 1, 1997.
11.1 Statement of Computation of Earnings Per Share
(b) No Reports on From 8-K were filed during the quarter ended
June 30, 1997
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its be half by the
undersigned thereunto duly authorized.
Dated:August 13, 1997
PROTEIN DESIGN LABS, INC.
(Registrant)
/s/Laurence Jay Korn
-----------------------------
Laurence Jay Korn
Chief Executive Officer, Chairperson
of the Board of Directors
(Principal Executive Officer)
/s/Fred Kurland
------------------------------
Fred Kurland
Chief Financial Officer
(Chief Accounting Officer)
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INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBITS
- ------ --------
10.40 Industrial Lease Agreement betweeen The
Company and Andenstone LLC, effective as
of July 1, 1997.
11.1 Statement of Computation of Earnings Per
Share
27.1 Financial Data Schedule
25
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBITS
- ------- --------
10.40 Industrial Lease Agreement between the Company and
Ardenstone LLC, effective as of July 1, 1997.
11.1 Statement of Computation of Earnings Per Share.
27.1 Financial Data Schedule