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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 September 30,
1998.
[ ] 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
incorporation or organization) identification no.)
256 East Grand Avenue,
South San Francisco, California 94080
(Address of principal executive offices and zip code)
(650) 244-6800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock $.0001 par value 24,319,173
Outstanding at October 31, 1998
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COR THERAPEUTICS, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
- ------- --------------------- --------
Item 1. Financial Statements and Notes
Condensed Balance Sheets - September 30, 1998 3
and December 31, 1997
Statements of Operations - for the three and nine months 4
ended September 30, 1998 and 1997
Statements of Cash Flows - for the nine months 5
ended September 30, 1998 and 1997
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
COR(TM) and INTEGRILIN(TM) are trademarks of COR THERAPEUTICS, INC.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Notes
COR THERAPEUTICS, INC.
CONDENSED BALANCE SHEETS
(in thousands)
ASSETS
September 30, December 31,
------------- ------------
1998 1997
--------- ---------
(Unaudited)
Current assets:
Cash and cash equivalents $ 15,671 $ 22,209
Short-term investments 65,200 60,360
Contract receivables 1,952 422
Prepaid copromotion expenses 15,001 6,422
Other current assets 1,113 564
--------- ---------
Total current assets 98,937 89,977
Property and equipment, net 5,495 5,408
--------- ---------
$ 104,432 $ 95,385
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,493 $ 2,446
Accrued compensation 3,504 2,510
Accrued development costs 906 3,155
Accrued pre-commercial costs 3,108 1,256
Deferred revenue 15,794 886
Other accrued liabilities 3,083 1,345
Long-term debt--current portion 841 873
Capital lease obligations--current portion 1,533 1,699
--------- ---------
Total current liabilities 32,262 14,170
Long-term debt--noncurrent portion 2,244 1,014
Capital lease obligations--noncurrent portion 783 1,803
Stockholders' equity 243,015 239,948
Accumulated deficit (173,872) (161,550)
--------- ---------
Total stockholders' equity 69,143 78,398
--------- ---------
$ 104,432 $ 95,385
========= =========
See accompanying notes.
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COR THERAPEUTICS, INC.
STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
Contract revenues:
Copromotion revenue $ 1,812 $ -- $ 1,812 $ --
Milestone payments -- -- 32,000 3,000
Development contract revenue 1,040 2,911 1,963 12,816
-------- -------- -------- --------
Total contract revenues 2,852 2,911 35,775 15,816
-------- -------- -------- --------
Expenses:
Cost of copromotion revenue 4,704 -- 4,733 --
Research and development 9,274 11,417 27,964 37,256
Marketing, general and administrative 6,159 2,644 18,169 7,246
-------- -------- -------- --------
Total expenses 20,137 14,061 50,866 44,502
-------- -------- -------- --------
Loss from operations (17,285) (11,150) (15,091) (28,686)
Interest income 1,126 437 3,347 1,684
Interest expense (116) (148) (578) (496)
-------- -------- -------- --------
Net loss $(16,275) $(10,861) $(12,322) $(27,498)
======== ======== ======== ========
Basic and diluted net loss per share $ (0.67) $ (0.54) $ (0.51) $ (1.37)
======== ======== ======== ========
Shares used in computing basic and diluted net loss per share 24,194 20,171 24,056 20,099
======== ======== ======== ========
See accompanying notes.
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COR THERAPEUTICS, INC.
STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(unaudited, in thousands)
Nine Months Ended
September 30,
----------------------
1998 1997
-------- --------
Cash flows provided by (used in) operating activities:
Net loss $(12,322) $(27,498)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,511 2,723
Amortization of deferred compensation 359 186
Changes in assets and liabilities:
Contract receivables (1,530) 1,088
Prepaid copromotion expenses (8,579) (2,106)
Other current assets (549) 2,555
Accounts payable 1,047 1,328
Accrued compensation 994 971
Accrued development costs (2,249) (3,420)
Accrued pre-commercial costs 1,852 764
Deferred revenue 14,908 (1,414)
Other accrued liabilities 1,738 (269)
-------- --------
Total adjustments 10,502 2,406
-------- --------
Net cash used in operating activities (1,820) (25,092)
-------- --------
Cash flows provided by (used in) investing activities:
Purchases of short-term investments (88,287) (18,546)
Sales of short-term investments 15,724 40,612
Maturities of short-term investments 68,000 7,500
Additions to property and equipment (2,598) (681)
-------- --------
Net cash provided by (used in) investing activities (7,161) 28,885
-------- --------
Cash flows provided by (used in) financing activities:
Proceeds from long-term debt 1,951 --
Principal payments on long-term debt (753) (943)
Proceeds from capital lease obligations 83 701
Principal payments under capital lease obligations (1,269) (1,193)
Issuance of common stock 2,431 695
-------- --------
Net cash provided by (used in) financing activities 2,443 (740)
-------- --------
Net increase (decrease) in cash and cash equivalents (6,538) 3,053
Cash and cash equivalents at the beginning of the period 22,209 2,615
-------- --------
Cash and cash equivalents at the end of the period $ 15,671 $ 5,668
======== ========
See accompanying notes.
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COR THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COR Therapeutics, Inc. ("COR" or the "Company") was incorporated in Delaware on
February 4, 1988. The Company is focused on the discovery, development and
commercialization of novel pharmaceutical products for the treatment and
prevention of severe cardiovascular diseases.
Interim financial information
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-Q and Article 10 of Regulation
S-X. In the Company's opinion, the financial statements include all adjustments,
consisting only of normal recurring adjustments, which the Company considers
necessary to fairly state the Company's financial position and the results of
its operations and its cash flows. The balance sheet at December 31, 1997 has
been derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The accompanying
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997. The results of the Company's operations for any
interim period are not necessarily indicative of the results of the Company's
operations for any other interim period or for a full fiscal year.
Revenues
Revenues consist of contract revenues and license fees. Contract revenues
include milestone payments, development-related revenues and copromotion-related
revenues. Milestone payments and development contract revenues are recorded as
earned based on the performance requirements of the contracts, while related
costs are expensed as incurred. Copromotion-related contract revenues are
generally recognized at the time of shipment of related product by
Schering-Plough Corporation ("Schering") to wholesalers and are recorded net of
allowances which management believes are sufficient to cover future
requirements. Copromotion-related contract revenues for INTEGRILIN(TM) include
the Company's share of profits, as defined, from the sales of product, as well
as the reimbursement of certain manufacturing-related and marketing expenses
which increase the amount of copromotion-related contract revenue included in
the financial statements. Certain manufacturing-related copromotion expenses are
deferred until the time of shipment of related product by Schering to
wholesalers. Deferred revenue includes payments from Schering received prior to
the period in which the related contract revenues are earned.
Prepaid contract expenses
Prepaid contract expenses represent materials on-hand and deposits associated
with manufacturing-related copromotion expenses.
2. EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standard No. 128
("Statement 128"), Earnings Per Share, ("EPS"), for the year ended December 31,
1997. The adoption of Statement 128 had no effect on amounts previously
reported. Basic and diluted net loss per share was calculated using the weighted
average number of shares of common stock outstanding of 24,194,000 and
24,056,000 for, respectively, the three and nine months ended September 30, 1998
and 20,171,000 and 20,099,000, respectively, for the same periods in 1997.
Potentially dilutive securities, such as stock options, are excluded from the
computation as their effect is antidilutive.
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3. RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Financial Accounting Standard No.
130 ("Statement 130"), Reporting Comprehensive Income. Statement 130 establishes
new rules for the reporting and display of comprehensive income and its
components; however, the adoption of Statement 130 had no impact on the
Company's financial condition or results of operations. Statement 130 requires
unrealized gains or losses on the Company's available-for-sale securities, which
are recorded separately in stockholders' equity, to be included in other
comprehensive income. Prior period financial statements have been reclassified
to conform to the requirements of Statement 130.
For all periods presented, the differences between the Company's loss as
reported and comprehensive income (loss) were immaterial.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In addition to the historical information contained herein, this document
includes forward-looking statements which involve risks and uncertainties.
Actual results of the Company's activities may differ significantly from the
potential results discussed in such forward-looking statements. These
forward-looking statements are based on current expectations, and the Company
assumes no obligation to update this information. Risk factors that might cause
such differences include, but are not limited to, those factors identified below
and in the sections titled "Business" and "Business-Additional Risk Factors" in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997.
The Company's business is subject to significant risks including, but not
limited to, market acceptance of INTEGRILIN(TM), the success of its research and
development efforts, lack of marketing and sales experience, the lengthy and
expensive regulatory process, intense competition, uncertainties related to
clinical trials, and the prosecution and enforcement of patents important to the
Company's business. 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. Additionally, when a product is approved
for commercialization, such as INTEGRILIN(TM), it may not be successful for a
number of reasons, including, but not limited to, competition from competing
products, pharmaceutical pricing and reimbursement practices, risk of product
recalls and potential supply shortages. Additional expenses, delays and losses
of opportunities that may arise out of these and other risks could have a
material adverse effect on the Company's business, financial condition and
results of operations.
OVERVIEW
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 incurred a cumulative net loss of
$173.9 million during the period from inception to September 30, 1998. The
Company'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, interest income and property and equipment
financings.
The Company's lead product is INTEGRILIN(TM) (eptifibatide). INTEGRILIN(TM) has
received marketing approval for the treatment of patients with Acute Coronary
Syndrome ("ACS"), a leading cause of hospitalization in the United States,
including patients who are to be managed medically and those undergoing
Percutaneous Coronary Intervention ("PCI"). INTEGRILIN(TM) is also approved for
the treatment of patients undergoing PCI who do not present with ACS.
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The Company and Schering-Plough Corporation ("Schering") are worldwide partners
for INTEGRILIN(TM). The Company and Schering co-promote the drug in the United
States and share profits, if any. The Company and Schering launched
INTEGRILIN(TM) in June 1998 in the United States.
Sales of INTEGRILIN(TM) to wholesalers, as reported to COR by Schering, were
$2,300,000 for the quarter ended September 30, 1998, and $3,700,000 from launch
through September 30, 1998. Product sales as reported by Schering for the period
from launch to June 30, 1998 or for the quarter ended September 30, 1998 are not
necessarily indicative of product sales for any other interim period, for a full
fiscal quarter or for a full fiscal year.
In February 1998, the European Union's ("EU") European Medicines Evaluation
Agency accepted for review a centralized Marketing Authorization application for
INTEGRILIN(TM) submitted by Schering. This application seeks European marketing
approval of INTEGRILIN(TM) in the EU for the treatment of patients with unstable
angina and Non-Q-wave Myocardial Infarction and as an adjunct to PCI. Schering
has the right to launch INTEGRILIN(TM) in the EU as an exclusive licensee on a
royalty-bearing basis for a period of time.
In addition to the collaboration agreement with Schering for INTEGRILIN(TM), the
Company has collaboration agreements with Ortho Pharmaceutical Corporation, a
subsidiary of Johnson & Johnson, and Kyowa Hakko Kogyo Co., Ltd.
RESULTS OF OPERATIONS
Three and nine months ended September 30, 1998
Contract revenues of $2.9 million for the three months ended September 30, 1998
were approximately equal to the corresponding period in 1997. The Company
recorded $1.8 million in copromotion revenue during the three months ended
September 30, 1998 resulting from the launch of INTEGRILIN(TM) in June 1998.
Development contract revenues decreased to $1.0 million for the three months
ended September 30, 1998 compared to $2.9 million for the corresponding period
in 1997, primarily due to the completion of PURSUIT, a large Phase III clinical
trail for INTEGRILIN(TM), in the first half of 1997.
Total revenues increased to $35.8 million for the nine months ended September
30, 1998, compared to $15.8 million for the corresponding period in 1997.
Contract revenues for the nine months ended September 30, 1998 included a $24.0
million milestone payment from Schering received in connection with regulatory
approval of INTEGRILIN(TM) in the United States for certain indications and an
$8.0 million milestone payment from Schering received in connection with the
acceptance for review of the centralized Marketing Authorization application
seeking marketing approval for INTEGRILIN(TM) in the EU. The increase in
contract revenues from milestone payments was offset in part by a decrease in
development contract revenues related to INTEGRILIN(TM). Development activities
for INTEGRILIN(TM) in the nine months ended September 30, 1998 were lower than
the corresponding periods of 1997, primarily due to the completion of the
PURSUIT trial.
Cost of copromotion revenue was $4.7 million for the three and nine months ended
September 30, 1998. Cost of copromotion revenue includes certain
manufacturing-related and marketing expenses incurred in connection with the
collaboration with Schering.
Research and development expenses decreased 19% and 25% for the three and nine
months ended September 30, 1998, compared to the corresponding periods in 1997,
primarily due to expenses associated with the completion of the PURSUIT trial in
the first half of 1997. These decreases were offset in part by increased costs
associated with increases in headcount and other research, development and
clinical activities associated with other potential products. The Company
expects research and development expenses to increase over the next several
years, although the timing of certain of these expenses may depend on the timing
and phase of, and indications pursued in, additional clinical trials of
INTEGRILIN(TM) and clinical trials of product candidates in development.
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COR THERAPEUTICS, INC.
Marketing, general and administrative expenses increased 133% and 151% for the
three and nine months ended September 30, 1998, compared to the corresponding
periods in 1997. These increases were primarily due to expenses associated with
increased marketing and sales personnel and the launch of INTEGRILIN(TM), as
well as increases in staffing and administrative expenses associated with
general corporate activities.
LIQUIDITY AND CAPITAL RESOURCES
The Company had available cash, cash equivalents and short-term investments of
$80.9 million at September 30, 1998. 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. The Company has funded
its operations to date primarily through public equity financings and proceeds
from collaboration research and development agreements, as well as private
equity financings, interest income and property and equipment financings.
Net cash used in operating activities, offset by additions to capital equipment,
was $4.4 million for the nine months ended September 30, 1998, compared to net
cash used by operating activities and additions to capital equipment of $25.8
million for the corresponding period in 1997. This change was primarily due to
the recognition of milestone revenues related to the collaboration agreement
with Schering. The Company expects 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
INTEGRILIN(TM) and product candidates in development.
The Company expects that its cash requirements will increase in future periods
due to costs related to continuation and expansion of research and development,
including clinical trials, and increased marketing, sales, general and
administrative activities. The Company anticipates that its existing capital
resources and interest earned thereon will enable it to maintain its operations
at least through 1999. However, the Company's capital requirements may change
depending on numerous factors including, but not limited to, the commercial
success of INTEGRILIN(TM), the progress of the Company's research and
development programs, the scope and results of preclinical studies and clinical
trials, the number and nature of the indications the Company pursues in clinical
trials, the timing of regulatory approvals, technological advances,
determinations as to the commercial potential of the Company's potential
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 may 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. If such funds are unavailable, the Company may need to delay or curtail its
research and development activities to a significant extent, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
YEAR 2000 ISSUE
The Company uses and relies on a wide variety of information technologies,
computer systems and scientific equipment containing computer-related
components. Some of the Company's older computer software programs and equipment
may use two digit fields rather than four digit fields to define the applicable
year (i.e., "98" in the computer code refers to the year "1998"). As a result,
time-sensitive functions of those software programs and equipment may
misinterpret dates after January 1, 2000 to refer to the twentieth century
rather than to the twenty-first century (i.e., "02" could be interpreted as
"1902" rather than "2002"). This condition is commonly referred to as the Year
2000 Issue. The Year 2000 Issue could have a material adverse effect on the
Company's business, financial condition or results of operations.
The Company has developed a strategy to address the potential exposures related
to the Year 2000 Issue on its operations for the Year 2000 and beyond. A review
of key financial, informational and operational
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COR THERAPEUTICS, INC.
systems has been completed. Plans for implementation and testing of any
necessary modifications to these key computer systems and equipment to ensure
that they are Year 2000 compliant have been or are in the final stages of being
developed to address computer system and equipment problems as required by
December 31, 1999. The Company believes that with these plans and completed
modifications, the Year 2000 Issue will not have a material adverse effect on
its business, financial condition or results of operations. However, there can
be no assurance that if these modifications are made in a timely fashion that
they will prevent a material adverse effect on the Company's business, financial
condition or results of operations. If such a material adverse effect were to
occur, the magnitude of it cannot be known at this time. The Company currently
has no contingency plans to deal with major Year 2000 failures, although such
plans will be developed over the coming quarters if they are deemed necessary.
In addition to risks associated with the Company's own computer systems and
equipment, the Company has relationships with, and is to varying degrees
dependent upon, a large number of third parties that provide information, goods
and services to the Company. These include corporate partners, suppliers,
vendors, financial institutions and governmental entities. There can be no
assurance that the systems of other organizations on which the Company may rely
will adequately address the Year 2000 Issue, or that the failure of other
organizations to address the Year 2000 Issue will not have a material adverse
effect on the Company's business, financial condition or results of operations.
The Company has instituted a review of key third parties to assess their
readiness to address the Year 2000 Issue.
The total cost of systems assessments and modifications related to the Year 2000
Issue is funded through operating cash flows and has not been material to date.
The Company is expensing these costs as incurred. The Company has identified
resources to address the Year 2000 Issue. The financial impact of making the
required systems changes cannot be known precisely at this time, but it is
currently expected to be less than $2.0 million. The actual financial impact
could, however, exceed this estimate. These costs are not expected to have a
material adverse effect on the Company's business, financial condition or
results of operations.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.22 * Long Term Supply Agreement between Registrant and Solvay, Societe Anonyme,
dated September 28, 1995.
10.23 * Amendment No. 1 to the Long Term Supply Agreement between Registrant and
Solvay, Societe Anonyme, as amended, dated April 1, 1997.
10.24 * License and Supply Agreement between the Registrant and Solvay, Societe Anonyme,
dated July 27, 1994.
10.25 * First Amendment to the License and Supply Agreement between Registrant and
Solvay, Societe Anonyme, as amended, dated March 13, 1995.
10.26 * Second Amendment to the License and Supply Agreement between Registrant and
Solvay, Societe Anonyme, as amended, dated June 1, 1995.
10.27 * Third Amendment to the License and Supply Agreement between Registrant and
Solvay, Societe Anonyme, as amended, dated September 5, 1995.
10.28 * Letter Amendment to the License and Supply Agreement between Registrant and
Solvay, Societe Anonyme, as amended, dated June 6, 1996.
10.29 * Fourth Amendment to the License and Supply Agreement between Registrant and
Solvay, Societe Anonyme, as amended, dated April 1, 1997.
27.1 Financial Data Schedule
* Confidential treatment requested.
(a) Reports
There were no reports on Form 8-K filed for the quarter
ended September 30, 1998.
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COR THERAPEUTICS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 12, 1998
COR THERAPEUTICS, INC.
By: /s/ VAUGHN M. KAILIAN By: /s/ LAURA A. BREGE
-------------------------- ----------------------------------
Vaughn M. Kailian Laura A. Brege
President and Chief Senior Vice President, Finance and
Executive Officer Chief Financial Officer
By: /s/ PETER S. RODDY
----------------------------------
Peter S. Roddy
Director, Finance and Controller
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EXHIBIT INDEX
10.22 * Long Term Supply Agreement between Registrant and Solvay, Societe Anonyme,
dated September 28, 1995.
10.23 * Amendment No. 1 to the Long Term Supply Agreement between Registrant and
Solvay, Societe Anonyme, as amended, dated April 1, 1997.
10.24 * License and Supply Agreement between the Registrant and Solvay, Societe Anonyme,
dated July 27, 1994.
10.25 * First Amendment to the License and Supply Agreement between Registrant and
Solvay, Societe Anonyme, as amended, dated March 13, 1995.
10.26 * Second Amendment to the License and Supply Agreement between Registrant and
Solvay, Societe Anonyme, as amended, dated June 1, 1995.
10.27 * Third Amendment to the License and Supply Agreement between Registrant and
Solvay, Societe Anonyme, as amended, dated September 5, 1995.
10.28 * Letter Amendment to the License and Supply Agreement between Registrant and
Solvay, Societe Anonyme, as amended, dated June 6, 1996.
10.29 * Fourth Amendment to the License and Supply Agreement between Registrant and
Solvay, Societe Anonyme, as amended, dated April 1, 1997.
27.1 Financial Data Schedule
* Confidential treatment requested.