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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, 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 24,139,718
Outstanding at July 21, 1998
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COR THERAPEUTICS, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements and Notes
Condensed Balance Sheets - June 30, 1998
and December 31, 1997 3
Statements of Operations - for the three and
six months ended June 30, 1998 and 1997 4
Statements of Cash Flows - for the six months
ended June 30, 1998 and 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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
June 30, December 31,
1998 1997
----------- ------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 11,431 $ 22,209
Short-term investments 73,071 60,360
Contract receivables 780 422
Prepaid contract expenses 15,252 6,422
Other current assets 610 564
---------- ----------
Total current assets 101,144 89,977
Property and equipment, net 5,771 5,408
---------- ----------
$ 106,915 $ 95,385
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,080 $ 2,446
Accrued compensation 2,539 2,510
Accrued development costs 1,082 3,155
Accrued pre-commercial costs 3,240 1,256
Deferred revenue 4,480 886
Other accrued liabilities 2,567 1,345
Long-term debt--current portion 621 873
Capital lease obligations--current portion 1,680 1,699
---------- ----------
Total current liabilities 20,289 14,170
Long-term debt--noncurrent portion 1,104 1,014
Capital lease obligations--noncurrent portion 1,024 1,803
Stockholders' equity 242,095 239,948
Accumulated deficit (157,597) (161,550)
---------- ----------
Total stockholders' equity 84,498 78,398
---------- ----------
$ 106,915 $ 95,385
========== ==========
See accompanying notes.
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COR THERAPEUTICS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1998 1997 1998 1997
-------- -------- -------- --------
Contract revenues $ 24,511 $ 6,580 $ 32,923 $ 12,905
Expenses:
Research and development 8,848 13,813 18,847 25,846
Marketing, general and administrative 7,186 2,091 11,882 4,596
-------- -------- -------- --------
Total expenses 16,034 15,904 30,729 30,442
-------- -------- -------- --------
Income (loss) from operations 8,477 (9,324) 2,194 (17,537)
Interest income 1,074 539 2,221 1,248
Interest expense (322) (177) (462) (348)
-------- -------- -------- --------
Net income (loss) $ 9,229 $ (8,962) $ 3,953 $(16,637)
======== ======== ======== ========
Basic net income (loss) per share $ 0.38 $ (0.45) $ 0.16 $ (0.83)
======== ======== ======== ========
Shares used in computing basic net income
(loss) per share 24,091 20,086 23,985 20,063
======== ======== ======== ========
Diluted net income (loss) per share $ 0.36 $ (0.45) $ 0.16 $ (0.83)
======== ======== ======== ========
Shares used in computing diluted net income
(loss) per share 25,662 20,086 25,438 20,063
======== ======== ======== ========
See accompanying notes.
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COR THERAPEUTICS, INC.
STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(in thousands)
(Unaudited)
Six Months Ended
June 30,
-----------------------
1998 1997
-------- --------
Cash flows provided by (used in) operating activities:
Net income (loss) $ 3,953 $(16,637)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 1,642 1,840
Amortization of deferred compensation 249 92
Changes in assets and liabilities:
Contract receivables (358) 1,703
Prepaid contract expenses (8,830) (1,748)
Other current assets (46) 633
Accounts payable 1,634 1,630
Accrued compensation 29 335
Accrued development costs (2,073) (2,960)
Accrued pre-commercial costs 1,984 531
Deferred revenue 3,594 881
Other accrued liabilities 1,222 116
-------- --------
Total adjustments (953) 3,053
-------- --------
Net cash provided by (used in) operating activities 3,000 (13,584)
-------- --------
Cash flows provided by (used in) investing activities:
Purchases of short-term investments (71,015) (17,569)
Sales of short-term investments 5,765 33,669
Maturities of short-term investments 52,500 3,000
Additions to property and equipment (2,005) (611)
-------- --------
Net cash provided by (used in) investing activities (14,755) 18,489
-------- --------
Cash flows provided by (used in) financing activities:
Proceeds from long-term debt 290 --
Principal payments on long-term debt (452) (620)
Proceeds from capital lease obligations 83 701
Principal payments under capital lease obligations (881) (801)
Issuance of common stock 1,937 344
-------- --------
Net cash provided by (used in) financing activities 977 (376)
-------- --------
Net increase (decrease) in cash and cash equivalents (10,778) 4,529
Cash and cash equivalents at the beginning of the period 22,209 2,615
-------- --------
Cash and cash equivalents at the end of the period $ 11,431 $ 7,144
======== ========
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 include the reimbursement of
certain manufacturing-related and marketing expenses which increase the amount
of copromotion-related contract revenue included in the financial statements. To
date, the Company has not recorded any copromotion-related contract revenues.
Certain manufacturing-related copromotion expenses are deferred until the time
of shipment of related product by Schering to wholesalers.
Prepaid contract expenses
Prepaid contract expenses represent materials on-hand and deposits associated
with manufacturing-related copromotion expenses.
2. LEGAL PROCEEDINGS
On January 30, 1998 the Company and Vaughn M. Kailian, the Company's Chief
Executive Officer, were named as defendants in a putative class action lawsuit
alleging violation of federal securities laws. The plaintiff voluntarily
dismissed all claims against all defendants in that action in May 1998.
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3. 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. The following is a reconciliation of the numerator and denominators of
the basic and diluted EPS computations for the three and six months ended June
30, 1998 and 1997 (in thousands).
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
Numerator:
Net income - numerator for basic and diluted EPS $ 9,229 $ (8,962) $ 3,953 $(16,637)
======== ======== ======== ========
Denominator:
Denominator for basic EPS -
weighted-average shares 24,091 20,086 23,985 20,063
Effect of dilutive securities -
stock options 1,571 -- 1,453 --
-------- -------- -------- --------
Denominator for diluted EPS - adjusted
weighted-average shares and assumed conversions 25,662 20,086 25,438 20,063
======== ======== ======== ========
4. 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 net income
(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,
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COR THERAPEUTICS, INC.
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 impact 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
$157.6 million during the period from inception to June 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.
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. Initial sales of
INTEGRILIN(TM) to wholesalers, as reported to the Company by Schering, were $1.4
million from launch through June 30, 1998. Product sales for the period from
launch to June 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 six months ended June 30, 1998
Total revenues increased significantly to $24.5 million and $32.9 million for
the three and six months ended June 30, 1998, compared to $6.6 million and $12.9
million for the corresponding periods in 1997. Contract revenues in the second
quarter of 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. Contract revenues in the first quarter of 1998
included 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. To date,
the Company has not recorded any copromotion-related contract revenues. Contract
revenues in the first quarter of 1997 included a milestone payment from Schering
of $3.0 million received in connection with a development-related milestone for
INTEGRILIN(TM).
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The increase in contract revenues from milestone payments was offset in part by
a decrease in development-related contract revenues for development activities
of INTEGRILIN(TM). Development activities for INTEGRILIN(TM) in the first and
second quarters of 1998 were lower than the corresponding periods of 1997,
primarily due to the completion of PURSUIT, a large Phase III clinical trial
for INTEGRILIN(TM), in the first half of 1997.
Research and development expenses decreased 36% and 27% for the three and six
months ended June 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.
Marketing, general and administrative expenses increased 244% and 159% for the
three and six months ended June 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
$84.5 million at June 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 provided by operating activities, offset by additions to capital
equipment, was $1.0 million for the six months ended June 30, 1998, compared to
net cash used by operating activities and additions to capital equipment of
$14.2 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.
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COR THERAPEUTICS, INC.
YEAR 2000 ISSUE
Until relatively recently, computer programs were written to record only two
digits of date-related information, making the programs unable to properly
distinguish between the year 2000 and the year 1900. Systems that cannot
properly distinguish such information may generate improper data. This condition
is commonly referred to as the Year 2000 Issue. The Year 2000 Issue may affect
systems of organizations with which the Company conducts business, including but
not limited to its corporate partners, suppliers and vendors. The Company is
addressing the Year 2000 Issue with such organizations. 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.
In addition, the Company is continuing to review its own systems to identify and
address systems that may require upgrading or reprogramming to address the Year
2000 Issue. The Company believes that the Year 2000 Issue will not have a
material adverse effect on its business, financial condition or results of
operations. However, the nature of the Year 2000 Issue is complex, and there can
be no assurance that the Company will be able to address problems that may arise
from the Year 2000 Issue without incurring a material adverse effect on the
Company's business, financial condition or results of operations.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Note 2 of the Notes to Financial Statements is incorporated herein by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on May 19, 1998.
The stockholders elected the Board's nominees for director by the votes
indicated:
Nominee Votes in Favor Votes Withheld
------- -------------- --------------
Vaughn M. Kailian 20,279,921 34,185
Shaun R. Coughlin 20,278,283 35,823
James T. Doluisio 20,277,921 36,185
Charles J. Homcy 20,279,921 34,185
Jerry T. Jackson 20,279,921 34,185
Ernest Mario 20,277,921 36,185
Robert R. Momsen 20,279,921 34,185
Lloyd Hollingsworth Smith, Jr. 20,277,421 36,685
The proposal to ratify the selection of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending December 31,
1998 was approved with 20,287,315 affirmative votes, 17,521 negative
votes, 9,720 abstentions and no broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports
There were no reports on Form 8-K filed for the quarter
ended June 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: July 23, 1998
COR THERAPEUTICS, INC.
By: /s/ VAUGHN M. KAILIAN By: /s/ LAURA A. BREGE
------------------------------------- -------------------------------
Vaughn M. Kailian Laura A. Brege
President and Chief Executive Officer Senior Vice President, Finance
and Chief Financial Officer
By: /s/ PETER S. RODDY
-------------------------------
Peter S. Roddy
Director, Finance and
Controller
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