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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the fiscal year ended: December 31, 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
(State or other jurisdiction of incorporation or organization)
94-3060271
(I.R.S. employer identification no.)
(650) 244-6800
(Registrant's telephone number, including area code)
256 EAST GRAND AVENUE, SOUTH SAN FRANCISCO, CALIFORNIA 94080
(Address of principal executive offices and zip code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 Par Value
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Preferred Share Purchase Rights
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 1, 1999, the aggregate market value (based upon the closing sales
price of such stock as reported in the Nasdaq National Market on such date) of
the voting stock held by non-affiliates of the Registrant was $171,862,185.
(Excludes 7,079,922 shares outstanding at March 1, 1999 of the Registrant's
Common Stock held by directors, executive officers and holders of more than 5%
of the Company's Common Stock. Exclusion of shares held by any person should not
be construed to indicate that such person possesses the power, direct or
indirect, to direct or cause the direction of the management or policies of the
Registrant, or that such person is controlled by or under common control with
the Registrant.)
As of March 1, 1999, the number of outstanding shares of the Registrants' Common
Stock was 24,474,880.
DOCUMENTS INCORPORATED BY REFERENCE:
Reference Document Form 10-K
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(1) Portions of the Registrant's definitive proxy statement with respect to the Part III
Registrant's 1999 Annual Meeting of Stockholders, to be filed with the
Securities and Exchange Commission not later than 120 days after the close
of the Registrant's fiscal year.
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PART I
ITEM 1. BUSINESS
Except for the historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties. COR
Therapeutics, Inc.'s actual results could differ materially from those discussed
herein. Factors that could cause or contribute to such differences include, but
are not limited to, those discussed below and in the sections entitled
"Additional Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." INTEGRILIN(TM) (eptifibatide) Injection
and COR(TM) are trademarks of COR Therapeutics, Inc.
GENERAL
COR Therapeutics, Inc. ("COR" or the "Company") was incorporated in Delaware on
February 4, 1988. COR is dedicated to the discovery, development and
commercialization of novel pharmaceutical products to establish new standards of
care for the treatment and prevention of severe cardiovascular diseases. COR has
complementary research and development programs that seek to address critical
needs in cardiovascular diseases, including unstable angina, acute myocardial
infarction, venous thrombosis and restenosis. In addition to INTEGRILIN, COR has
developed a portfolio of cardiovascular product candidates and programs by
combining its expertise with advanced drug discovery techniques.
INTEGRILIN is the first product that COR has taken from discovery to
commercialization. INTEGRILIN was approved for marketing in the United States by
the U.S. Food and Drug Administration ("FDA") in May 1998. INTEGRILIN is
indicated for the treatment of patients with acute coronary syndrome or "ACS"
(encompassing unstable angina and non-Q-wave myocardial infarction, collectively
"UA/NQMI") including patients who are to be managed medically and those
undergoing percutaneous coronary intervention ("PCI.") INTEGRILIN is also
indicated for the treatment of patients undergoing PCI.
COR and Schering-Plough Ltd. and Schering Corporation (collectively, "Schering")
are worldwide partners for INTEGRILIN. COR and Schering co-promote the drug in
the United States and share any profits or losses. COR and Schering launched
INTEGRILIN in June 1998 in the United States. See "Marketing and Sales
Strategy."
Schering has the right to launch INTEGRILIN in the European Union ("EU") as an
exclusive licensee on a royalty-bearing basis for a period of time. In February
1999, Schering announced that the Committee for Proprietary Medicinal Products
("CPMP") of the European Agency for the Evaluation of Medicinal Products issued
a positive opinion recommending approval of INTEGRILIN for the prevention of
myocardial infarction in patients presenting with UA/NQMI. The CPMP opinion
serves as the basis for a European Commission approval, which is typically
issued in approximately four months. The Company believes that the Commission
approval of the centralized Marketing Authorization application for INTEGRILIN
would result in a single Marketing Authorization with unified labeling that
would be valid in all 15 European Union member states. Schering submitted the
centralized Marketing Application in February 1998. INTEGRILIN has received
regulatory approval in a number of countries outside the EU and the United
States.
COR and Schering are conducting or have conducted Phase II clinical trials of
INTEGRILIN with different thrombolytics in the setting of acute myocardial
infarction. COR and Schering also sponsor additional clinical trials of
INTEGRILIN in a variety of clinical settings.
In addition to its commercial activities, COR continues to pursue a wide array
of research and development programs. The Company's next potential product is an
oral glycoprotein IIb-IIIa ("GP IIb-IIIa") inhibitor to prevent platelet
aggregation. Results to date of Phase I and initial Phase II studies for the
Company's lead compound, cromafiban, show that it has high affinity and
specificity for GP IIb-IIIa. Inhibition of platelet aggregation by cromafiban
has been shown to be dose- and concentration-dependent. Plasma concentrations
have indicated a sufficiently long elimination half-life to allow for once-daily
dosing with a low peak-to-trough ratio and low inter-patient variability. No
food interactions have been observed. Bleeding was the most prevalent
complication
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encountered during cromafiban therapy in clinical trials conducted to date. COR
is also conducting preclinical research and development in several other
cardiovascular programs.
STRATEGY
- - Maximize the Revenue Potential of INTEGRILIN(TM) (eptifibatide) Injection.
COR has established a dedicated cardiovascular sales force to promote
INTEGRILIN by educating the medical community about GP IIb-IIIa therapy and
marketing the use of INTEGRILIN in such therapy. COR is also pursuing a
development program that expands the use of INTEGRILIN into additional
indications and geographies.
- - Maintain Cardiovascular Disease Focus. Cardiovascular disease is the
leading cause of death in the United States. COR believes that by combining
its extensive knowledge of the molecular and cellular biology of
cardiovascular diseases with advanced drug discovery techniques, it can
develop new therapeutics to address large, unmet market opportunities.
- - Maximize Value of Strategic Collaborations. COR will continue to seek out
strategic collaborations that provide: (i) access to new and strategic
therapeutics and technologies, (ii) attractive financial terms to offset
internal research and development expenses and (iii) access to
international marketing, sales and distribution capabilities.
- - Continue to Build Relationships with Leading Clinicians and Scientists. COR
has conducted its clinical trials at premier academic and clinical centers
under the supervision of many of the world's leading cardiologists. COR
builds strong relationships with prominent scientists and clinical
cardiologists by sponsoring and conducting research and providing for
increased exposure to its product candidates in the medical community.
THERAPEUTIC OPPORTUNITIES IN CARDIOVASCULAR DISEASE
Despite decades of extensive research and development and significant advances
in treatment, cardiovascular disease remains the leading cause of death in the
United States. Approximately one million people die each year from heart
attacks, strokes and related diseases. As the number of elderly people in the
population increases, the number of deaths attributable to these diseases
continues to climb. COR has focused its research and development efforts on
agents that have the potential to prevent and/or treat these diseases. In
particular, COR has targeted the diseases of arterial thrombosis, venous
thrombosis and restenosis.
In arterial thrombosis, an aggregation of platelets (a thrombus, essentially a
plug) forms on the lining of an injured artery. The thrombus occludes the artery
and thereby impairs its ability to supply oxygen to the heart, brain and other
organs. In the heart, disorders from arterial thrombosis range from prolonged
episodes of severe chest pain (including unstable angina) to heart attack (acute
myocardial infarction) to sudden death. In the brain, disorders range from a
temporary reduction in oxygen supply to stroke. Each year, approximately six
million people suffer from severe chest pain, one million from heart attack and
600,000 from stroke.
In venous thrombosis, disorders are not generally related to occlusion but
rather to the breaking-off or embolization of the thrombus from its attachment
site. The broken-off thrombus can travel to the lungs and cause a pulmonary
embolism, a serious disorder in which blood supply is blocked and lung tissue is
killed. Each year, over 270,000 patients are diagnosed with venous thrombosis.
Approximately 50,000 patients die annually from pulmonary embolisms.
In restenosis, an artery significantly re-narrows following an angioplasty
procedure, usually within 6 months. Approximately 500,000 patients undergo
angioplasties each year and up to 40% suffer from restenosis. Restenosis rates
have declined recently with the acceptance of coronary stenting to accompany
angioplasty, but stenting itself can be
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complicated by restenosis, particularly in smaller vessels. Restenosis therefore
remains a threat whether or not stents are deployed.
INTEGRILIN(TM) (EPTIFIBATIDE) INJECTION
INTEGRILIN is a small synthetic peptide that blocks the platelet receptor GP
IIb-IIIa to inhibit platelet aggregation. By blocking GP IIb-IIIa, INTEGRILIN
helps prevent thrombus formations from fully occluding coronary arteries, a
situation that can lead to heart attack or death in patients with ACS or
patients undergoing PCI. Importantly, the effects of INTEGRILIN are specific to
platelets, thereby avoiding interference with other normal cardiovascular
processes. Additionally, the effects of INTEGRILIN can be reversed once therapy
with INTEGRILIN is discontinued. Over one million people in the United States
annually are candidates for INTEGRILIN therapy.
INTEGRILIN has the broadest range of indications among GP IIb-IIIa inhibitors
approved for marketing in the United States. INTEGRILIN can be administered at
the time of diagnosis in the emergency department to patients with ACS
regardless of whether they are medically managed or ultimately undergo PCI on
INTEGRILIN therapy. INTEGRILIN can be administered to patients prior to (but not
during) coronary artery bypass grafting surgery. Additionally, INTEGRILIN can
also be administered at the time of PCI to patients who undergo elective,
emergency or urgent PCI.
Contraindications include, but are not limited to, a history of bleeding
diathesis or stroke, evidence of abnormal bleeding within the previous 30 days,
recent major surgery or concomitant use of another parenteral GP IIb-IIIa
inhibitor.
Bleeding is the most common complication encountered during INTEGRILIN therapy.
The majority of excess major-bleeding events were localized at the femoral
artery access site. Oropharyngeal, genitourinary, gastrointestinal and
retroperitoneal bleeding were seen more commonly with INTEGRILIN compared with
placebo.
A competing product, abciximab, is used primarily in the catheterization
laboratory setting in patients undergoing PCI. Another competing product,
tirofiban, is used primarily in the setting of ACS. See "Competition."
INTEGRILIN was studied in two randomized, double-blind, placebo-controlled Phase
III clinical trials: the PURSUIT trial and the IMPACT II trial. PURSUIT was the
largest clinical study ever conducted of patients with UA/NQMI and the largest
study ever conducted with a GP IIb-IIIa inhibitor. PURSUIT's results were
published in August 1998 in The New England Journal of Medicine.
Commercialization of INTEGRILIN
COR and Schering launched INTEGRILIN in June 1998 in the United States. COR and
Schering are worldwide partners for INTEGRILIN. COR and Schering co-promote the
drug in the United States and share any profits or losses. In Europe, Schering
has the right to launch the product as an exclusive licensee on a
royalty-bearing basis for a period of time. See "Collaboration Agreements -
Collaboration Agreement with Schering-Plough Ltd. and Schering Corporation."
The Company's marketing strategy for INTEGRILIN is to encourage early use of
INTEGRILIN in patients with ACS and in patients undergoing PCI. COR believes
that INTEGRILIN sales will increase as early usage becomes more common and as
the number of hospitals stocking INTEGRILIN increases. COR and Schering have
identified over 2,000 hospitals as initial potential users of INTEGRILIN. Over
1,100 of these hospitals currently stock or use INTEGRILIN.
COR and Schering have each established cardiovascular sales forces to educate
the medical community about GP IIb-IIIa therapy and to market the use of
INTEGRILIN in such therapy. COR focuses its selling efforts for INTEGRILIN on
clinical cardiologists, interventional cardiologists and emergency medicine
physicians. The Company also focuses on hospital pharmacy directors, formulary
committee members, hospital administrators and nurses, all of whom might affect
purchasing decisions. See "Marketing and Sales Strategy."
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RESEARCH AND DEVELOPMENT PROGRAMS
Pipeline
The following table summarizes information about the Company's primary research
and development programs. For further information, see the more detailed
descriptions of these programs elsewhere in this Report.
Potential Product/Program Indication Status
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Oral GP IIb-IIIa Inhibitor (cromafiban) ACS and Stroke Phase II Clinical Trials
Factor Xa Inhibitor Venous Thrombosis Preclinical
Growth Factor Inhibitor(1) Restenosis Preclinical
Thrombin Receptor Inhibitor ACS, Restenosis, Stroke Prevention Research
Platelet ADP Receptor ACS, Restenosis, Stroke Prevention Research
Myocardial Signal Transduction Congestive Heart Failure Research
Integrin Signaling Multiple Research
(1) This program is being pursued in collaboration with Kyowa Hakko Kogyo
Co., Ltd. See "Collaboration Agreements - Relationship with Kyowa Hakko
Kogyo Co., Ltd."
Oral GP IIb-IIIa Inhibitor Product Candidate
Current therapies aimed at preventing arterial thrombosis either do not address
the underlying cause of thrombosis (namely, platelet aggregation) and/or are
severely limited in their ability to fight thrombosis. Agents such as beta
blockers, calcium antagonists, warfarin sodium and nitrates all inhibit platelet
aggregation, but through secondary processes and only under the careful
supervision of a monitoring physician. Agents such as aspirin, ticlopidine and
clopidigrel, on the other hand, do not require much supervision, but are
relatively weak inhibitors of platelet aggregation. Since the platelet receptor
GP IIb-IIIa acts as the final common pathway for platelet aggregation, the
Company believes that its inhibition offers the most effective means to prevent
thrombosis.
Oral GP IIb-IIIa inhibitors could represent a new class of drugs for patients
with a history of acute coronary syndromes or cerebrovascular accidents. Over
six million people in the U.S. have a history of heart attack, stroke or
transient ischemic attack. Oral GP IIb-IIIa inhibitors may prove useful in
helping to prevent these catastrophic events.
COR has developed an oral GP IIb-IIIa inhibitor to prevent platelet aggregation.
Results to date of Phase I and initial Phase II studies for the Company's lead
compound, cromafiban, show that it has high affinity and specificity for GP
IIb-IIIa. Inhibition of platelet aggregation by cromafiban has been shown to be
dose- and concentration-dependent. Plasma concentrations have indicated a
sufficiently long elimination half-life to allow for once-daily dosing with a
low peak-to-trough ratio and low inter-patient variability. No food interactions
have been observed. Bleeding was the most prevalent complication encountered
during cromafiban therapy in clinical trials conducted to date.
Factor Xa Inhibitor Program
The Company has identified the factor Xa/prothrombinase complex as a target for
small molecule inhibitors. The factor Xa/prothrombinase complex catalyzes the
conversion of prothrombin to thrombin. The Company believes that the inhibition
of this conversion offers the possibility for a safer and potentially more
efficacious approach to arterial and venous thrombosis than is presently
available with agents that inhibit both thrombin generation and thrombin
activity (e.g., heparin and low molecular weight heparin.) The Company's
scientists have discovered multiple chemical classes of novel small molecule
inhibitors with high potency and specificity which have been shown to block both
arterial and venous thrombosis in various animal models. A lead compound that
can be administered orally is currently in preclinical development. The Company
believes that the development of inhibitors in this class may offer significant
clinical advantages over presently available agents such as heparin, low
molecular weight heparin or warfarin sodium.
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Growth Factor Inhibitor Program
The Company's growth factor inhibitor program is directed toward the discovery
of protein and small molecule inhibitors of certain growth factor receptors in
the tyrosine kinase family. These inhibitors have the potential to reduce
restenosis following coronary intervention. This program is subject to a
collaboration agreement with Kyowa Hakko Kogyo Co., Ltd. (see "Collaboration
Agreements - Relationship with Kyowa Hakko Kogyo Co., Ltd.")
Other Research and Development Programs
The Company's thrombin receptor inhibitor program is directed toward the
discovery of agents for the treatment of arterial thrombosis and restenosis as
well as stroke. Thrombin is an enzyme that has multiple effects on cells and
proteins within the vasculature and is the most potent activator of platelets.
This program is subject to a collaboration agreement (see "Collaboration
Agreements - Relationship with Ortho Pharmaceutical Corporation.")
The Company's platelet ADP receptor program is directed toward the discovery of
agents for the treatment of arterial thrombosis as well as stroke. ADP receptors
on the surface of platelets play a key role in promoting platelet activation and
aggregation.
The Company's myocardial signal transduction program is directed toward the
discovery of agents for the treatment and prevention of congestive heart
failure. The Company is focusing on particular molecular targets in a specific
signaling pathway as a site for intervention. This program may also have
application in the treatment of myocardial ischemia.
The Company's integrin signal transduction program may produce agents that are
useful for the treatment or prevention of a wide variety of disorders including
thrombosis, inflammation, atherosclerosis and tumor metastasis. Integrins play a
key role in modulating not only cell migration and shape but also growth and
differentiation, thus placing them at a central location in a variety of disease
processes. This effort is being conducted in collaboration with investigators at
the Scripps Research Foundation.
Non-cardiovascular Research Applications
The Company's research has resulted in the identification of compounds with
potential non-cardiovascular applications. The Company believes certain of its
growth factor inhibitors may have applications in treating certain other
disorders which involve cell proliferation, such as cancer, angiogenesis and
chronic renal failure. The Company has identified other compounds with potential
applications in the areas of wound healing, tumor metastasis and osteoporosis.
The Company intends to pursue such opportunities and seek collaboration partners
to develop and commercialize any potential product opportunities where
appropriate.
DRUG DISCOVERY CAPABILITIES
To achieve its drug discovery objectives, the Company has established advanced
capabilities in several key technology areas.
Cardiovascular Biology
The Company's scientists and advisors have contributed to certain key advances
in the scientific understanding of thrombosis, restenosis and heart failure. The
Company has applied this expertise in its choice of specific disease targets and
in the creation of its drug discovery strategies. The Company's major focus has
been on thrombosis, the process underlying the syndromes of acute myocardial
infarction, unstable angina and restenosis, as well as the process of vascular
smooth muscle cell proliferation following PCI or other vascular interventional
procedures. The Company's scientists have targeted several of the potential
mechanisms that regulate intravascular thrombosis or restenosis, including the
platelet, the coagulation factor cascade and the vascular wall. The Company's
approach has been to understand the
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pathophysiology of the disease process itself and then to identify and
characterize molecular targets for which an agonist or antagonist might have a
positive therapeutic impact.
High Throughput Screening
The Company has applied its biological expertise to develop a variety of novel
assays suitable for high throughput screening. For each high throughput
screening assay developed, numerous secondary assays for confirming in vitro
activity and specificity have also been developed. The Company's screening
library consists of compounds either developed internally or purchased from
commercial or academic groups. The Company uses computer-based algorithms to
model molecular diversity in order to maximize the overall diversity of its
compound library. The Company is currently conducting high throughput screening
using multiple proprietary assays against the Company's molecular targets.
Medicinal Chemistry
The Company has established capabilities to synthesize small organic molecules.
These capabilities use both structure-based design principles and traditional
analog synthetic approaches applied to small molecules discovered through the
screening of organic molecules in the Company's proprietary assays. The Company
also has a combinatorial chemistry program. Using structure-based design
approaches, the Company believes it has developed particular expertise in
developing small molecule organic compounds that mimic the activity of peptide
leads. This capability enables the Company to more effectively generate
compounds with appropriate pharmaceutical properties, such as oral
bioavailability and a prolonged half-life.
Animal Model Studies
The Company has established an important internal capability in the development
of animal models. The Company uses a variety of animal models that are relevant
in predicting responses to the Company's disease targets in humans, including
proprietary models developed internally. In addition, the Company works closely
with outside consultants and laboratories in other areas, such as the
development of knock-out and transgenic models and the evaluation of compounds
in primate models. Using internal and external capabilities, the Company can
rapidly evaluate compounds with therapeutic potential in multiple complementary
models.
RESEARCH AND DEVELOPMENT EXPENSES
In 1998, 1997 and 1996, the Company's research and development expenses were
$39,915,000, $47,831,000 and $50,791,000 respectively. For further information
about the Company's research and development expenses, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
MARKETING AND SALES STRATEGY
The Company's marketing strategy for INTEGRILIN(TM) (eptifibatide) Injection is
to encourage early use of INTEGRILIN in patients with ACS and in patients
undergoing PCI. COR believes that INTEGRILIN sales will increase as early usage
becomes more common and as the number of hospitals stocking INTEGRILIN
increases. COR and Schering have identified over 2,000 hospitals as initial
potential users of INTEGRILIN. Over 1,100 of these hospitals currently stock or
use INTEGRILIN.
COR and Schering have each established cardiovascular sales forces to educate
the medical community about GP IIb-IIIa therapy and to market the use of
INTEGRILIN in such therapy. COR focuses its selling efforts for INTEGRILIN on
clinical cardiologists, interventional cardiologists and emergency medicine
physicians. The
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Company also focuses on hospital pharmacy directors, formulary committee
members, hospital administrators and nurses, all of whom might affect purchasing
decisions.
The Company and Schering are worldwide partners for INTEGRILIN(TM)
(eptifibatide) Injection. The Company and Schering co-promote the drug in the
United States and share any profits or losses. Schering is responsible for the
distribution of the final product from manufacturers to wholesalers. In Europe,
Schering has the right to launch the product as an exclusive licensee on a
royalty-bearing basis for a period of time. Following this initial period, the
Company has the right to co-promote the product in Europe and share any profits
or losses. In all co-promotion territories, the exact profit-sharing ratio
between the companies depends on the amount of sales effort contributed by each
company. Outside of the United States, Canada and Europe, Schering is the
exclusive licensee on a royalty-bearing basis. Schering is primarily responsible
for regulatory filings outside the United States and Canada. Schering
participates in and shares the costs of continuing development of INTEGRILIN.
See "Collaboration Agreements - Collaboration Agreement with Schering-Plough
Ltd. and Schering Corporation."
The Company's overall marketing strategy is to market any products for which it
obtains approval either directly or through co-promotion arrangements or other
licensing arrangements with pharmaceutical or biotechnology companies. The
Company's products under development are targeted towards both the acute care
and the chronic care markets. The Company intends to retain selected North
American and international marketing rights for products, where appropriate.
The Company has not developed a specific commercialization plan with respect to
other potential products. Implementation will depend in large part on the market
potential of any product candidates, as well as on the Company's financial
resources. The Company may establish co-promotion, corporate partner or other
arrangements for the marketing and sale of certain of its products and in
certain geographic markets. The Company may not be successful in establishing
such arrangements and/or these arrangements may not result in the successful
marketing and sales of any of the Company's products or product candidates.
Sales of INTEGRILIN and potential products may depend heavily upon the
availability of reimbursement from third-party payors, such as government and
private insurance plans. The Company meets with administrators of these plans to
discuss the potential medical benefits and cost-effectiveness of its products.
The Company believes this approach may assist in obtaining reimbursement
authorization for its products from these third-party payors. See "Additional
Risk Factors - Pharmaceutical Pricing and Reimbursement."
COMPETITION
Due to the incidence and severity of cardiovascular diseases, the market for
therapeutic products that address such diseases is large and competition is
intense and expected to increase. The Company's most significant competitors are
major pharmaceutical companies and established biotechnology companies, which
have significant resources and expertise in research and development,
manufacturing, testing, obtaining regulatory approvals and marketing. Emerging
pharmaceutical and biotechnology companies may also prove to be significant
competitors, particularly through collaboration arrangements with large
pharmaceutical companies. Many of these competitors have cardiovascular products
approved or in development and operate large, well-funded cardiovascular
research and development programs. Furthermore, academic institutions,
governmental agencies and other public and private research organizations
conduct research, seek patent protection and establish collaboration
arrangements for product and clinical development and marketing in the
cardiovascular disease field and other areas being targeted by the Company. In
addition, these companies and institutions compete with the Company in
recruiting and retaining highly qualified scientific and management personnel.
The Company is aware of products in research or development by its competitors
that address all of the diseases and disorders being targeted by the Company and
any of these products may compete with potential products being developed by the
Company, depending upon the pharmacological characteristics of each product.
Competition is
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based primarily on product efficacy, safety, the timing and scope of regulatory
approvals, availability of supply, marketing and sales capability, reimbursement
coverage, price and patent position.
In particular, many of the Company's competitors have programs specifically
designed to develop both parenteral and oral GP IIb-IIIa inhibitors. Two other
parenteral GP IIb-IIIa inhibitors have received regulatory approval in the
United States and are currently being marketed and sold: abciximab, which is
being developed by Centocor, Inc. and marketed by Centocor, Inc. and Eli Lilly &
Co.; and tirofiban, which is being developed and marketed by Merck & Co., Inc.
Orally available GP IIb-IIIa inhibitors are also being developed by a number of
pharmaceutical companies with agents at various stages of development. The
Company believes these orally administered compounds are not likely to represent
direct competition for parenteral products because they are being designed for
chronic therapies, are expected to be dosed to have a lesser anti-platelet
effect than parenteral products and are designed to have a long biological
half-life. Competitors might succeed in developing products or technologies that
are more effective than those being developed by the Company and these products
or technologies might render the Company's technology obsolete or
noncompetitive.
Any product which the Company succeeds in developing and for which it gains
regulatory approval must then compete for market acceptance and market share.
For certain of the Company's potential products, important competitive factors
will be the pricing and timing of market introduction of competitive products.
Accordingly, important competitive factors will be the relative speed with which
companies can develop products, complete the clinical testing and approval
processes and supply commercial quantities of the product to the market. With
respect to clinical testing, competition may also delay progress by limiting the
number of clinical investigators and patients available to test the Company's
potential products.
COLLABORATION AGREEMENTS
The Company evaluates, on an ongoing basis, potential collaborations where such
relationships may complement and expand the Company's research, development,
sales or marketing capabilities. The Company is currently engaged in a number of
collaborations with other companies, consultants, universities and medical
centers. The Company's main collaboration agreements are with Schering and Kyowa
Hakko Kogyo Co., Ltd. The research term of the Company's agreement with Ortho
Pharmaceutical Corporation expired in December 1998.
Collaboration Agreement with Schering-Plough Ltd. and Schering Corporation
In April 1995, the Company entered into a collaboration agreement with Schering
to jointly develop and commercialize INTEGRILIN(TM) (eptifibatide) Injection on
a worldwide basis. In December 1998, the Company and Schering amended the
agreement. See also "Marketing and Sales Strategy." Pursuant to this agreement,
decisions regarding the ongoing development and marketing of INTEGRILIN are
generally subject to the oversight of a Joint Steering Committee with equal
membership from the Company and Schering, although certain development decisions
are allocated specifically to the Company and in those markets where Schering
has exclusive marketing rights, Schering has decision-making authority with
respect to marketing issues.
The Company and Schering co-promote INTEGRILIN in the United States and share
any profits or losses. Schering is responsible for the distribution of the final
product from manufacturers to wholesalers. In Europe, Schering has the right to
launch INTEGRILIN as an exclusive licensee on a royalty-bearing basis for a
period of time. Following this initial period, the Company has the right to
co-promote the product in Europe and share any profits or losses. In all
co-promotion territories, the exact profit-sharing ratio between the companies
depends on the amount of sales effort contributed by each company. Outside of
the United States, Canada and Europe, Schering is the exclusive licensee on a
royalty-bearing basis. Schering is primarily responsible for regulatory filings
outside the United States and Canada. Schering participates in and shares the
costs of continuing development of INTEGRILIN. Under the terms of the agreement,
both parties have certain rights to terminate for breach.
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In 1998, the Company recognized $3,933,000 in co-promotion revenue from sales
of INTEGRILIN(TM) (eptifibatide) Injection under its agreement with Schering. In
1998, 1997 and 1996, the Company recognized $32,000,000, $8,000,000 and
$12,000,000, respectively, in milestone revenues and $5,730,000, $11,290,000 and
$6,635,000, respectively, in development-related contract revenues under the
agreement. Schering has agreed to pay additional milestone payments to the
Company if specified development milestones are achieved. If Schering were to
breach or terminate its agreement with the Company, fail to pay milestone
payments or its share of collaborative costs or otherwise fail to conduct its
collaborative activities in a timely manner, the Company would be required to
devote substantial additional resources to the development and promotion of
INTEGRILIN or seek to obtain capabilities or funding through alternative
sources, which would result in a significant delay of these activities.
Collaboration Agreement with Kyowa Hakko Kogyo Co., Ltd.
In November 1992, the Company entered into a collaboration agreement with Kyowa
Hakko Kogyo Co., Ltd. ("Kyowa Hakko") focused on the discovery and development
of small molecule pharmaceuticals, primarily for the prevention of restenosis
following angioplasty. The collaboration targets a defined class of growth
factor inhibitors. This agreement has been amended several times and has been
extended until November 1999. Both companies have committed significant internal
resources to all phases of research. The Company has exclusive development and
marketing rights in the United States for any products resulting from the
collaboration and Kyowa Hakko has exclusive development and marketing rights in
Asia for any such products. The companies have agreed to develop and
commercialize jointly any such products on a shared economic basis in the rest
of the world. The agreement further provides that Kyowa Hakko will have the
exclusive right to develop and commercialize small molecule products for
indications related solely to a single, defined non-cardiovascular disease
indication outside of the United States.
In addition, under the terms of the agreement, Kyowa Hakko has certain rights to
supply bulk material for the manufacture of any products resulting from the
collaboration and the Company has agreed to purchase its requirements for such
material from Kyowa Hakko. If Kyowa Hakko is unable to provide the Company with
adequate supplies of any material, the Company is entitled to seek alternate
suppliers. However, the Company may not be able to establish any alternative
supply arrangements on a timely or commercially reasonable basis.
Collaboration Agreement with Ortho Pharmaceutical Corporation
In December 1993, the Company entered into a collaboration agreement with Ortho
Pharmaceutical Corporation ("Ortho"), focusing on the joint discovery,
development and commercialization of novel pharmaceuticals that may result from
collaborative research on the thrombin receptor. This agreement was amended in
September 1996. The Company and Ortho each provided specified levels of internal
resources to the collaborative research over the initial three-year research
term. In 1997, the Company recognized $2,400,000 in development-related contract
revenues under this agreement. The research term expired in December 1998.
If products arise from this collaboration, Ortho will make development milestone
payments to the Company. In addition, the Company and Ortho may participate (i)
in development of products under the collaboration and share equally in the
development costs on a worldwide basis, (ii) equally in the commercialization of
co-developed products (with the Company's rights of commercialization to be
limited to specified countries, including the major countries of Europe and in
North America, Japan and Australia) and (iii) equally in profits or losses from
any co-developed products in those countries where the companies jointly
commercialize the products. If either company decides not to participate in the
development of a product under the collaboration or does not participate in the
commercialization of such product in one or more countries, that company would
receive royalties based on product sales.
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MANUFACTURING AND PROCESS DEVELOPMENT
The Company has no manufacturing facilities for either the commercial production
of bulk active drug substances or the manufacture of final dosage forms. The
Company is dependent on contract manufacturers or collaboration partners for the
commercial production of INTEGRILIN(TM) (eptifibatide) Injection and any
potential products or compounds for preclinical research and clinical trial
purposes and expects to be dependent on such manufacturers or collaboration
partners for the foreseeable future. The Company has conducted manufacturing
testing programs required to obtain FDA and other regulatory approvals for the
manufacture of drug substances and drug products. However, the Company has no
experience manufacturing pharmaceutical or other products.
The Company believes the contracted supply of INTEGRILIN is sufficient to meet
current market demand. The Company is working with its vendors on capacity
forecasts to assure that there is an adequate supply of the drug, including raw
materials, in the future. The Company has established long-term supply
arrangements with one supplier for the bulk product (Solvay, Societe Anonyme)
and with another supplier for the filling and final packaging of INTEGRILIN. In
addition, the Company has identified a second manufacturer of bulk product of
INTEGRILIN and has transferred the necessary process technology to that
manufacturer. The Company's manufacturing plans include the addition of capacity
with its existing suppliers and with secondary manufacturers of bulk and
finished product. Agreements with alternative contract manufacturers may not be
reached on a timely basis or at all. The Company may need expanded capacity to
meet additional market demand. If this were to occur, the Company may not be
able to expand capacity in a timely manner or at all.
The Company's dependence upon third parties for the manufacture of its potential
products may adversely affect the Company's profit margins, if any, and its
ability to develop and manufacture products on a timely and competitive basis.
In connection with the commercialization of its existing and potential products,
the Company's strategy is to establish multiple third-party manufacturing
sources on commercially reasonable terms. The Company may not be able to
establish such sources on commercially reasonable terms. Even if such sources
are established, the sources may not be successful. In the event that the
Company is unable to obtain contract manufacturing or obtain such manufacturing
on commercially acceptable terms, it may not be able to commercialize its
products as planned.
The Company believes that material that has been produced by contract
manufacturers has been done in conformity with applicable regulatory
requirements. The Company has established a quality assurance/control program to
ensure that the Company's compounds are manufactured in accordance with Current
Good Manufacturing Practices ("CGMP"), the requirements of the California State
Food and Drug Administration and other applicable regulations. Any contract
manufacturers that the Company may use must adhere to CGMP. The FDA or other
regulatory agencies may not approve the processes or the facilities by which any
of the Company's potential products may be manufactured. In addition, if the
facilities cannot pass regular post-approval FDA inspections, manufacturing and
distribution may be disrupted, recalls of distributed products may be necessary
and other sanctions could be applied, which would have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Government Regulation."
The Company believes that all of its existing compounds can be produced using
established manufacturing methods, including cell culture, fermentation or
traditional pharmaceutical synthesis. The manufacture of the Company's compounds
is based in part on technology that the Company believes to be proprietary.
Contract manufacturers may utilize their own technology, the technology of the
Company or that of third parties. Successful technology transfer is needed to
ensure success with potential secondary suppliers. Such manufacturers may not
abide by the limitations or confidentiality restrictions in licenses with the
Company. In addition, any such manufacturer may develop process technology
related to the manufacture of the Company's compounds that such manufacturer
owns either independently or jointly with the Company. This would increase the
Company's reliance on such manufacturer or require the Company to obtain a
license from such manufacturer in order to have its products manufactured. Any
such license may not be available on terms acceptable to the Company, if at all.
For the Company's product candidates in development, the Company expects that it
will need to improve or modify its existing process technologies and
manufacturing capabilities. The Company cannot quantify the time or expense that
may ultimately be required to improve or modify its existing process
technologies, but it is possible that such
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time or expense could be substantial. Moreover, the Company may not be able to
implement any of these improvements or modifications successfully.
PATENTS, PROPRIETARY RIGHTS AND LICENSES
Patents
The Company's policy is to file patent applications to protect technology,
inventions and improvements that are important to the development of its
business. The Company also relies upon trade secrets, know-how, continuing
technological innovations and licensing opportunities to develop and maintain
its competitive position. The Company plans to prosecute and defend its patent
applications aggressively, including any patents that may issue, as well as its
proprietary technology.
The Company's success will depend in part on its ability to obtain and maintain
patent protection for its product, INTEGRILIN(TM) (eptifibatide) Injection, and
its product candidates in development, both in the United States and in other
countries. The Company has patents or has filed applications for patents
covering many of its product candidates, processes, various aspects of the
Company's platelet aggregation inhibitor, growth factor receptor and venous
thrombosis programs, as well as other programs. Many of the patents or
applications include composition of matter claims relating to a number of the
Company's compounds. Also, the Company has exclusively licensed a series of
related patent applications with respect to certain of its product candidates.
The patent positions of pharmaceutical and biotechnology firms, including the
Company, are often uncertain and involve complex legal and factual questions. In
addition, the coverage claimed in a patent application can be significantly
reduced before the patent is issued. Consequently, the Company does not know
whether any of its applications will result in the issuance of patents or
whether any of its issued patents will provide significant proprietary
protection or will be circumvented or invalidated. Since patent applications in
the United States are maintained in secrecy until patents issue and since
publication of discoveries in the scientific or patent literature often lags
behind actual discoveries, the Company cannot be certain that it was the first
creator of inventions covered by its pending patent applications or that it was
the first to file patent applications for such inventions. Moreover, the Company
may need to participate in interference proceedings declared by the United
States Patent and Trademark Office or, with respect to foreign patents and
patent applications, with foreign regulatory agencies, to determine priority of
invention, which could result in substantial cost to the Company, even if the
eventual outcome is favorable to the Company.
The development of therapeutic products for cardiovascular applications is
intensely competitive. A number of pharmaceutical companies, biotechnology
companies, universities and research institutions have filed patent applications
or received patents in this field. Some of these applications are competitive
with the Company's applications or conflict in certain respects with claims made
under applications that cover one or more of the Company's programs. Such
conflict could result in a significant reduction of the coverage of the
Company's patents, if issued, which could materially adversely affect the
Company's prospects. In addition, if patents are issued to other companies that
contain competitive or conflicting claims and such claims are ultimately
determined to be valid, the Company may not be able to obtain licenses to these
patents at a reasonable cost or develop or obtain alternative technology.
In October 1997, a patent opposition was filed in Europe by another company
against the claims of a patent granted to the Company in Europe covering broad,
generic claims for INTEGRILIN, as well as numerous related compounds that are
not part of the Company's core technology. The opposition asserts that all
claims of the patent are unpatentable. The Company intends to vigorously defend
its patent. However, this patent opposition may result in an unfavorable
outcome.
Trade Secrets
The Company also relies upon trade secret protection for its confidential and
proprietary information. Other parties may independently develop substantially
equivalent proprietary information and techniques, otherwise gain access to
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the Company's trade secrets or disclose the Company's trade secrets or such
substantially equivalent technology. In addition, the Company may not be able to
meaningfully protect its trade secrets.
Licensed Technology
The Company has obtained licenses from certain universities, companies and
research institutions to technologies, processes and compounds that it believes
may be important to the development of its products. These agreements require
the Company to pay license maintenance fees and, upon commercial introduction of
certain products, to pay royalties. These include an exclusive license agreement
with the Regents of the University of California that may be canceled or
converted to a non-exclusive license if specified milestones are not achieved.
These licenses may not provide effective protection against the Company's
competitors.
Confidentiality Agreements
It is the Company's policy to require its employees, consultants, outside
scientific collaborators, sponsored researchers and other advisors to execute
confidentiality agreements upon the commencement of employment or consulting
relationships with the Company. These agreements provide that all confidential
information developed or made known to the individual during the course of the
individual's relationship with the Company is to be kept confidential and not
disclosed to third parties except in specific circumstances. In the case of
employees, the agreements provide that all inventions conceived by the
individual while in the Company's employment shall be the exclusive property of
the Company. These agreements may not provide meaningful protection or adequate
remedies for the Company's trade secrets in the event of unauthorized use or
disclosure of such information.
GOVERNMENT REGULATION
The production and marketing of the Company's product, INTEGRILIN(TM)
(eptifibatide) Injection and the Company's ongoing research and development of
product candidates and other activities, are subject to extensive regulation by
numerous government authorities in the United States and other countries. The
Food, Drug and Cosmetic Act (the "FDC Act") and other federal statutes and
regulations govern or influence the development, testing, manufacture, labeling,
storage, approval, advertising, promotion, sale and distribution of drug
products. Satisfaction of such regulatory requirements typically takes several
years or more depending upon the type, complexity and novelty of the product and
requires the expenditure of substantial resources. For its currently marketed
product, INTEGRILIN and for prospective products, failure to comply with
applicable regulatory requirements after obtaining regulatory approval can,
among other things, result in the suspension of regulatory approval, warning
letters, recall of product, suspension of production and/or distribution and
possible civil and criminal sanctions.
The FDA's policies may change and additional governmental regulations may be
promulgated which could prevent or delay regulatory approval of the Company's
potential products. The Company is unable to predict the likelihood of adverse
governmental regulation that might arise from future legislation or
administrative action, either in the United States or abroad. Furthermore, the
Company may encounter problems in clinical trials that will cause the Company or
the FDA to delay or suspend clinical trials. The Company may not be granted
approval for potential products. Additionally, the Company may not have
sufficient resources to carry potential products through the regulatory approval
process.
Clinical Testing
Prior to marketing in the United States, any product developed by the Company
must undergo rigorous preclinical testing and clinical trials and an extensive
regulatory approval process implemented by the FDA under the FDC Act. The steps
ordinarily required before a drug may be commercially marketed in the United
States include (a) the submission to the FDA of an Investigational New Drug
application (including results of preclinical testing) which must become
effective before clinical trials may commence; (b) the conduct of adequate and
well-controlled clinical trials to establish the safety and efficacy of the
drug; (c) the submission to the FDA of a new drug application
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("NDA"); and (d) the FDA's approval of the applications, including approval of
all product labeling and inspection of manufacturing facilities.
Preclinical studies must be conducted in compliance with Good Laboratory
Procedures regulations. Clinical testing must meet requirements for
Institutional Review Board oversight and informed consent, as well as FDA prior
review, oversight and Good Clinical Practice regulations. Generally, clinical
trials involve three phases and are subject to detailed protocols, which must be
reviewed by the FDA. The Company or the FDA may suspend clinical trials at any
time if either believes that the subjects participating in such trials are being
exposed to unacceptable health risks.
Data obtained from preclinical testing and clinical trials are susceptible to
varying interpretations that could delay, limit or prevent regulatory approvals.
The Company may not obtain regulatory approval for any of the Company's
potential products. If regulatory approval is granted by the FDA, such approval
will be limited to those specific segments of the population for which the
product is effective, as demonstrated through clinical trials. Approval may
entail ongoing requirements for post-marketing studies. Product candidates
developed by the Company alone or in conjunction with others may not be proven
to be safe and efficacious in clinical trials or may not meet all of the
applicable regulatory requirements needed to receive or maintain marketing
approval.
Other Regulation
Among the conditions for FDA approval of a pharmaceutical product is the
requirement that the manufacturer's quality control and manufacturing procedures
(either the Company's own or a third-party manufacturer's) conform to CGMP which
must be followed at all times. In complying with CGMP regulations,
pharmaceutical manufacturers must expend resources and time to ensure compliance
with specifications and production, record keeping, quality control, reporting
and other requirements. See also "Manufacturing and Process Development."
Outside the United States, the Company's ability to market a product is
contingent upon receiving marketing authorization from the appropriate
regulatory authorities. The requirements governing the conduct of clinical
trials, marketing authorization, pricing and reimbursement vary widely from
country to country. At present, foreign marketing authorizations are applied for
at a national level, although within the EU, centralized procedures are
available to companies wishing to market a product in more than one EU member
state. If the regulatory authorities are satisfied that adequate evidence of
safety, quality and efficacy has been presented, a marketing authorization will
be granted. This foreign regulatory approval process includes all of the risks
and potential delays associated with FDA approval set forth above.
The Company must also comply with other applicable federal, state and local laws
and regulations, such as the Occupational Safety and Health Act, the
Environmental Protection Act, the Nuclear Energy and Radiation Control Act, the
Toxic Substances Control Act, national restrictions on technology transfer,
regulations for the protection of human subjects in clinical studies and for
animal welfare in preclinical studies and import, export and customs regulation.
From time to time Congressional Committees and federal agencies have indicated
an interest in implementing further regulation of biotechnology and its
applications.
INSURANCE
The testing, marketing and sale of human pharmaceuticals expose the Company to
significant and unpredictable risks of product liability claims in the event
that the use of its technology or products is alleged to have resulted in
adverse effects. Such risks will exist even with respect to any products that
receive regulatory approval for commercial sale. While the Company has obtained
liability insurance for commercial use of INTEGRILIN(TM) (eptifibatide)
Injection and the conduct of the Company's clinical trails, such insurance may
not be sufficient to satisfy any liability that may arise. Additionally,
adequate insurance coverage may not be available in the future at an acceptable
cost, if at all. A product liability claim may adversely affect the Company's
business, financial condition, and results of operations.
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EMPLOYEES
As of March 1, 1999, the Company had 321 full-time employees, of whom 149 were
in research and development, 103 were in sales and 69 were in marketing, general
and administrative functions. The Company's sales force is located throughout
the United States. All other employees are located at the Company's facility in
South San Francisco, California.
None of the Company's employees is represented by a collective bargaining
agreement. The Company considers its employee relations to be good. The
Company's policy is to enter into confidentiality agreements with its employees
and consultants. See "Patents, Proprietary Rights and Licenses - Confidentiality
Agreements."
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ADDITIONAL RISK FACTORS
Stockholders and potential investors in shares of the Company's stock should
carefully consider the following risk factors, in addition to other information
in this Report. The Company is identifying these risk factors as important
factors that could cause the Company's actual results to differ materially from
those contained in any written or oral forward-looking statements made by or on
behalf of the Company. The Company is relying upon the safe-harbor for
forward-looking statements and any such statements made by or on behalf of the
Company are qualified by reference to the following cautionary statements, as
well as to those set forth elsewhere in this Report.
HISTORY OF OPERATING LOSSES AND UNCERTAINTY OF FUTURE PROFITABILITY AND FUNDING
The Company's revenues to date have consisted largely of contract revenue from
milestone payments and, to a very limited extent, contract revenue from product
sales by Schering of the Company's only commercial product, INTEGRILIN(TM)
(eptifibatide) Injection. Historically, the Company's expenses have exceeded
revenues. The Company had an accumulated deficit as of December 31, 1998 of
$189,164,000. These losses may increase as the Company expands its research and
development and commercialization activities and such losses may fluctuate
significantly from quarter to quarter. The Company may never achieve or sustain
significant revenues from product sales or profitable operations. The Company's
prospects are highly dependent upon increasing the sales of INTEGRILIN by
Schering.
The development of the Company's technology and potential products will require
a commitment of substantial funds to conduct the costly and time-consuming
research, preclinical testing and clinical trials necessary to develop and
optimize such technology and potential products, to establish manufacturing,
marketing and sales capabilities and to bring any such products to market. The
Company's future capital requirements will depend upon many factors, including
continued scientific progress in the research and development of the Company's
technology and drug programs, the size and complexity of these programs, the
ability of the Company to establish and maintain collaborative arrangements,
progress with preclinical testing and clinical trials, the time and costs
involved in obtaining regulatory approvals, the cost involved in preparing,
filing, prosecuting, maintaining and enforcing patent claims or trade secrets
and product commercialization activities. The Company may not be able to
successfully develop or commercialize any of its potential products.
The Company anticipates that its existing capital resources and interest earned
thereon will enable it to maintain its operations at least through the end of
2000. The Company may seek additional funding through collaboration arrangements
and public or private financings, including equity financings. Such additional
funding may not be available on favorable terms, if at all. In such event, the
Company may need to delay or curtail its research and development activities to
a significant extent. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
NO ASSURANCE OF MARKET ACCEPTANCE OF INTEGRILIN; LIMITED MARKETING AND SALES
EXPERIENCE
The Company's prospects are highly dependent upon increasing the sales of
INTEGRILIN. If INTEGRILIN sales fail to increase, it would have a material
adverse effect on the Company's business, financial condition and results of
operations.
A number of factors may affect the rate and breadth of market acceptance of
INTEGRILIN, including the perception by physicians and other members of the
health care community of the safety and efficacy of INTEGRILIN on an absolute
basis or in comparison to other drugs, the price of INTEGRILIN relative to other
drugs or competing treatment modalities, the availability of third-party
reimbursement, and the effectiveness of the sales and marketing efforts by COR
and Schering. In addition, side effects or unfavorable publicity concerning
INTEGRILIN or comparable drugs on the market could have a material adverse
effect on the Company's ability to obtain physician, patient or third-party
payor acceptance.
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The Company's strategy is to market and sell INTEGRILIN(TM) (eptifibatide)
Injection directly in the United States and Canada in copromotion with Schering.
In 1998, the Company developed and trained an initial sales force within the
United States. INTEGRILIN has not yet been approved for commercial sale in
Canada. The Company incurred in 1998, and expects to continue to incur,
significant expenses in developing, training, maintaining and managing its sales
organization. The cost of establishing and maintaining the sales force may
exceed INTEGRILIN product revenues and the Company's direct marketing and sales
efforts may not be successful. In addition, the Company competes with many other
companies that currently have extensive and well-funded marketing and sales
operations. The Company's marketing and sales efforts may not compete
successfully against such other companies. See "Marketing and Sales Strategy."
PHARMACEUTICAL PRICING AND REIMBURSEMENT
In both domestic and foreign markets, sales of pharmaceutical products depend
heavily upon the availability of reimbursement from third-party payors,
including government health administration authorities, managed care providers,
private health insurers and other organizations. In addition, other third-party
payors may challenge the price and cost effectiveness of medical products and
services. In many major markets outside the United States, pricing approval is
required before sales can commence. Significant uncertainty exists as to the
reimbursement status of newly approved health care products.
The Company may not be able to obtain its desired price on its products. Also,
government-approved prices, once established, may not be reduced in subsequent
years. The Company's products may not be considered cost effective. Also,
adequate third-party reimbursement may not be available to enable the Company to
maintain price levels sufficient to realize an appropriate return on its
investment in product development. Legislation and regulations affecting the
pricing of pharmaceuticals may change before the Company's product candidates
are approved for marketing. Adoption of such legislation could further limit
reimbursement for medical products. If adequate coverage and reimbursement
levels are not provided by the government and third-party payors for the
Company's products, the market acceptance of these products would be adversely
affected, which would have a material adverse effect on the Company's business,
financial condition and results of operations.
UNCERTAINTIES RELATED TO REGULATORY APPROVAL
Before obtaining required regulatory approvals for the commercial sale of any of
the Company's potential products under development, the Company must demonstrate
through preclinical testing and clinical trials and, to the FDA's satisfaction,
that each product is safe and effective for use in indications for which
approval is requested. The results from preclinical testing and early clinical
trials may not be predictive of results obtained in large clinical trials.
Companies in the pharmaceutical and biotechnology industries have suffered
significant setbacks in various stages of clinical trials, even in advanced
clinical trials after promising results had been obtained in earlier trials.
The development of safe and effective products is highly uncertain and subject
to numerous risks. Product candidates that may appear to be promising in
development may not reach the market for a number of reasons. Product candidates
may be found ineffective or cause harmful side effects during clinical trials,
may take longer to progress through clinical trials than had been anticipated,
may fail to receive necessary regulatory approvals, may prove impracticable to
manufacture in commercial quantities at reasonable cost and with acceptable
quality or may fail to achieve market acceptance. Completion of research,
preclinical testing and clinical trials may take many years and the length of
time varies substantially with the type, complexity, novelty and intended use of
the product. Delays or rejections may be encountered based upon many factors.
The Company's current development programs may not be successfully completed.
The Company's regulatory applications to conduct clinical trials may not be
allowed to proceed by the FDA or other regulatory authorities, or such clinical
trials may not commence as planned.
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All of the Company's potential products are subject to extensive regulation and
will require approval from the FDA and other regulatory agencies prior to
commercial sale. The cost to the Company of conducting clinical trials for any
potential product can vary dramatically based on a number of factors, including
the order and timing of clinical indications pursued and the extent of
development and financial support, if any, from corporate partners. Because of
the intense competition in the cardiovascular market, the Company may have
difficulty obtaining sufficient patient populations or clinician support to
conduct its clinical trials as planned and may have to expend substantial
additional funds to obtain access to such resources or delay or modify its plans
significantly. See "Competition" and "Government Regulation."
DEPENDENCE ON COLLABORATIVE RELATIONSHIPS
The Company is currently engaged in a number of collaborations with other
companies, consultants, universities and medical centers. The Company's main
collaboration agreements are with Schering and Kyowa Hakko. The research term of
the Company's agreement with Ortho expired in December 1998.
While the Company believes its agreements with collaborators provide incentives
to all parties, these relationships may not be successful or lead to the
development or commercialization of any particular product or product
opportunity. Although under the current agreements, the Company and its
collaborators work exclusively with each other within a defined field for a
defined period, a collaborator or collaborators may terminate its or their
agreement with the Company or separately pursue alternative products,
therapeutic approaches or technologies as a means of developing treatments for
the diseases targeted by the Company or a collaboration. For these and other
reasons, such as a change in a collaborator's strategic direction, even if a
collaborator continues its contributions to the arrangement, it may nevertheless
determine not to actively pursue the development or commercialization of any
resulting products. In such event, the Company's ability to pursue such
potential products could be severely limited.
The Company evaluates, on an ongoing basis, potential collaborations where such
relationships may complement and expand the Company's research, development,
sales or marketing capabilities. Any such arrangements may limit the Company's
flexibility in pursuing alternatives for the commercialization of its products.
The Company may not be able to establish any additional collaboration
arrangements. If established, such arrangements may not be successful. See
"Collaboration Agreements."
LACK OF MANUFACTURING CAPABILITY; RELIANCE ON THIRD-PARTY MANUFACTURERS
The Company currently has no manufacturing facilities and, accordingly, relies
on third parties for clinical and commercial production of INTEGRILIN(TM)
(eptifibatide) Injection and for clinical production of product candidates. If
the Company was unable to contract on acceptable terms for manufacturing
services or if the third party manufacturers or suppliers were to cease
production or otherwise fail to supply the Company, the Company's ability to
produce INTEGRILIN and to conduct preclinical testing and clinical trials of
product candidates, would be adversely affected, potentially resulting in
product supply and distribution shortages of INTEGRILIN and delay of regulatory
approval and new development of product candidates. These results could
materially impair the Company's competitive position and could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Manufacturing and Process Development."
UNCERTAINTY RELATING TO PATENTS AND PROPRIETARY RIGHTS
Biotechnology and pharmaceutical companies rely on patent and trade secret
protection for significant new technologies, products and processes because of
the long development time, uncertainty and high cost associated with bringing a
new product to the marketplace. The enforceability of patents issued to
companies in this industry
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can be highly uncertain and involve complex legal and technical questions for
which the legal principles are largely unresolved. The Company's success will
depend in part on its ability to obtain and enforce patent protection for its
technology both in the United States and other countries. While the Company is
seeking and/or maintaining patents for INTEGRILIN(TM) (eptifibatide) Injection
and its product candidates, patents may not issue and issued patents may afford
limited or no protection. Additionally, the Company may not be successful in
enforcing its patents and avoiding infringement of patents granted to others.
In response to litigation, the Company may be required to obtain licenses to
patents or other proprietary rights from third parties. Licenses required under
any patents or proprietary rights may not be made available on terms acceptable
to the Company, if at all. If the Company does not obtain required licenses, it
may encounter delays in product development while attempting to redesign
products or methods or it could find the development, manufacture or sale of
such products requiring licenses to be foreclosed. Further, the Company could
incur substantial costs in defending any patent litigation brought against it or
in asserting the Company's patent rights, including those rights licensed to the
Company by others. See "Legal Proceedings."
VOLATILITY OF COMMON STOCK PRICE
The market prices for securities of pharmaceutical and biotechnology companies,
including the Company, have historically been highly volatile. The market has
from time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies. Factors such as
fluctuations in the Company's operating results, announcements of technological
innovations or new therapeutic products by the Company or its competitors,
announcements regarding collaborative agreements, governmental regulation,
clinical trial results, developments in patent or other proprietary rights,
public concern as to the safety of drugs developed by the Company or others,
comments made by securities analysts and general market conditions may have a
significant effect on the market price of the Company's stock. In particular,
the realization of any of the risks described in this Report could have a
significant and adverse impact on the market price. See "Market For Registrant's
Common Equity and Related Stockholder Matters."
NEED TO ATTRACT AND RETAIN KEY EMPLOYEES AND CONSULTANTS
The Company is highly dependent on the principal members of its scientific and
management staff. In addition, the Company relies on consultants to assist the
Company in formulating its research and development strategy. Attracting and
retaining qualified personnel and consultants will be critical to the Company's
success. To pursue its product development and marketing plans, the Company will
be required to hire additional qualified scientific personnel to perform
research and development, as well as personnel with expertise in conducting
clinical trials, government regulation, manufacturing, marketing and sales.
Expansion in the areas of product development, marketing and sales is also
expected to require the addition of management personnel and the development of
additional expertise by existing management personnel. The Company faces
competition for qualified individuals with numerous pharmaceutical and
biotechnology companies, universities and other research institutions. The
Company may not be able to attract and retain such individuals.
In addition, a portion of the Company's research and development is conducted
under sponsored research programs with several universities and research
institutions. The Company depends on the availability of a principal
investigator for each such program and the Company cannot assure that these
individuals or their research staffs will be available to conduct research and
development for the Company. In addition, the Company's academic collaborators
are not employees of the Company. As a result, the Company has limited control
over their activities and can expect that only limited amounts of their time
will be dedicated to Company activities. The Company's academic collaborators
may have relationships with other commercial entities, some of which could
compete with the Company.
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RISKS ASSOCIATED WITH HAZARDOUS MATERIALS
The Company's research and development involves the controlled use of hazardous
materials, chemicals and various radioactive substances. Although the Company
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by state and federal regulations, the risk
of accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result and any such liability could exceed the resources of
the Company and could have a material adverse effect on the Company's business,
financial condition and results of operations.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company's Board of Directors has the authority to issue up to 5,000,000
shares of Preferred Stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the Company's
stockholders. The rights of the holders of Common Stock will be subject to and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. While the Company has no present intention to
issue shares of Preferred Stock, such issuance, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company.
In addition, the Company is subject to the anti-takeover provisions of Section
203 of the Delaware General Corporation Law, which prohibits the Company from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. The application of Section 203 could have the effect of
delaying or preventing a change of control of the Company.
In January 1995, the Company's Board of Directors adopted a Preferred Share
Purchase Rights Plan, commonly referred to as a "poison pill." In addition, the
Company's Restated Certificate of Incorporation (the "Restated Certificate")
does not permit cumulative voting. The Restated Certificate also includes a
"Fair Price Provision" that requires the approval of the holders of 66 2/3% of
the Company's voting stock as a condition to a merger or certain other business
transactions with or proposed by, a holder of 15% or more of the Company's
voting stock, except where disinterested Board or stockholder approval is
obtained or certain minimum price criteria and other procedural requirements are
met. These provisions and other provisions of the Restated Certificate, the
Company's bylaws and Delaware corporate law, may have the effect of deterring
hostile takeovers or delaying or preventing changes in control or management of
the Company, including transactions in which stockholders might otherwise
receive a premium for their shares over then current market prices.
RISKS RELATED TO THE 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 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 development to address computer system and
equipment problems as required by December 31, 1999. The Company believes that
with these
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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, even if these modifications are made in a timely fashion, they still
may not 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. These other
organizations may not adequately address the Year 2000 Issue and their failure
to address the Year 2000 Issue may 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 has been and is being funded through operating cash flows and has not been
material to date. The Company has been and is expensing these costs as incurred.
The Company has identified resources to address the Year 2000 Issue. The
aggregate financial impact to the Company of addressing the Year 2000 Issue
cannot be known precisely at this time, but it is currently expected to be less
than $2,000,000. The actual financial impact may exceed this estimate. The
financial impact is not expected to have a material adverse effect on the
Company's business, financial condition or results of operations.
EXECUTIVE OFFICERS OF THE COMPANY
The names of the Company's executive officers as of March 1, 1999 and certain
information about them is set forth below.
Name Age Position
- ---------------------- ------- ----------------------------------------------------------------
Vaughn M. Kailian 54 President, Chief Executive Officer and Director
Laura A. Brege 41 Senior Vice President, Finance and Chief Financial Officer
Patrick Broderick 40 Senior Vice President, General Counsel and Corporate Secretary
Charles J. Homcy, M.D. 50 Executive Vice President, Research and Development and Director
Mark D. Perrin 42 Executive Vice President, Commercial Operations
Lee M. Rauch 45 Senior Vice President, Corporate Development
Vaughn M. Kailian has served as President, Chief Executive Officer and a
Director of the Company since March 1990. From 1967 to 1990, Mr. Kailian was
employed by Marion Merrell Dow, Inc., a pharmaceutical company and its
predecessor companies, in various general management, product development,
marketing and sales positions. Mr. Kailian served as Corporate Vice President of
Global Commercial Development, Marion Merrell Dow, Inc.; President and General
Manager, Merrell Dow USA; Vice President, Marketing and Sales, Merrell Dow USA;
and Vice President, Marketing and Sales of Merrell Dow, Europe, Africa and the
Middle East. Mr. Kailian holds a B.A. from Tufts University. Mr. Kailian also
serves as a director of Amylin Pharmaceuticals and Axys Pharmaceutical
Corporation.
Laura A. Brege has served as Senior Vice President, Finance and Chief Financial
Officer of the Company since January 1998 and as Vice President, Finance and
Chief Financial Officer of the Company since January 1992. During 1991, Mrs.
Brege was Vice President, Finance and Chief Financial Officer of Computer Aided
Service, Inc., a manufacturer and marketer of computer systems. From 1988 to
1990, she was Vice President, Finance and Chief Financial Officer of
Flextronics, Inc., an electronics manufacturer. From 1982 to 1988, Mrs. Brege
held various financial positions at The Cooper Companies, Inc., a multinational
pharmaceutical and medical products company, last serving as Treasurer. Mrs.
Brege holds her B.S. from Ohio University and her M.B.A. from the University of
Chicago.
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Patrick Broderick has served as Senior Vice President, General Counsel and
Corporate Secretary since January 1999. From 1993 until he joined the Company,
Mr. Broderick held various legal positions with McKesson HBOC, Inc., last
serving as Senior Counsel. In this capacity, he was the legal counsel for drug
manufacturers' services for McKesson HBOC, Inc. From 1994 to 1999, Mr. Broderick
was also counsel to various subsidiaries of McKesson HBOC, Inc., including
Healthcare Delivery Systems, Inc., McKesson Bioservices Corporation and J.
Knipper and Company, Inc. From 1988 to 1992, Mr. Broderick practiced general
corporate law with Morrison & Foerster, prior to which he practiced business
litigation with McCutchen, Doyle, Brown & Enersen. Mr. Broderick received his
B.A. from Harvard College and his J.D. from Yale Law School.
Charles J. Homcy, M.D. has served as a Director of the Company since January
1998 and as Executive Vice President, Research and Development of the Company
since March 1995. Since 1997, Dr. Homcy has been Clinical Professor of Medicine,
University of California at San Francisco Medical School and Attending Physician
at the San Francisco VA Hospital. From 1994 until he joined the Company, Dr.
Homcy was President of the Medical Research Division of American Cyanamid
Company-Lederle Laboratories, a pharmaceutical company (now a division of
Wyeth-Ayerst Laboratories.) From 1990 until 1994, Dr. Homcy was Executive
Director of the Cardiovascular and Central Nervous System Research Section at
Lederle Laboratories, a pharmaceutical company. From 1991 to 1995, Dr. Homcy
also served as an attending physician at The Presbyterian Hospital, College of
Physicians and Surgeons, at Columbia University in New York. From 1979 to 1990,
he was an attending physician at Massachusetts General Hospital and an Associate
Professor of Medicine at Harvard Medical School. Dr. Homcy received his B.A. and
his M.D. degrees from the Johns Hopkins University in Baltimore.
Mark D. Perrin has served as Executive Vice President, Commercial Operations
since November 1995. From 1992 until he joined the Company, Mr. Perrin was Vice
President, Marketing and Sales, of Burroughs Wellcome Company, a pharmaceutical
company. From 1979 to 1992, Mr. Perrin held various sales and marketing
positions at American Cyanamid Company-Lederle Laboratories, a pharmaceutical
company (now a division of Wyeth-Ayerst Laboratories), last serving as Vice
President and General Manager of Lederle Pharmaceuticals. Mr. Perrin received
his B.S. from Fordham University and his Masters of Management from Northwestern
University.
Lee M. Rauch has served as Senior Vice President, Corporate Development since
January 1999. From 1997 to 1999, Ms. Rauch worked for the Mitchell Madison Group
where she was a Partner in the Healthcare Practice with leadership
responsibility for the Pharma/Supply sector. From 1995 to 1997, Ms. Rauch headed
Healthcare Strategies, a consulting practice serving clients in biotechnology,
healthcare information and medical devices. From 1989 to 1995, she held a
variety of corporate positions at Syntex Corporation, including Vice President
of Strategic Marketing, Vice President of New Product Planning, Director of
Therapy Area Planning for cardiovascular and central nervous system disease
areas and Director of Business Development. Prior to 1989, Ms. Rauch worked for
various companies including McKinsey & Co., Inc., Rohm and Haas Company and
American Cyanamid. Ms. Rauch received her B.A. from Arizona State University and
her M.B.A from the University of Chicago.
ITEM 2. PROPERTIES
The Company leases and occupies facilities consisting of approximately 100,000
square feet of laboratory and office space located in South San Francisco,
California. In 1999, the Company exercised its option to renew the lease for one
five-year period. The Company expects it will require additional laboratory and
office space as it expands its operations. The Company believes that additional
space will be available on commercially acceptable terms. The Company currently
has no production facilities.
ITEM 3. LEGAL PROCEEDINGS
In October 1997, a patent opposition was filed in Europe by another company
against the claims of a patent granted to the Company in Europe covering broad,
generic claims for INTEGRILIN(TM) (eptifibatide) Injection, as well as numerous
related compounds that are not part of the Company's core technology. The
opposition asserts that all
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claims of the patent are unpatentable. The Company intends to vigorously defend
its patent. However, this patent opposition may result in an unfavorable
outcome.
In May 1998, a plaintiff voluntarily dismissed all claims against the Company
and Vaughn M. Kailian, the Company's Chief Executive Officer, in a putative
class action lawsuit that had alleged violation of federal securities laws.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "CORR." The following table sets forth, for the calendar periods
indicated, the high and low sale prices per share of the Company's Common Stock
on the Nasdaq National Market. These prices represent quotations among dealers
without adjustments for retail markups, markdowns or commissions.
1998 High Low 1997 High Low
- ------------------- -------- -------- --------------- -------- --------
First Quarter $ 24.88 $ 8.63 First Quarter $ 13.88 $ 8.38
Second Quarter $ 22.75 $ 12.13 Second Quarter $ 11.00 $ 7.38
Third Quarter $ 16.00 $ 6.81 Third Quarter $ 17.50 $ 8.38
Fourth Quarter $ 14.13 $ 6.69 Fourth Quarter $ 26.13 $ 16.50
As of March 1, 1999 there were approximately 524 holders of record of the
Company's Common Stock. On March 1, 1999 the last reported sale price on the
Nasdaq National Market for the Company's Common Stock was $ 9.88 per share.
DIVIDEND POLICY
The Company has not paid any dividends since its inception and does not intend
to pay any dividends on its Common Stock in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
None in fourth quarter or the current year.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and Notes thereto included elsewhere in
this Report. The statement of operations data for the years ended December 31,
1998, 1997 and 1996 and the balance sheet data at December 31, 1998 and 1997,
are derived from the audited financial statements of the Company included
elsewhere in this Report. The statement of operations data for the years ended
December 31, 1995 and 1994 and the balance sheet data as of December 31, 1996,
1995 and 1994, are derived from audited financial statements not included
herein. The Company has not declared or paid cash dividends on its Common Stock
since inception and does not intend to pay any cash dividends in the foreseeable
future.
Year Ended December 31,
--------------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
STATEMENT OF OPERATIONS DATA: (in thousands, except per share data)
Total revenues $ 41,963 $ 22,190 $ 18,755 $ 31,850 $ 522
Expenses:
Cost of copromotion revenue 11,803 -- -- -- --
Research and development 39,915 47,831 50,791 37,392 40,185
Marketing, general and administrative 21,474 10,067 7,303 6,029 4,589
-------- -------- -------- -------- --------
Total expenses 73,192 57,898 58,094 43,421 44,774
-------- -------- -------- -------- --------
Loss from operations (31,229) (35,708) (39,339) (11,571) (44,252)
Interest income, net 3,615 2,216 2,793 4,040 4,715
-------- -------- -------- -------- --------
Net loss $(27,614) $(33,492) $(36,546) $ (7,531) $(39,537)
======== ======== ======== ======== ========
Basic and diluted net loss per share $ (1.14) $ (1.60) $ (1.86) $ (0.39) $ (2.07)
======== ======== ======== ======== ========
Shares used in computing
basic and diluted net loss per share 24,141 20,952 19,636 19,360 19,091
December 31,
-------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
BALANCE SHEET DATA: (in thousands)
Cash, cash equivalents and short-term
investments .................... $ 75,205 $ 82,569 $ 53,134 $ 84,834 $ 94,432
Total assets ........................ 103,093 95,385 71,245 100,906 106,367
Long-term obligations ............... 3,261 2,817 3,365 4,574 4,669
Total liabilities ................... 48,497 16,987 20,803 18,669 19,636
Accumulated deficit ................. (189,164) (161,550) (128,058) (91,512) (83,981)
Total stockholders' equity .......... 54,596 78,398 50,442 82,237 86,731
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In addition to the historical data contained herein, the following discussion
contains forward-looking statements that involve risk and uncertainties. The
Company's actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth elsewhere in this Report.
OVERVIEW
Since its inception, the Company has been dedicated to the discovery,
development and commercialization of novel pharmaceutical products to establish
new standards of care for the treatment and prevention of severe cardiovascular
diseases. The Company has incurred a cumulative net loss of $189,164,000 during
the period from inception to December 31, 1998. The Company has funded its
operations primarily through public equity financings and proceeds from
collaboration research and development agreements.
INTEGRILIN(TM) (eptifibatide) Injection is the first product that COR has taken
from discovery to commercialization. INTEGRILIN was approved for marketing in
the United States by the U.S. Food and Drug Administration ("FDA") in May 1998.
INTEGRILIN is indicated for the treatment of patients with acute coronary
syndrome or "ACS" (encompassing unstable angina and non-Q-wave myocardial
infarction, collectively "UA/NQMI") including patients who are to be managed
medically and those undergoing percutaneous coronary intervention ("PCI.")
INTEGRILIN is also indicated for the treatment of patients undergoing PCI.
COR and Schering-Plough Ltd. and Schering Corporation (collectively, "Schering")
are worldwide partners for INTEGRILIN. COR and Schering co-promote the drug in
the United States and share any profits or losses. COR and Schering launched
INTEGRILIN in June 1998 in the United States. See "Marketing and Sales
Strategy."
Total sales of INTEGRILIN to wholesalers, as reported to the Company by
Schering, were $12,200,000 from launch in June 1998 through December 31, 1998.
Product sales as reported by Schering for the period from launch in June 1998 to
December 31, 1998 are not necessarily indicative of product sales for any future
period.
Schering has the right to launch INTEGRILIN in the European Union ("EU") as an
exclusive licensee on a royalty-bearing basis for a period of time. In February
1999, Schering announced that the Committee for Proprietary Medicinal Products
("CPMP") of the European Agency for the Evaluation of Medicinal Products issued
a positive opinion recommending approval of INTEGRILIN for the prevention of
myocardial infarction in patients presenting with UA/NQMI. The CPMP opinion
serves as the basis for a European Commission approval, which is typically
issued in approximately four months. The Company believes that the Commission
approval of the centralized Marketing Authorization application for INTEGRILIN
would result in a single Marketing Authorization with unified labeling that
would be valid in all 15 European Union member states. Schering submitted the
centralized Marketing Application in February 1998. INTEGRILIN has received
regulatory approval in a number of countries outside the EU and the United
States.
COR and Schering are conducting or have conducted Phase II clinical trials of
INTEGRILIN with different thrombolytics in the setting of acute myocardial
infarction. COR and Schering also sponsor additional clinical trials of
INTEGRILIN in a variety of clinical settings.
In addition to its commercial activities, COR continues to pursue a wide array
of research and development programs. The Company's next potential product is an
oral glycoprotein IIb-IIIa ("GP IIb-IIIa") inhibitor to prevent platelet
aggregation. Results to date of Phase I and initial Phase II studies for the
Company's lead compound, cromafiban, show that it has high affinity and
specificity for GP IIb-IIIa. Inhibition of platelet aggregation by cromafiban
has been shown to be dose- and concentration-dependent. Plasma concentrations
have indicated a sufficiently long elimination half-life to allow for once-daily
dosing with a low peak-to-trough ratio and low inter-patient variability. No
food interactions have been observed. Bleeding was the most prevalent
complication
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encountered during cromafiban therapy in clinical trials conducted to date. COR
is also conducting preclinical research and development in several other
cardiovascular programs.
RESULTS OF OPERATIONS
Fiscal Years Ended December 31, 1998, 1997 and 1996
Total contract revenues were $41,963,000 in 1998 compared to $22,190,000 in 1997
and $18,755,000 in 1996. Copromotion revenue in 1998 was $3,933,000 resulting
from amounts due to the Company from Schering related to the sales of
INTEGRILIN(TM) (eptifibatide) Injection by Schering from launch in June 1998
through December 31, 1998. Milestone revenues in 1998 include $24,000,000
received from Schering in connection with the regulatory approval of INTEGRILIN
for certain indications in the United States and $8,000,000 from Schering in
connection with the acceptance for review of the centralized Marketing
Authorization application seeking marketing approval for INTEGRILIN in the EU.
Milestone revenues in 1997 were $8,000,000 received from Schering in connection
with the completion of PURSUIT, a large Phase III clinical trial for INTEGRILIN.
Milestone revenues in 1996 include $9,000,000 received from Schering in
connection with the safety of INTEGRILIN and $3,000,000 received from Schering
in connection with clinical studies of INTEGRILIN. Development and other
contract revenues were $6,030,000 in 1998 compared to $14,190,000 in 1997 and
$6,755,000 in 1996. Development and other contract revenues in 1998 were lower
than in 1997, primarily due to the completion of PURSUIT in the first half of
1997. The Company expects total contract revenues to continue to fluctuate in
the future.
Cost of copromotion revenue was $11,803,000 in 1998. Cost of copromotion revenue
includes certain manufacturing-related and marketing expenses incurred in
connection with the collaboration with Schering.
Research and development expenses were $39,915,000 in 1998 compared to
$47,831,000 in 1997 and $50,791,000 in 1996. The decrease in 1998 compared to
1997 and the decrease in 1997 compared to 1996 both resulted from the timing of
activities of PURSUIT, offset in part by 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 and other product candidates in development.
Marketing, general and administrative expenses were $21,474,000 in 1998 compared
to $10,067,000 in 1997 and $7,303,000 in 1996. The increase in 1998 compared to
1997 was primarily due to the addition of marketing and sales personnel for the
commercialization of INTEGRILIN, as well as increased staffing and
administrative expenses associated with general corporate activities. The
increase in 1997 compared to 1996 was primarily due to pre-commercial activities
associated with INTEGRILIN, as well as increases in staffing and administrative
expenses associated with general corporate activities. The Company expects
marketing, general and administrative costs to continue to increase
significantly over the next several years.
Interest income was $4,342,000 in 1998 compared to $2,840,000 in 1997 and
$3,552,000 in 1996. The increase in 1998 compared to 1997 and the decrease in
1997 compared to 1996 were primarily due to changes in cash and investment
balances. Interest expense was $727,000 in 1998 compared to $624,000 in 1997 and
$759,000 in 1996. Both the increase in 1998 compared to 1997 and the decrease in
1997 compared to 1996 were primarily due to changes in the amount of debt
obligations.
The Company incurred a net loss of $27,614,000 in 1998 and, accordingly, no
provision for federal or state income taxes was recorded. At December 31, 1998,
the Company had federal net operating tax loss carryforwards of approximately
$178,900,000. The Company's ability to use its net operating loss carryforwards
may be subject to an annual limitation in future periods. The Company believes,
however, that this limitation will not have a material impact on its future
operating results.
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LIQUIDITY AND CAPITAL RESOURCES
The Company had available cash, cash equivalents and short-term investments of
$75,205,000 at December 31, 1998. Cash in excess of immediate requirements is
invested according to the Company's investment policy. The primary objective of
the Company's investment activities is to preserve principal while at the same
time maximizing yields without significantly increasing risk. From inception,
the Company has funded its operations primarily through public equity financings
and proceeds from collaboration research and development agreements. Additional
funding has come from private equity financings, grant revenues, interest income
and property and equipment financings. At December 31, 1998, the Company had
approximately $4,000,000 available under an equipment financing facility.
Net cash used for operating activities and additions to capital equipment
decreased to $10,429,000 in 1998 from $30,968,000 in 1997, primarily due to the
timing of activities related to the agreement with Schering, including milestone
revenues received, partially offset by increased expenses. The Company
anticipates that its expenditures for operating activities and additions to
capital equipment will increase in future periods. The timing of these
expenditures may vary from period to period depending on the timing and phase
of, and indications pursued in, additional clinical trials of INTEGRILIN(TM)
(eptifibatide) Injection and clinical trials of product candidates in
development. Cash provided by financing activities of $2,895,000 in 1998,
$60,443,000 in 1997 and $3,927,000 in 1996 result primarily from the issuance of
Common Stock, including a public equity financing in 1997, and the net effect of
property and equipment financings.
The Company expects its cash requirements will increase in future years due to
costs related to continuation and expansion of research and development,
including clinical trials and increased marketing, 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 the end of 2000. However, the Company's capital requirements
may change depending on numerous factors, including the progress of the
Company's research and development programs, the scope and results of
preclinical and clinical studies and the number and nature of the indications
the Company pursues in clinical studies. The Company's capital requirements may
also change due to the timing of regulatory approvals, technological advances,
determinations as to the commercial potential of the Company's future products
and the status of competitive products. The Company's capital requirements may
also change because of other unanticipated circumstances. 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. Such funds may not 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.
The Company's business is subject to significant risks including, but not
limited to, the successful sales, distribution and manufacture of INTEGRILIN,
the success of its research and development activities, the length and expense
of obtaining regulatory approval and the results of clinical trials. Other
significant risks include uncertainty related to the availability of future
funding, uncertainty related to third-party reimbursement for the Company's
product and/or potential products, and uncertainty related to its collaborative
relationships. In addition, the Company's product candidates may be difficult to
manufacture on a large scale, uneconomical to market or precluded from
commercialization by proprietary rights of other parties. Additional expenses,
delays and lost 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.
YEAR 2000 COMPLIANCE
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
28
29
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 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 development 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, even if these modifications are made in a timely fashion,
they still may not 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. These other
organizations may not adequately address the Year 2000 Issue and their failure
to address the Year 2000 Issue may 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 has been and is being funded through operating cash flows and has not been
material to date. The Company has been and is expensing these costs as incurred.
The Company has identified resources to address the Year 2000 Issue. The
aggregate financial impact to the Company of addressing the Year 2000 Issue
cannot be known precisely at this time, but it is currently expected to be less
than $2,000,000. The actual financial impact may exceed this estimate. The
financial impact is not expected to have a material adverse effect on the
Company's business, financial condition or results of operations.
ITEM 7A. FINANCIAL MARKET RISKS
The Company is exposed to interest rate risk on the investments of its excess
cash. The primary objective of the Company's investment activities is to
preserve principal while at the same time maximizing yields without
significantly increasing risk. To achieve this objective, the Company invests in
highly liquid and high quality debt securities. To minimize the exposure due to
adverse shifts in interest rates, the Company invests in short-term securities
and maintains an average maturity of less than 2 years. Due to the nature of its
short-term investments, the Company has concluded that it does not have a
material market risk exposure.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Stockholders
COR Therapeutics, Inc.
We have audited the accompanying balance sheets of COR Therapeutics, Inc. as of
December 31, 1998 and 1997 and the related statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of COR Therapeutics, Inc. at
December 31, 1998 and 1997 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Palo Alto, California
January 19, 1999
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COR THERAPEUTICS, INC.
BALANCE SHEETS
(in thousands, except per share data)
December 31,
----------------------------
1998 1997
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 10,532 $ 22,209
Short-term investments 64,673 60,360
Contract receivables 2,398 422
Prepaid copromotion expenses 19,236 6,422
Other current assets 817 564
--------- ---------
Total current assets 97,656 89,977
Property and equipment, net 5,437 5,408
--------- ---------
$ 103,093 $ 95,385
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,268 $ 2,446
Accrued compensation 4,516 2,510
Accrued development costs 4,005 3,155
Accrued copromotion costs 3,405 1,256
Deferred revenue 23,494 886
Other accrued liabilities 1,545 1,345
Long-term debt--current portion 752 873
Capital lease obligations--current portion 1,251 1,699
--------- ---------
Total current liabilities 45,236 14,170
Long-term debt--noncurrent portion 2,693 1,014
Capital lease obligations--noncurrent portion 568 1,803
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 per share par value; 5,000 shares authorized -- --
Common stock, $.0001 per share par value; 40,000 shares
authorized; 24,431 and 23,767 shares issued and outstanding
at December 31, 1998 and December 31, 1997, respectively 2 2
Additional paid-in capital 244,937 240,386
Deferred compensation (1,179) (440)
Accumulated deficit (189,164) (161,550)
--------- ---------
Total stockholders' equity 54,596 78,398
--------- ---------
$ 103,093 $ 95,385
========= =========
See accompanying notes.
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COR THERAPEUTICS, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Year Ended
December 31,
--------------------------------------------
1998 1997 1996
-------- -------- --------
Contract revenues:
Copromotion revenue $ 3,933 $ -- $ --
Milestones 32,000 8,000 12,000
Development and other contract revenue 6,030 14,190 6,755
-------- -------- --------
Total contract revenues 41,963 22,190 18,755
-------- -------- --------
Expenses:
Cost of copromotion revenue 11,803 -- --
Research and development 39,915 47,831 50,791
Marketing, general and administrative 21,474 10,067 7,303
-------- -------- --------
Total expenses 73,192 57,898 58,094
-------- -------- --------
Loss from operations (31,229) (35,708) (39,339)
Interest income 4,342 2,840 3,552
Interest expense (727) (624) (759)
-------- -------- --------
Net loss $(27,614) $(33,492) $(36,546)
======== ======== ========
Basic and diluted net loss per share $ (1.14) $ (1.60) $ (1.86)
======== ======== ========
Shares used in computing basic and diluted net loss per share 24,141 20,952 19,636
======== ======== ========
See accompanying notes.
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33
COR THERAPEUTICS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the three years ended December 31, 1998
(in thousands)
Common Stock Additional Total
--------------------- Paid-in Deferred Accumulated Stockholders'
Shares Par Value Capital Compensation Deficit Equity
--------- --------- ---------- ------------ ----------- -------------
Balances at December 31, 1995 19,429 $ 2 $ 174,009 $ (262) $ (91,512) $ 82,237
Issuance of common stock upon exercise
of stock options and pursuant to the
Employee Stock Purchase Plan 156 -- 682 -- -- 682
Deferred compensation related to stock awards,
net of cancellations and amortization 25 -- 270 13 -- 283
Unrealized losses on available-for-sale
short-term investments -- -- (214) -- -- (214)
Issuance of common stock pursuant
to collaboration agreement 400 -- 4,000 -- -- 4,000
Net loss -- -- -- -- (36,546) (36,546)
--------- --------- --------- --------- --------- ---------
Balances at December 31, 1996 20,010 2 178,747 (249) (128,058) 50,442
Issuance of common stock in a public offering
net of issuance costs of $4,459 3,335 -- 58,906 -- -- 58,906
Issuance of common stock upon exercise
of stock options and pursuant to the
Employee Stock Purchase Plan 394 -- 2,334 -- -- 2,334
Deferred compensation related to stock awards,
net of cancellations and amortization 28 -- 439 (191) -- 248
Unrealized losses on available-for-sale
short-term investments -- -- (40) -- -- (40)
Net loss -- -- -- -- (33,492) (33,492)
--------- --------- --------- --------- --------- ---------
Balances at December 31, 1997 23,767 2 240,386 (440) (161,550) 78,398
Issuance of common stock upon exercise
of stock options and pursuant to the
Employee Stock Purchase Plan 519 -- 3,020 -- -- 3,020
Deferred compensation related to stock awards,
net of cancellations and amortization 145 -- 1,361 (739) -- 622
Unrealized gains on available-for-sale
short-term investments -- -- 170 -- -- 170
Net loss -- -- -- -- (27,614) (27,614)
--------- --------- --------- --------- --------- ---------
Balances at December 31, 1998 24,431 $ 2 $ 244,937 $ (1,179) $(189,164) $ 54,596
========= ========= ========= ========= ========= =========
See accompanying notes.
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COR THERAPEUTICS, INC.
STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(in thousands)
Year Ended
December 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
Cash flows provided by (used in) operating activities:
Net loss $ (27,614) $ (33,492) $ (36,546)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 3,358 3,545 3,593
Amortization of deferred compensation 622 248 283
Changes in assets and liabilities:
Contract receivables (1,976) 7,222 (3,270)
Prepaid copromotion expenses (12,814) (4,346) 936
Other current assets (253) 780 (735)
Accounts payable 3,822 1,048 (157)
Accrued compensation 2,006 1,015 (433)
Accrued development costs 850 (4,675) 2,071
Accrued commercial costs 2,149 1,256 --
Deferred revenue 22,608 (2,014) 2,400
Other accrued liabilities 200 351 (992)
--------- --------- ---------
Total adjustments 20,572 4,430 3,696
--------- --------- ---------
Net cash used in operating activities (7,042) (29,062) (32,850)
--------- --------- ---------
Cash flows provided by (used in) investing activities:
Purchases of short-term investments (104,124) (68,965) (39,725)
Sales of short-term investments 21,551 51,584 48,963
Maturities of short-term investments 78,430 7,500 19,400
Additions to property and equipment (3,387) (1,906) (2,563)
--------- --------- ---------
Net cash provided by (used in) investing activities (7,530) (11,787) 26,075
--------- --------- ---------
Cash flows provided by (used in) financing activities:
Proceeds from long-term debt 2,601 1,243 --
Principal payments on long-term debt (1,043) (1,157) (1,321)
Proceeds from capital lease obligations 83 701 1,854
Principal payments under capital lease obligations (1,766) (1,584) (1,288)
Issuance of common stock 3,020 61,240 4,682
--------- --------- ---------
Net cash provided by financing activities 2,895 60,443 3,927
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents (11,677) 19,594 (2,848)
Cash and cash equivalents at the beginning of the period 22,209 2,615 5,463
========= ========= =========
Cash and cash equivalents at the end of the period $ 10,532 $ 22,209 $ 2,615
========= ========= =========
Supplemental schedule of non-cash financing activities:
Cash paid during the period for interest $ 727 $ 624 $ 759
========= ========= =========
See accompanying notes.
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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. COR is dedicated to the discovery, development and
commercialization of novel pharmaceutical products to establish new standards of
care for the treatment and prevention of severe cardiovascular diseases.
Cash, investments and credit risk
The Company is exposed to interest rate risk on the investments of its excess
cash. The primary objective of the Company's investment activities is to
preserve principal while at the same time maximizing yields without
significantly increasing risk. To achieve this objective, the Company invests in
highly liquid and high quality debt securities. To minimize the exposure due to
adverse shifts in interest rates, the Company invests in short-term securities
and maintains an average maturity of less than 2 years.
Securities available-for-sale
Management determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet date.
Debt securities have been classified as available-for-sale. Available-for-sale
securities are carried at fair value, with the unrealized gains and losses
reported in a separate component of stockholders' equity. The amortized cost of
debt securities in this category is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization is included in interest
income. Realized gains and losses and declines in value judged to be other than
temporary on available-for-sale securities are included in interest income. The
cost of securities sold is based on the specific identification method. Interest
and dividends on securities classified as available-for-sale are included in
interest income.
Property and equipment
Property and equipment is stated at cost and depreciated over the estimated
useful lives of the assets, generally three to four years, using the
straight-line method. Assets under capitalized leases are amortized over the
shorter of the lease term or life of the asset. Property and equipment consists
of the following (in thousands):
December 31,
----------------------
1998 1997
-------- --------
Machinery and equipment $ 14,935 $ 12,127
Office furniture and fixtures 974 887
Leasehold improvements 10,204 9,762
-------- --------
26,113 22,776
Less accumulated depreciation and amortization (20,676) (17,368)
-------- --------
Property and equipment, net $ 5,437 $ 5,408
======== ========
Contract Revenues
Contract revenues include milestone revenues, development-related revenues and
copromotion-related revenues. Milestone revenues, development and other 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 Ltd. and Schering Corporation (collectively,
"Schering") to wholesalers and are recorded net of allowances that management
believes are sufficient to cover future requirements.
Copromotion-related contract revenues for INTEGRILIN(TM) (eptifibatide)
Injection include the Company's share of profits, as defined in the agreement
with Schering, from the sales of INTEGRILIN by Schering, as well as the
reimbursement from Schering of the Company's costs of copromotion revenue, which
include certain manufacturing-related and
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36
marketing expenses. 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. To the extent that
costs of copromotion revenue from prior periods have not been reimbursed to the
Company, reimbursements will be made by Schering from future sales of
INTEGRILIN(TM) (eptifibatide) Injection, if any.
Prepaid copromotion expenses
Prepaid copromotion expenses represent materials on-hand, valued at cost, and
deposits associated with manufacturing-related copromotion expenses. Prepaid
copromotion expenses consist of the following (in thousands):
December 31,
-------------------------
1998 1997
------- -------
Deposits and prepayments $10,637 $ 6,422
Bulk materials 6,900 --
Finished goods 1,699 --
------- -------
$19,236 $ 6,422
======= =======
Concentration
The Company and Schering copromote one product, INTEGRILIN, in the United
States. The Company has established long-term supply arrangements with one
supplier for the bulk product and with another supplier for the filling and
final packaging of INTEGRILIN.
Net loss per share
In accordance with Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128"), basic and
diluted net loss per share has been computed using the weighted average number
of shares of Common Stock outstanding during the period. Had the Company been in
a net income position, diluted earnings per share would have included the shares
used in the computation of basic net income per share as well as the impact of
outstanding options to purchase an additional 3,571,000 shares for the year
ended December 31, 1998, 3,649,000 shares for the year ended December 31, 1997
and 1,355,000 shares for the year ended December 31, 1996. Such shares have been
excluded because they are anti-dilutive for all periods presented.
Advertising and promotion costs
Advertising and promotion costs are expensed in the period they are incurred.
Advertising and promotion costs totaled $9,634,000 in 1998, $2,127,000 in 1997
and $0 in 1996.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Accounting for stock-based compensation
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options because, as
discussed in Note 6 below, the alternative fair value accounting provided for
under Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because
36
37
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
Reclassification
The Company has reclassified certain prior year balances to conform to current
year presentation.
Comprehensive Loss
In 1998, the Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130.") SFAS 130 requires unrealized
gains and losses on the Company's available-for-sale securities to be included
in other comprehensive income. In 1998, 1997 and 1996 unrealized gains or losses
were not material and total comprehensive loss closely approximated net loss in
each fiscal year.
Segment Information
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131.") SFAS No. 131 supersedes Statement of Financial
Accounting Standards No. 14, "Financial Reporting for Segments of a Business
Enterprise." SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. SFAS No. 131 also establishes
standards for related disclosures about products and services, geographic areas
and major customers.
The Company's business activities include the discovery, development and
commercialization of novel cardiovascular pharmaceutical products and have been
organized into one operating segment. All of the Company's operating assets are
located in the United States and all revenues are derived from within the United
States.
2. COLLABORATION AGREEMENTS
Collaboration agreement with Schering-Plough Ltd. and Schering Corporation
In April 1995, the Company entered into a collaboration agreement with Schering
to jointly develop and commercialize INTEGRILIN(TM) (eptifibatide) Injection on
a worldwide basis. Under the terms of the agreement, the Company received a
one-time license fee of $20,000,000 in 1995. During the past three years, the
Company has recognized milestone revenues under the agreement as follows (in
thousands):
1998 1997 1996
---------- ---------- ------
Development-Related Milestone Revenues $ 32,000 $ 8,000 $3,000
Safety-Related Milestone Revenues $ -- $ -- $9,000
During the past three years, the Company recorded contract revenues under this
agreement as follows (in thousands):
1998 1997 1996
------ --------- ------
Development-Related and Other Contract Revenues $5,730 $ 11,290 $6,635
Copromotion-Related Contract Revenues $3,933 $ -- $ --
The Company and Schering co-promote the drug in the United States and share any
profits or losses. Schering is responsible for the distribution of the final
product from manufacturers to wholesalers. In Europe, Schering has the right to
launch the product as an exclusive licensee on a royalty-bearing basis for a
period of time. Following this initial period, the Company has the right to
co-promote the product in Europe and share any profits or losses. In all
co-promotion territories, the exact profit-sharing ratio between the companies
depends on the amount of sales effort
37
38
contributed by each company. Outside of the United States, Canada and Europe,
Schering is the exclusive licensee on a royalty-bearing basis. Schering is
primarily responsible for regulatory filings outside the United States and
Canada. Schering participates in and shares the costs of continuing development
of INTEGRILIN(TM) (eptifibatide) Injection. Under the terms of the agreement,
both parties have certain rights to terminate for breach.
Collaboration Agreement with Kyowa Hakko Kogyo Co., Ltd.
In November 1992, the Company entered into a collaboration agreement with Kyowa
Hakko Kogyo Co., Ltd. ("Kyowa Hakko") focused on the discovery and development
of small molecule pharmaceuticals, primarily for the prevention of restenosis
following angioplasty. The collaboration targets a defined class of growth
factor inhibitors. This agreement has been amended several times and has been
extended until November 1999. Both companies have committed significant internal
resources to all phases of research. The Company has exclusive development and
marketing rights in the United States for any products resulting from the
collaboration and Kyowa Hakko has exclusive development and marketing rights in
Asia for any such products. The companies have agreed to develop and
commercialize jointly any such products on a shared economic basis in the rest
of the world. The agreement further provides that Kyowa Hakko will have the
exclusive right to develop and commercialize small molecule products for
indications related solely to a single, defined non-cardiovascular disease
indication outside of the United States.
Collaboration Agreement with Ortho Pharmaceutical Corporation
In December 1993, the Company entered into a collaboration agreement with Ortho
Pharmaceutical Corporation ("Ortho") focusing on the joint discovery,
development and commercialization of novel pharmaceuticals that may result from
collaborative research on the thrombin receptor. This agreement was amended in
September 1996. The Company and Ortho each provided specified levels of internal
resources to the collaborative research over the initial three-year research
term. In 1997, the Company recognized $2,400,000 in development-related contract
revenues under this agreement. The research term expired in December 1998.
3. FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount of cash and cash equivalents
reported on the balance sheet approximates its fair value.
Short-term investments: Short-term investments consist of marketable debt
securities and are classified as available-for-sale. These investments are
carried at fair value and any unrealized gains and losses are reported in a
separate component of stockholders' equity. The fair values are based upon
quoted market prices.
At December 31, 1998, short-term investments were as follows (in thousands):
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
--------- ---------- ---------- ----------
U.S. government securities $22,793 $ 116 $ (1) $22,908
Corporate debt obligations 41,683 89 (7) 41,765
------- ------- ------- -------
$64,476 $ 205 $ (8) $64,673
======= ======= ======= =======
During the year ended December 31, 1998, the Company sold short-term investments
with a fair value of $21,551,000, resulting in gross realized gains of $44,000
and gross realized losses of $22,000.
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39
The amortized cost and estimated fair value of short-term investments at
December 31, 1998, classified by contractual maturity, were as follows (in
thousands):
Amortized Estimated
Cost Fair Value
--------- ----------
Due in one year or less $38,400 $38,454
Due after one year and in less than 3 years 26,076 26,219
------- -------
$64,476 $64,673
======= =======
At December 31, 1997, short-term investments were as follows (in thousands):
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
--------- ---------- ---------- ----------
U.S. government securities $ 1,516 $ -- $ (1) $ 1,515
Corporate debt obligations 58,817 30 (2) 58,845
------- ------- ------- -------
$60,333 $ 30 $ (3) $60,360
======= ======= ======= =======
During the year ended December 31, 1997, the Company sold short-term investments
with a fair value of $51,584,000, resulting in gross realized gains of $38,000
and gross realized losses of $86,000.
Long and short-term debt: The carrying amounts of the Company's borrowings under
its secured debt agreements approximate their fair values. The fair values are
estimated using a discounted cash flow analysis based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements.
4. LONG-TERM DEBT
Long-term debt consists of various secured obligations related to the purchase
of property and equipment. Such notes are secured by the underlying property and
equipment, bear interest at approximately 7.9% to 13.5% per annum and are
payable in monthly installments over 48 months.
At December 31, 1998, aggregate long-term debt maturities were $752,000 in 1999,
$859,000 in 2000, $914,000 in 2001 and $920,000 in 2002.
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40
5. LEASE OBLIGATIONS
The Company leases office and laboratory facilities and equipment. Rent expense
for operating leases was approximately $2,521,000 in 1998, $1,656,000 in 1997
and $1,212,000 in 1996. Future minimum lease payments under non-cancelable
leases are as follows (in thousands):
Capital Operating
Leases Leases
--------- ---------
1999 $ 1,407 $ 2,197
2000 537 1,728
2001 63 1,728
2002 -- 1,728
2003 -- 1,728
Thereafter -- 1,727
--------- ---------
Total minimum lease payments 2,007 $ 10,836
=========
Less amount representing interest (188)
---------
Present value of future lease payments 1,819
Less current portion (1,251)
---------
Noncurrent portion of capital lease obligations $ 568
=========
The aggregate and net values of property and equipment under capital lease are
as follows (in thousands):
December 31,
--------------------
1998 1997
------- -------
Aggregate value of assets under capital lease $ 9,475 $ 6,977
Accumulated amortization (5,535) (5,336)
------- -------
Net value of assets under capital lease $ 3,940 $ 1,641
======= =======
At December 31, 1998, the Company had approximately $4,000,000 available under
an equipment financing facility.
6. STOCKHOLDERS' EQUITY
Stock option plans
In 1988, the Company adopted the 1988 Employee Stock Option Plan and the 1988
Consultant Stock Option Plan (collectively, the "1988 Plans.") Under these
plans, the Company granted both incentive and non-qualified stock options to
employees and consultants. The exercise prices were set at no less than the fair
market value of the Company's stock on the date of grant and the options became
exercisable based upon the individual terms of the grant.
In 1991, the Company terminated the 1988 Plans and adopted the 1991 Equity
Incentive Plan. Under this plan, the Company has granted (and continues to
grant) stock options and stock awards to employees and consultants. The exercise
prices are set at no less than the fair market value of the Company's stock on
the date of grant. The options generally vest over a period of 60 months and are
exercisable to the extent that they are vested.
In 1994, the Company adopted the 1994 Non-Employee Directors' Stock Option Plan.
Under this plan, the Company may make grants of non-qualified options to Board
members who are neither employees nor consultants to the Company. The exercise
prices are set at no less than the fair market value of the Company's stock on
the date of grant. The options generally vest over a period of 60 months and
are exercisable to the extent vested.
In 1998, the Company adopted the 1998 Non-Officer Equity Incentive Plan. Under
this plan, the Company may grant non-qualified stock options and stock awards to
employees who are not officers of the Company. The exercise
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41
prices are set at no less than the fair market value of the Company's stock on
the date of grant. The options generally vest over a period of 60 months and are
exercisable to the extent vested.
During the past three years, options under these plans were vested and
exercisable as follows:
December 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
Exercisable Shares:
1988 Employee Stock Option Plan 309,270 499,156 664,049
1988 Consultant Stock Option Plan 59,167 72,167 82,167
1991 Equity Incentive Plan 2,193,974 1,766,526 1,406,504
1994 Non-Employee Directors' Stock Option Plan 84,166 83,749 58,749
1998 Non-Officer Equity Incentive Plan 37,635 -- --
----------- ----------- -----------
2,684,212 2,421,598 2,211,469
=========== =========== ===========
Aggregate Exercise Price:
1988 Employee Stock Option Plan $ 338,000 $ 410,000 $ 476,000
1988 Consultant Stock Option Plan 24,000 28,000 31,000
1991 Equity Incentive Plan 26,926,000 21,767,000 17,692,000
1994 Non-Employee Directors' Stock Option Plan 1,209,000 1,238,000 878,000
1998 Non-Officer Equity Incentive Plan 545,000 -- --
----------- ----------- -----------
$29,042,000 $23,443,000 $19,077,000
=========== =========== ===========
During the past three years, activity under these plans was as follows:
Options Outstanding
--------------------------------
Shares
Available Number of Weighted Average
for Grant Shares Exercise Price
---------- ---------- ----------------
Balance at December 31, 1995 249,872 3,413,091 $ 9.68
Stock awards (25,678) -- $ --
Additional shares authorized 1,500,000 -- $ --
Options granted (857,000) 857,000 $ 9.22
Options forfeited 303,856 (303,856) $13.28
Options exercised -- (77,600) $ 0.41
---------- ---------- ------
Balance at December 31, 1996 1,171,050 3,888,635 $ 9.45
Stock awards (28,296) -- $ --
Additional shares authorized 600,000 -- $ --
Options granted (1,046,750) 1,046,750 $13.24
Options forfeited 217,932 (217,932) $11.34
Options exercised -- (304,922) $ 5.23
---------- ---------- ------
Balance at December 31, 1997 913,936 4,412,531 $10.64
Stock awards (161,941) -- $ --
Additional shares authorized 450,000 -- $ --
Options granted (731,750) 731,750 $13.56
Options forfeited 223,596 (223,596) $13.04
Options exercised -- (320,579) $ 4.39
---------- ---------- ------
Balance at December 31, 1998 693,841 4,600,106 $13.30
========== ========== ======
The Company recorded deferred compensation related to stock awards, net of
forfeitures, of $1,361,000 in 1998, $439,000 in 1997 and $270,000 in 1996. The
Company amortized deferred compensation of $622,000 in 1998, $248,000 in 1997
and $283,000 in 1996.
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The weighted-average grant-date fair value of options granted was $10.51 in
1998, $9.84 in 1997 and $6.69 in 1996.
The following table summarizes information about stock options outstanding at
December 31, 1998:
Weighted
Average
Number of Remaining Weighted Number of Weighted
Range of Options Contractual Average Exercise Options Average Exercise
Exercise Prices Outstanding Life (years) Price Exercisable Price
---------------- ----------- ------------ ---------------- ----------- ----------------
$ 0.30 - $ 8.56 787,997 4.02 $ 5.00 520,359 $ 3.19
$ 9.06 - $11.19 1,108,799 7.21 $ 9.99 524,991 $ 10.26
$ 11.38 - $12.50 1,092,635 5.73 $ 12.22 880,687 $ 12.19
$ 12.75 - $15.31 975,450 6.86 $ 13.71 516,252 $ 14.12
$ 15.38 - $21.00 635,225 8.07 $ 16.81 241,923 $ 16.41
---------------- --------- ---- -------- --------- --------
$ 0.30 - $21.00 4,600,106 6.36 $ 11.40 2,684,212 $ 10.82
================ ========= ==== ======== ========= ========
Stock purchase plan
In 1991, the Company adopted the 1991 Employee Stock Purchase Plan. Under this
plan, full-time employees may contribute up to 15% of their compensation to
purchase Common Stock at 85% of its fair market value on specified dates. The
Board of Directors has authorized 1,050,000 shares for issuance under the stock
purchase plan.
During the past three years, the Company has issued Common Stock under the stock
purchase plan as follows:
Shares Range
For the year ended Issued of Prices
- ------------------ ---------- ------------------
December 31, 1998 182,428 $6.22 - $17.56
December 31, 1997 88,383 $7.28 - $ 9.03
December 31, 1996 80,276 $7.28 - $ 8.82
Pro forma valuation of options
The Company has elected to follow APB 25 and related Interpretations in
accounting for employee stock options (see Note 1, "Summary of significant
accounting policies.") Under APB 25, the Company does not recognize any
compensation expense related to the grants of stock options because the exercise
price of the Company's stock options are equal to the fair market value of the
Company's stock on the date of grant.
Pro forma information regarding net loss and net loss per share is required by
SFAS No. 123. The Company has used the fair value method described in SFAS No.
123 to determine this pro forma information for all employee stock options
granted after December 31, 1994. The fair value method was also applied to
shares acquired through the Company's stock purchase plan which, for the
purposes of this disclosure, the Company has treated as employee stock options.
The fair value of the Company's employee stock options was estimated at the date
of grant and/or purchase using the Black-Scholes option-pricing model. During
the past three years, the Company has used the following weighted average
assumptions in the Black-Scholes model:
1998 1997 1996
---- ---- ----
Risk-free interest rate 5.23% 6.21% 6.06%
Dividends None None None
Volatility 0.77 0.69 0.73
Expected life 5 yrs 5 yrs 5 yrs
The Black-Scholes model was developed to estimate the fair value of traded
options. Traded options, however, have no vesting restrictions and are fully
transferable. Additionally, the model requires the input of highly subjective
42
43
assumptions. Because the Company's employee stock options have characteristics
significantly different from traded options and because slight changes in the
input assumptions can materially affect the fair value estimate, the Company
does not believe that the Black-Scholes model provides a reliable measure of the
fair value of the Company's employee stock options. Additionally, the effects of
applying SFAS No. 123 for the recognition of compensation expense and provision
of pro forma disclosures in 1998, 1997 and 1996 are not likely to be
representative of the effects on reported and pro forma net income in future
years because options vest over several years and additional awards may be made
in subsequent years.
Per SFAS No. 123, the Company has amortized the expense of the estimated fair
value over an option's vesting period. During the past three years, the
Company's pro forma expense has been as follows (in thousands except for the net
loss per share information):
For the Year Ended December 31,
--------------------------------------------------
1998 1997 1996
---------- ---------- ----------
Net loss (as reported) $ (27,614) $ (33,492) $ (36,546)
Basic and diluted net loss per share (as reported) $ (1.14) $ (1.60) $ (1.86)
Pro forma net loss $ (35,223) $ (39,677) $ (40,967)
Pro forma basic and diluted net loss per share $ (1.46) $ (1.89) $ (2.09)
Common shares reserved for future issuance
At December 31, 1998, 5,441,639 shares of Common Stock were reserved for future
issuance under the stock option and stock purchase plans.
7. INCOME TAXES
At December 31, 1998, the Company had available net loss carryforwards for
federal income tax purposes of approximately $178,900,000. The tax loss
carryforwards, if not utilized to offset taxable income in future periods,
expire between the years 2003 and 2018. Significant components of the Company's
deferred tax assets and liabilities for federal income taxes at December 31,
1998 and 1997 were as follows (in thousands):
December 31,
--------------------------
1998 1997
--------- ---------
Net operating loss carryforwards $ 61,700 $ 52,700
Capitalized research and development 9,500 8,600
Research and development credits
(expiring between 2003 and 2018) 5,300 5,300
Other, net 5,300 2,200
--------- ---------
Net deferred tax assets 81,800 68,800
Valuation allowance for deferred tax assets (81,800) (68,800)
--------- ---------
Deferred tax assets $ -- $ --
========= =========
The valuation allowance for deferred tax assets increased by $10,900,000 and
$13,100,000 during the years ended December 31, 1997 and 1996, respectively.
Because of "change of ownership" provisions of the Tax Reform Act of 1986, the
Company's net operating loss and credit carryforwards may be subject to an
annual limitation regarding utilization against taxable income in future
periods.
43
44
8. CONTINGENCIES
In October 1997, a patent opposition was filed in Europe by another company
against the claims of a patent granted to the Company in Europe covering broad,
generic claims for INTEGRILIN(TM) (eptifibatide) Injection, as well as numerous
related compounds that are not part of the Company's core technology. The
opposition asserts that all claims of the patent are unpatentable. The Company
intends to vigorously defend its patent. However, this patent opposition may
result in an unfavorable outcome.
In May 1998, a plaintiff voluntarily dismissed all claims against the Company
and Vaughn M. Kailian, the Company's Chief Executive Officer, in a putative
class action lawsuit that had alleged violation of federal securities laws.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
44
45
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
IDENTIFICATION OF DIRECTORS
The information required by this Item concerning the Company's directors is
incorporated by reference from the sections captioned "Proposal 1: Election of
Directors" contained in the Company's Definitive Proxy Statement related to the
Annual Meeting of Stockholders to be held May 25, 1999, to be filed by the
Company with the Securities and Exchange Commission (the "Proxy Statement.")
William Younger, Jr. resigned from the Company's Board of Directors effective
March 20, 1998.
IDENTIFICATION OF EXECUTIVE OFFICERS
The information required by this Item concerning the Company's executive
officers is set forth in Item I of this Report.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The information required by this Item is incorporated by reference from the
section captioned "Section 16(a) Beneficial Ownership Reporting Compliance"
contained in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from the
section captioned "Executive Compensation" contained in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference from the
section captioned "Security Ownership of Certain Beneficial Owners and
Management" contained in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference from the
sections captioned "Certain Transactions" and "Executive Compensation" contained
in the Proxy Statement.
45
46
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. INDEX TO FINANCIAL STATEMENTS
Page in
Form 10-K
--------------
Report of Ernst & Young LLP, Independent Auditors 30
Balance Sheets at December 31, 1998 and 1997 31
Statements of Operations for the years ended December 31, 1998, 1997 and 1996 32
Statements of Stockholders' Equity for the years ended December 31, 1998, 1997 and 1996 33
Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 34
Notes to Financial Statements 35
2. All schedules are omitted because they are not
applicable or not required or because the required
information is included in the financial statements
or notes thereto.
3. EXHIBITS
Number Exhibit
----------- -----------------------------------------------------------------------
3.1(9) Restated Certificate of Incorporation of the Registrant.
3.2(2) By-laws of the Registrant.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2(2) Information, Registration
Rights and Right of First Refusal
Agreement among the Registrant and
other parties named therein, as
amended as of May 15, 1991.
4.3(2) Side by Side Agreement among the Registrant and the other parties
named therein.
4.4(8) Registrant's Preferred Share Purchase Rights Agreement between the
Registrant and Chemical Trust Company of California, dated as of
January 23, 1995.
* 10.1(2) Form of Indemnification Agreement between the Registrant and its
directors, executive officers and officers.
* 10.2(2) Registrant's 1988 Employee Stock Option Plan and related agreements.
* 10.3(2) Registrant's 1988 Consultant Stock Option Plan and related
agreements.
++* 10.4(2) Research, Option and License Agreement between the Registrant and Eli
Lilly and Company, dated May 1, 1991.
* 10.5(2) Lease Agreement between the Registrant and NC Land Associates Limited
Partnership, dated September 23, 1988, as amended August 30, 1989 and
Lease Rider, dated September 23, 1988.
10.6(1) Forms of option agreements used under the Registrant's 1991 Equity
Incentive Plan.
10.7(3) Form of offering document used under the Registrant's 1991 Employee
Stock Purchase Plan.
++ 10.8(4) Consulting Agreement between the Registrant and Lloyd Hollingsworth
Smith, Jr., dated January 1, 1993.
46
47
Number Exhibit
----------- -----------------------------------------------------------------------
++ 10.9(4) Collaboration Research Agreement between the Registrant and Kyowa
++ Hakko Kogyo, Co., Ltd., dated November 30, 1992.
++ 10.10(5) Collaboration Agreement between Eli Lilly and Company and the
Registrant, dated May 28, 1993.
++* 10.11(6) Collaboration Agreement between Ortho Pharmaceutical Corporation and
the Registrant, dated December 21, 1993.
10.12(10) Registrant's 1994 Non-employee Directors' Stock Option Plan, as
amended.
10.13(7) Consulting Agreement between
the Registrant and Shaun R.
Coughlin, dated March 17, 1988, as
amended effective September 28,
1994.
10.14(10) Registrant's 1991 Stock Purchase Plan, as amended.
10.15(10) Registrant's 1991 Equity Incentive Plan, as amended.
++ 10.16(8) Collaboration Agreement between Schering-Plough Ltd., Schering
Corporation and the Registrant, dated April 10, 1995.
++ 10.17(9) Amendment No. 4 to Collaboration Research Agreement between the
Registrant and Kyowa Hakko Kogyo, Co., Ltd., dated November 10, 1995.
++ 10.18(10) Amendment No. 1 to Collaboration Research Agreement between Ortho
Pharmaceutical Corporation and the Registrant, dated September 27,
1996.
++ 10.19(10) Amendment No. 1 to Collaboration Research Agreement between Eli Lilly
and Company and the Registrant, dated November, 1996.
++ 10.20(i)(10) Amendment No. 1 to Collaboration Research Agreement between the
Registrant and Kyowa Hakko Kogyo Co., Ltd., dated May 9, 1994.
++ 10.20(ii)(10) Amendment No. 2 to Collaboration Research Agreement between the
Registrant and Kyowa Hakko Kogyo Co., Ltd., dated July 13, 1995.
++ 10.20(iii)(10) Amendment No. 3 to Collaboration Research Agreement between the
Registrant and Kyowa Hakko Kogyo Co., Ltd., dated August 1, 1995.
++ 10.20(iv)(10) Amendment No. 5 to Collaboration Research Agreement between the
Registrant and Kyowa Hakko Kogyo Co., Ltd., dated December 17, 1996.
10.21(10) Description of Registrant's 1996 Incentive Pay Plan.
++ 10.22(11) Long Term Supply Agreement between Registrant and Solvay, Societe
Anonyme, dated September 28, 1995.
++ 10.23(11) Amendment No. 1 to the Long Term Supply Agreement between Registrant
and Solvay, Societe Anonyme, as amended, dated April 1, 1997.
++ 10.24(11) License and Supply Agreement between the Registrant and Solvay,
Societe Anonyme, dated July 27, 1994.
++ 10.25(11) First Amendment to the License and Supply Agreement between
Registrant and Solvay, Societe Anonyme, as amended, dated March 13,
1995.
++ 10.26(11) Second Amendment to the License and Supply Agreement between
Registrant and Solvay, Societe Anonyme, as amended, dated June 1,
1995.
++ 10.27(11) Third Amendment to the License and Supply Agreement between
Registrant and Solvay, Societe Anonyme, as amended, dated September
5, 1995.
++ 10.28(11) Letter Amendment to the License and Supply Agreement between
Registrant and Solvay, Societe Anonyme, as amended, dated June 6,
1996.
++ 10.29(11) Fourth Amendment to the License and Supply Agreement between
Registrant and Solvay, Societe Anonyme, as amended, dated April 1,
1997.
47
48
Number Exhibit
----------- -----------------------------------------------------------------------
10.31 1998 Non-Officer Equity Incentive Plan.
10.32 Form of Option Agreements used for the 1998 Non-Officer Equity
Incentive Plan
+ 10.33 Amendment to Collaboration Agreement, dated December 23, 1998,
between Schering-Plough Ltd. and Schering Corporation and the
Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney, Reference is made to the signature page.
27.1 Financial Data Schedule.
* Indicates management contracts or compensatory plans
or arrangements filed pursuant to Item 601(b)(10) of
Regulation S-K.
+ Confidential treatment requested.
++ Confidential treatment granted.
(1) Filed as an exhibit to the Registrant's Registration Statement on
Form S-8 (Reg. No. 33-42912) and incorporated herein by reference.
(2) Filed as an exhibit to the Registrant's Registration Statement on
Form S-1 (Reg. No. 33-40627) or amendments thereto and incorporated
herein by reference.
(3) Filed as an exhibit to the Registrant's Registration Statement on
Form S-1 (Reg. No. 33-43181) or amendments thereto and incorporated
herein by reference.
(4) Filed as an exhibit to the Registrant's Annual Report
on Form 10-K for the period ended December 31, 1992
and incorporated by reference herein.
(5) Filed as an exhibit to the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30,
1993 and incorporated by reference herein.
(6) Filed as an exhibit to the Registrant's Annual Report
on Form 10-K for the period ended December 31, 1993
and incorporated by reference herein.
(7) Filed as an exhibit to the Registrant's Annual Report
on Form 10-K for the period ended December 31, 1994
and incorporated by reference herein.
(8) Filed as an exhibit to the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30,
1995 and incorporated by reference herein.
(9) Filed as an exhibit to the Registrant's Annual Report
on Form 10-K for the period ended December 31, 1995
and incorporated by reference herein.
(10) Filed as an exhibit to the Registrant's Annual Report
on Form 10-K for the period ended December 31, 1996
and incorporated by reference herein.
(11) Filed as an exhibit to the Registrant's Quarterly
Report on Form 10-Q for the period ended September
30, 1998 and incorporated by reference herein.
(B) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed for the quarter ended December
31, 1998.
48
49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of South San Francisco,
County of San Mateo, State of California, on the XXth day of March, 1999.
COR THERAPEUTICS, INC.
By /s/ PETER S. RODDY
--------------------------------------
Peter S. Roddy
Vice President, Finance
(Principal Accounting Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Peter S. Roddy and Laura A. Brege, and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution for him, and in his name in any and all capacities, to sign any and
all amendments to this Report, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and any of them or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
Signature Title Date
- ---------------------------------- ---------------------------------------- --------------
/s/ VAUGHN M. KAILIAN President, Chief Executive Officer and March 23, 1999
- --------------------------------- Director (Principal Executive Officer)
Vaughn M. Kailian
/s/ LAURA A. BREGE Senior Vice President, Finance and Chief March 23, 1999
- ---------------------------------
Laura A. Brege Financial Officer (Principal Financial
Officer)
/s/ CHARLES J. HOMCY Executive Vice President, Research and March 23, 1999
- --------------------------------- Development and Director
Charles J. Homcy
/s/ PETER S. RODDY Vice President, Finance (Principal March 23, 1999
- --------------------------------- Accounting Officer)
Peter S. Roddy
/s/ SHAUN R. COUGHLIN Director March 23, 1999
- ---------------------------------
Shaun R. Coughlin
/s/ JAMES T. DOLUISIO Director March 23, 1999
- ---------------------------------
James T. Doluisio
/s/ JERRY T. JACKSON Director March 23, 1999
- ---------------------------------
Jerry T. Jackson
/s/ ERNEST MARIO Director March 23, 1999
- ---------------------------------
Ernest Mario
/s/ ROBERT R. MOMSEN Director March 23, 1999
- ---------------------------------
Robert R. Momsen
/s/ LLOYD HOLLINGSWORTH SMITH, JR. Director March 23, 1999
- ---------------------------------
Lloyd Hollingsworth Smith, Jr.
49
50
EXHIBIT INDEX
Number Exhibit
----------- -----------------------------------------------------------------------
3.1(9) Restated Certificate of Incorporation of the Registrant.
3.2(2) By-laws of the Registrant.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2(2) Information, Registration
Rights and Right of First Refusal
Agreement among the Registrant and
other parties named therein, as
amended as of May 15, 1991.
4.3(2) Side by Side Agreement among the Registrant and the other parties
named therein.
4.4(8) Registrant's Preferred Share Purchase Rights Agreement between the
Registrant and Chemical Trust Company of California, dated as of
January 23, 1995.
* 10.1(2) Form of Indemnification Agreement between the Registrant and its
directors, executive officers and officers.
* 10.2(2) Registrant's 1988 Employee Stock Option Plan and related agreements.
* 10.3(2) Registrant's 1988 Consultant Stock Option Plan and related
agreements.
++* 10.4(2) Research, Option and License Agreement between the Registrant and Eli
Lilly and Company, dated May 1, 1991.
* 10.5(2) Lease Agreement between the Registrant and NC Land Associates Limited
Partnership, dated September 23, 1988, as amended August 30, 1989 and
Lease Rider, dated September 23, 1988.
10.6(1) Forms of option agreements used under the Registrant's 1991 Equity
Incentive Plan.
10.7(3) Form of offering document used under the Registrant's 1991 Employee
Stock Purchase Plan.
++ 10.8(4) Consulting Agreement between the Registrant and Lloyd Hollingsworth
Smith, Jr., dated January 1, 1993.
51
Number Exhibit
----------- -----------------------------------------------------------------------
++ 10.9(4) Collaboration Research Agreement between the Registrant and Kyowa
++ Hakko Kogyo, Co., Ltd., dated November 30, 1992.
++ 10.10(5) Collaboration Agreement between Eli Lilly and Company and the
Registrant, dated May 28, 1993.
++* 10.11(6) Collaboration Agreement between Ortho Pharmaceutical Corporation and
the Registrant, dated December 21, 1993.
10.12(10) Registrant's 1994 Non-employee Directors' Stock Option Plan, as
amended.
10.13(7) Consulting Agreement between
the Registrant and Shaun R.
Coughlin, dated March 17, 1988, as
amended effective September 28,
1994.
10.14(10) Registrant's 1991 Stock Purchase Plan, as amended.
10.15(10) Registrant's 1991 Equity Incentive Plan, as amended.
++ 10.16(8) Collaboration Agreement between Schering-Plough Ltd., Schering
Corporation and the Registrant, dated April 10, 1995.
++ 10.17(9) Amendment No. 4 to Collaboration Research Agreement between the
Registrant and Kyowa Hakko Kogyo, Co., Ltd., dated November 10, 1995.
++ 10.18(10) Amendment No. 1 to Collaboration Research Agreement between Ortho
Pharmaceutical Corporation and the Registrant, dated September 27,
1996.
++ 10.19(10) Amendment No. 1 to Collaboration Research Agreement between Eli Lilly
and Company and the Registrant, dated November, 1996.
++ 10.20(i)(10) Amendment No. 1 to Collaboration Research Agreement between the
Registrant and Kyowa Hakko Kogyo Co., Ltd., dated May 9, 1994.
++ 10.20(ii)(10) Amendment No. 2 to Collaboration Research Agreement between the
Registrant and Kyowa Hakko Kogyo Co., Ltd., dated July 13, 1995.
++ 10.20(iii)(10) Amendment No. 3 to Collaboration Research Agreement between the
Registrant and Kyowa Hakko Kogyo Co., Ltd., dated August 1, 1995.
++ 10.20(iv)(10) Amendment No. 5 to Collaboration Research Agreement between the
Registrant and Kyowa Hakko Kogyo Co., Ltd., dated December 17, 1996.
10.21(10) Description of Registrant's 1996 Incentive Pay Plan.
++ 10.22(11) Long Term Supply Agreement between Registrant and Solvay, Societe
Anonyme, dated September 28, 1995.
++ 10.23(11) Amendment No. 1 to the Long Term Supply Agreement between Registrant
and Solvay, Societe Anonyme, as amended, dated April 1, 1997.
++ 10.24(11) License and Supply Agreement between the Registrant and Solvay,
Societe Anonyme, dated July 27, 1994.
++ 10.25(11) First Amendment to the License and Supply Agreement between
Registrant and Solvay, Societe Anonyme, as amended, dated March 13,
1995.
++ 10.26(11) Second Amendment to the License and Supply Agreement between
Registrant and Solvay, Societe Anonyme, as amended, dated June 1,
1995.
++ 10.27(11) Third Amendment to the License and Supply Agreement between
Registrant and Solvay, Societe Anonyme, as amended, dated September
5, 1995.
++ 10.28(11) Letter Amendment to the License and Supply Agreement between
Registrant and Solvay, Societe Anonyme, as amended, dated June 6,
1996.
++ 10.29(11) Fourth Amendment to the License and Supply Agreement between
Registrant and Solvay, Societe Anonyme, as amended, dated April 1,
1997.
52
Number Exhibit
----------- -----------------------------------------------------------------------
10.31 1998 Non-Officer Equity Incentive Plan.
10.32 Form of Option Agreements used for the 1998 Non-Officer Equity
Incentive Plan
+ 10.33 Amendment to Collaboration Agreement, dated December 23, 1998,
between Schering-Plough Ltd. and Schering Corporation and the
Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney, Reference is made to the signature page.
27.1 Financial Data Schedule.
* Indicates management contracts or compensatory plans
or arrangements filed pursuant to Item 601(b)(10) of
Regulation S-K.
+ Confidential treatment requested.
++ Confidential treatment granted.
(1) Filed as an exhibit to the Registrant's Registration Statement on
Form S-8 (Reg. No. 33-42912) and incorporated herein by reference.
(2) Filed as an exhibit to the Registrant's Registration Statement on
Form S-1 (Reg. No. 33-40627) or amendments thereto and incorporated
herein by reference.
(3) Filed as an exhibit to the Registrant's Registration Statement on
Form S-1 (Reg. No. 33-43181) or amendments thereto and incorporated
herein by reference.
(4) Filed as an exhibit to the Registrant's Annual Report
on Form 10-K for the period ended December 31, 1992
and incorporated by reference herein.
(5) Filed as an exhibit to the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30,
1993 and incorporated by reference herein.
(6) Filed as an exhibit to the Registrant's Annual Report
on Form 10-K for the period ended December 31, 1993
and incorporated by reference herein.
(7) Filed as an exhibit to the Registrant's Annual Report
on Form 10-K for the period ended December 31, 1994
and incorporated by reference herein.
(8) Filed as an exhibit to the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30,
1995 and incorporated by reference herein.
(9) Filed as an exhibit to the Registrant's Annual Report
on Form 10-K for the period ended December 31, 1995
and incorporated by reference herein.
(10) Filed as an exhibit to the Registrant's Annual Report
on Form 10-K for the period ended December 31, 1996
and incorporated by reference herein.
(11) Filed as an exhibit to the Registrant's Quarterly
Report on Form 10-Q for the period ended September
30, 1998 and incorporated by reference herein.