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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the quarterly period ended March 31, 1999.
[ ] 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)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No[ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common stock $.0001 par value
24,565,235
Outstanding at April 2, 1999
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COR THERAPEUTICS, INC.
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INDEX
Page
Section Contents No.
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PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements and Notes
Condensed Balance Sheets - March 31, 1999 and December 31, 1998 3
Condensed Statements of Operations - for the three months ended
March 31, 1999 and 1998 4
Condensed Statements of Cash Flows - for the three months ended
March 31, 1999 and 1998 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 11
COR(TM) and INTEGRILIN(R) are trademarks of COR THERAPEUTICS, INC.
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COR THERAPEUTICS, INC.
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS AND NOTES
CONDENSED BALANCE SHEETS
(in thousands)
March 31, December 31,
1999 1998
--------- ---------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 21,396 $ 10,532
Short-term investments 38,895 64,673
Contract receivables 1,532 2,398
Prepaid copromotion expenses 23,135 19,236
Other current assets 2,207 817
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Total current assets 87,165 97,656
Property and equipment, net 5,319 5,437
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$ 92,484 $ 103,093
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,028 $ 6,268
Accrued compensation 3,401 4,516
Accrued development costs 3,050 4,005
Accrued copromotion costs 3,861 3,405
Deferred revenue 26,321 23,494
Other accrued liabilities 1,388 1,545
Long-term debt--current portion 876 752
Capital lease obligations--current portion 1,019 1,251
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Total current liabilities 45,944 45,236
Long-term debt--noncurrent portion 2,861 2,693
Capital lease obligations--noncurrent portion 393 568
Stockholders' equity 244,286 243,760
Accumulated deficit (201,000) (189,164)
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Total stockholders' equity 43,286 54,596
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$ 92,484 $ 103,093
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See accompanying notes.
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COR THERAPEUTICS, INC.
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CONDENSED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
Three Months Ended
March 31,
-------------------------
1999 1998
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Contract revenues:
Copromotion revenue $ 5,668 $--
Milestones -- 8,000
Development and other contract revenue 1,853 412
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Total contract revenues 7,521 8,412
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Expenses:
Cost of copromotion revenue 3,917 --
Research and development 9,984 9,999
Marketing, general and administrative 6,196 4,696
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Total expenses 20,097 14,695
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Loss from operations (12,576) (6,283)
Interest income 857 1,147
Interest expense (117) (140)
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Net loss $(11,836) $ (5,276)
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Basic and diluted net loss per share $ (0.48) $ (0.22)
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Shares used in computing basic and diluted net loss per share 24,471 23,878
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See accompanying notes.
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COR THERAPEUTICS, INC.
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CONDENSED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(unaudited, in thousands)
Three Months Ended
March 31,
-------------------------
1999 1998
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Cash flows provided by (used in) operating activities:
Net loss $(11,836) $ (5,276)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 642 862
Amortization of deferred compensation 268 62
Changes in assets and liabilities:
Contract receivables 866 (410)
Prepaid copromotion expenses (3,899) --
Other current assets (1,390) (1,571)
Accounts payable (240) 359
Accrued compensation (1,115) (530)
Accrued development costs (955) (225)
Accrued copromotion costs 456 1,020
Deferred revenue 2,827 --
Other accrued liabilities (157) 1,072
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Total adjustments (2,697) 639
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Net cash used in operating activities (14,533) (4,637)
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Cash flows provided by (used in) investing activities:
Purchases of short-term investments (5,957) (28,193)
Sales of short-term investments 25,162 --
Maturities of short-term investments 6,497 30,500
Additions to property and equipment (524) (365)
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Net cash provided by investing activities 25,178 1,942
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Cash flows provided by (used in) financing activities:
Proceeds from long-term debt 479 290
Principal payments on long-term debt (187) (218)
Principal payments under capital lease obligations (407) (402)
Issuance of common stock 334 753
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Net cash provided by financing activities 219 423
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Net increase (decrease) in cash and cash equivalents 10,864 (2,272)
Cash and cash equivalents at the beginning of the period 10,532 22,209
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Cash and cash equivalents at the end of the period $ 21,396 $ 19,937
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See accompanying notes.
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COR THERAPEUTICS, INC.
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NOTES TO CONDENSED 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.
Interim financial information
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-Q and Article 10 of Regulation
S-X. In the Company's opinion, the financial statements include all adjustments,
consisting only of normal recurring adjustments, which the Company considers
necessary to fairly state the Company's financial position and the results of
its operations and its cash flows. The balance sheet at December 31, 1998 has
been derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The accompanying
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998. The results of the Company's operations for any
interim period are not necessarily indicative of the results of the Company's
operations for any other interim period or for a full fiscal year.
Contract Revenues
Contract revenues include copromotion revenue, milestones and development and
other contract revenue. Copromotion revenue is generally recognized at the time
of shipment of related product by Schering-Plough Ltd. and Schering Corporation
(collectively, "Schering") to wholesalers and is recorded net of allowances that
management believes are necessary. Milestones and development and other contract
revenue are recorded as earned based on the performance requirements of the
contracts, while related costs are expensed as incurred.
Copromotion revenue includes the Company's share of profits, as defined in the
agreement with Schering, from the sales of INTEGRILIN(R) (eptifibatide)
Injection ("INTEGRILIN") by Schering, as well as the reimbursement from Schering
of the Company's costs of copromotion revenue, which include certain
manufacturing-related and marketing expenses. Certain manufacturing-related
copromotion expenses are deferred until the time of shipment of related product
by Schering to wholesalers. Deferred revenue consists of 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, if any.
Prepaid copromotion expenses
Prepaid copromotion expenses represent materials on-hand, valued at cost, and
deposits with suppliers associated with manufacturing-related copromotion
expenses. Prepaid copromotion expenses consist of the following (in thousands):
March 31, December 31,
1999 1998
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Deposits and prepayments $ 9,936 $10,637
Bulk materials 11,960 6,900
Finished goods 1,239 1,699
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$23,135 $19,236
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COR THERAPEUTICS, INC.
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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.
Advertising and promotion costs
Advertising and promotion costs are expensed in the period they are incurred.
Advertising and promotion costs totaled $3,037,000 and $1,227,000 for the three
months ended March 31, 1999 and 1998, respectively.
Comprehensive Loss
In 1998, the Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income." This statement requires unrealized gains
and losses on the Company's available-for-sale securities to be included in
other comprehensive income. For the three months ended March 31, 1999 and 1998,
unrealized gains or losses were not material and total comprehensive loss
closely approximated net loss in each period.
Segment Information
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 operations within
the United States.
2. NET LOSS PER SHARE
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 1,588,000
shares for the three months ended March 31, 1999 and 3,905,000 shares for the
three months ended March 31, 1998. Such shares have been excluded because they
are anti-dilutive for all periods presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In addition to the historical information contained herein, this document
includes forward-looking statements which involve risks and uncertainties.
Actual results of the Company's activities may differ significantly from the
potential results discussed in such forward-looking statements. These
forward-looking statements are based on current expectations, and the Company
assumes no obligation to update this information. Risk factors that might cause
such differences include, but are not limited to, those factors identified below
and in the sections titled "Business" and "Business-Additional Risk Factors" in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998.
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.
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COR THERAPEUTICS, INC.
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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 $201,000,000 during
the period from inception to March 31, 1999. The Company has funded its
operations primarily through public equity financings and proceeds from
collaboration research and development agreements.
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 in May 1998. INTEGRILIN is indicated for
the treatment of patients with acute coronary syndrome (encompassing unstable
angina and non-Q-wave myocardial infarction) 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 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.
Total sales of INTEGRILIN, as reported to COR by Schering, were $11,300,000 for
the three months ended March 31, 1999, as compared to $8,400,000 for the three
months ended December 31, 1998, a 35% increase. Product sales as reported by
Schering for either the three months ended March 31, 1999 or 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 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 unstable angina and non-Q-wave
myocardial infarction. 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 European Union 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 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
Three months ended March 31, 1999 and 1998
Total contract revenues were $7,521,000 for the three months ended March 31,
1999 compared to $8,412,000 for the three months ended March 31, 1998.
Copromotion revenue related to the sales of INTEGRILIN by Schering, which
commenced in June 1998, was $5,668,000 for the three months ended March 31, 1999
and $0 for the three months ended March 31, 1998.
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COR THERAPEUTICS, INC.
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Milestones were $0 during the three months ended March 31, 1999 compared to
$8,000,000 received from Schering in connection with the acceptance for review
of the centralized Marketing Authorization application seeking European
marketing approval of INTEGRILIN during the three months ended March 31, 1998.
Development and other contract revenue was $1,853,000 for the
three months ended March 31, 1999 compared to $412,000 for the three months
ended March 31, 1998. The Company expects contract revenues to continue to
fluctuate in the future.
Cost of copromotion revenue was $3,917,000 for the three months ended March 31,
1999 and $0 for the three months ended March 31, 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 $9,984,000 for the three months ended
March 31, 1999 compared to $9,999,000 for the three months ended March 31, 1998.
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 $6,196,000 for the three
months ended March 31, 1999 compared to $4,696,000 for the three months ended
March 31, 1998. The increase 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 Company expects marketing, general and administrative costs to
continue to increase significantly over the next several years.
Interest income was $857,000 for the three months ended March 31, 1999 compared
to $1,147,000 for the three months ended March 31, 1998. Interest expense was
$117,000 for the three months ended March 31, 1999 compared to $140,000 for the
three months ended March 31, 1998. The decreases in both interest income and
interest expense were primarily due to changes in cash, investment and debt
obligation balances.
LIQUIDITY AND CAPITAL RESOURCES
The Company had available cash, cash equivalents and short-term investments of
$60,291,000 at March 31, 1999. 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 March 31, 1999, the Company had
approximately $3,521,000 available under an equipment financing facility.
Net cash used for operating activities and additions to capital equipment
increased to $15,057,000 for the three months ended March 31, 1999 from
$5,002,000 for the three months ended March 31, 1998, primarily due to expenses
related to the copromotion of INTEGRILIN. 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 and clinical trials of product
candidates in development.
The Company expects its cash requirements will increase in future periods due to
costs related to continuation and expansion of research and development,
including clinical trials and increased marketing, sales, general and
administrative activities. The Company anticipates that its existing capital
resources and interest earned thereon will enable it to maintain its operations
at least through 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.
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COR THERAPEUTICS, INC.
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In addition, expenditures may depend 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.
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 developed 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.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports
There were no reports on Form 8-K filed for the three months
ended March 31, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 29, 1999
COR THERAPEUTICS, INC.
Signature Title
- ----------------------------- --------------------------------------------------
/s/ VAUGHN M. KAILIAN President, Chief Executive Officer and Director
- ----------------------------- (Principal Executive Officer)
Vaughn M. Kailian
/s/ LAURA A. BREGE Senior Vice President, Finance and Chief Financial
- ----------------------------- Officer (Principal Financial Officer)
Laura A. Brege
/s/ PETER S. RODDY Vice President, Finance
- ----------------------------- (Principal Accounting Officer)
Peter S. Roddy
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EXHIBIT INDEX
Exhibit
No. Description
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27.1 Financial Data Schedule