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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, 2001
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_ 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
[LOGO](TM)
COR
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 ___
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As of April 30, 2001, the number of outstanding shares of the Registrant's
Common Stock was 55,501,722.
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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, 2001 and December 31, 2000 3
Condensed Statements of Operations - for the three months ended March 31,
2001 and 2000 4
Condensed Statements of Cash Flows - for the three months ended March 31,
2001 and 2000 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 10
Item 3. Financial Market Risks 18
PART II OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
INTEGRILIN(R) (eptfibatide) Injection, COR THERAPEUTICS(R), and COR(R) are
registered trademarks of COR Therapeutics, Inc.
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Page 2 of 20
COR THERAPEUTICS, INC.
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements and Notes
CONDENSED BALANCE SHEETS
(unaudited, in thousands)
March 31, December 31,
2001 2000
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ASSETS
Current assets:
Cash and cash equivalents $ 74,272 $ 41,142
Short-term investments 264,257 298,736
Contract receivables 9,993 12,134
Prepaid copromotion expenses 66,236 58,649
Other current assets 1,837 1,189
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Total current assets 416,595 411,850
Property and equipment, net 3,943 3,724
Other assets 9,187 9,572
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$ 429,725 $ 425,146
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,706 $ 12,052
Accrued interest payable 1,250 5,000
Accrued compensation 7,147 8,086
Accrued development costs 2,397 1,447
Accrued copromotion costs 2,315 2,830
Deferred revenue 54,329 44,165
Other accrued liabilities 508 511
Capital lease obligations--current portion 1,347 1,265
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Total current liabilities 80,999 75,356
Capital lease obligations--noncurrent portion 1,234 1,659
Convertible subordinated notes 300,000 300,000
Stockholders' equity 282,232 280,016
Accumulated deficit (234,740) (231,885)
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Total stockholders' equity 47,492 48,131
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$ 429,725 $ 425,146
========== ==========
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,
-------------------------
2001 2000
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Contract revenues:
Copromotion revenue $ 20,632 $ 16,904
Development and other contract revenue 2,148 992
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Total contract revenues 22,780 17,896
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Expenses:
Cost of copromotion revenue 10,749 10,947
Research and development 10,745 10,414
Marketing, general and administrative 7,294 7,180
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Total expenses 28,788 28,541
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Loss from operations (6,008) (10,645)
Interest income 7,349 2,392
Interest expense (4,196) (1,688)
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Net loss $ (2,855) $ (9,941)
========= =========
Basic and diluted net loss per share $ (0.05) $ (0.19)
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Shares used in computing basic and diluted net loss
per share 55,027 51,776
========= =========
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,
-----------------------------
2001 2000
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Cash flows provided by (used in) operating activities:
Net loss $ (2,855) $ (9,941)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 929 741
Changes in assets and liabilities:
Contract receivables 2,141 (3,433)
Prepaid copromotion expenses (7,587) (8,651)
Other current assets (648) (174)
Accounts payable (346) (716)
Accrued interest payable (3,750) 1,465
Accrued compensation (939) 381
Accrued development costs 950 541
Accrued copromotion costs (515) 57
Deferred revenue 10,164 11,085
Other accrued liabilities (3) (8)
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Total adjustments 396 1,288
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Net cash used in operating activities (2,459) (8,653)
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Cash flows provided by (used in) investing activities:
Purchases of short-term investments (157,822) (168,987)
Sales of short-term investments 119,981 1,662
Maturities of short-term investments 72,239 6,432
Additions to property and equipment (763) (492)
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Net cash provided by (used in) investing activities 33,635 (161,385)
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Cash flows provided by (used in) financing activities:
Repayment of capital lease obligations (343) (453)
Proceeds from convertible subordinated notes, net of issuance costs -- 289,459
Issuance of common stock 2,297 13,351
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Net cash provided by financing activities 1,954 302,357
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Net increase in cash and cash equivalents 33,130 132,319
Cash and cash equivalents at the beginning of the period 41,142 12,780
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Cash and cash equivalents at the end of the period $ 74,272 $ 145,099
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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") was incorporated in Delaware on February 4, 1988.
COR is dedicated to the discovery, development and marketing of novel
therapeutic products to establish new standards of care for treating and
preventing acute and chronic cardiovascular diseases. We are marketing
INTEGRILIN(R) (eptifibatide) Injection, our approved drug, to treat patients
with acute cardiovascular disease. We are also developing a portfolio of drug
candidates to treat and prevent a broad range of acute and chronic
cardiovascular diseases and other conditions.
Interim financial information
We prepared the accompanying unaudited condensed financial statements 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 our opinion, these condensed financial statements include all
adjustments, consisting only of normal recurring adjustments, that we consider
necessary to fairly state our financial position, our results of operations and
our cash flows. We derived the condensed balance sheet at December 31, 2000 from
the audited financial statements at that date. The condensed balance sheet at
March 31, 2001 does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. The
accompanying condensed financial statements should be read in conjunction with
our audited financial statements and notes thereto for the year ended December
31, 2000, included in our 2000 Annual Report on Form 10-K. The results of
operations for any interim period are not necessarily indicative of the results
of operations for any other interim period or for a full fiscal year.
Contract revenues
Contract revenues include copromotion revenue and development and other contract
revenue.
Copromotion revenue includes our share of profits from the sale of INTEGRILIN in
copromotion territories by Schering-Plough Ltd. and Schering Corporation
(collectively, "Schering"), as well as the reimbursement by Schering of our
costs of copromotion revenue. We generally recognize copromotion revenue when
Schering ships related product to wholesalers and record it net of allowances,
if any, which we believe are necessary. Our costs of copromotion revenue consist
of certain manufacturing-related, advertising and promotional expenses related
to the sale of INTEGRILIN within copromotion territories. We defer certain
manufacturing-related expenses until the time Schering ships related product to
its customers inside and outside copromotion territories. Deferred revenue
includes payments from Schering received prior to the period in which the
related contract revenues are earned.
We record development and other contract revenue as earned based on the
performance requirements of the contract, and expense related costs as they are
incurred. Other contract revenue includes recognition of reimbursement to us by
Schering of certain manufacturing-related expenses for materials used outside
the copromotion territory, and royalties from Schering on sales of INTEGRILIN
outside the copromotion territory. We recognize these revenues when Schering
ships the related product to its customers.
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COR THERAPEUTICS, INC.
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Prepaid copromotion expenses
Prepaid copromotion expenses represent materials on hand, valued at cost, and
prepayments to third-party suppliers associated with manufacturing-related
copromotion expenses. Prepaid copromotion expenses consist of the following (in
thousands):
March 31, December 31,
2001 2000
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Deposits and prepayments $ 3,179 $ 4,690
Bulk materials 37,282 30,918
Finished goods 25,775 23,041
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$66,236 $ 58,649
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Other assets
Other assets represent issuance costs, net of accumulated amortization of
$1,682,000 and $1,297,000 at March 31, 2001 and December 31, 2000, respectively,
associated with our sale of $300,000,000 aggregate principal amount of 5.0%
convertible subordinated notes in February 2000. We are amortizing these
issuance costs to interest expense over the seven-year life of the notes.
Information concerning market and source of supply concentration
COR and Schering copromote INTEGRILIN in the United States and share any profits
or losses. Together with Schering and Genentech, Inc., we also copromote
INTEGRILIN, TNKase(TM) and Activase(R) for various indications in hospitals
across the United States. INTEGRILIN has received regulatory approval in the
European Union and a number of other countries for various indications. We have
exclusively licensed Schering to market INTEGRILIN outside the United States,
and Schering pays us royalties based on sales of INTEGRILIN outside the United
States. We have long-term supply arrangements with two suppliers for the bulk
product and with another two suppliers, one of which is Schering, for the
filling and final packaging of INTEGRILIN.
Advertising and promotion costs
Advertising and promotion costs are expensed in the period they are incurred and
classified as cost of copromotion revenue. Advertising and promotion costs
totaled $4,080,000 and $3,288,00 for the three months ended March 31, 2001 and
2000, respectively.
Reclassification
We have reclassified certain prior year balances to conform to the current year
presentation.
Comprehensive income (loss)
Comprehensive loss is comprised of net loss and other comprehensive income
(loss). Other comprehensive income (loss) includes certain changes in equity
that are excluded from net loss. Specifically, unrealized holding gains and
losses on our available-for-sale securities, which are reported in stockholders'
equity, are included in other comprehensive income (loss). Comprehensive loss
totaled $2,936,000 and $10,070,000 for the three months ended March 31, 2001 and
2000, respectively.
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COR THERAPEUTICS, INC.
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Segment information
Our business activities include the discovery, development and commercialization
of novel cardiovascular pharmaceutical products and are organized into one
operating segment. All of our operating assets are located in the United States.
All of our revenues are derived from within the United States, except for
royalty and other contract revenue earned on sales of INTEGRILIN by Schering
outside of the United States.
Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 was effective as of
January 1, 2001. SFAS No. 133 requires us to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through net income. We do not currently hold any derivatives and do
not anticipate holding any derivatives in the future. Accordingly, the adoption
of this pronouncement did not materially impact our financial statements.
Stock dividend
On August 15, 2000, we effected a two-for-one stock split by means of a stock
dividend, in which our stockholders of record at the close of business on July
31, 2000 received one additional share of our common stock for every share of
common stock then held. The effect of the two-for-one stock dividend has been
reflected throughout this report, including the share and per share amounts for
all periods presented.
2. Financial instruments
We used the following methods and assumptions in estimating the 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 government
and other 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 March 31, 2001, the amortized cost and estimated fair value of short-term
investments, classified by contractual maturity, are (in thousands):
Amortized Estimated
Cost Fair Value
------------ ------------
Due in one year or less $135,261 $135,977
Due after one year and in less than
three years 127,224 128,280
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$262,485 $264,257
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During the three months ended March 31, 2001, we sold short-term investments
with a fair value of $119,981,000, resulting in gross realized gains of
$2,090,000 and gross realized losses of $0.
Long and short-term debt: The estimated fair value of our convertible
subordinated notes at March 31, 2001 is $269,813,000, based upon the last
publicly-traded price for the notes. The carrying amounts of our capital lease
obligations at March 31, 2001 approximate their fair values. These fair values
are estimated using a discounted cash flow analysis based on current incremental
borrowing rates for similar types of borrowing arrangements.
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COR THERAPEUTICS, INC.
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3. Net loss per share
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share", we have computed basic and diluted net loss per share
using the weighted average number of shares of common stock outstanding during
the period. Had we recorded net income during the three months ended March 31,
2001 or 2000, 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 4,156,000 and 6,438,000 shares,
respectively. We have excluded the outstanding stock options and the impact of
our convertible subordinated notes from the computation of diluted net loss per
share because the effect would have been anti-dilutive for all periods
presented.
4. Contingencies
In October 1997, a patent opposition was filed in Europe by another company
against the claims of a patent granted to us in Europe covering broad, generic
claims for INTEGRILIN, as well as numerous related compounds that are not part
of our core technology. The opposition asserted that all claims of the patent
are unpatentable. In July 2000, the Opposition Division of the European Patent
Office confirmed the validity of our patent claims without requiring us to limit
or otherwise amend our claims. In November 2000, the opposition filed an appeal
of this decision.
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COR THERAPEUTICS, INC.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
In addition to historical information, this report contains forward-looking
statements regarding our performance that involve risks and uncertainties.
Actual results may differ materially from the anticipated results discussed in
such forward-looking statements due to factors such as the commercial success of
INTEGRILIN as well as other factors discussed below and under the caption "Risk
Factors." Forward-looking statements are based on our current expectations, and
we do not intend to update such information to reflect future events or
developments.
Overview
COR is dedicated to the discovery, development and marketing of novel
therapeutic products to establish new standards of care for treating and
preventing acute and chronic cardiovascular diseases. We are marketing
INTEGRILIN, our approved drug, to treat patients with acute cardiovascular
disease. We are also developing a portfolio of drugs to treat and prevent a
broad range of acute and chronic cardiovascular diseases and other conditions.
INTEGRILIN is our first product taken from discovery to commercialization. In
May 1998, the United States Food and Drug Administration approved INTEGRILIN to
treat patients who undergo a procedure known as angioplasty to open blood
vessels. The FDA has also approved INTEGRILIN to treat patients with
intermittent chest pains known as unstable angina and patients suffering from a
type of heart attack known as non-Q-wave myocardial infarction, whether the
doctor intends to treat these patients with medicines alone or with a subsequent
angioplasty. INTEGRILIN is the only drug in its class that the FDA has approved
for use in all these indications.
COR and Schering copromote INTEGRILIN in the United States and share any profits
or losses. INTEGRILIN also has received regulatory approval for various
cardiovascular indications in the European Union and a number of other
countries. We have exclusively licensed Schering to market INTEGRILIN outside
the United States, and Schering pays us royalties based on sales of INTEGRILIN
outside the United States.
In January 2001, we, Schering and Genentech, Inc., entered into an agreement to
copromote INTEGRILIN with Genentech's fibrinolytic, or clot-dissolving drugs,
TNKase(TM) and Activase(R) across the United States. We, Schering and Genentech
have also agreed to an exclusive clinical collaboration for any future large-
scale clinical trials that combine a fibrinolytic with drugs in the same class
as INTEGRILIN.
In addition to our commercial activities, we continue to pursue a wide array of
research and development programs. These programs have therapeutic potential for
a variety of indications including acute coronary syndromes, stroke, restenosis,
cancer and venous and arterial thrombosis.
We have funded our operations primarily through public and private debt and
equity financings and proceeds from research and development and
commercialization collaboration agreements. We have incurred a cumulative net
loss of $234,740,000 through March 31, 2001.
Results of Operations
Three months ended March 31, 2001 and 2000
Total contract revenues, which include copromotion and development and other
contract revenue, were $22,780,000 for the three months ended March 31, 2001
compared to $17,896,000 for the corresponding period in 2000.
Copromotion revenue related to the sales of INTEGRILIN by Schering was
$20,632,000 for the three months ended March 31, 2001 compared to $16,904,000
for the three months ended March 31, 2000. Schering reported to us total sales
of INTEGRILIN of $38,100,000 and $27,600,000 for the three months ended March
31, 2001 and 2000, respectively, and sales of INTEGRILIN in the United States
were $33,600,000 and $25,900,000 for the respective periods. The sales increase
in 2001 compared to 2000 is attributable to overall market growth as well as
increased market share for INTEGRILIN. Copromotion revenue fluctuates in
relation to the domestic sales of INTEGRILIN and to our and Schering's
respective costs of copromotion revenue, and we expect these fluctuations to
continue. Product sales reported by Schering for any period are not necessarily
indicative of product sales for any future
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COR THERAPEUTICS, INC.
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period. Wholesaler management decisions to increase or decrease their inventory
of INTEGRILIN may result in sales of INTEGRILIN to wholesalers that do not track
directly with sales from wholesalers of INTEGRILIN to hospitals.
Development and other contract revenue was $2,148,000 for the three months ended
March 31, 2001 compared to $992,000 for the three months ended March 31, 2000,
due to fluctuations in clinical trial and development activities, and we expect
these fluctuations to continue.
Cost of copromotion revenue was $10,749,000 for the three months ended March 31,
2001 compared to $10,947,000 for the three months ended March 31, 2000. Cost of
copromotion revenue includes certain manufacturing-related, advertising and
promotional expenses incurred in connection with our collaboration with
Schering. Cost of copromotion revenue fluctuates in relation to the domestic
sales of INTEGRILIN and as we incur more or less of the joint manufacturing,
advertising or promotional activities that we undertake in our collaboration
with Schering.
Research and development expenses were $10,745,000 for the three months ended
March 31, 2001 compared to $10,414,000 for the three months ended March 31,
2000, consistent with our ongoing clinical trial activities and expenses
pertaining to other research, development and clinical activities associated
with product candidates. Research and development expenses are expected 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 product candidates in development.
Marketing, general and administrative expenses were $7,294,000 for the three
months ended March 31, 2001 compared to $7,180,000 for the three months ended
March 31, 2000, consistent with our ongoing marketing and general corporate
activities. We expect marketing, general and administrative costs to increase
over the next several years.
Interest income was $7,349,000 for the three months ended March 31, 2001
compared to $2,392,000 for the three months ended March 31, 2000. The increase
in the first quarter of 2001 compared to the first quarter of 2000 was primarily
due to changes in average cash and investment balances, including the proceeds
from the issuance of $300,000,000 aggregate principal amount of 5.0% convertible
subordinated notes in February 2000 and realized gains from the sale of short-
term investments during the three months ended March 31, 2001. Interest expense
was $4,196,000 for the three months ended March 31, 2001 compared to $1,688,000
for the three months ended March 31, 2000. The increase in the first quarter of
2001 compared to the first quarter of 2000 was primarily due to changes in
average outstanding debt obligations, including the issuance of $300,000,000
aggregate principal amount of 5.0% convertible subordinated notes in February
2000.
We incurred a net loss of $2,855,000 for the three months ended March 31, 2001
and, accordingly, no provision for federal or state income taxes was recorded.
Liquidity and Capital Resources
We had available cash, cash equivalents and short-term investments of
$338,529,000 at March 31, 2001. Cash in excess of immediate requirements is
invested with the primary objective of preserving principal while at the same
time maximizing yields without significantly increasing risk. We have funded our
operations primarily through public and private debt and equity financings and
revenues from commercialization and research and development collaboration
agreements. Additional funding has come from grant revenues, interest income and
property and equipment financings.
Net cash used in operating activities and additions to capital equipment was
$3,222,000 for the three months ended March 31, 2001 compared to $9,145,000 for
the three months ended March 31, 2000. The decrease in 2001 compared to 2000 was
primarily due to the effect of reduced losses from operations. Cash requirements
for operating activities and additions to capital equipment may increase in
future periods. The timing of these cash requirements may vary from period to
period depending on the timing and phase of, and indications pursued in,
additional clinical trials of INTEGRILIN and other product candidates in
development and depending on our debt service obligations.
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COR THERAPEUTICS, INC.
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Cash provided by financing activities was $1,954,000 for the three months ended
March 31, 2001 compared to $302,357,000 for the three months ended March 31,
2000. The decrease in the first quarter of 2001 compared to the first quarter of
2000 is primarily the result of the issuance of $300,000,000 aggregate principal
amount of 5.0% convertible subordinated notes in February 2000. Additional cash
provided by financing activities stems from the issuance of common stock
pursuant to our stock option and stock purchase plans.
We expect our cash requirements will increase in future periods due to
anticipated expansion of research and development, including clinical trials,
and increased marketing, sales, and general and administrative activities.
Existing capital resources and interest earned thereon are expected to meet
these increased cash requirements for the next several years. However, cash
requirements may change depending on numerous factors, including the progress of
anticipated research and development programs, the scope and results of pre-
clinical and clinical studies and the number and nature of the indications
pursued in clinical studies. Cash requirements may also change due to the timing
of regulatory approvals, technological advances, determinations as to the
commercial potential of future products and the status of competitive products.
Finally, the establishment and maintenance of collaborative relationships with
other companies, the availability of financing and other unexpected factors may
require additional funds that may not be available on favorable terms, if at
all.
Risk Factors
Our business faces significant risks. Stockholders and potential investors in
our securities should carefully consider the following risk factors, in addition
to other information in this report. We are identifying these risk factors as
important factors that could cause our actual results to differ materially from
those contained in any forward-looking statements made by or on behalf of us.
These risks may not be the only risks we face. Additional risks that we do not
yet know of or that we currently think are immaterial also may impair our
business. We are relying upon the safe-harbor for forward-looking statements and
any such statements made by or on behalf of COR are qualified by reference to
the following cautionary statements, as well as to those set forth elsewhere in
this report
Risks related to our drug development and commercialization activities
If INTEGRILIN does not achieve commercial success, we will not be able to
generate the revenues necessary to support our business.
Our business depends on the commercial success of INTEGRILIN, which has been on
the market in the United States since June 1998. Marketing outside the United
States commenced in mid-1999 and INTEGRILIN has not yet achieved acceptance in
foreign markets. Although sales of INTEGRILIN have increased since its launch,
if they fail to continue to increase over current levels, we may not achieve
sustained profitability, and we will be forced to scale back our operations and
research and development programs.
We may not be able to compete effectively in the cardiovascular disease market.
Due to the incidence and severity of cardiovascular diseases, the market for
therapeutic products that address these diseases is large, and competition is
intense and expected to increase. Our most significant competitors are major
pharmaceutical companies and more established biotechnology companies. The two
products that compete with INTEGRILIN are ReoPro(R), which is produced by
Johnson & Johnson and sold by Johnson & Johnson and Eli Lilly & Co., and
Aggrastat(R), which is produced and sold by Merck & Co., Inc. Our competitors
operate large, well-funded cardiovascular research and development programs and
have significant expertise in manufacturing, testing, regulatory matters and
marketing. We also must compete with academic institutions, governmental
agencies, and other public and private research organizations that conduct
research in the cardiovascular field, seek patent protection for their
discoveries and establish collaborative arrangements for product and clinical
development and marketing.
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COR THERAPEUTICS, INC.
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We may not be able to obtain the regulatory approvals necessary to market new
products and to market INTEGRILIN for additional therapeutic uses.
We must satisfy stringent governmental regulations in order to develop,
commercialize and market our products. INTEGRILIN is the only product we have
submitted to the FDA for approval for commercial sale, and it has been approved
for a specific set of therapeutic uses. To grow our business, we may need to
obtain regulatory approval to be able to promote INTEGRILIN for additional
therapeutic uses and to commercialize new product candidates. A company cannot
market a pharmaceutical product in the United States until it has completed
rigorous pre-clinical testing and clinical trials of the product and an
extensive regulatory clearance process that the FDA implements. It typically
takes many years to satisfy regulatory requirements, depending upon the type,
complexity and novelty of the product. The process is very expensive. Of
particular significance are the requirements covering research and development,
testing, manufacturing, quality control, labeling and promotion of drugs for
human use.
Before we can receive FDA clearance to market a product, we must demonstrate
that the product is safe and effective for the patient population that will be
treated. Preclinical and clinical data are susceptible to varying
interpretations that could delay, limit or prevent regulatory clearances. In
addition, we may encounter delays or rejections from additional government
regulation, from future legislation or administrative action or changes in FDA
policy during the period of product development, clinical trials and FDA
regulatory review. Failure to comply with applicable FDA or other applicable
regulatory requirements may result in criminal prosecution, civil penalties,
recall or seizure of products, total or partial suspension of production or
injunction, as well as other regulatory action against our potential products or
us. If a product receives regulatory clearance, its marketing will be limited to
those disease states and conditions for which clinical trials demonstrate that
the product is safe and effective. Any compound we develop may not prove to be
safe and effective in clinical trials and may fail to meet all of the regulatory
requirements needed to receive marketing clearance.
Outside the United States, our ability to market a product depends on our
receiving a marketing authorization from the appropriate regulatory authorities.
This foreign regulatory approval process includes all of the risks associated
with FDA clearance described above.
We depend on our collaborative relationship with Schering to market and sell
INTEGRILIN, and our business will suffer if Schering fails to perform under the
collaboration.
Our strategy is to work with collaborative partners to develop product
candidates and commercialize products. Generally, collaborations with
established pharmaceutical companies provide funding for product development and
the benefit of an established sales and marketing organization. In particular,
our ability to successfully commercialize INTEGRILIN depends on our
collaboration with Schering. Under this collaboration, Schering has agreed to:
. co-market INTEGRILIN with us in the United States and market the product as
our exclusive licensee outside the United States;
. share profits and losses in the United States and pay royalties to us on
sales of INTEGRILIN outside the United States;
. provide manufacturing and manufacturing support services;
. design and conduct advanced clinical trials;
. fund promotional activities with us; and
. pay us fees upon achievement of certain milestones.
Schering's performance under the collaboration is outside our control. If
Schering fails to perform its obligations diligently and in a timely manner,
commercialization of INTEGRILIN will be impaired and our business may not be
profitable.
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COR THERAPEUTICS, INC.
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If we do not establish additional collaborative relationships, our ability to
develop and commercialize new products will be impaired.
In addition to INTEGRILIN, we have various product candidates in pre-clinical
and clinical trials and other product candidates in various stages of research
and development. We are a party to numerous research agreements related to these
product candidates, most of which do not contemplate taking a product candidate
through development and commercialization. We will need to enter into additional
collaborations to develop and commercialize these and additional product
candidates. We face significant competition in seeking appropriate collaborative
partners. Negotiating these arrangements is complex and time consuming. If we
are successful in establishing a collaboration, the collaboration may not be
successful. If we fail to establish collaborative partnerships for our product
candidates, we may have to terminate, delay or cut back development programs.
If our clinical trials are unsuccessful, or if they experience significant
delays, our ability to commercialize products will be impaired.
We must provide the FDA and foreign regulatory authorities with pre-clinical and
clinical data that demonstrate that our products are safe and effective before
they can be approved for commercial sale. Clinical development, including pre-
clinical testing, is a long, expensive and uncertain process. It may take us
several years to complete our testing, and failure can occur at any stage of
testing. Interim results of pre-clinical or clinical studies do not necessarily
predict their final results, and acceptable results in early studies might not
be seen in later studies. Any pre-clinical or clinical test may fail to produce
results satisfactory to the FDA. Pre-clinical and clinical data can be
interpreted in different ways, which could delay, limit or prevent regulatory
approval. Negative or inconclusive results from a pre-clinical study or clinical
trial or adverse medical events during a clinical trial could cause a pre-
clinical study or clinical trial to be repeated or a program to be terminated,
even if other studies or trials relating to the program are successful.
We may not complete our planned pre-clinical or clinical trials on schedule or
at all. In addition, due to the substantial demand for clinical trial sites in
the cardiovascular area, we may have difficulty obtaining a sufficient number of
appropriate patients or clinician support to conduct our clinical trials as
planned. If so, we may have to expend substantial additional funds to obtain
access to resources or delay or modify our plans significantly. Our product
development costs will increase if we have delays in testing or approvals.
Significant clinical trial delays could allow our competitors to bring products
to market before we do and impair our ability to commercialize our product or
potential products. Even if regulators approve a product for marketing, it may
not be commercially successful.
If our third party manufacturers fail to deliver sufficient quantities of
INTEGRILIN or product candidates on schedule, we may be unable to meet demand
for INTEGRILIN and may experience delays in product development.
We have no manufacturing facilities and, accordingly, rely on third parties and
Schering for clinical and commercial production of INTEGRILIN and for clinical
production of product candidates. We have only two manufacturers producing bulk
product, and two manufacturers, one of which is Schering, performing packaging
of INTEGRILIN. We have additional manufacturers producing product candidates for
clinical trials. We rely on Schering and our other contract manufacturers to
deliver INTEGRILIN and product candidates that have been manufactured in
accordance with Current Good Manufacturing Practices and other applicable
regulations.
If the third-party manufacturers or suppliers were to cease production or
otherwise fail to supply us, or if we were unable to renew our manufacturing
contracts or contract for additional manufacturing services on acceptable terms,
or if Schering and our other contract manufacturers were to fail to adhere to
Current Good Manufacturing Practices, our ability to produce INTEGRILIN and to
conduct pre-clinical testing and clinical trials of product candidates would be
impaired. If we do not have adequate supplies of INTEGRILIN to meet market
demand, we may lose potential revenues, and the healthcare community may turn to
competing products. If we cannot obtain adequate supplies of product candidates
for pre-clinical and clinical trials, regulatory approval and development of
product candidates may be delayed.
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COR THERAPEUTICS, INC.
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Our ability to commercialize cromafiban may be diminished if the ongoing
clinical study of roxifiban is unsuccessful.
Previous clinical trials of oral GP IIb-IIIa inhibitors developed by other
pharmaceutical companies have thus far failed to demonstrate the safety and
efficacy of drugs in this class. DuPont Pharmaceuticals is conducting an ongoing
Phase III clinical trial of the oral GP IIb-IIIa inhibitor roxifiban. New
patient enrollment for the trial has been deferred while DuPont effects changes
to the trial design and protocol. If the roxifiban trial is unsuccessful, we may
be unwilling to pursue development of our oral GP IIb-IIIa inhibitor,
cromafiban. Even if we were willing to continue to develop cromafiban after an
unsuccessful roxifiban trial, we may not be able to secure development partners
for the drug, obtain regulatory approval for continued clinical studies or to
enroll patients in such studies.
Our ability to generate revenues will be diminished if we fail to obtain
acceptable prices or an adequate level of reimbursement from third party payors.
Healthcare insurers, including the United States Health Care Financing
Administration, managed care providers, private health insurers and other
organizations set aggregate dollar amounts that they will reimburse to hospitals
for the medicines and care the hospitals administer to treat particular
conditions. These insurers adjust the amounts periodically, and could lower the
amount that they will reimburse hospitals to treat the conditions for which the
FDA has approved of INTEGRILIN. If they do, pricing levels or sales volumes of
INTEGRILIN may decrease and cause a reduction in sales and a loss of potential
revenues. In foreign markets a number of different governmental and private
entities determine the level at which hospitals will be reimbursed for
administering INTEGRILIN to insured patients. If these levels are set, or reset,
too low, it may not be possible to sell INTEGRILIN at a profit in these markets.
Each of our product candidates, if approved for marketing, will face the same
risk.
If we are unable to protect our patents and proprietary rights, we may not be
able to compete successfully.
We 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. Our success
will depend in part on our ability to obtain and enforce patent protection for
our technology both in the United States and other countries. While we are
seeking and/or maintaining patents for INTEGRILIN and our product candidates,
patents may not be issued, and issued patents may afford limited or no
protection.
We 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 us, if at all. If we do not
obtain required licenses, we may encounter delays in product development while
attempting to redesign products or methods or we could find the development,
manufacture or sale of such products requiring licenses to be foreclosed.
Further, we could incur substantial costs in defending any patent litigation
brought against us or in asserting our patent rights, including those rights
licensed to us by others.
If product liability lawsuits are successfully brought against us, we may incur
substantial liabilities.
The testing, marketing and sale of human pharmaceutical products expose us to
significant and unpredictable risks of product liability claims in the event
that the use of our technology or products is alleged to have resulted in
adverse effects. Our products are administered to patients with serious
cardiovascular disease who have a high incidence of mortality. A successful
product liability suit against us could impair our financial condition and force
us to limit commercialization of products.
If we do not attract and retain key employees and consultants, our business
could be impaired.
We are highly dependent on the principal members of our scientific and
management staff. In addition, we rely on consultants to assist us in
formulating our research and development strategy. Attracting and retaining
qualified personnel is critical to our success. Competition for scientific and
managerial personnel is particularly intense in the San Francisco Bay Area where
we, together with numerous other life sciences companies, universities and
research institutions, maintain our operations. Failure to continue to attract
these individuals, or the loss of key personnel, could impair the progress of
our programs.
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COR THERAPEUTICS, INC.
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Risks related to our finances
We have a history of annual operating losses and are uncertain of future
profitability.
Historically, our expenses have exceeded our revenues. As of March 31, 2001, we
had an accumulated deficit of approximately $234,740,000. The extent of future
losses and timing of future profitability are uncertain, even taking into
account our share of revenues from sales of INTEGRILIN. We continue to incur
significant expenses for research and development and to develop, train,
maintain and manage our sales force, and these expenses have exceeded our share
of INTEGRILIN product revenues. We may never achieve ongoing profitability.
If we should need additional funds beyond our existing capital resources and
fail to obtain them, we will be unable to successfully develop and commercialize
products.
We may require significant additional funds beyond our existing capital
resources to market INTEGRILIN and conduct the costly and time-consuming
research, pre-clinical testing and clinical trials necessary to develop and
optimize our technology and potential products, to establish manufacturing,
marketing and sales capabilities for product candidates and to bring any such
products to market. We may raise these funds through public or private equity
offerings, debt financings or additional corporate collaborations and licensing
arrangements. We may find that additional funding may not be available to us
when we need it, on acceptable terms or at all.
If we raise capital by issuing equity securities, our stockholders may
experience dilution. To the extent we raise additional funds through
collaborative arrangements, we may be required to relinquish some rights to our
technologies or product candidates or grant licenses on terms that are not
favorable to us. If we are unable to obtain adequate funding when needed,
commercialization of INTEGRILIN may be impaired, and we may be required to
curtail one or more development programs.
Our indebtedness and debt service obligations may adversely affect our cash
flow.
At March 31, 2001, we had $302,581,000 of outstanding debt, including primarily
our convertible subordinated notes. During each of the last five years, our
earnings were insufficient to cover our fixed charges. During each of the next
three years, our debt service obligations on our convertible subordinated notes
will be approximately $15,000,000 in interest payments. If we are unable to
generate sufficient cash to meet these obligations and have to use existing cash
or investments, we may have to delay or curtail research and development
programs.
We intend to fulfill our debt service obligations both from cash generated by
our operations and from our existing cash and investments. We may add additional
lease lines to finance capital expenditures and may obtain additional long-term
debt and lines of credit.
Our indebtedness could have significant additional negative consequences,
including:
. increasing our vulnerability to general adverse economic and industry
conditions;
. limiting our ability to obtain additional financing;
. requiring the dedication of a substantial portion of our expected cash flow
from operations to service our indebtedness, thereby reducing the amount of
our expected cash flow available for other purposes, including capital
expenditures;
. limiting our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete; and
. placing us at a possible competitive disadvantage to less leveraged
competitors and competitors that have better access to capital resources.
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COR THERAPEUTICS, INC.
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Risks related to an investment in our securities
Our common stock price is volatile, and an investment in our securities could
suffer a decline in value.
Our stock price has been highly volatile and may continue to be highly volatile
in the future. Our stock price depends on a number of factors, some of which are
beyond our control, which could cause the market price of our common stock to
fluctuate substantially. These factors include:
. fluctuations in our financial and operating results;
. whether our financial results are consistent with securities analysts'
expectations;
. the results of pre-clinical and clinical trials;
. announcements of technological innovations or new commercial products by us
or our competitors;
. developments concerning proprietary rights; and
. publicity regarding actual or potential performance of products under
development by us or our competitors.
In the past, stockholders have filed securities class action lawsuits against
companies after the market price of the company's stock has fallen
precipitously. Such a lawsuit could cause us to incur significant defense costs
and divert management's attention and other resources. Any adverse determination
could subject us to significant liabilities.
In addition, the stock market in general has from time to time and in
particular, recently experienced extreme price and volume fluctuations. These
broad market fluctuations may lower the market price of our common stock.
Moreover, during periods of stock market price volatility, share prices of many
biotechnology companies have often fluctuated in a manner not necessarily
related to the companies' operating performance. Accordingly, our common stock
may be subject to greater price volatility than the stock market as a whole, and
you could lose a part of your investment.
Because our convertible subordinated notes are convertible into shares of our
common stock, their value may be affected by these factors as well.
Anti-takeover provisions in our charter documents and under Delaware law may
make it more difficult to acquire us, even though an acquisition may be
beneficial to our stockholders.
Provisions of our certificate of incorporation and by-laws could make it more
difficult for a third party to acquire us, even if doing so would benefit our
stockholders. These provisions:
. authorize the issuance of "blank check" preferred stock that could be issued
by our board of directors to increase the number of outstanding shares and
thwart a takeover attempt; and
. limit who may call a special meeting of stockholders.
In January 1995, our board of directors adopted a preferred share purchase
rights plan, commonly known as a "poison pill." The provisions described above,
our preferred share purchase rights plan and provisions of the Delaware General
Corporation Law relating to business combinations with interested stockholders
may discourage, delay or prevent a third party from acquiring us, even if our
stockholders might receive a premium for their shares in the acquisition over
then current market prices.
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COR THERAPEUTICS, INC.
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Item 3. Financial Market Risks
Our exposure to market risk for changes in interest rates relate primarily to
our investment portfolio and long-term obligations. Our primary investment
objective is to preserve principal while at the same time maximizing yields
without significantly increasing risk. To achieve this objective, we invest in
highly liquid and high-quality government and other debt securities. Our
portfolio includes money market funds, commercial paper, medium-term notes,
corporate notes and government securities. To minimize the exposure due to
adverse shifts in interest rates, we invest in short-term securities with
maturities of less than three years. At March 31, 2001, approximately 62% of our
investment portfolio was composed of investments maturing in one year or less.
The remainder of our investment portfolio matures in less than three years.
Our long-term obligations include $300,000,000 of 5.0% convertible subordinated
notes due March 1, 2007. Interest on the notes is fixed and payable semi-
annually on March 1 and September 1 of each year. The notes are convertible into
shares of our common stock at any time prior to maturity, unless previously
redeemed or repurchased, subject to adjustment in certain events.
The following table presents, as of March 31, 2001, the amounts of our cash,
cash equivalents and short-term investments that may be subject to interest rate
risk and the average interest rates by year of maturity ($ in thousands):
2001 2002 2003 2004 Total Fair Value
----------- ---------- ---------- --------- ---------- ------------
Cash, cash equivalents and
short-term investments:
Fixed rate amount $ 194,950 $ 74,437 $ 64,054 $ 5,088 $ 338,529 $ 338,529
Average fixed rate 5.58% 6.45% 5.83% 5.25% 5.81% 5.81%
Variable rate amount $ -- $ -- $ -- $ -- $ -- $ --
Average variable rate -- -- -- -- -- --
----------- ---------- ---------- --------- ----------- -----------
Total cash, cash equivalents
and short-term investments:
Amount $ 194,950 $ 74,437 $ 64,054 $ 5,088 $ 338,529 $ 338,529
Average rate 5.58% 6.45% 5.83% 5.25% 5.81% 5.81%
----------- ---------- ---------- --------- ----------- -----------
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COR THERAPEUTICS, INC.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In October 1997, a patent opposition was filed in Europe by another company
against the claims of a patent granted to us in Europe covering broad, generic
claims for INTEGRILIN, as well as numerous related compounds that are not part
of our core technology. The opposition asserted that all claims of the patent
are unpatentable. In July 2000, the Opposition Division of the European Patent
Office confirmed the validity of our patent claims without requiring us to limit
or otherwise amend our claims. In November 2000, the opposition filed an appeal
of this decision.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
Number Exhibit
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+ 10.1 Co-Promotion Agreement dated January 1, 2001 by and between
Genentech, Schering Sales Management, Inc. and the Registrant.
* 10.2 Registrant's 1991 Equity Incentive Plan, as amended to date.
* 10.3 Registrant's 1991 Employee Stock Purchase Plan, as amended to
date.
* 10.4 Registrant's 1994 Non-Employee Directors' Stock Option Plan,
as amended to date.
* 10.5 Registrant's 1998 Non-Officer Equity Incentive Plan, as
amended to date.
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+ Confidential treatment requested.
* Indicates management contracts or compensatory plans or
arrangements filed pursuant to Item 601(b)(10) of Regulation S-K.
Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended March 31,
2001.
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COR THERAPEUTICS, INC.
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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: May 9, 2001
COR THERAPEUTICS, INC.
Signature Title
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/s/ VAUGHN M. KAILIAN President, Chief Executive Officer and Director
- -----------------------------
Vaughn M. Kailian (Principal Executive Officer)
/s/ PETER S. RODDY Senior Vice President, Finance and Chief Financial Officer
- -----------------------------
Peter S. Roddy (Principal Financial Officer)
/s/ JOHN M. SCHEMBRI Director, Finance and Controller
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John M. Schembri (Principal Accounting Officer)
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Page 20 of 20
EXHIBITS LIST
Number Exhibit
- -------- ------------------------------------------------------------------------------------
+ 10.1 Co-Promotion Agreement dated January 1, 2001 by and between Genentech, Schering
Sales Management, Inc. and the Registrant.
* 10.2 Registrant's 1991 Equity Incentive Plan, as amended to date.
* 10.3 Registrant's 1991 Employee Stock Purchase Plan, as amended to date.
* 10.4 Registrant's 1994 Non-Employee Directors' Stock Option Plan, as amended to date.
* 10.5 Registrant's 1998 Non-Officer Equity Incentive Plan, as amended to date.
- ----------
+ Confidential treatment requested.
* Indicates management contracts or compensatory plans or arrangements filed
pursuant to Item 601(b)(10) of Regulation S-K.