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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-K
(Mark One)
[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
OR
[ ] 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: 000-22891
CORIXA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 91-1654387
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1124 COLUMBIA ST., SUITE 200
SEATTLE, WA 98104
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (206) 754-5711
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value per share
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 than 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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $124 million as of December 31, 1998, based
upon the closing sale price on the Nasdaq National Market reported for such
date. Shares of Common Stock held by each officer and director and by each
person who owns 5% of more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
There were 13,400,895 shares of the registrant's Common Stock
outstanding as of December 31, 1998.
Documents Incorporated By Reference:
Part III incorporates information by reference from the Registrant's
Proxy Statement for its 1999 Annual Meeting of Stockholders.
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TABLE OF CONTENTS
PART I
Item 1. Business 2
Item 2. Properties 31
Item 3. Legal Proceedings 32
Item 4. Submission of Matters to a Vote of Security Holders 32
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 32
Item 6. Selected Financial Data 33
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 35
Item 8. Financial Statements and Supplementary Data 51
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 68
PART III
Item 10. Directors and Executive Officers of the Registrant 68
Item 11. Executive Compensation 68
Item 12. Security Ownership of Certain Beneficial Owners and Management 68
Item 13. Certain Relationships and Related Transactions 68
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 69
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INTRODUCTORY STATEMENT
Except for the historical information contained in this Annual Report on
Form 10-K, the matters discussed herein, including management's discussion and
analysis of financial condition and results of operations in Item 7 of Part II
hereof, are "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including, without limitation, statements
regarding regulatory approvals, operating results and capital requirements, that
are subject to certain risks and uncertainties that could cause the actual
results to differ materially from those projected. Factors that could cause
actual results to differ materially include, but are not limited to,
uncertainties related to the early stage of the Company's research and
development programs; uncertainties related to the effectiveness of the
Company's technology and the development of its products; dependence on and
management of existing and future corporate partnerships; integration of
operations and scientific cultures related to acquisitions; dependence on
in-licensed technology; dependence on proprietary technology and uncertainty of
patent protection; management of growth; history of operating losses; future
capital needs and uncertainty of additional funding; dependence on key
personnel; intense competition; the Company's lack of manufacturing and
marketing experience and reliance on third parties to perform such functions;
existing government regulations and changes in, or the failure to comply with,
government regulations, and other risks detailed below, including those in Item
7 of Part II "Factors Affecting Future Results," and those included from time to
time in the Company's other reports with the Securities Exchange Commission and
press releases, copies of which are available from the Company upon request. The
Company assumes no obligation to update any forward-looking statements contained
herein.
References made in this Annual Report on Form 10-K to "Corixa
Corporation," the "Company," or the "Registrant" refer to Corixa Corporation.
Corixa has applied for trademark registration for Corixa(TM) and the stylized
Corixa logo. As a result of the Company's acquisition of Anergen, Inc. in
February 1999, the Company acquired the Anergix (R) trademark. The Company is
also seeking trademark registration for AnervaX(TM).
PART I
ITEM 1. BUSINESS.
INTRODUCTION
Corixa is a research-based biotechnology company committed to the goal
of treating and preventing diseases by understanding and directing the immune
system. The Company applies its immunological expertise and proprietary
technology platforms to the discovery and development of vaccine and other
antigen-based products, specifically: (i) T cell vaccines, (ii) monoclonal
antibody-based therapeutics, and (iii) diagnostics. The Company is further
committed to partnering with innovative developers and marketers of
pharmaceutical and diagnostic products with the goal of making its products
available to patients around the world. The Company's principal offices are
located in Seattle, Washington. Corixa was incorporated under the laws of the
State of Delaware in September 1994.
Included in Corixa's approach is the discovery and development of a
novel class of therapeutic and prophylactic products known as T cell vaccines.
Although commercially available vaccines can prevent infection by a variety of
pathogens such as bacteria, viruses and parasites through antibody-based immune
responses, these responses are not sufficient to eliminate tumors or certain
infectious diseases, including tuberculosis. To induce an effective immune
response against these diseases, pathogen- or tumor-reactive T lymphocytes ("T
cells") must be stimulated. In particular, cytotoxic T lymphocytes ("CTL"),
which are specialized T cells that have the ability to recognize and kill
pathogen-infected tissue or tumor cells, must be activated.
Corixa's therapeutic and prophylactic T cell vaccines represent a new
approach to the treatment of cancer, infectious diseases and autoimmune
disorders. The Company believes that markets for such vaccine products may be
extensive given that current treatments such as chemotherapy and radiation
therapy may not lead to lasting cure or prevention and create certain serious
adverse side effects. Immunologists and molecular biologists recently have
identified certain previously unknown molecular signals that are responsible for
T cell recognition of pathogen and/or tumor-associated proteins referred to as
antigens. Corixa's vaccine products are designed to exploit these recent
developments by using each of the three components of its core technology
platform -- proprietary microsphere delivery systems, adjuvants and antigens --
to force the immune system to recognize antigens in such a manner that potent T
cell, particularly CTL, responses are induced. Corixa's cancer, infectious
disease and autoimmune disease vaccines are likely
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to consist of proprietary antigens which may be encapsulated in biodegradable
and biocompatible microspheres and combined with a proprietary adjuvant, which
is a molecule or substance capable of non-specifically enhancing or boosting an
immune response. The majority of Corixa's efforts focus on the discovery of
novel and disease-specific antigens because Corixa believes that such antigens
will be the key active component(s) of future therapeutic and prophylactic
vaccine products.
In addition to its T cell vaccine programs, Corixa is engaged in the
discovery and development of additional immunotherapeutic products for the
treatment of cancer, certain infectious diseases and certain autoimmune
diseases, such as psoriasis. The Company believes that such products may result
from the Company's core efforts in antigen and adjuvant discovery. For example,
the Company believes that it may have identified potential immunomodulating
products through its adjuvant research program on Mycobacterium vaccae. In
addition, monoclonal antibodies directed against antigens discovered by the
Company's scientists may be useful in the treatment of cancer and certain
infectious diseases. Consequently, during the course of 1998, Corixa added
internal scientific expertise to complement its acquisition of GenQuest, Inc.
("GenQuest") and its monoclonal antibody collaboration with ImmGenics
Pharmaceuticals, Inc ("ImmGenics").
On December 11, 1998, Corixa entered into a definitive agreement to
acquire Anergen Inc. ("Anergen"), a development stage biotechnology company
focused on the treatment of autoimmune diseases through the discovery and
development of proprietary therapeutics that selectively interrupt the disease
process. The stockholders of Anergen approved the merger, and the merger became
effective on February 10, 1999.
SCIENTIFIC BACKGROUND
Vaccines
A variety of prophylactic vaccine products are commercially available
for the prevention of certain infectious diseases. However, these products do
not address therapeutic treatment of such diseases. The majority of current
vaccines trigger a protective antibody response capable of destroying an
invading pathogen in the event the patient is exposed to the pathogen in the
future. Antibodies are protein-based products of specialized immune system cells
called B lymphocytes that recognize and attach to antigens and trigger the
non-specific elimination of the pathogen. Antigens are components of the
invading pathogen that are recognized by cells of the immune system. Current
vaccines are made up of whole organisms that contain antigens or antigens
themselves, which can be peptides, proteins or carbohydrates. Typically such
vaccines are formulated by combining antigens with an adjuvant, an immune system
booster.
The immune response begins when antigens are processed by a specialized
immune system cell called an antigen presenting cell ("APC"). Antigens are
processed by APCs through two distinct pathways, the Class I and Class II
Pathways. The antibody response produced by current vaccines results from
antigen processing only through the Class II Pathway. The Class II Pathway
breaks down antigens into specific peptides that are then presented on the
surface of an APC via major histocompatibility ("MHC") Class II proteins.
Antigen presentation via MHC Class II proteins results in activation of CD4
positive helper T cells. These cells produce immune system hormones called
cytokines that serve to "help" with the generation of various components of both
cellular and antibody-based immune responses. Depending on the specific
cytokines that helper T cells produce, the helper T cell response is classified
as either Th1 or Th2. Th1 responses help generate and activate CTL and lead to
antibody production by B cells and possible pathogen elimination.
Such antibody production can be sufficient to prevent or eliminate
pathogen infection in the case of certain diseases. However, antibody responses
alone are not sufficient in other diseases, such as cancer. In these diseases, a
cellular immune response that includes the generation of CTL is necessary in
order to achieve protective immunity. While stimulation through the Class II
Pathway can lead to Th1 responses helpful in generating CTL, CTL activation
cannot occur without antigen presentation through the Class I Pathway. The Class
I Pathway breaks down antigens into specific peptides that are then presented on
the surface of an APC via MHC Class I proteins. Antigen presentation via MHC
Class I proteins results in generation and activation of CTL. Corixa believes
that CTL are necessary to eliminate tumors and various pathogens that antibodies
alone cannot destroy.
Corixa has shown in preclinical studies that CTL are capable of
eliminating either tumors or certain pathogens in settings where antibody
responses fail. Such CTL are not only capable of preventing disease when they
are activated prior to pathogen
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infection but are also able to eliminate disease or a tumor once the infection
has taken place or, in the case of cancer, once a tumor has developed.
Corixa believes vaccines that activate specific T cell responses can
form the basis for a new class of products that may be used either in the
treatment or prevention of disease. Until recently, scientists lacked sufficient
understanding to design vaccine formulations capable of promoting T cell immune
reactivity against tumors or certain pathogens. Corixa has incorporated recent
advances in the understanding of the molecular mechanisms controlling how
antigens are normally presented to T cells and has designed vaccine formulations
which incorporate disease-specific antigens into biodegradable and biocompatible
microspheres that give rise to potent CTL responses. Corixa's antigen discovery
program has resulted in identification of antigens from a variety of tumor types
and from infectious disease pathogens for which no vaccines currently exist.
Furthermore, Corixa has discovered a novel adjuvant that has been shown in
preclinical studies to significantly enhance the efficacy of microsphere
formulated vaccines through the stimulation and activation of Th1 helper T cells
and CTL. Corixa believes that its three proprietary core technologies --
microsphere-mediated antigen delivery, novel adjuvants and proprietary antigen
discovery -- form the basis for the successful development of such products.
Adjuvants
Adjuvants are formulations and/or additives that are routinely combined
with vaccines to boost immune responses directed against the antigens in such
vaccines. Because current vaccines depend upon the generation of antibody
responses to injected antigens, commercially available adjuvants have been
developed largely to enhance such antibody responses. To date, there are no
adjuvants that have been approved for use in humans that augment helper T cell
and CTL responses.
Since its inception, Corixa has been involved in research activity aimed
at the generation of novel adjuvants for its vaccines. The only
commercially-approved adjuvant for use with human vaccines is aluminum
hydroxide, or alum. Alum is useful in boosting antibody responses to vaccine
antigens but is without effect on the type of immune responses that Corixa's T
cell vaccines are meant to generate. Therefore the Company has been interested
in the discovery of novel adjuvants that could be used to boost T cell immune
responses as well as antibody production following vaccine administration. Based
on the early work of one of its scientific founders, Corixa has been
particularly interested in the products of microorganisms that can infect
antigen presenting cells as a potential source for such novel adjuvants. One of
the Company's proprietary adjuvants, LeIF, is a recombinant version of a
parasite protein that has significant T cell stimulatory activity. The parasite
from which LeIF is derived is called Leishmania. Leishmania are intracellular
parasites that infect antigen presenting cells.
As a function of its collaboration with Genesis Research and Development
Corporation Limited ("Genesis"), Corixa has been investigating the adjuvant
properties of another intracellular microorganism, Mycobacterium vaccae ("M.
vaccae"). M. vaccae, as well as certain derivative products prepared from M.
vaccae, have been shown to have the capacity to stimulate immune responses that
can lead to enhanced or altered T-cell function.
CORIXA'S STRATEGY
Corixa's objective is to be a leader in the discovery and
commercialization of products useful in preventing, treating or diagnosing
cancer and certain infectious and automimmune diseases. Corixa's strategy is to
dedicate its resources to the discovery of vaccines and other antigen-based
products and to establish corporate partnerships early in the development
process for all aspects of product development and commercialization, including
research, clinical development, obtaining regulatory approval, manufacturing and
marketing. Corixa believes that this research and partner-driven approach
creates significant scientific, operational and financial advantages for Corixa
and accelerates the commercial development of new therapeutic and prophylactic T
cell vaccines and other immunotherapeutic products. The principal elements of
Corixa's strategy are as follows:
Integrate Corixa's Core Technologies. Corixa believes that the
integration of its three proprietary core technologies may be essential to
providing effective vaccines for cancers and certain infectious and autoimmune
diseases. These technologies consist of: (i) proprietary delivery systems; (ii)
potent, novel adjuvants; and (iii) novel, specific antigens. Corixa believes
that its three component approach is unique among entities currently undertaking
the development of vaccines and that it has developed or acquired proprietary
rights in each of these technologies. Corixa also believes that integrating one
or more of its delivery systems, adjuvants or
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antigens with certain other companies' proprietary technologies may improve such
companies' existing or developmental-stage vaccine products.
Establish Corporate Partnerships at an Early Stage. Corixa intends to
enter into corporate partnerships early in the development process. For those
products that show promise in the preclinical or clinical stage, Corixa usually
will seek a corporate partner no later than prior to the initiation of Phase II
clinical trials. Corixa believes that this active corporate partnering strategy
provides three distinct advantages: (i) it permits Corixa to focus on its
fundamental strengths in immunotherapeutic discovery; (ii) it capitalizes on the
corporate partner's strengths in product development, manufacturing and
commercialization; and (iii) it significantly reduces Corixa's financing
requirements. When entering into such corporate partnering relationships, Corixa
seeks to cover its research and development expenses through research funding,
milestone payments and option, technology or license fees, while retaining
significant downstream participation in its product sales through either
profit-sharing or product royalties paid on annual net sales.
Partner Discrete Core Technologies and Non-Vaccine Products. Because
Corixa believes that certain other companies' immunotherapeutic products may be
enhanced by components available from Corixa, Corixa seeks to establish
corporate partnerships with major commercial entities for each of its
proprietary core technologies. For example, Corixa may partner its proprietary
antigens with companies that have developed their own delivery and adjuvant
technologies. Similarly, Corixa believes that it can partner adjuvant products
with a variety of vaccine companies that may have vaccine antigens but lack an
adjuvant with the appropriate Th profile. Corixa also believes it can partner
its antigen delivery technology with companies whose vaccines currently suffer
from sub-optimal T cell immune stimulation in vivo. Corixa further believes that
certain of the antigens it discovers may lead to the development of useful
non-vaccine products. These products may include antibody-based therapeutics or
in-vivo imaging agents, small molecule drugs derived from the use of novel
antigens that as drug targets, and diagnostics. For some of its products, Corixa
will seek to establish territory-specific exclusive collaborative relationships
with a number of pharmaceutical or biopharmaceutical firms. For the use of
antigens as diagnostics, Corixa intends to establish non-exclusive
collaborations with a variety of diagnostic companies to generate near-term
royalty or other revenues.
Selectively Acquire or In-License Complementary Technology. In addition
to developing technology internally, Corixa has, since its inception,
in-licensed a number of significant product opportunities. The Company intends
to continue to pursue such in-licensing efforts, and also intends to continue to
evaluate selected acquisitions of companies with complementary technologies. As
demonstrated by the expected benefits accruing from the recent acquisitions of
GenQuest and Anergen, the Company believes that its existing technology and
product base may be expanded by such efforts, and that such acquisitions may
lead to additional partnering opportunities. Such partnered programs may also
benefit from existing Corixa technology, such as delivery systems and/or
adjuvants. See "Factors Affecting Future Results - Corixa's Integration of
Operations and Scientific Cultures Related to Acquisitions May Be Difficult and
Lead to Adverse Effects" and "Factors Affecting Future Results - Corixa May Not
Manage Its Growth Successfully or Integrate Successfully Future Acquisitions."
CORIXA'S CORE TECHNOLOGY PLATFORMS
Corixa seeks to discover and develop products that consist in whole or
in part of its three proprietary core technologies: (i) novel and
disease-specific antigens that are essential to elicit appropriate T cell
responses; (ii) microsphere antigen delivery systems that specifically activate
helper T cells and CTL; and (iii) adjuvants that specifically enhance helper T
cell and CTL responses. The majority of the Company's resources are currently
focused on discovering novel and disease-specific antigens, which may then serve
to drive discovery of immunotherapeutic and diagnostic products, as well as
provide the active component of its T cell vaccines.
Antigen Discovery
Corixa's ability to discover and patent multiple antigens allows it to
select those that will work most effectively in a given vaccine (i.e., are
recognized by the greatest percentage of individuals, stimulate the strongest
immune response and are expressed by the greatest percentage of pathogen strains
or tumor types). To capitalize on this ability, approximately half of Corixa's
scientific personnel are devoted to antigen discovery. Discovery approaches and
technologies used by Corixa include: (i) tumor tissue procurement and human
tumor propagation in severe combined immune deficient ("SCID") mice; (ii)
analysis of differential gene expression; (iii) cDNA subtraction; (iv)
expression cloning; (v) pathogen protein purification; (vi) antigenic peptide
stripping; and
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(vii) immunological characterization of candidate tumor vaccine antigens.
Corixa's discovery approach also includes mapping patient immune responses to
ensure that discoveries focus on identification of proteins that are recognized
by the human immune system and are therefore antigenic.
The culmination of Corixa's antigen discovery research is the isolation
of pathogen, tumor or auto-antigen genes that encode those antigens with
significant potential to be effective components of vaccines. Such antigens (in
the form of either recombinant proteins or biosynthetically produced peptides)
are then formulated in microspheres for vaccination. Multiple pathogen and/or
tumor gene and protein sequences have been discovered by Corixa. Corixa has
filed numerous patent applications seeking both composition of matter and/or
vaccine and diagnostic method of use claims to antigens discovered as a result
of the Company's research in breast, prostate, colon, ovarian and lung cancer;
in tuberculosis, chlamydia, Chagas' disease and leishmaniasis; as well as a
number of applications for the potential use of its antigens or adjuvant-based
technology for use in the diagnosis, prevention or treatment of certain
autoimmune diseases.
There can be no assurance that patents will issue from any of the
pending applications, or that if issued, such patents will not be challenged,
invalidated or circumvented by third parties, or that the rights granted under
any issued patents will provide adequate proprietary protection or competitive
advantage to Corixa. Corixa's three core technologies are at an early stage of
development. There can be no assurance that any of such technologies will prove
to be safe and effective. Products that may result from Corixa's research and
development programs are not expected to be commercially available for a number
of years, if at all. See "-- Patents and Proprietary Technology," "Factors
Affecting Future Results -- There Are Uncertainties Related to Corixa's Early
Stage of Development" and "Factors Affecting Future Results - There Are
Uncertainties Related to Technology and Product Development."
Microsphere Antigen Delivery Systems
Corixa has demonstrated in preclinical studies that potent antibody and
CTL responses can be generated against antigens using Corixa's proprietary
microsphere antigen delivery system. Corixa has determined that CTL generated as
a result of microsphere-mediated antigen presentation are capable of killing
antigen positive cells either in vitro (in test tubes) or in preclinical studies
of immune function. For example, injection of microsphere-encapsulated tumor
antigens in animals generated an immune response that prevented growth of
antigen positive tumors when such animals were later challenged with a lethal
dose of tumor cells. The immune cells responsible for this microsphere-mediated
tumor rejection were shown to be antigen specific CTL. Immunization with naked
(not encapsulated) antigens neither activated CTL responses nor resulted in
protective immunity in animals later challenged in the same manner.
Corixa believes that microsphere-mediated antigen delivery may be
superior in terms of versatility, stability, safety and cost to other approaches
that circumvent the antigen presentation pathways, including the use of various
gene therapies as well as liposome or recombinant-protein lipid formulations.
Microspheres of the particular size range used by Corixa are taken up only by
APCs. This is not true for formulations containing genes or lipids, where
significant amounts of the delivered product are taken up by non-APCs or lost in
the blood stream or elsewhere in the body. Microsphere delivery of antigens may
also avoid certain safety issues associated with gene therapy. Corixa uses
microspheres that are produced from synthetic co-polymers approved by the FDA.
In addition, there is no immune response to the microsphere itself, in contrast
to the immune response that can occur to other proteins encoded by viral or
bacterial vectors used in gene therapy. Additionally, a single microsphere
formulation may be useful in multiple vaccine products. This avoids the
repetitive costs associated with the construction, manufacture and testing of
different gene therapy vectors or recombinant protein-lipid formulations for
different target indications. Furthermore, Corixa believes that its microsphere
vaccine preparations will be stable as freeze-dried formulations, resulting in
multi-year shelf-life. Corixa announced on February 22, 1999 that it had
initiated a Phase I clinical trial of a breast cancer vaccine combining a breast
cancer vaccine antigen and the Company's microsphere formulation.
Corixa has an exclusive, worldwide license to a number of patents and
pending patent applications from the Southern Research Institute ("SRI")
covering the composition, use and production of microspheres for augmenting
immune responses. In addition, Corixa has an exclusive, worldwide license to
antigen delivery technology from the Dana-Farber Cancer Institute
("Dana-Farber") comprising patent applications claiming the composition and use
of microspheres of a particular size range for the purpose of activating CTL.
Corixa is also internally developing certain microsphere technology. See "--
Certain License Agreements" and "-- Patents and Proprietary Technology."
Adjuvants
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Adjuvants are formulations and/or additives that are routinely combined
with vaccines to boost immune responses directed against the antigens in such
vaccines. Because current vaccines depend upon the generation of antibody
responses to injected antigens, commercially available adjuvants have been
developed largely to enhance such antibody responses. To date, there are no
adjuvants that have been approved for use in humans that augment helper T cell
and CTL responses.
Corixa has identified a protein, known as LeIF, that functions as a
potent adjuvant for enhancing immune responses directed at T cell vaccine
antigens. LeIF is a protein produced by the parasite Leishmania, which is
carried by sand flies and causes both a skin and visceral disease known as
Leishmaniasis. In cell culture studies conducted by Corixa, LeIF has been found
to have potent immune system stimulatory effects, both for cells from
individuals who have been exposed to the parasite and from individuals who have
not been so exposed.
Preclinical studies conducted by Corixa indicate that LeIF is a unique
protein stimulator of the Th1 response. Additional research conducted by Corixa
has confirmed that the cell within the immune system that responds to LeIF is an
APC. APCs stimulated with LeIF produce large quantities of a certain cytokine
and a certain cell surface protein, both of which are molecular signals required
for the generation of potent CTL responses. Corixa has conducted further
research to determine whether LeIF functions as an adjuvant for T cell vaccines.
In preclinical studies, use of microsphere-encapsulated tumor antigens together
with LeIF resulted in tumor regression, even when administered to animals with
established tumors. In all cases, tumor regression was shown to correlate with
the in vivo development of tumor antigen reactive CTL. As a result, Corixa's
research suggests that immunity induced by the combination of
microsphere-encapsulated antigens and the LeIF adjuvant is both antigen specific
and long-lived. Treated animals were still able to reject lethal doses of
antigen positive tumors when challenged more than four months after therapy.
Corixa believes that the use of LeIF as an adjuvant may greatly enhance
the efficacy of its T cell vaccines. Corixa also believes that LeIF, together
with microsphere-encapsulation technology, may be useful in developing
therapeutic products from current prophylactic vaccines due to the ability of
Corixa's technologies to promote potent Th1 and CTL responses. Corixa has
granted licenses to or options to license its LeIF technology to several
corporate partners, including SmithKline Beecham and Heska Corporation
("Heska"). See "-- Corporate Partnerships -- Vaccines" and " Corixa's Products
in Development -- Other Products in Development."
In connection with Corixa's adjuvant discovery and development program,
Corixa, in collaboration with Genesis, has been investigating immunomodulatory
activities associated with other intracellular microbe, M. vaccae. Corixa has
determined that M. vaccae, as well as protein derivatives from M. vaccae, have
considerable adjuvant activity. Corixa believes that M. vaccae and such protein
derivatives may be useful as vaccine adjuvants and may also be capable of
altering immune responses in a manner useful in the treatment of autoimmune
diseases.
Acquired and In-Licensed Technology
Through its acquisitions of GenQuest and Anergen, and its collaboration
with ImmGenics, Corixa believes that it has added a number of product
development opportunities, broadly categorized as therapeutics and diagnostics,
which are summarized below:
Therapeutics
Autoimmune Disease Vaccines. The AnergiX(R) and AnervaX(TM)
technologies, acquired from Anergen, offer the potential to treat a number of
important autoimmune diseases through two separate technology platforms. AnergiX
technology may enable the selective destruction or inactivation of T cells
implicated in autoimmune disease, while AnervaX offers a means to stimulate the
immune system to produce antibodies which may then interfere with the
presentation of self-antigens to destructive T cells. The Company intends to
pursue partnerships with four programs using any of these technologies, in
rheumatoid arthritis, multiple sclerosis, diabetes and myasthenia gravis.
Therapeutic Monoclonal Antibodies. Corixa believes that its antibody
products may, when administered to patients, promote tumor elimination or
shrinkage, resulting in improved cancer patient response or survival rates. For
example, Corixa believes that monoclonal antibodies directed against antigens on
the surface of tumor cells may be used either directly to destroy these targets
or as carriers of other therapeutic compounds for the destruction of tumor
cells.
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Gene Therapy. Corixa believes that it or its prospective corporate
partners may be able to introduce certain of Corixa's proprietary cancer genes
into tumor cells to potentially kill such tumor cells or slow their growth.
Small Molecule Drug-Screening and Resulting Small Molecule Therapeutics.
Corixa and its prospective corporate partners may be able to develop techniques
that use Corixa methodologies or genes to search for low molecular weight
compounds that inhibit tumor cell growth or metastasis. These compounds may
prove useful as orally bioavailable cancer therapeutics.
Diagnostics
Diagnostic Monoclonal Antibodies. Corixa believes that Corixa
antigen-specific antibody products may be used to attach in vitro to proteins or
other antigens that are preferentially produced by tumor cells, thereby
providing a useful diagnostic tool. These antibodies may also be used for in
vivo detection of tumor cells in patients, reducing the need for multiple organ
biopsies. Through the identification of tumors and the development of
specifically reactive antibodies, Corixa believes it may bring valuable cancer
diagnostic reagents to its corporate partners' cancer diagnostics programs.
Nucleic Acid Probes. Chemically labeled or radioactive fragments of
genes that Corixa scientists have demonstrated to be markedly overexpressed in
tumor cells can also be used as the basis for development of diagnostic
products. Hybridization analysis using such products may lead to the ability to
determine whether biopsy specimens are contaminated with infiltrating tumor
cells.
Peptide and Polypeptide Probes. Corixa believes that gene product
fragments known as peptides or multiple peptides known as polypeptides can also
be used as the basis of diagnostic tests for cancer. Serum taken from cancer
patients can be tested for its ability to interact with these peptides and
polypeptides, confirming the presence of a given malignancy or infection in the
patient whose serum is being analyzed.
CORIXA'S PRODUCTS IN DEVELOPMENT
Corixa has a number of products in various stages of development, many
of which are the subject of collaborations with corporate partners. The
following table sets forth the type of product currently in development, the
application(s) for the particular product, its present stage of development and
the identity of Corixa's corporate partner, if any, for such product
application.
PRODUCTS DEVELOPMENT PHASE(1) PARTNER
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Partnered Vaccines:
AnergiX.RA(TM) complex, novel therapy for Phase I N.V. Organon
rheumatoid arthritis
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Breast cancer vaccine, comprised of Corixa's research SmithKline Beecham
novel vaccine antigens
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Chlamydia Pneumoniae vaccine, comprised of research SmithKline Beecham
Corixa's novel vaccine antigens
- --------------------------------------------------------------------------------------------------------
Chlamydia Trachomitis vaccine, comprised of research SmithKline Beecham
Corixa's novel vaccine antigens
- --------------------------------------------------------------------------------------------------------
Colon cancer vaccine, comprised of Corixa's research SmithKline Beecham
novel vaccine antigens
- --------------------------------------------------------------------------------------------------------
Her2/neu vaccine, for treatment of late Phase I SmithKline Beecham
stage breast and ovarian cancer
- --------------------------------------------------------------------------------------------------------
Mammaglobin vaccine, for treatment of breast research SmithKline Beecham
cancer
- --------------------------------------------------------------------------------------------------------
8
10
- --------------------------------------------------------------------------------------------------------
Microsphere-based antigen delivery preclinical SmithKline Beecham
holds certain option
rights under its
cancer vaccine
collaborations with
Corixa
- --------------------------------------------------------------------------------------------------------
Ovarian cancer vaccine, comprised of research SmithKline Beecham
Corixa's novel vaccine antigens
- --------------------------------------------------------------------------------------------------------
Prostate cancer vaccine, comprised of research SmithKline Beecham
Corixa's novel vaccine antigens
- --------------------------------------------------------------------------------------------------------
Tuberculosis vaccine, comprised of Corixa's preclinical SmithKline Beecham
novel vaccine antigens
- --------------------------------------------------------------------------------------------------------
PRODUCTS DEVELOPMENT PHASE(1) PARTNER
- -------- ------------------- -------
Diagnostics:
- --------------------------------------------------------------------------------------------------------
Diagnostic for canine leishmaniasis commercialized Heska, Inc.
- --------------------------------------------------------------------------------------------------------
Diagnostic for Chagas' Disease development Diamed SA
(Switzerland) and
Trinity Biotech, LTD
(UK)
- --------------------------------------------------------------------------------------------------------
Diagnostics for detection of visceral commercialized, several companies
Leishmaniasis developmental
- --------------------------------------------------------------------------------------------------------
Rapid test for diagnosis or detection of commercialized ICT Diagnostics, a
tuberculosis subsidiary of AMRAD,
LTD (Australia)
- --------------------------------------------------------------------------------------------------------
Rapid test for diagnosis or detection of development Abbott Laboratories,
tuberculosis Inc. (US)
- --------------------------------------------------------------------------------------------------------
Reference diagnostic for detection of development IMUGEN, Inc.
certain tick-borne diseases
- --------------------------------------------------------------------------------------------------------
Other:
- --------------------------------------------------------------------------------------------------------
Certain vaccine technologies for companion development Heska, Inc.
animal health
- --------------------------------------------------------------------------------------------------------
Unpartnered Programs:
- --------------------------------------------------------------------------------------------------------
AnergiX.MG(TM) complex, for myasthenia gravis preclinical seeking worldwide
partner(s)
- --------------------------------------------------------------------------------------------------------
AnergiX.MS(TM) complex, for multiple sclerosis Phase I seeking worldwide
partner(s)
- --------------------------------------------------------------------------------------------------------
AnervaX.DB(TM) peptide vaccine, for diabetes preclinical seeking worldwide
partner(s)
- --------------------------------------------------------------------------------------------------------
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11
- --------------------------------------------------------------------------------------------------------
AnervaX.RA(TM) peptide vaccine, for rheumatoid Phase I/II seeking worldwide
arthritis partner(s)
- --------------------------------------------------------------------------------------------------------
Herpes Virus vaccine, comprised of Corixa's research seeking worldwide
novel vaccine antigens partner(s)
- --------------------------------------------------------------------------------------------------------
Leukemia/lymphoma vaccine, comprised of research seeking worldwide
Corixa's novel vaccine antigens partner(s)
- --------------------------------------------------------------------------------------------------------
Lung cancer vaccine, comprised of Corixa's research seeking worldwide
novel vaccine antigens partner(s)
- --------------------------------------------------------------------------------------------------------
Muc-1 peptide vaccine, for the treatment of Phase I seeking worldwide
epithelial tumors partner(s)
- --------------------------------------------------------------------------------------------------------
Diagnostics for detection of certain development seeking US and
tick-borne diseases Canadian partners
- --------------------------------------------------------------------------------------------------------
ELISA-based diagnostic for tuberculosis research seeking worldwide
partner(s)
- --------------------------------------------------------------------------------------------------------
Adoptive immunotherapy for cancer preclinical seeking worldwide
partner(s)
- --------------------------------------------------------------------------------------------------------
PVAC(TM) compound, for treatment of psoriasis Phase I/II seeking worldwide
partner(s)
- --------------------------------------------------------------------------------------------------------
(1) Notes to previous table: "research" indicates the discovery or creation of
prototype products and includes antigen discovery and characterization.
"development" indicates testing of prototype diagnostic assays in a particular
format and testing of such products. "preclinical" indicates product scale up,
formulation and further testing in animals, including toxicology. "Phase I
Clinical Trials" are performed to evaluate the safety of a vaccine and its
ability to stimulate an immune response. "commercialized" indicates sales to
third parties for use in diagnostic applications which have resulted in
immaterial revenues to date. "Phase I/Phase II" indicates products which are
currently in Phase I/Phase II clinical testing.
Vaccine Products
Cancer Vaccines. Corixa is currently engaged in discovery of antigens
from a variety of the world's most widespread cancers, including breast,
prostate, lung, colon and ovarian carcinoma and leukemia. According to the
American Cancer Society ("ACS"), the number of new cases projected for these six
diseases for 1999 is just over 3.2 million patients worldwide, with just over
21%, or 677,300 of these estimated to occur in the US. A large percentage of
these patients undergo chemotherapy, radiation therapy and surgery, yet the vast
majority are likely to relapse with malignant disease within ten years following
surgical intervention. Corixa believes that its vaccines will initially be
useful in those patients who have undergone such therapies. Of the tumor antigen
discovery programs at Corixa, the breast, prostate, colon and ovarian cancer
antigen discovery programs are the subject of the Company's expanded
collaboration and license agreement effective September 1, 1998 with SmithKline
Beecham. See "-- Corporate Partnerships -- Vaccines."
Corixa has identified numerous gene sequences having tumor cell and
normal tissue expression patterns indicating that they may be either uniquely
expressed or markedly over-expressed in breast tumors and/or prostate tumors or
tissue. Analysis of comparative expression of such genes in multiple tumor
specimens and in normal tissue has resulted in patent filings on a significant
portion of these tumor gene sequences. Corixa is continuing to make progress
toward the immunological characterization of these and other gene sequences with
the goal of selecting several antigens for use in vaccines for each of breast,
ovarian, colon and prostate carcinoma.
In addition to the aforementioned antigen discovery efforts, the Company
has been involved since its inception with the development of its most advanced
cancer vaccine, the Her-2/neu vaccine, for breast and ovarian cancer. Among
breast and ovarian cancer patients, a significant percentage markedly
over-express the gene Her-2/neu on the surface of their respective breast and
ovarian carcinomas. To date, in in vitro studies with animal and human cells,
peptides from the Her-2/neu protein have been shown to generate potent T cell
immune responses. In vitro data indicate that cells from different patients
respond to different Her-2/neu
10
12
peptides. Consequently, Corixa is currently developing a "cocktail" approach to
vaccine formulation, combining multiple peptides in a single vaccine. Corixa
believes that a "cocktail" of peptides may be useful as a therapeutic vaccine
for breast and ovarian cancer patients whose tumors over-express Her-2/neu.
In July 1996, pursuant to certain contractual obligations, Corixa,
together with the University of Washington, filed an investigational new drug
application to begin a clinical trial of three different Her-2/neu peptide
vaccines in breast and ovarian carcinoma patients. This Phase I clinical trial
began accruing patients in September 1996 and was conducted and completed at the
University of Washington during 1997 and 1998. Safety was the primary endpoint
of this clinical trial, which consisted of 70 patients who each received monthly
vaccinations for a period of six months. Secondary endpoints of the trial
focused on the ability of such vaccination to lead to demonstration of
anti-Her-2/neu immune reactivity. This clinical trial used "naked" Her-2/neu
peptides together with granulocyte macrophage colony stimulating factor as an
adjuvant. Corixa believes that results to date from such clinical trials
demonstrate the safety of Her-2/neu peptides as a vaccine. In late February
1999, Corixa announced its initiation of a Phase I clinical study involving a
microsphere-encapsulated formulation of a Her-2/neu peptide vaccine. The Company
is continuing its preclinical studies incorporating LeIF as an adjuvant for
Her-2/neu vaccines as a prelude to adding this component of its proprietary core
technology to a Phase I clinical trial. Corixa has an exclusive worldwide
license to Her-2/neu peptide vaccine technology from the University of
Washington. See "-- Certain License Agreements." The September 1998
collaboration and license agreement between Corixa and SmithKline Beecham grants
SmithKline Beecham the right to continue development of and to commercialize
Her-2/neu vaccines. See "-- Corporate Partnerships -- Vaccines."
Building on Corixa's initial progress in cancer antigen discovery,
Corixa has initiated additional discovery programs in several other tumor types,
including lung cancer and leukemia. According to the ACS, lung cancer remains
the most common cancer in terms of both worldwide incidence (1.0 million new
cases) and mortality (920,000 deaths) based on data for 1990, the latest
available. For the US, an estimated 171,600 new cases will be diagnosed in 1999,
while an estimated 158,900 will die this year from the disease. For leukemia,
30,200 new cases are projected by the ACS to arise in the US in 1999, with
22,100 deaths predicted in the US in 1999. Due to the magnitude and severity of
such diseases, and the absence of effective therapies in these areas, Corixa has
begun to undertake antigen discovery and vaccine development efforts in these
tumor types using approaches similar to those it uses in other cancers. In
addition to its internal discovery efforts, the Company has in-licensed a novel
and patented gene from the Massachusetts Institute of Technology for its
potential development in a leukemia vaccine. The gene, known as WT-1, is
expressed in a significant percentage of most leukemias and may, therefore, be
quite useful as an antigen to provoke an effective immune response in patients.
Corixa is currently seeking partners in the areas of lung cancer and leukemia
vaccines. There can be no assurance, however, that such discussions will lead to
the establishment of any new corporate partnerships on favorable terms, or at
all. See "--Factors Affecting Future Results -- Corixa is Dependent on Existing
and Future Corporate Partnerships."
Infectious Disease Vaccine Programs. As part of the Company's
collaboration with SmithKline Beecham, Corixa has been pursuing research in
antigen discovery in several major infectious diseases, including tuberculosis,
Chlamydia pneumoniae and Chlamydia trachomitis. The most advanced program is
aimed at the development a vaccine to prevent or treat infection caused by the
bacterium known as Mycobacterium tuberculosis ("Mtb"). Mtb infection results in
more deaths than any other infectious disease in the world. According to the
National Institute of Allergy and Infectious Diseases, an estimated 1.7 billion
people are infected with Mtb, including approximately 15 million people in the
US who may develop active Tb during some stage of their lives. Each year,
approximately 8 million people worldwide contract active Tb, and an estimated 3
million die each year from the disease. Once believed to be eradicated in the
US, the latest statistics from the Centers for Disease Control ("CDC") show
21,337 active Tb cases in 1996 (of which an estimated 3,000 are in HIV
sero-positive patients). The World Health Organization ("WHO") estimates more
than 50 million people worldwide may be infected with drug-resistant strains of
Mtb. Corixa's goal is to develop specific vaccines for both conventional and
drug-resistant strains of Mtb.
From more than 100 novel candidate Mtb gene products, Corixa has
identified a number of antigens that specifically trigger appropriate helper T
cell responses in vitro. These gene products are the subject of multiple patent
applications filed by Corixa covering composition of matter and vaccine and
diagnostic methods of use. The in vitro tests have led to the selection of
several candidate vaccine antigens that have been skin-tested in both
infected-healthy and infected-diseased individuals in South America to determine
which antigens are recognized by patients. Results from these tests, together
with continued analysis of patient T cell responses in vitro, have led to the
commencement by Corixa of preclinical studies for both therapeutic and
prophylactic vaccine use. The goal of these preclinical studies is
identification of the optimal vaccine formulation for subsequent initiation of
Phase I clinical trials.
11
13
Chlamydia pneumoniae is the recently recognized third species of
Chlamydia and is a major cause of pneumonia, bronchitis and sinusitis. C.
pneumoniae is a human pathogen transmitted by the respiratory route, and from
retrospective studies made by using serum bank investigations, appears to be as
prevalent today as in 1963. According to the CDC, more than half of the adults
in the US and many other countries worldwide have antibodies specific to C.
pneumoniae, indicating widespread prior infection. The incidence of pneumonia in
the US is about 1 in 80 persons each year, and virtually everyone is infected at
some point in life, with reinfection common. Importantly, the CDC reports that
the sequelae spectrum of C. pneumonaie has been extended to atherosclerosis and
its clinical manifestations. Seroepidemiological studies have associated C.
pneumoniae infection with coronary artery disease, myocardial infarction,
carotid artery disease and cerebrovascular disease. The association of C.
pneumoniae with atherosclerosis has been corroborated by the presence of the
organism in atherosclerotic lesions throughout the arterial tree, and the near
absence of the organism in healthy arterial tissue. In collaboration with
SmithKline Beecham, Corixa is now actively engaged in the discovery of C.
pneumoniae specific antigens, in order to develop a target vaccine which may be
useful in reducing infection from the organism, thereby potentially reducing
development of atherosclerosis. See "-- Corporate Partnerships -- Vaccines."
Chlamydia trachomitis is the bacterium that causes the most common
sexually transmitted disease in the US. The disease can be transmitted during
sexual contact with an infected partner, yet the disease is often not diagnosed
and treated until complications develop. Studies show that as many as 85% of
women and 40% of men with chlamydial infections have no symptoms whatsoever. The
CDC estimates that in the US alone, over 4 million new cases arise each year.
The highest rates of chlamydial infections are among 15 to 19 year olds
regardless of demographics or geographic location. Complications from the
disease include Pelvic Inflammatory Disease ("PID"), a serious cause of
infertility among women of childbearing age. Further, a woman may pass the
infection to her newborn during delivery, with subsequent neonatal eye infection
or pneumonia. The WHO estimates that worldwide, approximately 89 million C.
trachomitis infections occurred in 1997 alone. Corixa is engaged in the
identification of C. trachomitis antigens for use in a preventative or
therapeutic vaccine for this pathogen. This program is one of the three
infectious disease efforts covered under the September 1998 SmithKline Beecham
collaboration.
The Company is also engaged in antigen discovery and vaccine development
for infections stemming from Herpes Virus (Type 1 and Type 2) and Leishmania.
The Company believes its antigen discovery technology will be useful in
identifying antigens for use in vaccines which may either prevent or treat these
widespread diseases, which afflict over 100 million people worldwide. The
Company's efforts in Herpes are in early stage research, while a candidate
leishmaniasis vaccine is currently in preclinical development and is undergoing
field tests in canine leishmaniasis.
Autoimmune Disease Vaccines. As a consequence of Corixa's efforts in
adjuvant research, and the Company's acquisition of Anergen, Corixa is now
actively engaged in research related to understanding and directing the immune
system to mitigate or prevent certain autoimmune diseases.
In the body's immune system, T cells normally regulate the
identification and destruction of foreign substances and malignant cells.
Autoimmune diseases are caused by the abnormal destruction of healthy body
tissues by normal tissue reactive T cells and antibodies. Anergen's results to
date suggest that treatments based on its technology platforms may interrupt the
chain of events fundamental to the onset and continuation of certain autoimmune
diseases, which include rheumatoid arthritis, multiple sclerosis, myasthenia
gravis and diabetes. Anergen's AnergiX(R) technology is designed to selectively
destroy or inactivate (anergize) the T cells implicated in the disease process.
Anergen's second core technology, AnervaX(TM) technology, stimulates the immune
system to produce antibodies that may interfere with the presentation of
self-antigens to destructive T cells. In contrast to today's therapies in these
diseases, which often act to suppress the immune system or to mediate symptoms,
Anergen scientists believed that their approaches may provide a means to target
the disease process while leaving the normal immune system otherwise unaffected.
To date, Anergen has completed a Phase I clinical trial for the use of
AnergiX.MS(TM) complex in multiple sclerosis, and Corixa intends to seek a
corporate partner for this compound. In addition, Corixa is currently enrolling
patients in a Phase I clinical trial of AnergiX.RA(TM) complex, in connection
with its collaboration with Organon NV (see "Corporate Partnerships"). Anergen
has also completed a Phase IIa trial of AnervaX.RA(TM) peptide vaccine, for the
treatment of rheumatoid arthritis, and Corixa is actively engaged in seeking a
corporate partner for this program. In preclinical development, Anergen has
compiled data suggesting that its programs in myasthenia gravis (AnergiX.MG(TM)
complex) and diabetes (AnervaX.DB(TM) peptide vaccine), are also targets for
corporate partner collaboration and subsequent clinical development.
Psoriasis is one of the world's most common dermatological disorders,
afflicting an estimated 100 million people worldwide. The disease is
characterized by chronic inflammatory lesions with red, scaling plaques and is
believed to be an autoimmune
12
14
phenomenon mediated by T cells. PVAC(TM), which Corixa and researchers at
Genesis derived from M. vaccae, is currently in clinical Phase I/II trials being
conducted in the Philippines. Approximately 40 moderate to severe psoriatic
patients have been treated to date with either heat-killed M. vaccae or
PVAC(TM), using a protocol involving two injections, an initial dose followed by
a second injection three weeks later. Preliminary data from this trial suggest
that PVAC(TM) is safe and capable of promoting long lasting clinical benefits,
with more than half of the responding patients exhibiting significantly reduced
disease for several months following treatment. In addition, more than 50% of
all treated patients have manifested clinical improvements past treatment.
Corixa is actively engaged in seeking pharmaceutical partners for this program,
in particular for territories outside of the US and Canada. See "-- Factors
Affecting Future Results -- Clinical Results of Acquired Technology May Not Be
Reproducible."
Adjuvants
Corixa has discovered a gene from the parasite Leishmania that codes for
the protein LeIF, which is capable of stimulating Th1 helper and CTL responses.
Corixa has demonstrated in preclinical studies that when combined with certain
target antigens, LeIF induces a stronger antibody response directed against the
target antigen than was induced by vaccination with the antigen alone.
Co-administration of LeIF with various T cell vaccines in preclinical studies
for both infectious disease and tumors has also resulted in enhanced generation
of anti-vaccine reactive CTL.
Corixa currently produces LeIF as a recombinant protein in bacteria.
Corixa anticipates that it will use LeIF in its proprietary vaccine formulations
and will also out-license LeIF for incorporation as an adjuvant in vaccines
outside of the Company's cancer, infectious disease and autoimmune disease
targets.
In connection with the Company's adjuvant discovery and development
program, Corixa, in collaboration with Genesis, has been investigating
immunomodulatory activities associated with another intracellular microbe, M.
vaccae. Corixa has determined that M. vaccae, as well as protein derivatives
from M. vaccae have considerable adjuvant activity and may be capable of
altering immune responses in a manner useful in the treatment of autoimmune
disease. Based on encouraging early-stage clinical trial results Corixa intends
to continue development of M. vaccae preparations for the treatment of
psoriasis. The Company believes the same products might also be useful in
treatment of other autoimmune diseases, most notably rheumatoid arthritis,
scleroderma, lupus and diabetes.
Diagnostic Products
Corixa believes that many of the antigens it has discovered in the
fields of cancer and infectious disease also have applications in disease
diagnosis. Antigens can be used in diagnostic tests to determine whether an
individual possesses antibodies against the antigen. The presence of such
antibodies can indicate that the individual is infected by the pathogen.
Diagnostic products for the following infectious diseases are currently under
development at Corixa:
Trypanosoma cruzi ("T. cruzi"). T. cruzi is an intracellular blood and
tissue parasite endemic to South America, Central America, Mexico and parts of
the United States, which is most commonly transmitted by blood transfusion. T.
cruzi is responsible for the development of Chagas' disease, which can develop
into fatal infectious heart disease. Current diagnostic procedures to determine
blood exposure to T. cruzi infection are based on the detection of patient
antibodies that react with crude extracts of this parasite. These tests often
produce false results due to their inability to distinguish antibodies against
T. cruzi from antibodies against other infectious agents. Corixa has discovered
and evaluated in vitro a number of peptides encoded by genes of the T. cruzi
parasite for their ability to serve as highly specific and sensitive reagents
for detection of T. cruzi. Corixa has licensed its T. cruzi antigen technology
for the development of point-of-care diagnostic tests to several diagnostic
companies, including DiaMed S.A. ("DiaMed") and Trinity Biotech UK Limited
("Trinity Biotech" formerly Centocor U.K. Limited). See "-- Corporate
Partnerships -- Diagnostic Products."
Tuberculosis ("Tb"). Corixa believes that many antigens currently under
investigation by Corixa could be useful in the development of novel diagnostics
to determine whether patients have been infected with Mtb. Current diagnostic
assays to determine Mtb infection are expensive and labor intensive. The
majority of patients exposed to Mtb receive chest x-rays, and attempts are made
to culture the bacterium in vitro from sputum samples. Mtb grows poorly and
slowly outside the body, which can produce false negative test results. In
addition, standard skin tests are not ideal in detecting infection and cannot be
used in areas of the world where patients receive childhood vaccination with
bacterial strains related to Mtb. Corixa is developing a combination of
proprietary antigens that may be used in detecting the presence and degree of
Mtb infection. Corixa has granted Abbott Laboratories ("Abbott") and AMRAD-ICT,
a division of AMRAD Corporation PTY LTD, non-exclusive licenses to certain of
its Tb antigen technologies and intends to pursue additional out-licensing
opportunities for this product. See "-- Corporate Partnerships -- Diagnostic
Products."
13
15
Leishmaniasis. The parasite Leishmania causes a systemic disease of the
liver, spleen and bone marrow called leishmaniasis, which can be fatal if not
treated. The disease is endemic to Southern Europe, the Middle East, Africa,
China and India, as well as Central and South America. The largest United States
population infected with Leishmania are military personnel and veterans who were
exposed to the parasite while stationed in the Middle East during the Gulf War.
Leishmania has also become a leading cause of opportunistic infection in AIDS
patients in Southern Europe. Currently, the most reliable test for this parasite
infection is an extremely costly and potentially dangerous procedure requiring
the collection of bone marrow from patients and microscopically searching for
evidence of infection. Corixa has identified and patented a Leishmania antigen
that is useful in determining whether patients are infected with the parasite.
Corixa has licensed its Leishmania diagnostic technology to multiple diagnostic
companies on a non-exclusive basis. Corixa is currently negotiating with other
diagnostic companies who have expressed interest in using Corixa's patented
technology. There can be no assurance, however, that such negotiations will lead
to the establishment of any new corporate partnerships on terms favorable to
Corixa, if at all. See " -- Corporate Partnerships -- Diagnostic Products."
Tick-Borne Diseases. There are multiple diseases, such as Lyme disease,
caused by pathogens harbored by several tick species in North America. Recent
scientific investigation has identified two tick-borne pathogens, Ehrlichia and
Babesia microti, infection by which can lead to Lyme disease-like symptoms and
which can also cause death. No diagnostic tests currently exist for these
pathogens. Corixa has identified multiple genes from these pathogens that Corixa
believes may form the basis of novel diagnostic products and has begun
discussions with diagnostic companies that have expressed interest in this
field. In April 1998, Corixa granted Imugen, Inc. ("Imugen") an exclusive
license to certain of its tick-borne antigen technologies for use in clinical
reference laboratory testing, and Corixa intends to pursue additional
partnerships for diagnostic products based on its discovery of antigens from
Erlichia and Babesia microti. See "-- Corporate Partnerships -- Diagnostic
Products."
Other Products In Development
Adoptive Immunotherapy Products. Because T cells, particularly CTL, are
generally believed to be essential for the generation of protective immunity
against tumors, scientists and clinicians have for many years studied the
potential of using CTL obtained from patients and grown outside the body (ex
vivo) for use in treating patients with advanced cancer. CTL grown ex vivo have
been shown to be effective in shrinking and/or eliminating tumors, both in
animal models and in clinical trials. This therapeutic approach, called adoptive
immunotherapy, has been limited by its dependence on the ability to grow
sufficient numbers of tumor antigen reactive CTL or other T cell populations ex
vivo for re-infusion into cancer patients. Corixa believes that several of its
core technologies will be useful in the development of adoptive immunotherapy
procedures for cancer treatment, and Corixa has identified multiple tumor
antigens that can be used to stimulate in vitro growth of tumor-reactive CTL. In
addition, Corixa's microsphere and adjuvant technologies have been demonstrated
to enhance the in vitro generation and growth of tumor antigen reactive CTL.
Corixa intends to pursue research and corporate partnership opportunities in the
field of adoptive immunotherapy of cancer. See "-- Corporate Partnerships --
Adoptive Immunotherapy Products."
Animal Health Products. Corixa believes that certain of its vaccine and
diagnostic products also may have applications in the detection of infection and
treatment of disease in animals. One such disease is Leishmaniasis, which can be
carried by dogs. Europe is the primary market for these products. Corixa is
currently collaborating with Heska, a developer and marketer of companion animal
diagnostics and therapeutic products, to develop both diagnostics and vaccines
for the treatment of Leishmaniasis in dogs. Corixa has also granted Heska a
license to use LeIF in combination with other types of vaccines in the companion
animal field. Corixa intends to explore further opportunities to partner its
technology for use in animal health markets. See "-- Corporate Partnerships --
Animal Health Products."
14
16
Corixa's products are in an early stage of development and have not been
demonstrated to be safe or effective. There can be no assurance that any of
Corixa's programs will move beyond their current stages of development. In
addition, even if Corixa is able to successfully complete its development
efforts with respect to a particular product, there can be no assurance that
regulatory approvals will be obtained or that any such product can be
successfully manufactured and commercialized. See "-- Factors Affecting Future
Results -- There are Uncertainties Related to Corixa's Technology and Product
Development."
CORPORATE PARTNERSHIPS
An element of Corixa's strategy is to establish multiple corporate
partnerships with pharmaceutical, biopharmaceutical and diagnostic companies
that have the expertise and capability to develop, manufacture, obtain
regulatory approval of and commercialize Corixa's products. In such corporate
partnerships, Corixa seeks to cover its research and development expenses
through research funding, milestone payments and option, technology or license
fees, while retaining significant downstream participation in product sales
through either profit-sharing or product royalties paid on annual net sales.
Corixa has focused on three discrete types of product collaborations, vaccine
antigen discovery programs, novel immunotherapy development programs derived
from its antigen and adjuvant research, and diagnostic programs. Corixa has
also, to a lesser extent, pursued partnerships in adoptive immunotherapy and
animal health products.
Vaccines
SmithKline Beecham. On October 28, 1998, Corixa entered into a
collaboration and license agreement effective September 1, 1998 with SmithKline
Beecham, which superseded and significantly expanded the scope of Corixa's
then-existing agreements with SmithKline Beecham Manufacturing and SmithKline
Beecham Biologicals. Corixa granted SmithKline Beecham an exclusive worldwide
license to develop, manufacture and sell vaccine products and certain dendritic
cell therapy products that incorporate antigens discovered or in-licensed under
this corporate partnership; provided that with respect to tuberculosis, such
rights are co-exclusive with Corixa in Japan. Under the collaboration and
license agreement, SmithKline Beecham agreed to provide payment for work that is
performed under Corixa's existing antigen discovery programs in tuberculosis,
breast cancer and prostate cancer. In addition, SmithKline Beecham agreed to
provide payment for work that is performed in additional programs in the
following areas: (i) ovarian and colon carcinoma vaccine discovery and
development and (ii) vaccines for two chronic infectious pathogens, Chlamydia
trachomatis, which causes sexually-transmitted disease, and Chlamydia
pneumoniae, which is associated with the development of atherosclerosis. The
discovery phase of the agreement also allows for the selection of one additional
disease field to be agreed upon at a future date. Corixa also granted SmithKline
Beecham an exclusive worldwide license to develop, manufacture and sell vaccine
products resulting from Corixa's Her-2/neu vaccines for the treatment of breast
and ovarian cancer as well as Corixa's vaccine program based on Mammaglobin, a
novel gene and protein associated with breast cancer. For certain of these
disease areas, Corixa granted SmithKline Beecham certain license rights to
develop, manufacture and sell passive immunotherapy products such as T cell or
antibody therapeutics as well as therapeutic drug monitoring products.
SmithKline Beecham has committed to funding of $43.6 million for work
that is to be performed in the above mentioned programs during the initial four
year term of the agreement. Corixa and SmithKline Beecham may mutually agree to
extend the research and development programs beyond the initial four-year term.
Upon the signing of the agreement in October 1998, SmithKline Beecham agreed to
purchase $2.5 million worth of Corixa Common Stock at a premium to its fair
market value, and Corixa has the right in the future to require SmithKline
Beecham to purchase an additional $2.5 million of Corixa Common Stock, at a
premium to its then-current fair market value. The initial equity investment
combined with the discovery program payment results in aggregate funding of
$48.6 million during the first four years of the agreement. Additionally, with
respect to the $5.0 million previously paid to Corixa by SmithKline Beecham
under a prior option agreement, which covered the fields of ovarian and colon
cancer vaccines, SmithKline Beecham may elect to have Corixa repay such amount
to SmithKline Beecham on September 1, 2003 or convert such amounts into the
purchase of Corixa Common Stock at a premium to its then-current fair market
value. To the extent that certain clinical and commercial milestones in the
programs are achieved, Corixa is entitled to receive payments, which in the
aggregate could exceed $150 million. The individual amounts of such payments
vary, depending on the milestones achieved and the types of product sold. Corixa
is also entitled to receive future royalty payments on all product sales, which
royalties vary depending on the types of products sold.
15
17
Organon N.V. As a result of the acquisition of Anergen, Corixa gained an
additional corporate partner, Organon N.V. ("Organon"). Organon is the
pharmaceutical division of the Dutch-based Akzo-Nobel Group. The Organon
partnership is targeting the development of a novel vaccine for the potential
treatment of rheumatoid arthritis ("RA"). First established in June 1996, the
Organon/Anergen relationship has focused on the preclinical and clinical
development of AnergiX.RA(TM) complex, a novel treatment that combines Organon's
proprietary RA peptide and Anergen's proprietary soluble MHC class II
(AnergiX(R) technology). Corixa is presently enrolling patients in a Phase I
clinical trial, which the Company currently anticipates will be completed by the
end of 1999. Under the terms of the collaboration, all current clinical trials
costs are borne by Organon, and in the event of ongoing success, Organon will
pay Corixa milestone and royalty payments.
Novel Immunotherapeutic Products Derived from Antigens or Adjuvants
Pasteur Merieux Connaught. In December 1996, Corixa entered into an
option and license agreement with PMC whereby Corixa granted PMC an option to
license its novel adjuvant LeIF for exclusive use in influenza and respiratory
syncytial virus and non-exclusive use in HIV, Tb and malaria. That agreement
lapsed on December 31, 1998. Subsequently, the companies entered into a new
letter agreement to continue to collaborate on the study of vaccine adjuvants.
IDEC Pharmaceuticals. In late February 1999, IDEC announced its research
and option collaboration with Corixa for the potential treatment of prostate
cancer. The companies are pursuing the identification of monoclonal antibodies
directed to certain prostate cancer antigens discovered by Corixa. IDEC retains
certain limited option rights to license such antibodies, under terms which will
include exercise fees, research support, milestone and royalty payment
obligations.
Diagnostic Products
Corixa has entered into and intends to continue to pursue corporate
partnerships in the fields of cancer and infectious disease diagnostics to
complement its therapeutic research efforts and to expand its scientific
platform. Corixa has established corporate partnerships for the development of
diagnostic products for infectious diseases with Abbott, DiaMed, Trinity
Biotech, AMRAD-ICT, and other small diagnostic companies. Under these
arrangements, Corixa generally grants a non-exclusive license to Corixa's
antigens for use in specified infectious disease indications in exchange for the
respective corporate partner's agreement to make certain payments upon
achievement of development milestones, a commitment to purchase a minimum number
of reagents and an agreement to pay royalties on any product sales. Corixa has
also established a corporate partnership with Imugen pursuant to which Corixa
granted Imugen an exclusive license to certain Corixa antigens for use in
Imugen's clinical reference laboratory services to detect and diagnose certain
infectious diseases caused by certain tick-borne pathogens. In exchange for this
license, Imugen will pay Corixa certain annual minimum payments as well as a
percentage of revenues received in connection with the clinical reference
laboratory services.
Adoptive Immunotherapy Products
In April 1998, Corixa and CellPro, Incorporated ("CellPro") agreed to
terminate the license and collaborative research agreement originally entered
into by such parties in November 1995. Corixa intends to pursue additional
research and corporate partnerships in this field.
Animal Health Products
Heska. In March 1996, Corixa entered into a license and research
agreement with Heska. Under the license and research agreement, Corixa granted
Heska an exclusive worldwide license to Corixa's LeIF adjuvant for use in
certain of Heska's vaccines and for use as a stand-alone vaccine against canine
leishmaniasis. In addition, Corixa granted Heska a license to its diagnostic
antigen, K39, for use in detecting canine leishmaniasis. The license is
exclusive worldwide, except that it is non-exclusive in Central and South
America. Heska paid an up-front license fee and agreed to make future payments
upon the achievement of certain development milestones, as well as royalty
payments on any product sales. In December 1996, Heska made a payment to Corixa
based on achievement of a development milestone for Corixa's K39 diagnostic
product. Heska has begun commercial sales of two different diagnostic products
for canine leishmaniasis in Italy. In December 1997, Heska announced commercial
availability of the first product, a diagnostic test for use in clinical
laboratories, and paid a corresponding milestone payment to Corixa. In June
1998, Heska announced commercial availability of a second product, a
point-of-care diagnostic test.
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Corixa's corporate partnership agreements generally provide recourse for
Corixa with respect to its existing product and technology rights in the event
of an uncured material breach of such an agreement by a corporate partner. In
such event, Corixa generally may elect to terminate the licenses granted to such
corporate partner under such agreements. However, because Corixa's strategy for
the discovery, research, development, clinical testing and commercialization of
its products is to enter into multiple corporate partnerships, the success of
Corixa is substantially dependent on its ability to enter into and maintain such
arrangements on terms favorable to Corixa, its ability to successfully manage
current or future corporate partnerships, if any, and the ability of its
corporate partners to perform their respective obligations under such
arrangements. There can be no assurance that Corixa will be able to negotiate
any additional corporate partnerships on favorable terms, or at all, that its
current corporate partnerships will be successful or that its corporate partners
will perform their obligations under such arrangements in a timely manner or at
all, any of which would have a material adverse effect on Corixa's business,
financial condition and results of operations. See "-- Factors Affecting Future
Results -- Corixa is Dependent on Existing and Future Corporate Partnerships."
CERTAIN BUSINESS RELATIONSHIPS
Relationship with Infectious Disease Research Institute
In September 1994, Corixa entered into a research services and
intellectual property agreement with the Infectious Disease Research Institute,
a not-for-profit, grant-funded private research institute ("IDRI"). Under this
agreement, as amended and restated effective January 1997, Corixa has agreed to
provide IDRI with research funding and certain administrative and facilities
support, including use of Corixa's research laboratory space. IDRI pays a
services fee for the administrative and facilities support provided by Corixa.
Corixa's funded research performed by IDRI is in the area of infectious disease.
Under the agreement, IDRI is obligated to disclose to Corixa all significant
developments relating to information or inventions discovered at IDRI, and
Corixa will own, on a royalty-free basis, all of IDRI's interest in inventions
and patent rights arising out of IDRI's research during the term of the
agreement (other than inventions and patent rights arising out of research that
is or in the future may be funded by certain governmental or not-for-profit
organizations). With respect to such rights arising out of research funded by
governmental and not-for-profit organizations, Corixa has been granted a
royalty-bearing, worldwide, perpetual license, exclusive except as to rights
held by such governmental or not-for-profit organizations.
IDRI is independent of Corixa, and Corixa does not have the right to
control or direct IDRI's activities. A majority of the members of IDRI's board
of directors are not affiliated with Corixa. However, Corixa's Chief Scientific
Officer is co-founder and during 1998 was a member of the board of directors of
IDRI. Corixa's Chief Operating Officer is also a member of the board of
directors of IDRI and Corixa's Vice President and Chief Financial Officer was
treasurer of IDRI during 1998. The research services and intellectual property
agreement terminates on December 31, 1999, subject to renewal for one or more
three year terms at the option of Corixa. If IDRI terminates the agreement as a
result of Corixa's failure to make required payments, Corixa would be obligated
to pay royalties on any product sales. Subsequent to December 31, 1998, Corixa's
Chief Scientific Officer, Chief Operating Officer and Vice President and Chief
Financial Officer resigned from their respective positions as directors and
officers of IDRI.
CERTAIN LICENSE AGREEMENTS
Corixa seeks to obtain technologies that complement and expand its
existing technology base. Where consistent with its strategy, Corixa has
licensed and intends to continue to license product and marketing rights from
selected research and academic institutions in order to capitalize on the
capabilities and technology bases of these entities. Under these license
agreements, Corixa generally seeks to obtain unrestricted sublicense rights
consistent with its partner-driven strategy. Corixa is generally obligated under
these agreements to diligently pursue product development, make development
milestone payments and pay royalties on any product sales.
Agreement with Genesis Research and Development Corporation Limited.
Corixa entered into a collaborative research and development agreement with
Genesis, effective January 1, 1998, for the development and commercialization of
an M. vaccae-derived product for the treatment of psoriasis. Under the
agreement, Corixa and Genesis will share the costs of product development and
the revenues received by Genesis and Corixa related to such product. In the
event one party becomes responsible for more than 50% of
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product development costs, such party shall also receive a pro rata increased
portion of revenues received by Genesis and Corixa related to such products.
Under the agreement, Genesis also granted Corixa the worldwide, exclusive right
to develop the M. vaccae-derived product for certain other autoimmune diseases,
including rheumatoid arthritis, multiple sclerosis and diabetes.
Agreement with Stanford Rook Ltd. In December 1998, Corixa entered into
a worldwide, exclusive license agreement with Stanford Rook Ltd. ("SR") for
rights under SR's M. vaccae-related intellectual property for the development
and commercialization of certain M. vaccae-derived products for the treatment of
psoriasis, rheumatoid arthritis, multiple sclerosis and diabetes, with an option
to certain additional fields. Under the license agreement, Corixa agreed to pay
SR license fees, milestone payments and a percentage of revenues received by
Corixa from product sales. The agreement was amended and restated in February
1999 to reflect the additional grant of manufacturing rights by SR to Corixa. In
addition, in February 1999, SR and Corixa also entered into a worldwide,
non-exclusive license agreement for rights under SR's M. vaccae-related
intellectual property for the manufacture, development and commercialization of
certain M. vaccae-derived products for use as adjuvants in Corixa's proprietary
vaccines other than Tb vaccines.
Agreements with Southern Research Institute. In May 1996, Corixa entered
into a license agreement with SRI. Under the license agreement, SRI granted
Corixa an exclusive, worldwide, sublicensable license (subject to the rights of
certain United States governmental agencies and a grant-back to SRI for
non-commercial research purposes) to certain polymer microsphere technology for
use in the fields of cancer and infectious disease, to the extent a product
incorporates an antigen, cytokine or adjuvant owned or controlled by Corixa. In
addition, SRI granted Corixa options to exclusive, worldwide, sublicensable
licenses in certain autoimmune and viral disease fields. Corixa paid up-front
license fees upon execution of the license agreement. Corixa is also obligated
to make future payments upon the achievement of certain development milestones,
as well as royalty payments on any product sales, subject to an annual minimum
royalty. In addition, Corixa issued SRI 15,151 shares of Common Stock upon
execution of the license agreement and a warrant exercisable for 7,575 shares
for each grant of sublicense rights to a third party, up to a maximum of 37,875
shares, and 7,575 shares for initiation of each Phase III clinical trial, up to
a maximum of 37,875 shares. In April 1997, the parties amended the license
agreement to extend Corixa's license in the field of cancer to include products
that incorporate third-party antigens or cytokines. Corixa is obligated to share
revenues from such third-party sublicense agreements with SRI. Corixa issued SRI
4,545 shares of Common Stock upon the first anniversary of the effective date of
the license agreement, and issued an additional 4,545 shares of Common Stock on
June 30, 1998. SRI may terminate the license agreement in the event Corixa
fails to perform certain obligations under such agreement.
Agreement With Dana-Farber Cancer Institute. In January 1995, Corixa
entered into a licensing agreement with Dana-Farber. Under the licensing
agreement, Dana-Farber granted Corixa an exclusive, worldwide, sublicensable
license (subject to the rights of certain US governmental agencies and a
grant-back to Dana-Farber for non-commercial research purposes) to certain
microsphere technology related to the induction of a CTL response for use in all
fields. Corixa paid up-front license fees upon execution of the licensing
agreement. Corixa is also obligated to make future payments upon the achievement
of certain development milestones, as well as royalty payments on any product
sales, subject to an annual minimum royalty. In addition, Corixa issued
Dana-Farber 15,151 shares of Common Stock upon execution of the licensing
agreement and agreed to issue an additional 15,151 shares of Common Stock upon
issuance of the first patent containing claims covering the licensed technology.
Corixa must continue to meet certain research-based obligations in order to
retain its rights under the licensing agreement. Dana-Farber may terminate the
licensing agreement in the event Corixa does not make required royalty payments
or fails to perform certain obligations under such agreement.
Agreements with ImmGenics Pharmaceuticals, Inc. On November 4, 1998
Corixa signed an exclusive agreement with ImmGenics Pharmaceuticals, Inc.
("ImmGenics") to utilize ImmGenics' proprietary Selected Lymphocyte Antibody
Method technology to develop high affinity therapeutic and diagnostic monoclonal
antibodies targeting Corixa's proprietary antigens in cancer and infectious
disease. Under the terms of the agreement, Corixa will make research and
development payments and, if certain milestones are achieved, additional
milestone payments, as well as royalty payments on future product sales. In
addition to the collaborative agreement, Corixa invested $1.75 million in
exchange for preferred stock in ImmGenics, convertible debt and warrants, and
may be required under the terms of the agreement to invest an additional $1.25
million in 1999, for a total investment by Corixa of $3.0 million. Corixa may
obtain additional ownership in ImmGenics over time under certain terms of the
agreement. The Vice President and Chief Financial Officer of Corixa is a member
of the Board of Directors of ImmGenics.
Other License Agreements. Additionally, Corixa is a party to certain
other option or license agreements useful in vaccine formulation and delivery
with academic institutions, including an exclusive license agreement with the
University of Washington for the use of Her-2/neu technology in all fields.
Corixa is also a party to option or license agreements useful in its antigen
discovery program, including agreements with (i) Washington University in St.
Louis, Missouri for the use of mammaglobin, a breast cancer-
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related protein and genes for prophylactic and therapeutic treatment of and
diagnosis of adenocarcinoma, (ii) Health Research, Inc. for the use of a
proprietary mouse model for human cancer, (iii) Mayo Foundation for Medical
Education and Research for use of tick-borne disease antigens, (iv)
Massachusetts Institute of Technology for the use of WT-1, a leukemia-related
gene and antigen in therapeutic applications, and (v) University of Pittsburgh
for Muc-1 peptide vaccine for use in the diagnosis and therapy of cancer.
Certain of these agreements require Corixa or other parties to meet certain
performance obligations in order to retain their rights under such agreements or
require Corixa to make certain payments in order to obtain or maintain rights to
the subject technology.
PATENTS AND PROPRIETARY TECHNOLOGY
Corixa's success will depend in large part on the ability of Corixa and
its licensors to obtain patent and other proprietary protection for Corixa's
vaccine and diagnostic products, antigens and adjuvants, defend patents once
obtained, preserve its trade secrets and operate without infringing the patents
and proprietary rights of third parties both in the United States and in foreign
countries. Where appropriate, Corixa intends to seek patent protection for its
vaccine, discovery, screening, diagnostic and other proprietary technologies by
filing patent applications in the United States and certain other countries. As
of January 31,1999, Corixa owned or had licensed 37 issued United States patents
that expire at various times between December 2004 and August 2016, and 154
pending United States patent applications.
While Corixa believes its patents and patent applications provide a
competitive advantage in its efforts to discover, develop and commercialize
useful vaccine and diagnostic products, as well as antigens and adjuvants, the
patent positions of pharmaceutical and biopharmaceutical companies, including
those of Corixa, are highly uncertain and involve complex legal and factual
questions for which important legal principles are unresolved. For example there
is substantial uncertainty regarding the potential for patent protection for
gene fragments or genes without known function or correlation with specific
diseases. There can be no assurance that Corixa, its corporate partners or its
licensors have or will develop or obtain rights to products or processes that
are patentable, that patents will issue from any of the pending applications
owned or licensed by Corixa or its corporate partners, that any claims allowed
will issue, or in the event of issuance, that such claims will be sufficient to
protect the technology owned by or licensed to Corixa or its corporate partners.
Corixa has licensed certain patent applications from SRI related to Corixa's
microsphere encapsulation technology, one of which is currently the subject of
an opposition proceeding before the European Patent Office. There can be no
assurance that SRI will prevail in this opposition proceeding or that any
patents will issue in Europe related to such technology. There can also be no
assurance that Corixa's or its corporate partners' current patents, or patents
that issue on pending applications, will not be challenged, invalidated,
infringed or circumvented, or that the rights granted thereunder will provide
proprietary protection or competitive advantages to Corixa. Patent applications
in the United States are maintained in secrecy until patents issue, patent
applications in certain foreign countries are not generally published until many
months or years after they are filed, and publication of technological
developments in the scientific and patent literature often occur long after the
date of such developments. Accordingly, Corixa cannot be certain that it or one
of its corporate partners was the first to invent the subject matter covered by
any patent application or that it or one of its corporate partners was the first
to file a patent application for any such invention.
The commercial success of Corixa depends significantly on its ability to
operate without infringing patents and proprietary rights of third parties, and
there can be no assurance that Corixa's and its corporate partners' technologies
do not or will not infringe the patents or proprietary rights of others. A
number of pharmaceutical companies, biotechnology companies, universities and
research institutions may have filed patent applications or may have been
granted patents that cover technologies similar to the technologies owned,
optioned by or licensed to Corixa or its corporate partners. In addition, Corixa
is unable to determine with certainty the patents or patent applications of
other parties that may materially affect Corixa's or its corporate partners'
ability to make, use or sell any products. The existence of third-party patent
applications and patents could significantly reduce the coverage of the patents
owned, optioned by or licensed to Corixa or its corporate partners and limit the
ability of Corixa or its corporate partners to obtain meaningful patent
protection. If patents containing competitive or conflicting claims are issued
to third parties, Corixa or its corporate partners may be enjoined from pursuing
research, development or commercialization of products or be required to obtain
licenses to these patents or to develop or obtain alternative technology. There
can be no assurance that Corixa or its corporate partners will not be so
enjoined or will be able to obtain any license to the patents and technologies
of third parties on acceptable terms, if at all, or will be able to obtain or
develop alternative technologies. If Corixa or any of its corporate partners is
enjoined from pursuing its research, development or commercialization activities
or if any such license is not obtained, or alternative technologies are not
obtained or developed, Corixa or such corporate partner may be delayed or
prevented from commercializing its products, which would have a material adverse
effect on Corixa's business, financial condition and results of operations.
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There can be no assurance that third parties will not independently
develop similar or alternative technologies to those of Corixa, duplicate any of
the technologies of Corixa, its corporate partners or its licensors, or design
around the patented technologies developed by Corixa, its corporate partners or
its licensors. The occurrence of any of these events would have a material
adverse effect on Corixa's business, financial condition and results of
operations.
Litigation may also be necessary to enforce patents issued or licensed
to Corixa or its corporate partners or to determine the scope or validity of a
third party's proprietary rights. Corixa could incur substantial costs if
litigation is required to defend itself in patent suits brought by third
parties, if Corixa participates in patent suits brought against or initiated by
its corporate partners or if Corixa initiates such suits, and there can be no
assurance that funds or resources would be available to Corixa in the event of
any such litigation. Additionally, there can be no assurance that Corixa or its
corporate partners would prevail in any such action. An adverse outcome in
litigation or an interference to determine priority or other proceeding in a
court or patent office could subject Corixa to significant liabilities, require
disputed rights to be licensed from other parties or require Corixa or its
corporate partners to cease using certain technology, any of which may have a
material adverse effect on Corixa's business, financial condition and results of
operations.
Corixa also relies on trade secrets and proprietary know-how, especially
in circumstances where patent protection is not believed to be appropriate or
obtainable. Corixa's policy is to require each of its employees, consultants and
advisors to execute a confidentiality agreement upon the commencement of any
employment, consulting or advisory relationship with Corixa. These agreements
generally provide that all confidential information developed or made known to
the individual during the course of such relationship will be kept confidential
and not disclosed to third parties except in specified circumstances. These
agreements also generally provide that all inventions conceived by the
individual in the course of rendering services to Corixa shall be the exclusive
property of Corixa. There can be no assurance, however, that these agreements
will provide meaningful protection or adequate remedies for any breach, or that
Corixa's trade secrets will not otherwise become known or be independently
discovered by its competitors, any of which could have a material adverse effect
on Corixa's business, financial condition and results of operations.
Corixa is a party to various license agreements that give it rights to
use certain technologies in its research, development and commercialization
activities. Disputes may arise as to the inventorship and corresponding rights
in know-how and inventions resulting from the joint creation or use of
intellectual property by Corixa and its corporate partners, licensors,
scientific collaborators and consultants. There can be no assurance that Corixa
will be able to maintain its proprietary position or that third parties will not
circumvent any proprietary protection Corixa does have. The failure of Corixa to
maintain exclusive or other rights to such technologies could have a material
adverse effect on Corixa's business, financial condition and results of
operations. See "-- Factors Affecting Future Results -- Corixa is Dependent on
Proprietary Technology and Its Patent Protection is Uncertain."
GOVERNMENT REGULATION
Regulation by governmental entities in the United States and other
countries will be a significant factor in the development, production and
marketing of any products developed by Corixa or its corporate partners.
Pharmaceutical products and medical devices are subject to rigorous regulation
by the Food and Drug Administration ("FDA") in the United States and similar
health authorities in foreign countries under laws and regulations that govern,
among other things, testing, manufacturing, safety, efficacy, labeling, storage,
record keeping, export and promotion, marketing and distribution of such
products. Product development and approval within this regulatory framework is
uncertain, can take a number of years and requires the expenditure of
substantial resources. Any failure to obtain regulatory approval, or any delay
in obtaining such approvals, could adversely affect the marketing of products
under development by Corixa or its corporate partners, Corixa's ability to
receive product or royalty revenues, and its liquidity and capital resources.
The nature and extent of the governmental premarket review process for Corixa's
products will vary, depending on the regulatory categorization of particular
products. Corixa believes that its vaccine and related pharmaceutical products
will be regulated as biologics by the FDA and comparable regulatory bodies in
other countries. The necessary steps before a new biological product may be
marketed in the United States ordinarily include: (i) preclinical laboratory
tests and in vivo preclinical studies; (ii) the submission to the FDA of an
investigational new drug application ("IND"), which must become effective before
clinical trials may commence; (iii) adequate and well-controlled clinical trials
to establish the safety and efficacy of the product; (iv) the submission to the
FDA of a biologics license application ("BLA"); and (v) FDA review and approval
of the BLA prior to any commercial sale or shipment of the product. The FDA's
Modernization Act of 1997 (the "Modernization Act") eliminated the requirement
that both a product license application and an establishment license application
be filed with respect to certain categories
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of biotechnology products after February 19, 1998. It is impossible to predict
what impact, if any, the Modernization Act will have upon the regulatory review
of Corixa's biological products.
Preclinical tests include laboratory evaluation of the product, as well
as animal studies to assess the potential safety and efficacy of the product.
Preclinical tests must be conducted by laboratories that comply with FDA
regulations regarding good laboratory practices. The results of preclinical
tests, together with manufacturing information and analytical data, are
submitted to the FDA as part of an IND, which must become effective before the
commencement of clinical trials. The IND will automatically become effective 30
days after receipt by the FDA unless the FDA indicates prior to the end of such
30-day period that the proposed protocol raises concerns that must be resolved
to the satisfaction of the FDA before the trials may proceed as outlined in the
IND. In such case, there can be no assurance that such resolution will be
achieved in a timely fashion, if at all. In addition, the FDA may impose a
clinical hold on an ongoing clinical trial, if, for example, safety concerns are
presented, in which case the study cannot recommence without FDA authorization
under terms sanctioned by the agency.
Clinical trials involve the administration of the product to healthy
volunteers or to patients under the supervision of a qualified principal
investigator. Clinical trials are conducted in accordance with good clinical
practices under protocols that detail the objectives of the trial, inclusion and
exclusion criteria, the parameters to be used to monitor safety and the efficacy
criteria to be evaluated. Each protocol must be submitted to the FDA as part of
the IND. Further, each clinical trial must be reviewed and approved by an
independent institutional review board ("IRB") at the institutions at which the
trial will be conducted. The IRB will consider, among other things, ethical
factors and the safety of human subjects. The IRB may require changes in a
protocol, and there can be no assurance that the submission of an IND will
enable a study to be initiated or completed.
Clinical trials generally are conducted in three sequential phases, but
the phases may overlap. In Phase I, the initial introduction of the product into
human subjects or patients, the product is tested to assess safety, metabolism,
pharmacokinetics and pharmacological actions associated with increasing doses.
Phase II usually involves studies in a limited patient population to (i)
determine the efficacy of the potential product for specific, targeted
indications, (ii) determine dosage tolerance and optimum dosage and (iii)
further identify possible adverse reactions and safety risks. If a compound is
found to be effective and to have an acceptable safety profile in Phase II
evaluations, Phase III trials are undertaken to evaluate further clinical
efficacy in comparison to standard therapies, within a broader patient
population, generally at geographically dispersed clinical sites. There can be
no assurance that Phase I, Phase II or Phase III testing will be completed
successfully within any specific period of time, if at all, with respect to any
of Corixa's products. In addition, after marketing approval is granted, the FDA
may require post-marketing clinical studies, which typically entail extensive
patient monitoring and may result in restricted marketing of an approved product
for an extended period of time. See "--Factors Affecting Future Results --
Corixa Faces Much Government Regulation."
The results of pharmaceutical development, preclinical studies and
clinical trials are submitted to the FDA in the form of a BLA for approval of
the manufacture, marketing and commercial shipment of the biological product.
The testing and approval process is likely to require substantial time, effort
and resources, and there can be no assurance that any approval will be granted
on a timely basis, if at all. The FDA may deny the BLA if applicable regulatory
criteria are not satisfied, require additional testing or information, or
require postmarket testing and surveillance to monitor the safety or efficacy of
the product.
Any diagnostic products developed by Corixa or its corporate partners
are likely to be regulated as medical devices. In the United States, medical
devices are classified into one of three classes on the basis of the controls
deemed by the FDA to be necessary to reasonably ensure their safety and
effectiveness: Class I (general controls -- e.g., labeling, premarket
notification and adherence to Good Manufacturing Practices ("GMP")), Class II
(general controls and special controls -- e.g., performance standards and
postmarket surveillance) and Class III (premarket approval).
Before a new device can be introduced into the market, its manufacturer
generally must obtain marketing clearance through either a premarket clearance
under Section 510(k) of the Federal Food, Drug and Cosmetic Act ("510(k)") or
approval of a premarket approval application ("PMA"). Because Corixa believes
that any diagnostic device developed by it or its corporate partners would be
classified as a Class III device, such product would be subject to the PMA
approval requirement. A 510(k) clearance typically will be granted if a company
establishes that its device is "substantially equivalent" to a legally marketed
Class I or II medical device or to a Class III device for which the FDA has not
yet required the submission of PMAs. A 510(k) clearance must contain information
to support the claim of substantial equivalence, which may include laboratory
test results or the results of clinical studies. Commercial distribution of a
device subject to the 510(k) requirement may begin only after the FDA issues an
order finding the device to be substantially equivalent to a predicate device.
It generally takes from four to 12 months from the date of submission to obtain
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clearance of a 510(k) submission, but it may take longer. The FDA may determine
that a proposed device is not substantially equivalent to a legally marketed
device, that additional information is needed before a substantial equivalence
determination may be made, or that the product must be approved through the PMA
process. An FDA determination of "not substantially equivalent," a request for
additional information, or the requirement of PMA approval could delay market
introduction of products that fall into this category. Furthermore, for any
devices cleared through the 510(k) process, modifications or enhancements that
could significantly affect safety or effectiveness, or constitute a major change
in the intended use of the device, require new 510(k) submissions.
If a device does not qualify for the premarket notification procedure, a
company must file a PMA. The PMA requires more extensive pre-filing testing than
required for a 510(k) premarket notification and usually involves a
significantly longer review process. A PMA application must be supported by
valid scientific evidence that typically includes extensive data, including
preclinical and clinical trial data, to demonstrate that safety and efficacy of
the device. If clinical trials are required, and the device presents a
"significant risk," an investigation device exemption ("IDE") application must
be filed with the FDA and become effective prior to the commencement of clinical
trials. If the device presents a "nonsignificant risk" to trial subjects,
clinical trials may begin on the basis of appropriate IRB approval. Clinical
investigation of medical devices may involve risks similar to those involved in
the clinical investigation of pharmaceutical products.
The PMA application must contain the results of clinical trials and
nonclinical tests, a complete description of the device, and a detailed
description of the methods, facilities and controls used to manufacture the
device. The PMA review and approval process can be expensive, uncertain and
lengthy, and there can be no assurance that any approval will be granted on a
timely basis, if at all. A PMA application may be denied if applicable
regulatory criteria are not satisfied, and the FDA may impose certain conditions
upon the applicant, such as postmarket testing and surveillance.
Regulatory approval, if granted for any biopharmaceutical or medical
device product, may entail limitations on the indicated uses for which it may be
marketed, and product approvals, once granted, may be withdrawn if problems
occur after initial marketing. Manufacturers of FDA-regulated products are
subject to pervasive and continuing governmental regulation, including record
keeping requirements and reporting of adverse experiences associated with
product use. Corixa and its corporate partners will be required to adhere to
applicable regulations setting forth detailed GMP requirements, which include
testing, control and documentation requirements. The FDA has recently revised
the GMP regulations. The new Quality System Regulation imposes design controls
and makes other significant changes in the requirements applicable to
manufacturers. These and future changes in regulatory regulations could have a
material adverse effect on Corixa's business, financial condition and results of
operations. Manufacturing facilities in the United States are subject to
periodic inspection by the FDA. Failure to comply with GMP and other applicable
regulatory requirements may result in, among other things, warning letters,
fines, injunctions, civil penalties, recall or seizure of products, total or
partial suspension of production, failure of the government to review pending
marketing approval applications, withdrawal of marketing approvals and criminal
prosecution.
For clinical investigation and marketing of products outside the United
States, Corixa and its corporate partners may be subject to regulation by
regulatory authorities in other countries. The requirements governing the
conduct of clinical trials, marketing authorization and pricing and
reimbursement vary widely from country to country. The regulatory approval
process in other countries entails risks similar to those associated with FDA
approval.
Corixa's research and development activities involve the controlled use
of hazardous materials, chemicals and various radioactive materials. Corixa is
subject to federal, state and local laws and regulations governing the use,
storage, handling and disposal of such materials and certain waste products.
Although Corixa believes that its safety procedures for using, handling, storing
and disposing of such materials comply with the standard prescribed by state and
federal laws and regulations, the risk of accidental contamination or injury
from these materials cannot be completely eliminated. In the event of such an
accident, Corixa's use of these materials could be curtailed by state or federal
authorities, Corixa could be held liable for any damages that result and any
liability could exceed the resources of Corixa. See "--Factors Affecting Future
Results -- Corixa Faces Much Government Regulation."
COMPETITION
The biotechnology and biopharmaceutical industries are characterized by
rapidly advancing technologies, intense competition and a strong emphasis on
proprietary products. Many entities, including pharmaceutical and biotechnology
companies,
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academic institutions and other research organizations are actively engaged in
the discovery, research and development of products that could compete directly
with products Corixa is seeking to develop. Many companies are also developing
alternative therapies to treat cancer and infectious disease and, in this
regard, are competitive with Corixa. Many of the entities developing and
marketing such competing products have significantly greater financial resources
and expertise in research and development, manufacturing, preclinical testing,
conducting clinical trials, obtaining regulatory approvals and marketing than
Corixa. In addition, many of these competitors have become more active in
seeking patent protection and licensing arrangements in anticipation of
collecting royalties for use of technology that they have developed. Smaller
companies may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies. These companies
and institutions compete with Corixa in recruiting and retaining qualified
scientific and management personnel, as well as in acquiring technologies
complementary to Corixa's programs. Corixa's ability to compete effectively will
depend on its ability to advance its technology platforms, license additional
technology, maintain a proprietary position in its technologies and products,
obtain required government and other public and private approvals on a timely
basis, attract and retain key personnel and enter into corporate partnerships
that enable Corixa and its corporate partners to develop effective products that
can be manufactured cost-effectively and marketed successfully. Corixa expects
that competition among products approved for sale will be based, among other
things, on efficacy, reliability, product safety, price and patent position.
There can be no assurance that competitors will not develop more effective or
more affordable products, or achieve earlier patent protection or product
commercialization than Corixa or that such products will not render Corixa's
products obsolete. See "--Factors Affecting Future Results -- Corixa Faces
Intense Competition."
EMPLOYEES
As of December 31, 1998, Corixa employed 132 personnel, including 94 in
research and development and 38 in research and development support and
administration. Each of Corixa's employees has signed a confidentiality
agreement and none are covered by a collective bargaining agreement. Corixa has
never experienced employment-related work stoppages and considers its employee
relations to be good.
ITEM 2. PROPERTIES
Corixa maintains its headquarters in Seattle, Washington where it leases
approximately 77,000 square feet of laboratory, discovery, research and
development, manufacturing and general administration space. As of December 31,
1998, Corixa's monthly rent for this space, including amortization of tenant
improvements, was approximately $155,000. The lease for this facility expires in
January 2005, with an option to renew the lease for two additional periods of
five years each. Corixa believes that its existing facilities are adequate to
meet its immediate needs and that suitable additional space will be available in
the future on commercially reasonable terms as needed.
ITEM 3. LEGAL PROCEEDINGS
As of the date hereof, the Company is not a party to any material
pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of the 1998 fiscal year.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
In connection with its initial public offering of Common Stock (the
"Offering") in 1997, the Company filed a Registration Statement on Form S-1, SEC
File No. 333-32147, which was declared effective by the Commission on October 2,
1997.
The Company incurred the following expenses in connection with the
Offering during the quarter ended December 31, 1997.
Underwriting discounts and commissions $3,139,500
Other expenses 932,404
----------
Total Expenses $4,071,904
==========
All of such expenses were direct or indirect payments to others.
The net offering proceeds to the Company after deducting the total
expenses above were approximately $40,778,100. The Company is using these
proceeds for research and development expenses, working capital and general
corporate purposes.
Corixa's Common Stock trades under the symbol "CRXA" on the Nasdaq
National Market. As of March 10, 1999 there were 481 holders of record of the
Company's Common Stock.
The following table shows the Company high and low selling prices of the Common
Stock as quoted on the Nasdaq National Market for each of the quarters
indicated. Future stock prices may be subject to volatility particularly on a
quarterly basis. Any shortfall in revenues or net income from amounts expected
by securities analysts could have an immediate and significant adverse effect on
the trading price of the Company's Common Stock.
High Low
------- -----
1997
----
Fourth Quarter $14.125 $8.75
(from October 2, 1997)
1998
----
First Quarter $10.000 $6.7500
Second Quarter $10.500 $6.1250
Third Quarter $7.0000 $3.3125
Fourth Quarter $9.5000 $3.5000
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and has
no present plans to do so in the foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial information has been derived from the
audited financial statements. The information set forth below is not necessarily
indicative of results of future operations, and should be read in conjunction
with Item 7 of Part II "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and related notes thereto included elsewhere in this Form 10-K.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCEPTION
(SEPTEMBER 8,
YEAR ENDED 1994) TO
DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Revenue:
Collaborative agreements ................... $ 17,003 $ 13,390 $ 4,402 $ 2,411 $ --
Government grants .......................... 1,267 977 1,403 304 --
-------- -------- -------- -------- --------
Total revenue ............................ 18,270 14,367 5,805 2,715 --
Operating expenses:
Research and development.................... 27,436 16,398 9,995 7,040 439
General and administrative ................. 2,672 2,033 781 532 205
In-process research and development......... 12,021 -- -- -- 428
-------- -------- -------- -------- --------
Total operating expenses.................. 42,129 18,431 10,776 7,572 1,072
-------- -------- -------- -------- --------
Loss from operations.......................... (23,859) (4,064) (4,971) (4,857) (1,072)
Interest income .............................. 3,016 1,300 642 772 83
Interest expense ............................. (767) (327) (166) (82) --
Other income ................................. 294 415 348 17 --
-------- -------- -------- -------- --------
Net loss ..................................... $(21,316) $ (2,676) $ (4,147) $ (4,150) $ (989)
======== ======== ======== ======== ========
Basic and diluted net loss
per share .................................. $ (1.75) $ (0.55) $ (1.65) $ (1.67) $ (0.41)
======== ======== ======== ======== ========
Shares used in computation
of basic and diluted net loss
per share .................................. 12,172 4,891 2,521 2,487 2,403
======== ======== ======== ======== ========
Pro forma basic and diluted net loss
per share .................................. $ (0.31) $ (0.55) $ (0.58) $ (0.27)
======== ======== ======== ========
Shares used in computation
of pro-forma basic and diluted net loss
per share .................................. 8,755 7,490 7,120 3,648
======== ======== ======== ========
DECEMBER 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments ....................... $ 45,141 $ 56,318 $ 11,933 $ 10,773 $ 11,064
Working capital...................... 42,508 53,962 10,101 9,743 10,939
Total assets......................... 61,184 61,807 15,185 12,340 14,334
Long term obligations less current
portion ........................... 11,835 6,924 1,175 816 --
Accumulated deficit.................. (33,278) (11,962) (9,286) (5,139) (989)
Total stockholders' equity........... 42,184 51,285 11,226 10,264 14,038
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Corixa's objective is to be a leader in the discovery and
commercialization of products useful in preventing, treating or diagnosing
cancer, certain infectious diseases and certain autoimmune diseases. Corixa's
strategy is to dedicate its resources to the discovery of vaccines and other
antigen-based products and to establish corporate collaborations early in the
development process for all aspects of product development and
commercialization, including research, clinical development, obtaining
regulatory approval, manufacturing and marketing. Corixa believes that this
research-and partner-driven approach creates significant scientific, operational
and financial advantages for the Company and accelerates the commercial
development of new therapeutic and prophylactic T cell vaccines and other
immunotherapeutic products. As of December 31, 1998, approximately 90% of
Corixa's revenue has resulted from such collaborative agreements. In particular,
Corixa has entered into significant corporate partnerships with SB Biologicals
and SB Manufacturing with respect to tuberculosis, breast cancer and prostate
cancer. In addition, SmithKline Beecham agreed to provide payment for work that
is performed in additional programs in the following areas: (i) ovarian and
colon carcinoma vaccine discovery and development programs and (ii) vaccine
discovery programs for two chronic infectious pathogens, Chlamydia trachomatis
and Chlamydia pneumoniae. The discovery phase of the agreement also allows for
the selection of one additional disease field to be agreed upon at a future
date. The Company has also granted SmithKline Beecham an exclusive worldwide
license to develop, manufacture, and sell vaccine products resulting from the
Company's clinical program based on Her-2/neu for the treatment of breast and
ovarian cancer as well as the Company's preclinical program based on
Mammoglobin, a novel gene product associated with breast cancer. For certain of
these disease areas, the Company granted SmithKline Beecham certain rights to
develop, manufacture and sell passive immunotherapy products such as T cell or
antibody therapeutics and therapeutic drug monitoring products. SmithKline
Beecham has committed $43.6 million to fund work in such discovery programs
during the next four years. Additionally, since Corixa's inception,
approximately 10% of Corixa's revenue has resulted from funds awarded through
government grants. As of December 31, 1998, Corixa had total stockholders'
equity of $42.2 million. See "-- Item 1 -- Business -- Corporate Partnerships -
Vaccines."
Corixa has entered, and intends to continue to enter, into collaborative
agreements early in the development process. Corixa believes that this active
corporate partnering strategy enables the Company to maintain its focus on its
fundamental strengths in vaccine discovery and research, capitalizes on its
corporate partners' strengths in product development, manufacturing and
commercialization, and significantly diminishes Corixa's financing requirements.
When entering into such corporate partnering relationships, Corixa seeks to
cover its research and development expenses through research funding, milestone
payments and collaboration agreement credit lines, technology or license fees,
while retaining significant downstream participation in product sales through
either profit-sharing or product royalties paid on annual net sales.
On September 15, 1998, the Company completed an acquisition of GenQuest,
Inc., a Delaware corporation ("GenQuest"). The financial statements of Corixa
Corporation include the accounts of its wholly-owned subsidiary, Chinook, a
Delaware corporation (formerly known as Chinook Acquisition Corporation)
("Chinook") created to effect the merger with GenQuest. Pursuant to the terms
set forth in the Agreement and Plan of Merger by and among the Company, Chinook
and GenQuest, GenQuest merged with and into Chinook and the separate corporate
existence of GenQuest ceased, with Chinook surviving as a wholly-owned
subsidiary of Corixa. All significant intercompany balances and transactions
have been eliminated in consolidation. Corixa's income statement for the period
in which the acquisition of GenQuest occurred includes a write-off of
approximately $12.0 million (or 96.6% of the purchase price), representing the
values determined by management to be attributable to the in-process research
and development assets associated with the technology acquired in acquisition of
GenQuest. Of this amount, approximately 54% is related to potential diagnostic
products, approximately 35% is related to drug screening products and services,
approximately 10% is related to gene therapy products, and approximately 1% is
related to therapeutic antibody products. This represents the value ascribed to
these programs by Corixa's management, based on the discounted cash flows
management currently expects from the technologies and genes acquired. There can
be no guarantee, however, that any particular acquired technology will result in
a particular product or treatment or that any of the technologies acquired in
the acquisition of GenQuest will result in any products. See "Factors Affecting
Future Results -- There are Uncertainties Related to Corixa's Early Stage of
Development," "-- There are Uncertainties Related to Corixa's Technology and
Product Development," "-- Corixa is Dependent on Existing and Future Corporate
Partnerships," and "-- Corixa is Dependent on In-Licensed Technology."
Corixa management believes that the allocation of a majority of the
purchase price to these product areas is appropriate because of the future
potential that these programs may contribute to the operations of Corixa. In
evaluating the acquisition of
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GenQuest, Corixa management considered a number of factors, including an
analysis of GenQuest that assumed the acquired technology would result in a
commercialized product or initial product revenue as early as 2002. There can be
no assurance, however, that any of such acquired technology will result in
product revenue in 2002 or at all.
Corixa remains focused on the discovery and early clinical development
of proprietary vaccine products that induce specific and potent pathogen- or
tumor-reactive T cell responses for the treatment and prevention of cancer,
infectious diseases and certain autoimmune diseases. Corixa also intends to
broaden its scope to include other strategic relationships that complement its
approach to immune system based therapies for cancer, infectious diseases and
autoimmune diseases.
Corixa has experienced significant operating losses in each year since
its inception. As of December 31, 1998, Corixa's accumulated deficit was
approximately $33.3 million. Corixa may incur substantial additional operating
losses over, at a minimum, the next several years. Such losses have been and may
continue to be principally the result of various costs associated with Corixa's
discovery, research and development programs and preclinical and clinical
activities and the purchase of technology, for example the GenQuest acquisition.
Substantially all of Corixa's revenue to date has resulted from corporate
partnerships, other research, development and licensing arrangements, research
grants and interest income. Corixa's ability to achieve a consistent, profitable
level of operations is dependent in large part upon entering into collaborative
agreements with corporate partners for product discovery, research, development
and commercialization, obtaining regulatory approvals for its products and
successfully manufacturing and marketing commercial products. There can be no
assurance that Corixa will be able to achieve consistent profitability. In
addition, payments under collaborative agreements and licensing arrangements
will be subject to significant fluctuations in both timing and amounts,
resulting in quarters of profitability and quarters of losses by Corixa.
Therefore, Corixa's results of operations for any period may fluctuate
significantly and may not be comparable to the results of operations for any
other period.
RESULTS OF OPERATIONS
FISCAL YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Total Revenue
Revenue increased to $18.3 million for the year ended December 31, 1998,
from $14.4 million for the same period in 1997 and from $5.8 million in 1996.
This increase was primarily attributable to revenue recognition from the
multi-field agreement with SmithKline Beecham. Revenue of approximately $1.0
million was recognized during the year ended December 31, 1998 in conjunction
with the collaboration agreement with GenQuest. Revenue under government grants
received in 1998 was $1.3 million, more than the $977,000 received in 1997 and
down from $1.4 million in 1996.
Research and Development Expenses
Research and development expenses increased to $27.4 million for the
year ended December 31, 1998, from $16.4 million for the same period in 1997 and
from $10.0 million in 1996. The increase was primarily attributable to increased
payroll and personnel expenses, laboratory services and supplies, increased
collaboration and patent expenses, increased consulting costs, and increased
deferred compensation costs associated with the amortization of certain stock
option grants. Additionally, increased research and development expense for the
year ended December 31, 1998 includes the second quarter $489,000 charge to
reflect a write-off of the receivable for warrants issued associated with the
GenQuest collaboration and a $330,000 charge in the first quarter to reflect
expenses associated with termination of the collaboration with CellPro. The
non-cash compensation expense associated with the stock option grant
amortization will continue to be recognized over the remaining vesting period of
such options, through June 2001. Research and development expenses of
approximately $1.7 million and $2.4 million were incurred during the period
ended September 15, 1998 (the date of the GenQuest acquisition), and year ended
1997, respectively, in conjunction with the GenQuest collaboration agreement.
Corixa expects research and development expenses to increase in the future to
support the expansion of its research and development activities.
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29
General and Administrative Expenses
General and administrative expenses increased to $2.7 million for the
year ended December 31, 1998, from $2.0 for the same period in 1997 and from
$781,000 in 1996. The increase was primarily attributable to increased expenses
related to legal fees, business development, and other costs associated with
being a public company, and the general and administrative portions of the
amortized deferred compensation expense associated with the grant of certain
stock options. Corixa expects general and administrative expenses to increase in
the future to support the expansion of its business activities.
In-Process Research and Development
For the year ended December 31, 1998, in-process research and
development expense reflects the amount allocated to in-process technology
acquired in the GenQuest acquisition.
Interest Income
Interest income increased to $3.0 million for the year ended December
31, 1998, from $1.3 million for the same period in 1997 and from $642,000 in
1996. This increase resulted from higher average cash balances in 1998 compared
to 1997 as a result of Corixa's initial public offering.
Interest Expense
Interest expense increased to $767,000 for the year ended December 31,
1998, from $327,000 for the same period in 1997 and from $166,000 in 1996. The
increase was primarily attributable to higher loan and capital lease financing
balances.
Other Income
Other income decreased to $294,000 for the year ended December 31, 1998,
from $415,000 for the same period in 1997 and from $348,000 in 1996. The balance
for 1998 includes $204,000 and $90,000 in proceeds from management and
administrative services agreements with GenQuest and IDRI, respectively. 1997
includes other income of $325,000 and $90,000 for management and administrative
agreements with GenQuest and IDRI, respectively. For 1996, other income consists
of $300,000 and $48,000 in proceeds from GenQuest and IDRI, respectively. The
Company provides services to IDRI with respect to corporate management,
accounting and financial matters, record keeping, personnel administration and
human resources, and treasury services as required by the agreement with IDRI.
Similar services were performed under the GenQuest agreement, which ended upon
the acquisition of GenQuest by Corixa.
Deferred Compensation
Amortization of deferred compensation of approximately $1.4 million and
$1.3 million was recorded in the year ended December 31, 1998 and 1997
respectively. Deferred compensation represents the amortization of the
difference between the exercise prices of options for 645,000 shares of Common
Stock granted during the year ended December 31, 1997 and the deemed fair value
of the Company's Common Stock on the grant dates. The remaining balance of $1.2
million will be amortized over fiscal years 1999 through 2001 as the subject
options vest.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Beginning in
the year 2000, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. If noncompliant systems
are not modified, the result could be a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. Corixa has largely completed its assessment of its internal
systems affected by the Year 2000 issue and anticipates that it will not be
required to modify or replace significant portions of its software to cause its
computer systems will properly utilize dates past December 31, 1999.
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30
Corixa has initiated communications, in the form of questionnaires, with
its significant suppliers and customers to determine the extent to which Corixa
is vulnerable to those third parties' failure to solve their own Year 2000
issues. At this time, Corixa cannot predict the level of Year 2000 readiness
with respect to its significant suppliers and customers. Corixa intends to
continue to monitor the progress of these third parties and will develop
contingency plans during the fiscal year 1999 in the event Corixa becomes aware
that one or more of these third parties fails to solve their Year 2000 issues in
such a way as to materially adversely affect the operations of Corixa. The total
exposure of the Year 2000 issue is estimated to be less than $100,000 and will
be funded through operating cash flows. To date Corixa has not incurred
significant costs related to the assessment of, and preliminary efforts in
connection with, its Year 2000 project and the development of a remediation
plan. Management does not currently expect Corixa's financial condition or
results of operations will be materially adversely affected by the Year 2000
issue. There can be no guarantee that the systems of other companies on which
Corixa's systems rely will be timely converted, or that a failure to convert by
another company, or a conversion that is incompatible with Corixa's systems,
would not have a material adverse effect on Corixa.
Corixa intends to complete its contingency planning based upon analysis
of results of questionnaires received from customers and suppliers.
LIQUIDITY AND CAPITAL RESOURCES
Corixa has financed its operations primarily through the issuance of
equity securities, collaborative agreements and debt instruments. The October
1997 initial public offering and preceding private placements of equity
securities have provided Corixa with aggregate proceeds of approximately $61.1
million. Through December 31, 1998, Corixa recognized approximately $41.1
million of revenue under corporate partnerships and grants and has drawn $7.0
million on a bank loan and $5.0 million from credit lines under collaborative
agreements. Through December 31, 1998, Corixa's operations have used cash of
approximately $14.5 million.
Corixa has invested $7.0 million in property and equipment and has
acquired an additional $5.4 million of equipment through capital lease
financings since inception. Corixa expects capital expenditures to increase over
the next year as it completes its facility expansion in the first quarter of
1999. After that, capital expenditures should stabilize.
During the year ended December 31, 1998, net cash used in Corixa's
operations was $7.5 million, compared to $249,000 in 1997 and $2.8 million in
1996. The increase in cash used by operations was due primarily to an increase
in research and development expenses. Investing activities used $8.5 million,
compared to $30.9 million over the same period in 1997 and $2.7 million in 1996.
The decrease was due primarily to proceeds from the sale of securities and the
$4.5 million expended to acquire GenQuest. As of December 31, 1998, Corixa had
approximately $45.1 million in cash, cash equivalents and securities
available-for-sale. Working capital decreased to $42.5 million at December 31,
1998 from $54.0 million in 1997 and $10.1 million in 1996.
Corixa believes that its existing capital resources, committed payments
under its existing collaborative agreements and licensing arrangements,
equipment financing and interest income will be sufficient to fund its current
and planned operations until at least January 2000. There is, however, no
assurance such sources of capital will be sufficient for such period of time.
Corixa intends to enter into additional corporate collaborations that will
provide funding for all or a part of Corixa's research and development
activities. Corixa's future capital requirements will depend on many factors,
including, among others, continued scientific progress in its discovery,
research and development programs; the magnitude and scope of these activities;
the ability of Corixa to maintain existing, and enter into additional, corporate
partnerships and licensing arrangements; progress with preclinical studies and
clinical trials; the time and costs involved in obtaining regulatory approvals;
the costs of acquiring companies with complementary technology; the costs
involved in preparing, filing, prosecuting, maintaining, defending and enforcing
patent claims; and the potential need to develop, acquire or license new
technologies and products and other factors not within Corixa's control. Corixa
intends to seek additional funding through some or all of the following methods:
corporate collaborations, licensing arrangements, public or private equity or
debt financings, and capital lease transactions. There can be no assurance,
however, that additional financing will be available on acceptable terms, if at
all. If sufficient capital is not available, Corixa may be required to delay,
reduce the scope of, eliminate or divest one or more of its discovery, research
or development programs, any of which could have a material adverse effect on
Corixa's business, financial condition and results of operations.
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MARKET RISK DISCLOSURES
Interest Rate Risk
The Company's line of credit has an interest rate that is based on rates that
may fluctuate over time based on economic changes in the U.S. and worldwide
financial environment. The Company is subject to interest rate risk, and could
be subject to increased interest payments if market interest rates fluctuate.
The Company does not expect any change in the interest rates to have a material
adverse effect on the Company's results from operations.
The Company's interest income and expense are most sensitive to changes in the
general level of US and European interest rates. In this regard, changes in U.S.
interest rates affect the interest earned on the Company's cash equivalents and
short-term investments as well as interest paid on debt.
The table below summarizes the estimated effects of hypothetical increases and
decreases in interest rates. It is assumed the changes occur immediately and
uniformly to each category of instrument containing interest rate risks.
Significant variations in market interest rates could produce changes in the
timing of repayments due to prepayment options available. The fair value of such
instruments could be affected and, therefore, actual results might differ from
those reflected in the table which follows.
Estimated
Hypothetical Fair Value after Hypothetical
Change in Hypothetical Percentage
Fair Value at Interest Rate Change in Increase (Decrease) in
December 31, 1998 (bp=basis points) Interest Rate Stockholders' Equity
----------------- ----------------- ------------- --------------------
(in thousands)
Assets:
U.S. Government agencies
and Corporate Obligations ........ $36,043 100 bp decrease $36,591 1.3%
100 bp increase 35,510 (1.3)
200 bp increase 34,989 (2.5)
300 bp increase 34,485 (3.7)
Liabilities:
Long-Term Debt ..................... $ 5,250 100 bp decrease $ 5,350 *
100 bp increase 5,153 *
200 bp increase 5,060 *
300 bp increase 4,969 *
* Less than 1%
FACTORS AFFECTING FUTURE RESULTS
There are Uncertainties Related to Corixa's Early Stage of Development.
Corixa is at an early stage in the development of its therapeutic, prophylactic
and diagnostic products. To date, almost all of Corixa's revenues have resulted
from payments made under agreements with its corporate partners. Corixa expects
that most of its revenues for the foreseeable future will continue to result
from existing and future corporate partnerships, if any. Corixa has generated
only minimal revenues from diagnostic product sales and no revenues from
therapeutic product sales since inception. Vaccine products that may result from
Corixa's research and development programs are not expected to be commercially
available for a number of years, if at all. It will be a number of years, if
ever, before Corixa will receive any significant revenues from commercial sales
of such products. Corixa may not receive anticipated revenues under existing
corporate partnerships, and Corixa may not be able to enter into any additional
corporate partnerships. Thus, Corixa may not ever achieve consistent
profitability.
There are Uncertainties Related to Corixa's Technology and Product
Development. Corixa's technological approach to the development of therapeutic
and prophylactic vaccines and other immunotherapeutic products for cancers and
certain infectious and autoimmune diseases is unproven in humans. Products based
on Corixa's technologies are currently in the discovery, preclinical or early
clinical investigation stages, and to date, neither Corixa nor any of its
corporate partners have conducted any clinical trials that
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incorporate Corixa's proprietary microsphere delivery systems or its proprietary
adjuvants. In addition, neither Corixa nor any other Company has successfully
commercialized any therapeutic vaccines for cancer or infectious diseases
targeted by Corixa. Corixa may not be able to develop successfully effective
vaccines for such diseases in a reasonable time frame, if ever, and such
vaccines may not be capable of being commercialized. In addition to its internal
development programs, Corixa in-licenses and acquires technologies to enhance
its product pipeline. Any in-licensed technologies or technologies acquired as a
result of the GenQuest or Anergen merger or otherwise may not prove to be
effective or may not result in the successful development of commercial
products.
A majority of Corixa's programs are currently in the discovery stage or
in preclinical development. Only four of Corixa's therapeutic vaccine products
have advanced to Phase I clinical trials. Corixa's vaccines have not been
demonstrated to be safe and effective in clinical settings. Corixa's programs
may not move beyond their respective current stages of development. Assuming
Corixa's research does advance, certain preclinical development efforts will be
necessary to determine whether any product is safe to enter clinical trials.
Under certain of Corixa's existing corporate partnerships, the respective
corporate partner has primary responsibility for the clinical development of a
product. Any such corporate partner may not pursue clinical development in a
timely or effective manner, if at all. If such a product receives authorization
from the FDA to enter clinical trials, then it may be, and in the case of
vaccine products will be, subjected to a multi-phase, multi-center clinical
studies to determine its safety and efficacy. It is difficult to predict the
number or extent of clinical trials required or the period of mandatory patient
follow-up. Assuming clinical trials of any product are successful and other data
are satisfactory, Corixa or its applicable corporate partner will submit an
application to the FDA and appropriate regulatory bodies in other countries to
seek permission to market the product. Typically, the review process at the FDA
takes several years, and the FDA may not approve Corixa's or its corporate
partner's application or may require additional clinical trials or other data
prior to approval. Furthermore, even if regulatory approval is ultimately
obtained, delays in the approval process could have a material adverse effect on
Corixa's business, financial condition and results of operations. In addition,
Corixa may not be able to produce any products in commercial quantities at a
reasonable cost or may not be able to market successfully such products.
Corixa is Dependent on Existing and Future Corporate Partnerships. The
success of Corixa's business strategy is largely dependent on its ability to
enter into multiple corporate partnerships and to manage effectively the
numerous relationships that may exist as a result of this strategy. Corixa has
established significant relationships with various corporate partners as of
December 31, 1998. For example, in October 1998 Corixa entered into a strategic
collaboration and license agreement with SmithKline Beecham for the research,
development and commercialization of vaccine products aimed at the prevention
and/or treatment of tuberculosis, Chlamydia trachomatis infection, Chlamydia
pneumoniae infection, breast cancer, prostate cancer, ovarian cancer and colon
cancer. Corixa derived 86% and 93% of its revenues during the year ended
December 31, 1998 and the year ended December 31, 1997, respectively, from
research and development and other funding under its existing corporate
partnerships. The termination of any of these corporate partnerships would have
a material adverse effect on Corixa's business, financial condition and results
of operations. Certain of Corixa's corporate partners have entered into
agreements granting them options to license certain aspects of Corixa's
technology. Any such corporate partner may not exercise its option to license
such technology. Corixa has also entered into corporate partnerships with
several companies for the development, commercialization and sale of diagnostic
products incorporating Corixa's proprietary antigen technology. Any such
diagnostic corporate partnership may not ever generate significant revenues.
Furthermore, Corixa is currently engaged in discussions with a number of
pharmaceutical and diagnostic companies with respect to potential corporate
partnering arrangements covering various aspects of Corixa's technologies.
However, due in part to the early stage of Corixa's technologies, the process of
establishing corporate partnerships is difficult and time-consuming and involves
significant uncertainty. Such discussions may not lead to the establishment of
any new corporate partnership on favorable terms, or at all. If established, any
such corporate partnership may not result in the successful development of
Corixa's products or the generation of significant revenues.
Because Corixa enters into research and development collaborations with
corporate partners at an early stage of product development, Corixa's success is
highly reliant upon the performance of its corporate partners. Under existing
corporate partnership arrangements, Corixa's corporate partners are generally
required to undertake and fund certain research and development activities with
Corixa, make payments upon achievement of certain scientific milestones and pay
royalties or make profit-sharing payments when and if a product is
commercialized. Corixa does not directly control the amount or timing of
resources to be devoted to activities by its existing or future corporate
partners. Any of Corixa's existing or future corporate partners may not commit
sufficient resources to Corixa's research and development programs or the
commercialization of its products. If any corporate partner fails to conduct its
activities in a timely manner, or at all, Corixa's preclinical or clinical
development related to such corporate partnership could be delayed or
terminated. Corixa's corporate partners may not perform their obligations as
expected. Also, Corixa's current corporate partners or future corporate
partners, if any, may pursue existing or other development-stage products or
alternative technologies in
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preference to those being developed in collaboration with Corixa. Further,
disputes may arise with respect to ownership of technology developed under any
such corporate partnership. Finally, any of Corixa's current corporate
partnerships may be terminated by its corporate partner, and Corixa may not be
able to negotiate additional corporate partnerships in the future on acceptable
terms, or at all.
Because the success of Corixa's business is largely dependent upon its
ability to enter into multiple corporate partnerships and to manage effectively
the numerous issues that arise from such partnerships, management of these
relationships will require significant time and effort from Corixa's management
team, effective allocation of Corixa's resources to multiple projects and an
ability to obtain and retain management, scientific and other personnel
sufficient to accomplish the foregoing. Corixa's need to manage simultaneously a
number of corporate partnerships may not be successful, and the failure to
manage effectively such corporate partnerships would have a material adverse
effect on Corixa's business, financial condition and results of operations.
Corixa's Stockholders Face Potential Dilution. Corixa's stockholders
will experience immediate and substantial dilution as a result of the shares of
Corixa Common Stock issued to Anergen stockholders in the merger with Anergen,
which closed on February 10, 1999 (see "Notes to Consolidated Financial
Statements - Investments"). Additional dilution may also occur upon exercise, if
at all, of outstanding options and warrants to purchase Corixa Common Stock with
an exercise price greater than $2.50 assumed by Corixa in the merger.
Additionally, if Corixa elects to put the sale of shares of Corixa Common Stock
to SmithKline Beecham Biologicals, S.A. ("SmithKline Beecham") under the October
1998 collaboration and license agreement, Corixa will issue additional shares of
its Common Stock to SmithKline Beecham, which issuance will result in additional
dilution to Corixa's stockholders. See "Part I -- Business -- Corporate
Partnerships -- Vaccines."
Corixa's Integration of Operations and Scientific Cultures Related to
Acquisitions May Be Difficult and Lead to Adverse Effects. Corixa believes that
the mergers with GenQuest (see "Part I - Business -- Introduction" and "Notes to
Consolidated Financial Statements -- Note 3. Acquisition of GenQuest" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Item 7") and Anergen (see "Notes to Consolidated Financial
Statements -- Investments") will result in long-term benefits. These anticipated
benefits will depend in part on whether the companies can integrate their
operations in an efficient and effective manner. This may not occur. Integrating
distinctive operations and scientific cultures will be a complex, time consuming
and expensive process, in addition to direct and indirect transaction costs.
Successful integration requires integration of the companies' respective
research efforts and scientific cultures and coordination of the companies'
respective business development efforts. This integration may not be
accomplished smoothly or successfully. The diversion of the attention of
management and any difficulties encountered in the process of combining
operations could cause the interruption of, or a loss of momentum in, Corixa's
business activities. Furthermore, there could be a material adverse effect on
employee morale and on the ability of Corixa to retain key scientific and
managerial personnel. Combining operations may be more difficult because of the
necessity to consolidate geographically separate facilities. If Corixa has
difficulty integrating the operations of Anergen and GenQuest into Corixa, a
material adverse effect may result on Corixa's business, operating results and
financial condition. In addition, failure to achieve synergies may lead to a
decline in Corixa's stock price.
Corixa May Not Manage Its Growth Successfully or Integrate Successfully
Potential Future Acquisitions. In the future, Corixa may make additional
acquisitions of complementary companies, products or technologies. Managing
acquired businesses entails numerous operational and financial risks and
strains, including difficulties in assimilating acquired operations and
scientific cultures, diversion of management's attention to other business
concerns, amortization of acquired intangible assets and potential loss of key
employees or strategic relationships of acquired entities. Corixa may not be
able to manage effectively growth, and failure to do so could have a material
adverse effect on the Company's business, financial condition and results of
operation.
Corixa is Dependent on In-Licensed Technology. Corixa's success is also
dependent on its ability to enter into licensing arrangements with commercial or
academic entities to obtain technology that is advantageous or necessary to the
development and commercialization of Corixa's products. Corixa is party to
various license agreements that give it rights to use certain technologies in
its and its corporate partners' discovery, research, development and
commercialization activities. Disputes may arise as to the inventorship and
corresponding rights in inventions and know-how resulting from the joint
creation or use of intellectual property by Corixa and its licensors or
scientific collaborators. Additionally, many of Corixa's in-licensing agreements
contain milestone-based termination provisions. Corixa's failure to meet any
significant milestones in a particular agreement could allow the licensor to
terminate such agreement. Corixa may not be able to negotiate additional license
agreements in the future on acceptable terms, if at all, that any of its current
license agreements will not be terminated, and it may not be able to maintain
the exclusivity of its exclusive
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licenses. In the event Corixa is unable to obtain or maintain licenses to
technology advantageous or necessary to Corixa's business, Corixa and its
corporate partners may be required to expend significant time and resources to
develop or in-license similar technology. Corixa and its corporate partners may
not be successful in this regard. If Corixa cannot acquire or develop necessary
technology, it may be prevented from commercializing certain of its products.
Any such event would have a material adverse effect on Corixa's business,
financial condition and results of operations.
Corixa is Dependent on Proprietary Technology and Its Patent Protection
Is Uncertain. Corixa's success will depend in part on its ability and that of
its corporate partners to obtain and enforce their respective patents and
maintain trade secrets, both in the United States and in other countries. As of
January 31, 1999, Corixa owned or had licensed 37 issued United States patents
that expire at various times between December 2004 and August 2016, and 154
pending United States patent applications. Corixa, its corporate partners or its
licensors may not have or may not develop or obtain rights to products or
processes that are patentable. Patents may not issue from any of the pending
applications owned or licensed by Corixa or its corporate partners. Any claims
allowed may not issue, or in the event of issuance, may not be sufficient to
protect the technology owned by or licensed to Corixa or its corporate partners.
Corixa has licensed certain patent applications from SRI related to Corixa's
microsphere encapsulation technology, one of which is currently the subject of
an opposition proceeding before the European Patent Office. SRI may not prevail
in this opposition proceeding and patents may not issue in Europe related to
such technology. In addition, through its acquisition of Anergen, Corixa assumed
responsibility for a currently pending opposition proceeding directed toward a
third party European patent. There is no guarantee Corixa will prevail in this
opposition proceeding. Also, Corixa's or its corporate partners' current
patents, or patents that issue on pending applications, may be challenged,
invalidated, infringed or circumvented, or the rights granted thereunder may not
provide proprietary protection or competitive advantages to Corixa. Patent
applications in the United States are maintained in secrecy until patents issue
and patent applications in certain foreign countries are not generally published
until many months or years after they are filed. Publication of technological
developments in the scientific and patent literature often occurs long after the
date of such developments. Accordingly, Corixa cannot be certain that it or one
of its corporate partners was the first to invent the subject matter covered by
any patent application or that it or one of its corporate partners was the first
to file a patent application for any such invention.
Patent law relating to the scope and enforceability of claims in the
fields in which Corixa operates is still evolving. The patent positions of
biotechnology and biopharmaceutical companies, including Corixa, are highly
uncertain and involve complex legal and technical questions for which legal
principles are not firmly established. For example, there is substantial
uncertainty regarding the potential for patent protection for gene fragments or
genes without known function or correlation with specific diseases. The degree
of future protection for Corixa's proprietary rights, therefore, is highly
uncertain. In this regard, independent patents may not issue from each of the
154 pending United States patent applications referenced above, which include
many interrelated applications directed to common or related subject matter. In
addition, there may be issued patents and pending applications owned by others
directed to technologies relevant to Corixa's or its corporate partners'
research, development and commercialization efforts. Corixa's or its corporate
partners' technology may not be able to be developed and commercialized without
a license to such patents. Also, such patent applications may be granted
priority over patent applications filed by Corixa or one of its corporate
partners.
The commercial success of Corixa depends significantly on its ability to
operate without infringing the patents and proprietary rights of third parties,
and Corixa's and its corporate partners' technologies may, or in the future may,
infringe the patents or proprietary rights of others. A number of pharmaceutical
companies, biotechnology companies, universities and research institutions may
have filed patent applications or may have received patent grants that cover
technologies similar to the technologies owned, optioned by or licensed to
Corixa or its corporate partners. In addition, Corixa is unable to determine the
patents or patent applications that may materially affect Corixa's or its
corporate partners' ability to make, use or sell any products. The existence of
third party patent applications and patents could significantly reduce the
coverage of the patents owned, optioned by or licensed to Corixa or its
corporate partners and limit the ability of Corixa or its corporate partners to
obtain meaningful patent protection. If patents containing competitive or
conflicting claims are issued to third parties, Corixa or its corporate partners
may be enjoined from pursuing research, development or commercialization of
products or be required to obtain licenses to these patents or to develop or
obtain alternative technology. Corixa or its corporate partners may be so
enjoined or may not be able to obtain any license to the patents and
technologies of third parties on acceptable terms, if at all. Corixa or its
corporate partners may not be able to obtain or develop alternative
technologies. If Corixa or any of its corporate partners is enjoined from
pursuing its research, development or commercialization activities or if any
such license is not, or alternative technologies are not, obtained or developed,
Corixa or such corporate partner may be delayed or prevented from
commercializing its products, which would have a material adverse effect on
Corixa's business, financial condition and results of operations.
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Third parties may independently develop similar or alternative
technologies to those of Corixa, duplicate any of the technologies of Corixa,
its corporate partners or its licensors, or design around the patented
technologies developed by Corixa, its corporate partners or its licensors. The
occurrence of any of these events would have a material adverse effect on
Corixa's business, financial condition and results of operations.
Litigation may also be necessary to enforce patents issued or licensed
to Corixa or its corporate partners or to determine the scope and validity of a
third party's proprietary rights. Corixa could incur substantial costs if
litigation is required to defend itself in patent suits brought by third
parties, if Corixa participates in patent suits brought against or initiated by
its corporate partners or if Corixa initiates such suits. Funds or resources may
not be available to Corixa in the event of any such litigation. Additionally,
Corixa or its corporate partners may not prevail in any such action. An adverse
outcome in litigation or an interference to determine priority or other
proceeding in a court or patent office could subject Corixa to significant
liabilities, require disputed rights to be licensed from other parties or
require Corixa or its corporate partners to cease using certain technology, any
of which may have a material adverse effect on Corixa's business, financial
condition and results of operations.
Corixa also relies on trade secrets and proprietary know-how, especially
in circumstances in which patent protection is not believed to be appropriate or
obtainable. Corixa attempts to protect its proprietary technology in part by
confidentiality agreements with its employees, consultants and advisors. These
agreements generally provide that all confidential information developed or made
known to the individual by Corixa during the course of the individual's
relationship with Corixa will be kept confidential and not disclosed to third
parties except in specific circumstances. These agreements also generally
provide that all inventions conceived by the individual in the course of
rendering services to Corixa shall be the exclusive property of Corixa. These
agreements may not provide meaningful protection or adequate remedies for any
breach, and Corixa's trade secrets may otherwise become known or be
independently discovered by its competitors, any of which could have a material
adverse effect on Corixa's business, financial condition and results of
operations.
Clinical Results of Acquired Technology May Not Be Reproducible.
Clinical results from trials of companies acquired, or from technology acquired
through in-licensing may not be reproducible by the Company. Inability to
reproduce such clinical results could have a material adverse effect on Corixa's
business, financial condition and results of operations.
Corixa Has a History of Operating Losses. Corixa has experienced
significant operating losses in each year since its inception on September 8,
1994. As of December 31, 1998, Corixa's accumulated deficit was approximately
$33.3 million. Corixa may incur substantial additional operating losses over at
least the next several years. Such losses have been and may continue to be
principally the result of the various costs associated with Corixa's discovery,
research and development programs, preclinical studies and clinical activities.
Substantially all of Corixa's revenues to date have resulted from corporate
partnerships, other research, development and licensing arrangements, research
grants and interest income. Corixa's ability to achieve a consistent, profitable
level of operations is dependent in large part upon entering into agreements
with corporate partners for product discovery, research, development and
commercialization, obtaining regulatory approvals for its products and
successfully manufacturing and marketing commercial products. Corixa may not be
able to achieve consistent profitability. In addition, payments under corporate
partnerships and licensing arrangements will be subject to significant
fluctuations in both timing and amounts, resulting in quarters of profitability
and quarters of losses by Corixa. Therefore, Corixa's results of operations for
any period may fluctuate and may not be comparable to the results of operations
for any other period.
Corixa's Need for, and Ability to Secure, Additional Funding is
Uncertain. The Company will require substantial capital resources in order to
conduct its operations. The Company's future capital requirements will depend on
many factors, including, among others, the following:
- continued scientific progress in its discovery, research and development
programs;
- the magnitude and scope of its discovery, research and development
programs;
- the ability of the Company to maintain existing, and establish
additional, corporate partnerships and licensing arrangements;
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- progress with preclinical studies and clinical trials;
- the time and costs involved in obtaining regulatory approvals;
- the costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims;
- the potential need to develop, acquire or license new technologies and
products; and
- other factors not within the Company's control.
The Company intends to seek such additional funding through corporate
partnerships, public or private equity or debt financings and capital lease
transactions. Additional financing, however, may not be available on acceptable
terms, if at all. Additional equity financings could result in significant
dilution to stockholders. If sufficient capital is not available, the Company
may be required to delay, reduce the scope of, eliminate or divest one or more
of its discovery, research or development programs, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. Corixa believes that following the GenQuest merger, the
Company's existing capital resources, committed payments under existing
corporate partnerships and licensing arrangements, bank credit arrangements,
equipment financing and interest income will be sufficient to fund the Company's
current and planned operations over at least the next 12 months. Such funds,
however, may not be sufficient to meet the capital needs of the Company. In
addition, a substantial number of the payments to be made by Corixa's corporate
partners and other licensors are dependent upon the achievement by Corixa of
development and regulatory milestones. Failure to achieve such milestones would
have a material adverse effect on the Company's future capital needs.
Corixa is Dependent on Key Personnel. Corixa is highly dependent on the
principal members of its scientific and management staff, the loss of whose
services might significantly delay or prevent Corixa's achievement of its
scientific or business objectives. Competition among biotechnology and
biopharmaceutical companies for qualified employees is intense, and the ability
to retain and attract qualified individuals is critical to Corixa's success.
Corixa may not be able to attract and retain such individuals currently or in
the future on acceptable terms, or at all, and the failure to do so would have a
material adverse effect on Corixa's business, financial condition and results of
operations. In addition, Corixa does not maintain "key person" life insurance on
any officer, employee or consultant of Corixa. Corixa also has relationships
with scientific collaborators at academic and other institutions, some of whom
conduct research at Corixa's request or assist Corixa in formulating its
research and development strategy. These scientific collaborators are not
employees of Corixa and may have commitments to, or consulting or advisory
contracts with, other entities that may limit their availability to Corixa.
Corixa has limited control over the activities of these scientific collaborators
and, except as otherwise required by its license, consulting and sponsored
research agreements, can expect only limited amounts of time to be dedicated to
Corixa's activities by such individuals. Failure of any such persons to devote
sufficient time and resources to Corixa's programs could have a material adverse
effect on Corixa's business, financial condition and results of operations. In
addition, these collaborators may have arrangements with other companies to
assist such companies in developing technologies that may prove competitive to
those of Corixa.
Corixa Faces Intense Competition. The biotechnology and
biopharmaceutical industries are intensely competitive. Several biotechnology
and biopharmaceutical companies, as well as certain research organizations,
currently engage in, or have in the past engaged in, efforts related to the
development of vaccines for the treatment and prevention of cancers and various
infectious diseases, as well as the development of diagnostic products for
infectious disease indications. Many companies, including Corixa's corporate
partners as well as academic and other research organizations, are also
developing alternative therapies to treat cancers, infectious diseases and
autoimmune diseases and, in this regard compete with Corixa. Moreover,
technology controlled by third parties that may be advantageous to Corixa's
business may be acquired or licensed by competitors of Corixa, thereby
preventing Corixa from obtaining such technology on favorable terms, or at all.
Many of the companies developing competing technologies and products
have significantly greater financial resources and expertise in discovery,
research and development, manufacturing, preclinical and clinical testing,
obtaining regulatory approvals and marketing than Corixa or its corporate
partners. Other smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and established
companies. Academic institutions, government agencies and other public and
private research organizations may also conduct research, seek patent protection
and establish collaborative arrangements
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for discovery, research, clinical development and marketing of products similar
to those of Corixa. These companies and institutions compete with Corixa in
recruiting and retaining qualified scientific and management personnel as well
as in acquiring technologies complementary to Corixa's programs. Corixa and its
corporate partners will face competition with respect to product efficacy and
safety, the timing and scope of regulatory approvals, availability of resources,
reimbursement coverage, price and patent position, including potentially
dominant patent positions of others. Competitors may develop more effective or
more affordable products, or may achieve earlier patent protection or product
commercialization than Corixa and its corporate partners. Such competitive
products may render Corixa's products obsolete.
Corixa Lacks Manufacturing Experience and Relies on Contract
Manufacturers. Corixa does not have significant manufacturing facilities.
Although Corixa currently manufactures limited quantities of certain antigens
and adjuvants, including Corixa's novel LeIF adjuvant, to conduct preclinical
studies and to supply corporate partners, Corixa intends to rely on third party
contract manufacturers to produce large quantities of such substances for
clinical trials and product commercialization. Additionally, Corixa may be
required to rely on contract manufacturers to produce antigens, adjuvants and
other components of its products for research and development, preclinical and
clinical purposes. Corixa's vaccines and other products have never been
manufactured on a commercial scale. Such products may not be able to be
manufactured at a cost or in quantities necessary to make them commercially
viable. Third party manufacturers may not be able to meet Corixa's needs with
respect to timing, quantity or quality. If Corixa is unable to contract for a
sufficient supply of required products and substances on acceptable terms, or if
it should encounter delays or difficulties in its relationships with
manufacturers, Corixa's preclinical and clinical testing would be delayed,
thereby delaying the submission of products for regulatory approval or the
market introduction and subsequent sales of such products. Any such delay may
have a material adverse effect on Corixa's business, financial condition and
results of operations. Moreover, contract manufacturers that Corixa may use must
continually adhere to current Good Manufacturing Practices ("GMP") regulations
enforced by the FDA through its facilities inspection program. If the facilities
of such manufacturers cannot pass a pre-approval plant inspection, the FDA
premarket approval of Corixa's products will not be granted.
Corixa Lacks Marketing Experience and is Dependent on Third Parties.
Corixa currently has no sales, marketing or distribution capability. Corixa
intends to rely on its current and future corporate partners, if any, to market
its products. Such corporate partners, however, may not have effective sales
forces and distribution systems. If Corixa is unable to maintain or establish
such relationships and is required to market any of its products directly,
Corixa will have to develop a marketing and sales force with technical expertise
and with supporting distribution capabilities. Corixa may not be able to
maintain or establish such relationships with third parties or develop in-house
sales and distribution capabilities. To the extent that Corixa depends on its
corporate partners or third parties for marketing and distribution, any revenues
received by Corixa will depend upon the efforts of such corporate partners or
third parties. Such efforts may not be successful.
Corixa Faces Much Government Regulation. The preclinical testing and
clinical trials of any products developed by Corixa or its corporate partners
and the manufacturing, labeling, sale, distribution, export or import,
marketing, advertising and promotion of any new products resulting therefrom are
subject to regulation by federal, state and local governmental authorities in
the United States, the principal one of which is the FDA, and by similar
agencies in other countries. Any product developed by Corixa or its corporate
partners must receive all relevant regulatory approvals or clearances before it
may be marketed in a particular country. The regulatory process, which includes
extensive preclinical studies and clinical trials of each product in order to
establish its safety and efficacy, is uncertain, can take many years and
requires the expenditure of substantial resources. Data obtained from
preclinical and clinical activities are susceptible to varying interpretations
which could delay, limit or prevent regulatory approval or clearance. In
addition, delays or rejections may be encountered based upon changes in
regulatory policy during the period of product development and/or the period of
review of any application for regulatory approval or clearance for a product.
Delays in obtaining regulatory approvals or clearances would adversely affect
the marketing of any products developed by Corixa or its corporate partners,
impose significant additional costs on Corixa and its corporate partners,
diminish any competitive advantages that Corixa or its corporate partners may
attain and adversely affect Corixa's ability to receive royalties and generate
revenues and profits. Even after such time and expenditures, any required
approvals or clearances may not be obtained for any products developed by or in
collaboration with Corixa.
Regulatory approval, if granted, may entail limitations on the indicated
uses for which the new product may be marketed that could limit the potential
market for such product, and product approvals, once granted, may be withdrawn
if problems occur after initial marketing. Furthermore, manufacturers of
approved products are subject to pervasive review, including compliance with
detailed regulations governing GMP. The FDA has recently revised the GMP
regulations. The new Quality System Regulation imposes design controls and makes
other significant changes in the requirements applicable to manufacturers.
Failure to comply with
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applicable regulatory requirements can result in, among other things, warning
letters, fines, injunctions, civil penalties, recall or seizure of products,
total or partial suspension of production, refusal of the government to renew
marketing applications and criminal prosecution.
Corixa is also subject to numerous federal, state and local laws,
regulations and recommendations relating to safe working conditions, laboratory
and manufacturing practices, the experimental use of animals, the environment
and the use and disposal of hazardous substances, used in connection with
Corixa's discovery, research and development work, including radioactive
compounds and infectious disease agents. In addition, Corixa cannot predict the
extent of government regulations or the impact of new governmental regulations
which might have an adverse effect on the discovery, development, production and
marketing of Corixa's products. Corixa may be required to incur significant
costs to comply with current or future laws or regulations. Corixa may be
adversely affected by the cost of such compliance.
Corixa Faces Product Liability Exposure and Potential Unavailability of
Insurance. Corixa risks financial exposure to product liability claims in the
event that the use of such products results in personal injury. Corixa may
experience losses due to product liability claims in the future. Corixa has
obtained limited product liability insurance coverage. Such coverage, however,
may not be adequate or may not continue to be available in sufficient amounts or
at an acceptable cost, or at all. Corixa may not be able to obtain commercially
reasonable product liability insurance for any product approved for marketing. A
product liability claim, product recalls or other claim, as well as any claims
for uninsured liabilities or in excess of insured liabilities, may have a
material adverse effect on Corixa's business, financial condition and results of
operations.
Corixa's Products May Not be Accepted by the Market. Any products
successfully developed by Corixa or its corporate partners, if approved for
marketing, may never achieve market acceptance. Corixa's products, if
successfully developed, will compete with a number of traditional drugs and
therapies manufactured and marketed by major pharmaceutical and other
biotechnology companies, as well as new products currently under development by
such companies and others. The degree of market acceptance of any products
developed by Corixa or its corporate partners will depend on a number of
factors, including the establishment and demonstration of the clinical efficacy
and safety of the product candidates, their potential advantage over alternative
treatment methods and reimbursement policies of government and third-party
payors. Physicians, patients or the medical community in general may not accept
and utilize any products that may be developed by Corixa or its corporate
partners. The lack of such market acceptance would have a material adverse
effect on Corixa's business, financial condition and results of operations.
Corixa Faces Uncertainty Related to Pricing and Reimbursement and Health
Care Reform. In both domestic and foreign markets, sales of Corixa's or its
corporate partners' products, if any, will depend in part on the availability of
reimbursement from third-party payors such as government health administration
authorities, private health insurers, health maintenance organizations, pharmacy
benefit management companies and other organizations. Both the federal and state
governments in the United States and foreign governments continue to propose and
pass legislation designed to contain or reduce the cost of health care, and
regulations affecting the pricing of pharmaceuticals and other medical products
may change or be adopted before any of Corixa's or its corporate partners'
products are approved for marketing. Cost control initiatives could decrease the
price that Corixa receives for any product it or any of its corporate partners
may develop in the future and may have a material adverse effect on Corixa's
business, financial condition and results of operations. In addition,
third-party payors are increasingly challenging the price and cost-effectiveness
of medical products and services. Significant uncertainty exists as to the
reimbursement status of newly approved health care products, including
pharmaceuticals. Corixa's or its corporate partners' products, if any, may not
be considered cost effective or that adequate third-party reimbursement will be
available to enable Corixa or its corporate partners to maintain price levels
sufficient to realize a return on their investment. In any such event, Corixa's
business, financial condition and results of operations may be materially
adversely affected.
Corixa Faces Potential Volatility in Its Stock Price. The market prices
for securities of biotechnology companies have in the past been, and can in the
future be expected to be, especially volatile. The market price of Corixa's
Common Stock may be subject to substantial volatility depending upon many
factors, including:
- Announcements regarding the results of discovery efforts, preclinical and
clinical activities;
- Announcements regarding the acquisition of technologies or companies,
including the GenQuest and Anergen mergers;
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- Technological innovations or new commercial products developed by Corixa
or its competitors;
- Changes in government regulations;
- Changes in Corixa's patent portfolio;
- Developments or disputes concerning proprietary rights, changes in
existing corporate partnerships or licensing arrangements;
- Establishment of additional corporate partnerships or licensing
arrangements;
- Progress of regulatory approvals;
- Issuance of new or changed stock market analyst reports and/or
recommendations;
- Economic and other external factors;
- Operating losses by Corixa; and
- Fluctuations in Corixa's financial results and degree of trading liquidity
in its Common Stock.
These factors could have a material adverse effect on Corixa's business,
financial condition and results of operations and the price of its Common Stock
in the public market.
Control By Existing Stockholders. As of February 28, 1999,
executive officers and directors of Corixa, together with entities
affiliated with them, beneficially own approximately 43.3% of the
outstanding Corixa Common Stock together with applicable options and
warrants held by such stockholders. The voting power of these stockholders
could have the effect of delaying or preventing a change in control of
Corixa. For further information refer to the Company's 1999 Proxy
Statement to be filed within 120 days after the end of the Company's
fiscal year ended December 31, 1998.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
38
40
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Corixa Corporation
We have audited the accompanying balance sheets of Corixa Corporation 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 Corixa Corporation 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
Seattle, Washington
February 3, 1999
39
41
CORIXA CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
DECEMBER 31,
----------------------
1998 1997
-------- --------
Current assets:
Cash and cash equivalents ................................................... $ 9,098 $ 16,458
Securities available-for-sale ............................................... 36,043 39,860
Accounts receivable (including $161 and $79
receivable from an affiliated company at December 31,
1998 and December 31, 1997, respectively) ................................ 3,449 602
Interest receivable ......................................................... 567 134
Prepaid expenses ............................................................ 516 506
-------- --------
Total current assets .......................................................... 49,673 57,560
Property and equipment, net ................................................... 8,831 4,046
Investments ................................................................... 2,544 --
Deferred charges and deposits ................................................. 136 201
-------- --------
Total assets .................................................................. $ 61,184 $ 61,807
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities .................................... $ 4,368 $ 1,571
Deferred revenue ............................................................ 100 1,097
Current portion of long-term obligations .................................... 2,697 930
-------- --------
Total current liabilities ..................................................... 7,165 3,598
Long-term obligations, less current portion ................................... 11,835 6,924
Stockholders' equity:
Convertible preferred stock, $0.001 par value:
Authorized shares -- 10,000,000 (1998 and 1997)
Common stock, $0.001 par value:
Authorized shares -- 40,000,000
Issued and outstanding shares -- 13,400,895 in 1998
and 11,774,214 in 1997 .................................................. 13 12
Additional paid-in capital .................................................. 76,539 66,467
Receivable for warrants ..................................................... -- (652)
Deferred compensation ....................................................... (1,180) (2,575)
Accumulated other comprehensive income/ (loss) .............................. 90 (5)
Accumulated deficit ......................................................... (33,278) (11,962)
-------- --------
Total stockholders' equity .................................................... 42,184 51,285
-------- --------
Total liabilities and stockholders' equity .................................... $ 61,184 $ 61,807
======== ========
40
42
CORIXA CORPORATION
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
-------- -------- --------
Revenue:
Collaborative agreements .................... $ 17,003 $ 13,390 $ 4,402
Government grants ........................... 1,267 977 1,403
-------- -------- --------
Total revenue ............................. 18,270 14,367 5,805
Operating expenses:
Research and development .................... 27,436 16,398 9,995
General and administrative .................. 2,672 2,033 781
In-process research and development ......... 12,021 -- --
-------- -------- --------
Total operating expenses .................. 42,129 18,431 10,776
-------- -------- --------
Loss from operations .......................... (23,859) (4,064) (4,971)
Interest income ............................... 3,016 1,300 642
Interest expense .............................. (767) (327) (166)
Other income .................................. 294 415 348
-------- -------- --------
Net loss ...................................... $(21,316) $ (2,676) $ (4,147)
======== ======== ========
Basic and diluted net loss
per share ................................... $ (1.75) $ (0.55) $ (1.65)
======== ======== ========
Shares used in computation
of basic and diluted net loss
per share ................................... 12,172 4,891 2,521
======== ======== ========
Pro forma basic and diluted
net loss per share .......................... $ (0.31) $ (0.55)
======== ========
Shares used in computation
of pro forma basic and diluted
net loss per share ......................... 8,755 7,490
======== ========
41
43
CORIXA CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE
--------------------- -------------------- PAID-IN FOR
SHARES AMOUNT SHARES AMOUNT CAPITAL WARRANTS
------ -------- ------ -------- -------- ---------
Balance at January 1, 1996 ................. 4,646 $ 5 2,493 $ 3 $ 15,384 $ --
Issuance of common stock, valued at
$0.33 per share for services ...... -- -- 33 -- 13 --
Stock options exercised ................ -- -- 68 -- 22 --
Issuance of Series B convertible
preferred stock for cash, at $9.90 per
share ................................ 505 1 -- -- 4,999 --
Issuance of Series A convertible
preferred stock and common stock
warrants for acquired technology ..... -- -- -- -- 97 --
Warrants issued in exchange for
receivable ........................... -- -- -- -- 1,140 (1,140)
Net unrealized loss on securities
available-for-sale ................... -- -- -- -- -- --
Net loss ............................... -- -- -- -- -- --
Comprehensive loss ......................
----- -------- ------- -------- -------- --------
Balance at December 31, 1996 ............... 5,151 6 2,594 3 21,655 (1,140)
Warrants payment received ................ -- -- -- -- -- 488
Stock options exercised .................. -- -- 126 -- 69 --
Issuance of common stock, valued at
$8.25 and $9.08 per share for ........... -- -- 8 -- 65 --
Deferred compensation related to
stock option grants ..................... -- -- -- -- 3,904 --
Amortization of deferred compensation..... -- -- -- -- -- --
Proceeds from initial public offering
(net of offering costs of $932,404
commissions of $3,139,500) ............. -- -- 3,450 4 40,774 --
Preferred stock conversion upon .......... (5,151) (6) 5,151 5 (1)
Stock warrants net exercised ............. -- -- 445 0 -- --
Net unrealized gain on securities
available-for-sale ..................... -- -- -- -- -- --
Net loss ................................ -- -- -- -- -- --
Comprehensive loss ......................
----- -------- ------- -------- -------- --------
Balance at December 31, 1997 ............... -- -- 11,774 12 66,467 (652)
Warrants payment received ................ -- -- -- -- -- 652
Stock options exercised .................. -- -- 106 -- 59 --
Issuance of common stock, employee stock
purchase plan .......................... -- -- 6 -- 32 --
Issuance of common stock for GenQuest .... --
acquisition ............................. -- -- 1,064 1 7,350 --
Issuance of common stock in exchange for
technology and services ................. -- -- 23 -- 131 --
Amortization of deferred compensation..... -- -- -- -- -- --
Issuance of common stock
for cash, at $5.84 per share ......... -- -- 428 -- 2,500 --
Net unrealized gain on securities
available-for-sale ................... -- -- -- -- -- --
Net loss ............................... -- -- -- -- -- --
Comprehensive loss ......................
----- -------- ------- -------- -------- --------
Balance at December 31, 1998 ............... -- -- 13,401 $ 13 $ 76,539 $ --
===== ======== ======= ======== ======== ========
OTHER
DEFERRED COMPREHENSIVE ACCUMULATED
COMPENSATION INCOME/(LOSS) DEFICIT TOTAL
------------ -------------- ----------- --------
Balance at January 1, 1996 ................. $ -- $ 13 $ (5,139) $ 10,266
Issuance of common stock, valued at
$0.33 per share for services ...... -- -- -- 13
Stock options exercised ................ -- -- -- 22
Issuance of Series B convertible
preferred stock for cash, at $9.90 per
share ................................ -- -- -- 5,000
Issuance of Series A convertible
preferred stock and common stock
warrants for acquired technology ..... -- -- -- 97
Warrants issued in exchange for
receivable ........................... -- -- -- --
Net unrealized loss on securities
available-for-sale ................... -- (25) (25)
Net loss ............................... -- -- (4,147) (4,147)
--------
Comprehensive loss ...................... (4,172)
-------- -------- -------- --------
Balance at December 31, 1996 ............... -- (12) (9,286) 11,226
Warrants payment received ................ -- -- -- 488
Stock options exercised .................. -- -- -- 69
Issuance of common stock, valued at
$8.25 and $9.08 per share for ........... -- -- -- 65
Deferred compensation related to
stock option grants ..................... (3,904) -- -- --
Amortization of deferred compensation .... 1,329 -- -- 1,329
Proceeds from initial public offering
(net of offering costs of $932,404
commissions of $3,139,500) ............. -- -- -- 40,778
Preferred stock conversion upon .......... (1)
Stock warrants net exercised ............. -- -- -- 0
Net unrealized gain on securities
available-for-sale ..................... -- 7 7
Net loss ................................ -- -- (2,676) (2,676)
--------
Comprehensive loss ...................... (2,669)
-------- -------- -------- --------
Balance at December 31, 1997 ............... (2,575) (5) (11,962) 51,285
Warrants payment received ................ -- -- -- 652
Stock options exercised .................. -- -- -- 59
Issuance of common stock, employee stock
purchase plan .......................... -- -- -- 32
Issuance of common stock for GenQuest ....
acquisition ............................. -- -- -- 7,351
Issuance of common stock in exchange for
technology and services ................. -- -- -- 131
Amortization of deferred compensation..... 1,395 -- -- 1,395
Issuance of common stock
for cash, at $5.84 per share ......... -- -- -- 2,500
Net unrealized gain on securities
available-for-sale ................... -- 95 -- 95
Net loss ............................... -- -- (21,316) (21,316)
--------
Comprehensive loss ...................... (21,221)
-------- -------- -------- --------
Balance at December 31, 1998 ............... $ (1,180) $ 90 $(33,278) $ 42,184
======== ======== ======== ========
42
44
CORIXA CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
-------- -------- --------
Operating activities
Net loss ..................................................................... $(21,316) $ (2,676) $ (4,147)
Adjustments to reconcile net loss to net cash used in operating activities:
In-process research and development ........................................ 12,021 -- --
Amortization of deferred compensation ...................................... 1,395 1,329 --
Depreciation and amortization .............................................. 1,609 1,091 571
Equity instruments issued in exchange for technology
and services ............................................................ 131 65 97
Write-off of warrant receivable ............................................ 489 -- --
Changes in certain assets and liabilities:
Accounts receivable ...................................................... (2,805) 80 (635)
Interest receivable ...................................................... (433) (129) 50
Prepaid expenses ......................................................... 109 (242) (87)
Deferred charges and deposits ............................................ 66 (138) 6
Accounts payable and accrued expenses .................................... 2,305 592 409
Deferred revenue ......................................................... (1,097) (221) 905
-------- -------- --------
Net cash used in operating activities ....................................... (7,526) (249) (2,831)
INVESTING ACTIVITIES
Purchases of securities available-for-sale ................................... (86,844) (35,802) (11,270)
Proceeds from maturities of securities available-for-sale .................... 63,751 5,794 9,118
Proceeds from sale of securities ............................................. 27,004 -- --
Purchases of property and equipment .......................................... (5,590) (888) (544)
Investment in Immgenics ...................................................... (1,750)
Anergen preacquisition cost .................................................. (345)
Cash paid in acquisitions - net of cash acquired ............................. (4,737) -- --
-------- -------- --------
Net cash provided by (used in) investing activities ......................... (8,511) (30,896) (2,696)
FINANCING ACTIVITIES
Proceeds from issuance of common stock ....................................... 2,591 40,847 5,035
Proceeds from long term obligations .......................................... 5,000 2,000 --
Borrowings from collaborative agreement ...................................... 2,000 3,000 --
Principal payments on capital leases ......................................... (1,077) (820) (425)
Payments on receivables for warrants ......................................... 163 488 --
Other ........................................................................ -- -- --
-------- -------- --------
Net cash used in financing activities ........................................ 8,677 45,515 4,610
Net increase (decrease) in cash and cash equivalents ......................... (7,360) 14,370 (916)
Cash and cash equivalents at beginning of period ............................. 16,458 2,088 3,004
-------- -------- --------
Cash and cash equivalents at end of period ................................... $ 9,098 $ 16,458 $ 2,088
======== ======== ========
SUPPLEMENTAL DISCLOSURES
Interest paid .............................................................. 706 327 166
SUPPLEMENTAL SCHEDULE OF NONCASH, INVESTING, AND
FINANCING ACTIVITIES
Equity instruments issued - GenQuest acquisition ............................ $ 7,352 $ -- $ --
Assets acquired pursuant to capital leases .................................. 308 2,067 996
43
45
CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Corixa Corporation is focused on the discovery and early clinical
development of products useful in preventing, treating or diagnosing cancer and
certain infectious diseases as well as immunotherapeutic products for the
treatment of certain autoimmune diseases.
CASH AND CASH EQUIVALENTS
All short-term investments, which consist primarily of bankers' acceptances
and certificates of deposit, with maturities of three months or less at date of
purchase are considered to be cash equivalents. The amounts are recorded at
cost, which approximates fair market value.
SECURITIES AVAILABLE-FOR-SALE
The Company's investment portfolio is classified as available-for-sale. The
Company's main investment objectives are preservation of principal, a high
degree of liquidity and a maximum total return. The Company invests primarily in
(U.S. denominated only): commercial paper; short and mid-term corporate
notes/bonds, with no more than 10% of the portfolio in any one corporate issuer;
and Federal agencies with terms not exceeding four years. Such securities are
stated at fair value, with the unrealized gains and losses reflected in
stockholders' equity. Interest earned on securities is included in interest
income. The amortized cost of investments is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization and
accretions are included in interest income. The cost of securities sold is
calculated using the specific identification method.
MANAGEMENT OF CREDIT RISK
The Company is subject to concentration of credit risk, primarily from its
investments. Credit risk for investments is managed by purchase of investment
grade securities, A1/P1 for money market instruments and A or better for debt
instruments, and diversification of the investment portfolio among issuers and
maturities.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and is depreciated on the
straight-line method over the assets' estimated useful lives, which range from
three to four years. Leasehold improvements are amortized over the lesser of
their estimated useful lives or the term of the lease. Amortization of assets
recorded under capital leases is included in depreciation.
STOCK-BASED COMPENSATION
The Company has adopted the disclosure-only provisions of Financial
Accounting Standards No. 123 and applies Accounting Principles Board Opinion No.
25 ("APB 25") and related Interpretations in accounting for its stock option
plans. Accordingly, Corixa's employee stock-based compensation expense is
recognized based on the intrinsic value of the option on the date of grant. Pro
forma disclosure of net loss and net loss per share under Statement 123 is
provided in Note 6.
Stock-based awards granted to non-employees are expensed based on the fair
market value of the award at the date that performance has been completed.
USE OF ESTIMATES
44
46
CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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.
OTHER FINANCIAL INSTRUMENTS
At December 31, 1998 and December 31, 1997, the carrying value of financial
instruments such as receivables and payables approximated their fair values,
based on the short-term maturities of these instruments. Additionally, the
carrying value of long-term liabilities approximated fair values because the
underlying interest rates approximate market rates at the balance sheet dates.
PRINCIPLES OF CONSOLIDATION
As a result of the merger with GenQuest, all significant inter-company
account balances and transactions have been eliminated in consolidation.
REVENUE
Revenue under collaborative agreements typically consists of nonrefundable
up-front fees, ongoing research funding, development and technology access
payments, and milestone and royalty payments. Revenue from nonrefundable
up-front fees is recognized upon satisfaction of related obligations. Revenue
from ongoing research and co-development payments is recognized ratably over the
term of the agreement, as the Company believes such payments approximate the
research and development expense being incurred associated with the agreement.
Revenue from milestone, royalty, and other contingent payments will be
recognized as earned. Advance payments received under any agreements in excess
of amounts earned are recorded as deferred revenue. Revenue under cost
reimbursement contracts is recognized as the related costs are incurred. The
Company recognized 76%, 74% and 71% of its revenue in fiscal years 1998, 1997
and 1996, respectively from two collaborative partners. Grant revenue
represented 7% of the Company's revenue during the twelve month period ended
December 31, 1998 and 7% during the same period in 1997.
RESEARCH AND DEVELOPMENT EXPENSES
Pursuant to SFAS No. 2, "Accounting for Research and Development Costs,"
the Company's research and development costs are expensed as incurred. Acquired
In-Process Research and Development is charged to expense.
INCOME TAXES
Corixa accounts for income taxes using the liability method under Statement
of Accounting Standards No. 109, "Accounting for Income Taxes."
NET LOSS PER SHARE CALCULATION
Basic loss per share is based on the weighted average number of common
shares outstanding for the period, and excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share assumes the
conversion of all dilutive securities, such as options, warrants and convertible
preferred stock, unless such inclusion is anti-dilutive.
As all preferred stock converted to common stock at the closing of Corixa's
initial public offering, (the "Offering") pro forma basic and diluted loss per
share is computed on the basis of the average number of common shares
outstanding plus the effect of preferred shares using the "if-converted" method.
COMPREHENSIVE LOSS
As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements and
45
47
CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
requires reclassification of financial statements for earlier periods to be
provided for comparative purposes. The Company's comprehensive loss includes all
items which comprise net loss and the effect of unrealized gains/(losses) on
available-for-sale securities. Comprehensive income is shown on the statement of
stockholders' equity.
SEGMENT REPORTING
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the manner in which public companies report information about operating segments
in annual and interim financial statements. The statement is effective for
fiscal years beginning after December 15, 1997. The Company does not have any
reporting requirements as defined by SFAS No. 131.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' financial
statements to conform to the 1998 presentation.
2. SCIENTIFIC COLLABORATIVE AND LICENSE AGREEMENTS
In October 1998, Corixa entered into a collaboration and license agreement
effective September 1, 1998 with SmithKline Beecham, which superseded and
significantly expanded the scope of Corixa's then-existing agreements with SB
Manufacturing and SB Biologicals. SmithKline Beecham has committed to funding of
$43.6 million for work that is performed in multiple discovery programs over the
next four years. Corixa and SmithKline Beecham may mutually agree to extend the
research and development programs beyond the initial four-year term.
In addition, SmithKline Beecham purchased $2.5 million worth of Corixa
Common Stock at a premium to its fair market value, and Corixa has the right in
the future to require SmithKline Beecham to purchase an additional $2.5 million
of Corixa Common Stock, at a premium to its then-current fair market value. The
equity component combined with the discovery program payment results in
aggregate funding of $48.6 million during the first four years of the agreement.
Additionally, with respect to the $5.0 million previously paid to Corixa by
SmithKline Beecham under the prior option agreements, which covered the
discovery fields of ovarian and colon cancer, SmithKline Beecham may elect to
have Corixa repay such amount to SmithKline Beecham on September 1, 2003 or
convert such amounts into the purchase of Corixa Common Stock at a premium to
its then-current fair market value.
The Company has various other collaborative research agreements with
academic universities and research institutions, which expire at various
intervals through 2000. Certain agreements stipulate the reimbursement by the
Company of research costs incurred by these universities and institutions on
behalf of the Company. Included in research and development expenses for the
years ended December 31, 1998, 1997 and 1996 are reimbursements approximating
$2.3 million, $1.8 million and $1.4 million, respectively. Certain 1998
collaborative agreements extend into fiscal years 1999 and 2000, and as of
December 31, 1998 the Company is committed to reimburse these universities and
institutions approximately $1.2 million and $212,000 in 1999 and 2000,
respectively.
The Company has entered into certain license agreements and obtained
options to negotiate license agreements under the terms of which the Company
received license, technology, and patent rights. During 1998, 1997 and 1996, the
Company paid initial license and/or option fees approximating $1.8 million,
$500,000 and $200,000 respectively. The Company issued 22,724, 19,697 and 33,328
shares of common stock during 1998, 1997 and 1996, for such rights. In
conjunction with certain 1996 collaboration agreements, the Company also issued
options to purchase 129,393 shares of common stock and warrants to purchase
75,757 and 163,636 shares of common stock and Series A Preferred Stock,
respectively. See Note 4.
Certain agreements call for royalty and milestone payments to be paid by
the Company. The agreements are for terms from 10 to 17 years or the expiration
of the last issued patent within the licensed technology, unless terminated
earlier for certain specified events, as defined in the respective agreements.
Additionally, the Company has entered into research and license agreements
and granted options to other parties to negotiate license agreements under the
terms of which the Company provides license, technology, and patent rights.
Under the terms of the
46
48
CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
agreements, the Company will receive additional license fees, option fees and/or
reimbursement of certain research and development costs through 1998. The
agreements provide for one-time payments upon the achievement of certain
milestones and the payment of royalties based on product sales.
3. ACQUISITION OF GENQUEST
On September 15, 1998, the Company acquired all of the outstanding shares
of common stock of GenQuest. GenQuest was a development stage biotechnology
company focused on applying functional genomics technology to discover novel
genes and to develop the potential of such genes and related gene products to be
used as diagnostics, therapeutics, and drug screening targets in the field of
oncology. Prior to the acquisition, Corixa was a stockholder in GenQuest.
Aggregate consideration for the acquisition was approximately $12.4
million, which consisted of 1,063,695 shares of Corixa common stock, with a
market value of approximately $7.3 million, approximately $4.5 million in cash,
and approximately $600,000 of acquisition costs. The aggregate purchase price
exceeded the fair value of tangible assets by approximately $12.0 million, and
this amount was allocated to in-process research and development during the
third quarter of 1998. The aggregate purchase price was allocated, based on
estimated fair values on the acquisition date, as follows (in thousands):
In-process research and
development $ 12,021
Net assets acquired 421
----------------
Total purchase price $ 12,442
================
In February 1996, Corixa entered into a license and research collaboration
agreement with GenQuest for the purpose of discovering, characterizing,
developing, and commercializing novel genes for use in the treatment,
prevention, or diagnosis of cancer. In connection with the agreement, Corixa
acquired an aggregate of 4,412,613 shares of Series A preferred stock of
GenQuest in exchange for the transfer of certain intellectual property rights.
The Series A preferred shares represented approximately 16% of GenQuest's
outstanding capital stock at December 31, 1997.
In conjunction with the relationship between Corixa and GenQuest, Corixa
issued warrants to purchase 454,533 shares of Corixa's Series B shares at a
price of $9.90 per share. The warrants expire on the earlier of December 23,
2001 or certain events as specified in the warrant agreements. A receivable of
$652,000 from GenQuest, which represents the outstanding amount due for the
warrants was established at the time of issuance. The remaining receivable was
expensed in connection with the acquisition of GenQuest (see below).
For the years ended December 31, 1998, 1997 and 1996, Corixa recognized
other income of approximately $204,000, $325,000 and $300,000, respectively, as
a result of administrative services provided to GenQuest.
In conjunction with its collaborative agreement with GenQuest, Corixa's
December 31, 1998 and 1997 results include collaborative revenue and research
and development expenses of approximately $1.0 million and $1.7 million and $1.9
million and $2.4 million, respectively. Additionally, Corixa recognized $652,000
and $488,000 in warrant amortization during the year ended December 31, 1998 and
1997, respectively. Corixa did not recognize collaborative revenue or research
and development expenses relating to GenQuest in 1996.
PRO FORMA FINANCIAL INFORMATION
The following pro forma information presents the results of operations of
the Company and GenQuest for the years ended December 31, 1998 and 1997 as if
the acquisition had been consummated as of the beginning of the periods
presented. This pro forma information does not purport to be indicative of what
would have occurred had the acquisitions been made as of those dates or of
results, which may occur in the future. The pro forma information does not
include the charge for purchased in-process technology of $12 million or other
transaction-related costs relating to the acquisition of GenQuest.
47
49
CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEAR ENDED
DECEMBER 31,
-------------------------
1998 1997
-------- --------
Total Revenue ........ $ 17,430 $ 12,477
Net Loss ............. $(10,855) $ (6,534)
Net loss per share ... $ (0.21) $ (0.67)
4. SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale consist of the following:
GROSS GROSS
MARKET UNREALIZED UNREALIZED AMORTIZED
VALUE GAINS LOSSES COST
-------- -------- -------- --------
December 31, 1998
U.S. Government agencies ... $ 9,609 $ 11 $ (12) $ 9,070
U.S. Corporate
obligations ............. 26,974 106 (15) 26,883
-------- -------- -------- --------
$ 36,043 $ 117 $ (27) $ 35,953
======== ======== ======== ========
December 31, 1997
U.S. Government agencies ... $ 13,978 $ 10 $ (8) $ 13,976
U.S. Corporate
obligations ............. 25,881 2 (10) 25,889
-------- -------- -------- --------
$ 39,859 $ 12 $ (18) $ 39,865
======== ======== ======== ========
Corixa's gross realized gains or losses were immaterial on sales of
available-for-sale securities for the fiscal years 1998 and 1997 and are
therefore not shown. The contractual maturities of Corixa's available-for-sale
securities are shown below:
ESTIMATED
FAIR MARKET AMORTIZED
VALUE COST
----------- ---------
December 31, 1998
Due in one year or less .................. $18,263 $18,218
Due in one year through three years ...... 17,780 17,735
------- -------
$36,043 $35,953
======= =======
December 31, 1997
Due in one year or less .................. $25,914 $25,915
Due after one year through three years ... 13,945 13,950
------- -------
$39,859 $39,865
======= =======
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
48
50
CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31,
-------------------------
1998 1997
-------- --------
Laboratory equipment ....................... $ 4,985 $ 3,577
Computers and office equipment ............. 2,182 1,151
Leasehold improvements ..................... 4,111 1,256
Construction in progress ............... 1,099 --
-------- --------
12,377 5,984
Accumulated depreciation and amortization .. (3,546) (1,938)
-------- --------
$ 8,831 $ 4,046
======== ========
At December 31, 1998 and 1997, the Company held equipment under capitalized
leases with an original cost of approximately $5.4 million and $4.3 million,
respectively, and a net book value of approximately $ 2.4 million and $2.9
million, respectively. These leases are secured by the underlying assets.
6. STOCKHOLDERS' EQUITY
COMMON STOCK
In October 1997, Corixa completed the Offering of its common stock by
selling 3,450,000 shares at $13 per share, resulting in proceeds to Corixa of
$40,778,096 net of underwriting discounts, commissions and offering expenses
incurred by Corixa.
PREFERRED STOCK
In connection with the Offering, Corixa's Series A Preferred Stock and
Series B Preferred Stock were converted, after obtaining the consent of a
majority of the holders of each class of such shares, into 5,151,181 shares of
common stock.
1994 STOCK OPTION PLAN
Corixa has a stock option plan, the Amended and Restated 1994 Stock Option
Plan (the "1994 Plan") under which an aggregate of 2,364,208 shares of common
stock were reserved for grants to employees, members of the Board of Directors,
and consultants as of December 31, 1998. Options granted under the 1994 Plan may
be designated as incentive or nonqualified at the discretion of the Plan
Administrator (as defined in the 1994 Plan). On July 25, 1997, Corixa amended
and restated the 1994 Plan, whereby the number of shares authorized under the
1994 Plan was increased by 700,000 shares and is subject to automatic increase
on the first trading day of each of the ten calendar years beginning in 1998 and
ending in 2007, in an amount equal to 3% of the number of shares of common stock
outstanding on December 31 of the immediately preceding calendar year, up to a
maximum of 500,000 shares each year over the ten-year period.
Generally, the options become exercisable over a four-year period with 25%
vesting upon the first year and the remainder vesting monthly thereafter. All
options expire no later than ten years from the date of grant. Incentive stock
options are exercisable at not less than the fair market value of the stock at
the date of grant, and nonqualified stock options are exercisable at prices
determined at the discretion of the Plan Administrator, but not less than 85% of
the fair market value of the stock at the date of grant. The Administrator has
the discretion to grant options that are exercisable for unvested shares of
Corixa Common Stock and, to the extent that an optionee holds options for such
unvested shares of Corixa Common Stock upon termination, Corixa has the right to
repurchase any or all of the unvested shares at the per-share exercise price
paid by the optionee for the unvested shares.
1997 EMPLOYEE STOCK PURCHASE PLAN
On July 25, 1997, Corixa adopted the 1997 Employee Stock Purchase Plan (the
"Purchase Plan"). Under the Purchase Plan, a total of 125,000 shares of common
stock were reserved for issuance under the Purchase Plan. The Purchase Plan
permits eligible
49
51
CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
employees to purchase shares of Corixa's common stock through payroll deductions
at a price equal to 85% of the fair market value of Corixa's common stock on the
first day or the last day of the applicable six-month offering period, whichever
is lower.
The number of authorized shares is subject to automatic increase on the
first trading day of each of the 20 calendar years beginning in 1998 and ending
in 2017. If the number of shares reserved for issuance is less than 1% of the
outstanding common stock, the number of shares reserved for issuance shall be
increased until it equals 1% of the outstanding common stock (up to a maximum of
125,000 in any calendar year), or such lower amount as determined by the Board
of Directors. The Board of Directors has the power to amend or terminate the
Purchase Plan as long as such action does not adversely affect any outstanding
rights to purchase stock thereunder. If not terminated earlier, the Purchase
Plan will have a term of 20 years.
In 1998, 5,887 shares were issued under the Purchase Plan at prices ranging
from $4.89 to $7.65.
1997 DIRECTORS' STOCK OPTION PLAN
The Directors' Plan was adopted by Corixa on July 25, 1997. As of December
31, 1998, a total of 250,000 shares of Corixa's common stock were reserved for
issuance under the Directors' Plan. The number of authorized shares is subject
to automatic increase, on the first trading day of each of the five calendar
years beginning in 1998 and ending in 2002 in an amount equal to 50,000 shares
of common stock or such lesser amount as the Board of Directors may establish.
The Directors' Plan provides for the grant of nonqualified stock options to
non-employee directors of Corixa. The Directors' Plan provides that each person
who first became a non-employee director of Corixa shall be granted nonqualified
stock options to purchase 15,000 shares of common stock (the "First Option").
Thereafter, on the first day of each fiscal year, commencing fiscal year 1998,
each non-employee director shall be automatically granted an additional option
to purchase 5,000 shares of common stock (a "Subsequent Option") if, on such
date, he or she shall have served on Corixa's Board of Directors for at least
six months. The First Options and Subsequent Options generally vest over 36 and
12 months, respectively, and have 10-year terms. The exercise price of such
options shall be equal to the fair market value of the Corixa's common stock on
the date of grant of the option. The Plan has a 10-year term unless terminated
earlier.
A summary of Corixa's stock option activity and related information
follows:
WEIGHTED
SHARES UNDER AVERAGE
OUTSTANDING PRICE PER EXERCISE
OPTIONS SHARE PRICE
------------ ----------------- --------
Balance at January 1, 1996 ............... 496,801 0.33 0.33
Options granted ........................ 182,413 0.33 - 0.99 0.58
Options exercised ...................... (67,999) 0.33 0.33
Options canceled ....................... (6,090) 0.33 - 0.99 0.38
----------
Balance at December 31, 1996 ............. 605,125 0.33 - 0.99 0.40
Options granted ........................ 710,004 0.99 - 13.50 2.08
Options exercised ...................... (126,188) 0.33 - 0.99 0.55
Options canceled ....................... (19,852) 0.33 - 0.99 0.67
----------
Balance at December 31, 1997 ............. 1,169,089 0.33 - 13.50 1.40
Options granted ........................ 433,775 5.00 - 9.50 8.22
Options assumed upon GenQuest merger ... 12,325 0.77 0.77
Options exercised ...................... (107,610) 0.33 - 0.99 0.61
Options canceled ....................... (68,253) 0.33 - 11.50 4.04
----------
Balance at December 31, 1998 ............. 1,439,326 0.33 - 13.50 3.38
==========
50
52
CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes information about the stock options
outstanding at December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ (WITHOUT RESTRICTION)
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISE
EXERCISE PRICES 12/31/98 LIFE PRICE SHARES PRICE
- --------------- ----------- ----------- -------- --------- ----------
$ 0.33 - 0.99 965,598 7.5 years $ 0.73 576,571 $ 0.61
$ 5.00 - 9.50 414,707 9.3 years $ 8.20 61,911 $ 9.12
$11.50 - 13.50 59,021 8.8 years $13.02 22,395 $13.06
--------- -------
$ 0.33 - 13.50 1,439,326 8.1 years $ 3.39 660,877 $1.83
========= =======
Deferred compensation of approximately $3.9 million was recorded during
1997 representing the difference between the exercise prices of options granted
during that period and the deemed fair market value. Deferred compensation
expense of $1.4 million and $1.3 million were amortized at for the years ended
December 31, 1998 and 1997 respectively.
Options of 17,095 and 96,845 shares had been exercised as of December 31,
1998 and 1997 respectively for which the underlying stock continues to be
restricted. During 1998 the Company repurchased 1,042 of unvested shares that
were previously exercised. At December 31, 1998 and 1997, 874,127 and 847,706,
respectively, shares remain available for grant.
PRO FORMA STOCK BASED COMPENSATION
Pro forma information regarding net loss and loss per share required by
Statement 123 has been determined as if Corixa had accounted for its employee
stock options under the fair value method of that Statement. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions on the option
grant date:
EMPLOYEE STOCK
EMPLOYEE STOCK OPTION PURCHASE PLAN
---------------------------------- -------------
1998 1997 1996 1998
Expected life (years) ..... 4 4 4 .94
Expected volatility ....... 67% 57% 0% 67%
Risk-free interest rate ... 5.5% 6.4% 6.5% 5.4%
Expected dividend yield ... 0.0% 0.0% 0.0% 0.0%
The weighted average fair value of options granted during 1998, 1997 and
1996 was $5.59, $6.60 and $0.17 per option, respectively.
Under Statement 123, if Corixa had elected to recognize the compensation
cost based upon the fair value of the options granted at the grant date, net
loss would have been increased as follows (the estimated fair value of the
options is amortized to expense over the options' vesting period or upon the
achievement of certain milestones):
51
53
CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1998 1997 1996
---------- ---------- ----------
Net loss:
As reported .................... $ (21,316) $ (2,676) $ (4,147)
Pro forma ...................... (22,395) (2,914) (4,171)
Pro forma net loss per share:
As reported .................... $ (1.75) $ (0.31) $ (0.55)
Pro forma ...................... (1.84) (0.33) (0.56)
The Statement 123 pro forma disclosures above are not necessarily
indicative of future pro forma disclosures because of the manner in which the
pro forma impact of Statement 123 calculations is phased in over time.
STOCK WARRANTS
During 1996, Corixa issued warrants to purchase 114,342 shares of common
stock at exercise prices ranging from $0.003 to $6.60 per share and 163,636
shares of Series A Preferred Stock at an exercise price of $6.60 per share.
These warrants were issued in connection with certain collaborative agreements
and the leasing of office and research facilities. Vesting of the warrants to
purchase 75,757 shares of common stock and warrants to purchase 163,636 shares
of Series A stock is contingent upon the achievement of certain milestones. The
weighted average grant-date fair value ranges from $0.99 to negligible per
share, and negligible per share for common stock and Series A shares,
respectively. Additional warrants to purchase 454,533 shares of Series B stock
were issued in 1996. (See Note 9 of these Corixa financial statements.)
In connection with the Offering, all Series A and Series B share warrants
were converted to warrants to purchase common shares on a share-for-share basis.
445,139 shares of common stock were issued upon the net exercise of 483,008
stock warrants during 1997. The number of common shares purchased reflects the
difference between the aggregate exercise price of the warrants and the market
price per share of the common stock of the aggregate number of shares
purchasable under the warrant.
Corixa recognizes research and development expense for the calculated fair
value of milestone specific warrants, for which milestone achievement has been
deemed probable by management. No warrant-related milestones were reached during
1998 or in 1997. Final valuation of the warrant costs is calculated at the
actual achievement of these milestones based on the fair value of the underlying
stock at that date.
Corixa had common stock warrants outstanding for 684,893 shares as of
December 31, 1998 at a weighted average exercise price of $8.04 which will
expire between 2001 and 2008.
SHARES RESERVED
Common stock was reserved for the following purposes:
DECEMBER 31,
1998
------------
Stock options 2,313,453
Warrants to purchase common stock 684,893
Employee Stock Purchase Plan 119,113
License, technology, and patent rights agreements 13,635
---------
3,131,094
=========
52
54
CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NET LOSS PER SHARE
Basic and diluted loss per share are calculated using the average number of
common shares outstanding (see Note 1). Pro forma basic and diluted loss per
share are computed on the basis of the average number of common shares
outstanding plus the effect of convertible preferred shares using the
"if-converted" method as follows:
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
---------- ------- -------
Net loss (A) $ (21,316) $(2,676) $(4,147)
========== ======= =======
Weighted average outstanding:
Common stock (B) 12,172 4,891 2,521
Convertible preferred stock -- 3,864 4,969
---------- ------- -------
Total weighted
average outstanding (C) 12,172 8,755 7,490
========== ======= =======
Loss per share:
Basic and diluted (A/B) $ (1.75) $ (0.55) $ (1.65)
========== ======= =======
Pro forma basic and diluted (A/C) $ (0.31) $ (0.55)
======= =======
7. INCOME TAXES
At December 31, 1998 and 1997, the Company had net operating loss
carryforwards of approximately $29.0 million and $9.9 million, respectively, and
research and experimentation credit carryforwards of approximately $1.9 million
and $836,000, respectively, which begin to expire in 2009. Utilization of net
operating losses and research and development tax credit carryforwards is
subject to change of certain limitations under Section 382 of the Internal
Revenue Code. During the period 1995 through 1998, the Company experienced
ownership changes as defined by the Revenue Code. Accordingly, the Company's use
of losses incurred through the date of any ownership changes will be limited on
an annual basis during the carryforward period.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company has
recognized a valuation allowance equal to the deferred tax assets due to the
uncertainty of realizing the benefits of the assets. The valuation allowance for
deferred tax assets increased $6.4 million and $1.1 million during 1998 and
1997, respectively. The effects of temporary differences and carryforwards that
give rise to deferred tax assets and liabilities are as follows:
DECEMBER 31,
-------------------------
1998 1997
-------- --------
Deferred tax assets:
Net operating loss carryforwards $ 9,431 $ 3,361
Research and experimentation credit and
foreign tax credit carryforwards 1,931 861
Deferred revenue 34 373
Financial statement expenses not deducted
on tax return 73 162
-------- --------
11,469 4,757
-------- --------
Deferred tax liabilities:
Depreciation 413 37
Tax return expenses not charged
against financial statements 73 96
-------- --------
486 133
-------- --------
53
55
CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31,
-------------------------
1998 1997
-------- --------
Net deferred tax asset 10,983 4,624
Less valuation allowance (10,983) (4,624)
-------- --------
Net deferred tax assets $ -0- $ -0-
======== ========
8. 401(K) PLAN
Corixa has a tax-qualified employee savings and retirement plan (the
"401(k) Plan") covering all of Corixa's employees. Pursuant to the 401(k) Plan,
employees may elect to reduce their current compensation by up to the
statutorily prescribed annual limit ($10,000 in 1998) and to have the amount of
such reduction contributed to the 401(k) Plan. Corixa did not match
contributions before 1998. Effective January 1, 1998, Corixa implemented a
401(k) matching program whereby Corixa contributes twenty-five cents for each
dollar a participant contributes, with a maximum contribution of 25% of the
first 8% of a participant's earnings not to exceed 25% of the prescribed annual
limit. The 401(k) Plan is intended to qualify under Section 401 of the Internal
Revenue Code so that contributions by employees or by Corixa to the 401(k) Plan,
and income earned on 401(k) Plan contributions, are not taxable to employees
until withdrawn from the 401(k) Plan, and so that contributions by Corixa, if
any, will be deductible by Corixa when made. At the direction of each
participant, Corixa invests the assets of the 401(k) Plan in any of five
investment options. Company contributions under the plan were approximately
$98,000 in 1998.
9. LONG-TERM OBLIGATIONS
DECEMBER 31,
----------------------
1998 1997
------- -------
Capital lease obligations $ 2,534 $ 2,854
Credit line from corporate partner 5,000 3,000
Bank loan 7,000 2,000
------- -------
14,532 7,854
Less current portion of obligations
and commitments 2,697 930
------- -------
$11,835 $ 6,924
======= =======
Capital leases are secured by the underlying equipment.
The $5 million advance from a corporate partner at December 31, 1998
represents payments received in exchange for options to license two of Corixa's
early-stage cancer vaccines. Refer to Note 8 with regard to the terms and
conditions of the line.
As of December 31, 1998, the Company had outstanding an unsecured bank loan
for $7 million. Borrowings under note bear interest at a rate that is a function
of either the prime rate of a major bank or federal fund rates. Under the terms
of the note, the Company is required to meet minimum (i) tangible net worth,
(ii) net cash calculated based upon the sum of the principal balance under the
note plus a multiple of the Company's actual cash burn or $10,000,000, whichever
is greater, (iii) total debt to net worth ratios and (iv) current ratio. As of
December 31, 1998 the Company had borrowed $7 million against the facility. The
note includes provisions for quarterly interest-only payments based upon the
outstanding loan balance until December 1998 followed by 48 payments of interest
and principal beginning January 1999 based upon the outstanding amount on the
note as of December 31, 1998. No additional amounts may be drawn against the
note after December 31, 1998. As of December 31, 1998 the Company was in
compliance with the note covenants.
The Company rents office and research facilities under a noncancelable
operating lease which expires in January 2005. The Company has issued an
irrevocable standby letter of credit in the amount of $750,000 as a security
deposit on the lease. The Company has options to renew the lease for two
additional terms of five years each.
Minimum future rental payments under all lease agreements at December 31,
1998 are as follows:
54
56
CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CAPITAL OPERATING
YEAR ENDED DECEMBER 31, LEASES LEASES
- ----------------------- ------ ------
1999 $ 1,285 $ 2,702
2000 1,069 2,670
2001 558 2,750
2002 33 2,832
2003 -0- 2,917
Thereafter -0- 3,134
------- -------
Total minimum payments $ 2,945 $17,005
=======
Less interest 411
-------
Present value of minimum lease payments 2,534
Less current portion 947
-------
Capital lease obligations, less current portion $ 1,587
=======
Rent expense was $ 2.3 million, $1.5 million, and $638,000, for the years
ended December 31, 1998, 1997 and 1996, respectively.
10. INVESTMENTS
ImmGenics
On November 4th, 1998 Corixa and ImmGenics Pharmaceuticals Inc.
("ImmGenics"), a privately held biotechnology company signed an exclusive
agreement to utilize ImmGenics' proprietary Selected Lymphocyte Antibody Method
technology to develop high-potency therapeutic and diagnostic monoclonal
antibodies targeting Corixa's proprietary antigens in cancer and infectious
disease. This agreement marks Corixa's first venture into the development of
antibodyproducts. Under the terms of the agreement, ImmGenics could receive
research, development and milestone payments, as well as royalty streams on
future product sales. In addition to the collaborative agreement, Corixa
purchased an aggregate 859,000 shares of Class A Preferred stock for $1.25
million and also entered into a $500,000 non-interest bearing convertible
debenture and will be required to invest an additional $1.25 million in 1999, if
certain scientific milestones are achieved, for a total investment by Corixa of
$3.0 million. Additionally, the Company received warrants to acquire ImmGenics
Class A Preferred stock. The number of warrants increases if ImmGenics does not
obtain specified financing milestones.
Anergen
In December 1998 the Company entered into a definitive agreement to acquire
Anergen, Inc. ("Anergen"), a development stage biotechnology company focused on
the treatment of autoimmune diseases through the discovery and development of
proprietary therapeutics that selectively interrupt the disease process. The
acquisition of Anergen was dependent on Anergen shareholder approval. That
approval occurred on February 10, 1999. The transaction was accounted for as a
purchase valued at approximately $8.1 million. The balance will be paid in
approximately 1.1 million shares of Corixa common stock. Through December 31,
1998, Corixa has incurred approximately $800,000 in pre-acquisition costs
associated with the transaction. A substantial portion of the purchase price
will be allocated to In-Process Research and Development and charged to expense.
55
57
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item is incorporated by reference to
the information set forth under the caption "Executive Officers" in the
Company's 1999 Proxy Statement to be filed within 120 days after the end of the
Company's fiscal year ended December 31, 1998.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference to
the information set forth under the caption "Compensation of Executive Officers"
in the Company's 1999 Proxy Statement to be filed within 120 days after the end
of the Company's fiscal year ended December 31, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated by reference to
the information set forth under the caption "Common Stock Ownership of Certain
Beneficial Owners and Management" in the Company's 1999 Proxy Statement to be
filed within 120 days after the end of the Company's fiscal year ended December
31, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference to
the information set forth under the caption "Certain Relationships and Related
Transactions" in the Company's 1998 Proxy Statement to be filed within 120 days
after the end of the Company's fiscal year ended December 31, 1998.
56
58
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
(1) Report of Ernst & Young, LLP, independent auditors Balance
Sheet as of December 31, 1998, 1997 and 1996. Statement of
Operations - Years Ended December 31, 1998, 1997 and 1996.
Statement of Stockholders' Equity - Years Ended December 31,
1998, 1997 and 1996.
Statement of Cash Flows - Years Ended December 31, 1998, 1997
and 1996.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules All schedules are omitted
because they are not applicable or the required information is
shown in the financial statements or notes thereto.
(3) Index to Exhibits for Form 10-Q for the quarter ended December
31, 1998
Exhibit
No. Exhibit Description Page
- ------- ------------------- ----
2.01 Agreement and Plan of Reorganization dated December 11, 1998 by and
among the Registrant, Yakima Acquisition Corporation and Anergen, Inc.
Registrant agrees to furnish supplementally to the Commission upon
request a copy of any omitted schedule. (G)
2.02 Form of Certificate of Merger between Yakima Acquisition Corporation and
Anergen, Inc. (G)
2.1 Agreement and Plan of Merger dated June 22, 1998 by and among the
Registrant, Chinook Acquisition Corporation and GenQuest, Inc.
Registrant agrees to furnish supplementally to the Commission upon
request a copy of any omitted schedule. (E)
2.2 Form of Certificate of Merger between Chinook Acquisition Corporation
and GenQuest, Inc. (E)
3.1 Amended and Restated Certificate of Incorporation of Corixa Corporation. (A)
3.2 Bylaws of Corixa Corporation. (A)
4.1 Amended and Restated Investors' Rights Agreement dated as of May 10,
1996 between Corixa Corporation and certain holders of its capital
stock. (A)
10.1 1994 Amended and Restated Stock Option and Restricted Stock Plan and
forms of stock purchase and stock option agreement. (A)
10.2 1997 Directors' Stock Option Plan and form of stock option agreement. (A)
10.3 1997 Employee Stock Purchase Plan and form of subscription agreement. (A)
10.4 Corixa Corporation 401(k) Savings & Retirement Plan. (A)
10.5 Form of Indemnification Agreement. (A)
10.6 Lease Agreement dated October 28, 1994 and amended December 29, 1995
between Corixa Corporation and Fred Hutchinson Cancer Research Center. (A)
10.7 Amendment No. 2 , dated September 25, 1998, to the Lease Agreement Dated
May 31, 1996 between Corixa Corporation and Alexandria Real Estate
Equities. (F)
10.8 Multi-Field Vaccine Discovery Collaboration and License Agreement
between Corixa Corporation and SmithKline Beecham, dated September 1, 1998. (H)
10.9+ Licensing Agreement between Corixa Corporation and Dana-Farber Cancer
Institute, Inc., dated January 1, 1995. (A)
57
59
Exhibit
No. Exhibit Description Page
- ------- ------------------- ----
10.11+ Amendment No. 1, dated September 29, 1997, to the Licensing Agreement,
dated January 1, 1995, by and between Corixa Corporation And Dana-Farber
Cancer Institute, Inc. (D)
10.12 Amendment No. 2, dated July 31, 1998, to the Licensing Agreement, dated
January 1, 1995, by and between Corixa Corporation and Dana- Farber
Cancer Institute, Inc.
10.13+ Amended and Restated Research Services and Intellectual Property
Agreement effective as of January 1, 1997 by and between Corixa
Corporation and the Infectious Disease Research Institute. (A)
10.14+ Amendment No. 1 to License Agreement dated April 30, 1997 by and among
Corixa Corporation, Southern Research Institute and University of
Alabama at Birmingham Research Foundation. (A)
10.15 Confirmation Letter, Purchase of $7,000,000 Loan Facility, dated August
21, 1998 to Corixa Corporation from Banque Nationale de Paris. (F)
10.16 Assignment and Assumption Agreement, dated August 21, 1998, by and Among
Sumitomo Bank, Limited, Sumitomo Bank of New York Trust Corporation,
Corixa Corporation, Well Fargo Bank, N.A., Banque Nationale de Paris,
and Bank of The West Trust and Investment Services Division. (F)
23.1 Consent of Ernst and Young, LLP, Independent Auditors
27.1 Financial Data Schedule
- ------------------------------
(A) Incorporated herein by reference the Company's Form S-1, as
amended, (File No. 333-32147), filed with the Commission on
September 30, 1997.
(B) Incorporated by herein reference to the Company's Form 10-K
(File No. 333-32147), filed with the Commission on March 10,
1998.
(C) Incorporated herein by reference to the Company's Form 10-Q
(File No. 333-32147), filed with the Commission on May 15, 1998.
(D) Incorporated herein by reference to the Company's Form 10-Q
(File No. 333-32147), filed with the Commission on August 11,
1998.
(E) Incorporated herein by reference to Appendix A of The Proxy
Statement/Prospectus included in the Registration Statement on
Form S-4, as amended, (File No. 333-32147), filed with the
Commission on August 5, 1998.
(F) Incorporated herein by reference to the Company's Form 10-Q
(File No. 333-32147), filed with the Commission on November 12,
1998.
(G) Incorporated herein by reference to the Company's Form S-4 (File
No. 333-69679), filed with the Commission on January 12, 1999.
(H) Incorporated herein by reference to the Company's Form 8-K (File
No. 0-22891), filed with the Commission on October 28, 1998.
+ Confidential treatment granted by order of the SEC.
(b) Reports on Form 8-K
On October 28, 1998 the Company filed a Current Report on Form 8-K stating under
"Item 5. Other Events" that on that day it had entered into a collaboration and
license agreement with SmithKline Beecham which superseded and significantly
expanded the scope of the Company's then-existing agreements with SmithKline
Beecham Manufacturing and SmithKline Beecham Biologicals. (File No. 0-22891).
58
60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CORIXA CORPORATION
By: /s/ MICHELLE BURRIS
---------------------------------------
Michelle Burris
Vice President and Chief Financial Officer
Date: March 3, 1999
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Steve Gillis and Michelle Burris, jointly
and severally, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes may 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/ STEVEN GILLIS Chairman and Chief Executive March 3, 1999
- ------------------------------ Officer
Steven Gillis (Principal Executive Officer)
/s/ MICHELLE BURRIS Vice President and Chief March 3, 1999
- ------------------------------- Financial Officer
Michelle Burris (Principal Financial and
Accounting Officer)
/s/ MARK MCDADE Director March 3, 1999
- -------------------------------
Mark McDade
/s/ JOSEPH LACOB Director March 3, 1999
- -------------------------------
Joseph Lacob
/s/ ARNOLD ORONSKY Director March 3, 1999
- -------------------------------
Arnold Oronsky
/s/ ANDREW SENYEI Director March 3, 1999
- -------------------------------
Andrew Senyei
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