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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 2000
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 (I.R.S. EMPLOYER
INCORPORATION 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 $447 million as of March 15, 2001, 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% or 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 40,666,186 shares of the registrant's Common Stock outstanding
as of March 15, 2001.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III incorporates information by reference from the Registrant's Proxy
Statement for its 2001 Annual Meeting of Stockholders.
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INTRODUCTORY STATEMENT
In this Annual Report "Corixa" or the "company," "we," "us" and "our" refer
to Corixa Corporation and our wholly owned subsidiaries. This Annual Report
contains forward-looking statements that involve risk and uncertainties. Our
actual results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, factors discussed in "Important Factors That May Affect
Our Business, Our Results of Operations and Our Stock Price," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" as well as those discussed elsewhere in this Annual Report. Actual
events or results may differ materially from those discussed in this Annual
Report. Corixa assumes no obligation to update any forward looking statements
contained in this Annual Report.
ANERGIX(R), MELACINE(R), MPL(R), CORIXA(R), and stylized Corixa logo(R) are
registered trademarks and ANERGIX.MG(TM), ANERGIX.MS(TM), ANERGIX.RA(TM),
ANERVAX(TM), ANERVAX.DB(TM), ANERVAX.RA(TM), DETOX(TM), DETOX B-SE(TM),
PVAC(TM), RIBI-529(TM), ENHANZYN(TM), BEXXAR(TM), PATIENT OPTIMIZED(TM), and
POWERED BY CORIXA(TM) are trademarks of Corixa Corporation. All other brand
names, trademarks or service marks referred to in this Annual Report are the
property of their respective owners.
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PART I
ITEM 1. BUSINESS
OVERVIEW
We are a developer of immunotherapies with a commitment to treating and
preventing autoimmune diseases, cancer and infectious diseases by understanding
and directing the immune system. We have a broad range of technology platforms,
which enable both integrated vaccine product design and the use of our separate
proprietary technologies -- antigens, monoclonal antibodies, adjuvants, antigen
delivery technology and tumor activated peptide, or TAP, pro-drug
technology -- on a standalone, POWERED BY CORIXA(TM) basis. We exploit our
expertise in immunology and our proprietary technology platforms to discover and
develop vaccines, antigen-based products, including therapeutic antibodies,
novel adjuvants and targeted oncologics. Corixa Corporation was originally
incorporated in Delaware as WWE Corporation on September 8, 1994. We are
headquartered in Seattle, Washington with additional operations in Hamilton, MT,
Redwood City, CA, and South San Francisco, CA.
OUR ANTIGEN DISCOVERY CAPABILITY
We believe our antigen discovery capability, which uses numerous
proprietary technologies, is one of our key competitive strengths. Our ability
to discover antigens allows us to select those antigens that will work most
effectively in a vaccine or as the best targets for developing antibody-based
products. To make this selection, we focus on antigens that are recognized by
the greatest percentage of individuals, stimulate the strongest immune responses
or are expressed by the greatest percentage of pathogen strains or tumor types.
In connection with autoimmune diseases, we focus on discovering otherwise normal
antigens, or auto-antigens, that may trigger autoimmune responses.
THROUGH A VARIETY OF PROPRIETARY METHODS,
CORIXA IMMUNOLOGICALLY "SIEVES" FOR ANTIGENS RELATED TO
AUTOIMMUNE DISEASES, CANCER, AND INFECTIOUS DISEASES.
[GRAPHIC]
[Graphic of "sieve" surrounding the following text:
Normal Tissue, Diseased Tissue, cDNA and Protein
(graphic of down arrow)
Gene Expression Profiling
Quantitative PCR
Full Length Cloning
Immunohistochemistry
Immunogenicity
Antigenicity
In Vitro/In Vivo
(graphic of down arrow)]
NOVEL AND
DISEASE-SPECIFIC
ANTIGENS
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To capitalize on our antigen discovery expertise, a majority of our
scientific personnel is involved in antigen discovery and vaccine and
therapeutic antibody product development. We use discovery approaches and
technologies that include:
- acquisition of normal and diseased tissue, and related cDNA and protein;
- cDNA subtraction and analysis of differential gene expression;
- quantitative PCR;
- expression cloning of full-length cDNAs;
- immunohistochemistry to determine tissue distribution of candidate
antigens;
- immunological characterization of candidate antigens; and
- analysis of antigens as targets for developing antibody-based products.
Our antigen discovery approach also includes correlating the antigens that
we discover with patient immune responses. We focus on identifying proteins that
are recognized by the human immune system and therefore are antigenic. Our
antigen discovery research culminates in isolating pathogen, tumor or auto-
antigen genes that encode antigens with significant potential to be the basis of
vaccines or other immunotherapeutic products.
OUR NOVEL VACCINE DESIGN
Most currently available vaccines trigger protective antibody responses
that can destroy an invading pathogen. However, these antibody responses cannot
eliminate tumors or certain infectious diseases. We believe that an effective
immune response against these diseases requires the action of pathogen- or
tumor-reactive T lymphocytes, or T cells. Many of our vaccine programs focus on
activating specialized T cells known as cytotoxic T lymphocytes, or CTL, that
have the ability to recognize and kill pathogen-infected tissue or tumor cells.
We have shown in preclinical studies that CTL can eliminate either tumors
or some pathogens in situations in which antibody responses fail. These CTL not
only prevent disease if they are activated before pathogen infection, but also
can eliminate disease once the infection has occurred or, in the case of cancer,
once a tumor has developed. We believe vaccines that activate specific T cell
responses can form the basis for a new class of products that may be used to
treat or prevent disease. Using recent advances in understanding molecular
mechanisms that control the way in which antigens are normally presented to T
cells, we are designing vaccines that incorporate disease-specific antigens into
biodegradable and biocompatible microspheres. We believe that these vaccines may
give rise to potent CTL responses. Through our antigen discovery program, we
have identified antigens from many tumor types and from infectious disease
pathogens for which no vaccines currently exist.
OUR PRODUCT CATEGORIES
We utilize our expertise in immunology and our proprietary technology
platforms to discover and develop vaccines and other antigen-based products
targeting autoimmune diseases, cancer and infectious diseases in the following
product categories:
- vaccines and immunotherapeutics;
- monoclonal antibody-based therapeutics;
- adjuvants and antigen delivery systems to increase effectiveness of
vaccines and immunotherapeutics; and
- antigen-specific diagnostic products.
We have also initiated a program to discover and develop targeted
oncologics based on TAP pro-drug technology.
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Our strategy is to develop and commercialize selected potential products
ourselves and to partner other selected technologies with numerous developers
and marketers of pharmaceutical and diagnostic products with the goal of making
our products available to patients worldwide.
VACCINES AND IMMUNOTHERAPEUTICS FOR AUTOIMMUNE DISEASES, CANCER AND INFECTIOUS
DISEASES
Autoimmune Disease Technology Platforms. Our autoimmune disease technology
platforms consist of:
- PVAC(TM) treatment; and
- ANERGIX(R) complexes.
We believe that we may have identified certain immune system modulators
through our adjuvant research programs. We are developing one of these immune
system modulators, PVAC treatment, as a possible psoriasis therapeutic. We have
completed a PVAC Phase II clinical trial in the United States and are currently
in Phase II clinical trials in Brazil under a U.S. investigational new drug
application, or IND. Preliminary data from the Phase II clinical trial in the
United States and a Phase I clinical trial in the Philippines indicate that PVAC
treatment induces beneficial clinical responses in patients with moderate to
severe psoriasis.
Our ANERGIX complex-based products are in, or have completed, randomized,
blinded, placebo-controlled Phase I clinical trials for treating rheumatoid
arthritis, or RA, and multiple sclerosis, or MS. In the trials, the ANERGIX
complex-based products were demonstrated to be safe, and we observed beneficial
clinical responses in several ANERGIX-treated patients. We have also commenced
development of an ANERVAX.RA(TM) vaccine for RA, for which we have completed an
initial Phase II clinical trial, which demonstrated that the product was well
tolerated and the results indicate that ANERVAX.RA vaccine may provide clinical
benefit.
Cancer and Infectious Disease Technology Platforms. Our cancer and
infectious disease technology platforms are based on our specialization in the
discovery and development of a new class of therapeutic and prophylactic
products known as T cell vaccines. Using our three-part technology platform, we
design our vaccine products to direct the immune system to recognize antigens in
a way that potent T cell responses result. This three-part technology platform
consists of:
- proprietary antigens;
- proprietary adjuvants; and
- proprietary antigen delivery systems.
In addition to our vaccine programs, we discover and develop other
immunotherapeutic products for treating cancer and infectious diseases. To date,
these products have resulted from our efforts in antigen and adjuvant discovery
and our acquisition and in-licensing activities. We expect to continue to derive
novel immunotherapies from our internal and external research efforts.
MONOCLONAL ANTIBODY-BASED THERAPEUTICS
We believe that monoclonal antibodies directed against our antigens may
also be useful in treating autoimmune diseases, cancer and infectious diseases.
Consequently, we have entered into a number of collaborations focused on
monoclonal antibody development. We intend to enter into additional
collaborations with antibody companies to more rapidly develop antibody-based
therapeutics derived from our novel antigen targets.
In some cases, the effectiveness of therapeutic antibodies can be increased
by attaching radioisotopes or other cytotoxic agents for use as
"radioimmunotherapy" or "chemoimmunotherapy." By using an antibody to deliver a
radioisotope or other cytotoxic agent to the targeted cells, the effect of the
radiation or cytotoxic agent can be concentrated in the immediate vicinity of
those cells.
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BEXXAR(TM), our most advanced product candidate, incorporates each of the
principal attributes of an effective radioimmunotherapy for treating
Non-Hodgkin's lymphoma, or NHL. These attributes are:
- an antigen specific to B-cells;
- a therapeutically active monoclonal antibody targeted to that antibody;
- the radioisotope appropriate for the disease profile; and
- an optimized therapeutic protocol.
ADJUVANTS AND ANTIGEN DELIVERY SYSTEMS TO INCREASE EFFECTIVENESS OF VACCINES AND
IMMUNOTHERAPEUTICS
By combining our antigen discovery capabilities with our adjuvant and
delivery technologies, we believe we can accelerate the development of potential
therapies for treating or preventing autoimmune diseases, cancer and infectious
diseases. We also believe that many vaccines can be improved by including our
adjuvant and delivery components, leading to multiple new products that are at
least in part, POWERED BY CORIXA(TM).
TARGETED ONCOLOGICS
We believe that combining our TAP pro-drug technology with our
understanding of biochemical mechanisms involved in metastasis may lead to
broader therapeutic uses of conventional chemotherapies. TAP pro-drug versions
of existing cytotoxic drugs are designed to be activated near metastatic cancer
cells, but remain stable in circulation and in normal tissues. Accordingly,
TAP-based products may cause larger quantities of cytotoxic agents to reach and
enter malignant cells as opposed to normal cells, which could permit a
significant increase in maximum tolerated dosages, and potentially overcome drug
resistance in cancer cells currently observed in more conventional therapies.
OUR STRATEGY
Our goal is to be a leader in the development and commercialization of
products to prevent, treat or diagnose autoimmune diseases, cancer and
infectious diseases. By understanding and directing the immune system and
disease mechanisms, we discover and develop vaccines, antigen-based products,
novel adjuvants and targeted oncologics. To accelerate the commercial
development of potential new therapeutic and prophylactic T cell vaccines and
other immunotherapeutic products, we may retain the right to develop and
commercialize selected product candidates or we may establish corporate
partnerships for product development and commercialization at various stages in
the development process. The principal elements of our strategy are as follows:
BUILD AN INTEGRATED PRODUCT PIPELINE FOCUSED ON THE IMMUNE SYSTEM. We
believe that we can best develop effective immunotherapeutic products for
autoimmune diseases, cancer and infectious diseases by integrating our
proprietary antigen, monoclonal antibody, adjuvant and antigen delivery
technologies. We also believe that targeted immunotherapies, such as conjugated
antibodies, and targeted oncologics can improve the effectiveness of therapeutic
antibodies and existing chemotherapies.
BROADLY PARTNER CORE TECHNOLOGIES. Because we believe that other companies'
immunotherapeutic products may be enhanced by components available from us, we
seek to establish corporate partnerships with major commercial entities for each
of our proprietary core technologies -- our POWERED BY CORIXA approach. Examples
of these partnerships include both antigen-specific collaborations aimed at
generating new antibody targets, and license and supply relationships involving
vaccine adjuvants, such as MPL(R) adjuvant or ENHANZYN(TM) adjuvant. We believe
that both types of partnerships should enable improved immunotherapy based in
part on our proprietary technologies.
ENHANCE OUR PRODUCT PIPELINE BY ESTABLISHING CORPORATE PARTNERSHIPS AT
VARIOUS RESEARCH AND DEVELOPMENT STAGES. We intend to enter into corporate
partnerships at various stages in the research and development process. For
those potential products that show promise in the preclinical or clinical stage,
we may seek a corporate partner prior to initiating Phase II clinical trials. In
the case of selected technologies or
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potential products, we may choose to retain development rights and partner these
products at a later stage. We believe our active corporate partnering strategy
provides four distinct advantages:
- it focuses on our fundamental strength in immunotherapeutic product
discovery and selected product development;
- it capitalizes on our corporate partners' strengths in product
development, manufacturing and commercialization;
- it may enable us to retain significant downstream participation in
product sales; and
- it reduces our financing requirements.
ESTABLISH SALES AND MARKETING CAPABILITY. We intend to market and sell
selected products in the United States through a direct sales force and, where
appropriate, in collaboration with marketing partners. We believe that this
strategy should enable us to establish a commercial presence in the cancer
therapeutics market with BEXXAR, if approved, and create the capability to sell
other products that we develop or in-license from other developers. We believe
that an established sales and marketing capability will enable us to compete
more effectively for opportunities to license or distribute later-stage product
candidates and approved products.
SELECTIVELY ACQUIRE OR IN-LICENSE COMPLEMENTARY TECHNOLOGIES. In addition
to developing technology internally, we have in-licensed several significant
product opportunities. We intend to continue to pursue in-licensing efforts, and
to continue to evaluate acquisitions of companies with complementary
technologies. We believe that we can expand our existing technology and product
base by in-licensing and that future acquisitions may lead to additional
commercial opportunities.
OUR CLINICAL PROGRAMS
AUTOIMMUNE DISEASE
We have five clinical programs in various stages of clinical testing for a
number of autoimmune diseases that are considered important targets for new
disease therapy. These five programs are:
- MPL adjuvant, our vaccine adjuvant, is undergoing Phase III clinical
testing in Europe for use in allergy vaccines that are marketed by
Allergy Therapeutics and sold by Allergy Therapeutics on a named-patient
basis in Germany. MPL adjuvant has completed Phase III clinical trials
with GlaxoSmithKline, or GSK, hepatitis and herpes vaccines. In both
cases MPL adjuvant improved vaccine efficacy;
- PVAC(TM) treatment, an immunomodulator to potentially treat moderate to
severe psoriasis, is licensed in Japan to Zenyaku Kgoyo and in the United
States and Canada to Medicis and has completed a randomized, blinded and
controlled Phase II clinical trial in the United States;
- ANERGIX.RA(TM) complex, a multihistocompatability complex, or MHC, -class
II molecule loaded with a collagen peptide for treating RA, is licensed
worldwide to Organon and has completed a Phase I/II clinical trial;
- ANERGIX.MS(TM) complex, an MHC-class II molecule loaded with a
MS-associated peptide for treating MS, has completed a Phase I/II
clinical trial; and
- ANERVAX.RA(TM) vaccine, a peptide vaccine for treating RA, has completed
a Phase II clinical trial.
CANCER
We are moving four of our novel cancer therapeutics through clinical
development. These four products, in various stages of human testing, are:
- BEXXAR(TM) therapy, a monoclonal antibody conjugated with a radioisotope
for treating low-grade and transformed low-grade NHL. We have
co-promotion rights in the United States with GSK through its
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wholly owned subsidiary, SmithKline Beecham Corporation. BEXXAR is the
subject of a BLA under review by the FDA;
- MELACINE(R) vaccine, a melanoma vaccine for treatment of late-stage
melanoma, for which Schering-Plough holds exclusive distribution rights,
is currently approved for sale in Canada and has completed Phase III
clinical trials in the United States;
- ENHANZYN(TM) adjuvant, a novel vaccine adjuvant contained in both
MELACINE and Biomira's Theratope vaccine. ENHANZYN is currently in Phase
III clinical trials of Theratope for treating breast cancer; and
- Her-2/neu vaccine, for breast and ovarian cancer, is licensed worldwide
to SmithKline Beecham plc, and is in Phase I clinical trials.
INFECTIOUS DISEASE
Our partners are evaluating our adjuvants in a new generation of adult and
pediatric vaccines designed to be more safe and effective and to protect against
a broader range of diseases. MPL(R) adjuvant is our flagship adjuvant. It is a
derivative of the lipid A molecule found in gram-negative bacteria, and has been
observed to be a potent immunostimulant. Licenses for MPL adjuvant have been
granted to several affiliates of GSK and to Wyeth-Lederle Vaccines for
development in over 25 disease targets. Vaccines that incorporate MPL adjuvant
have completed or are now in late-stage clinical trials to protect against
infection from:
- herpes virus;
- hepatitis B virus;
- human papilloma virus;
- malaria; and
- respiratory syncytial virus.
Our RIBI-529(TM) adjuvant is now in Phase III clinical trials in Argentina
as part of a hepatitis B vaccine being developed in collaboration with Rhein
Biotech.
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OUR PRODUCTS IN DEVELOPMENT
We have a number of product candidates in various stages of development,
many of which are the subject of collaborations with corporate partners. The
following table sets forth the potential application(s) for a particular product
candidate, the product candidate's present stage of development and the identity
of our corporate partner, if any. Partnerships with subsidiaries of GSK are
identified as GSK partnerships.
PRODUCTS DISEASE/INDICATION DEVELOPMENT STAGE PARTNER(S)
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AUTOIMMUNE DISEASE
MPL(R) adjuvant Enhance efficacy of certain Phase III Allergy Therapeutics
allergy vaccines holds co-exclusive
rights;
PVAC(TM) treatment Moderate to severe psoriasis Phase II Medicis Pharmaceutical
and Zenyaku Kogyo
ANERGIX.RA(TM) complex Rheumatoid arthritis Phase I/II Organon
ANERGIX.MS(TM) complex Multiple sclerosis Phase I/II Unpartnered
ANERVAX.RA(TM) vaccine Rheumatoid arthritis Phase I/II Unpartnered
MPL(R) adjuvant Enhance efficacy of certain Preclinical GSK holds co- exclusive
allergy vaccines rights
IFNAR Several autoimmune indications Preclinical Unpartnered
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CANCER
BEXXAR(TM) therapy Low-grade and transformed NHL BLA under review GSK
MELACINE(R) vaccine Stage IV malignant melanoma Approved in Canada; Schering-Plough
Phase III in U.S.
MELACINE(R) vaccine Stage II malignant melanoma Phase III Schering-Plough
ENHANZYN(TM) adjuvant Adjuvant component in Phase III Biormira holds
Theratope(R) therapeutic vaccine exclusive rights for
for breast cancer certain antigens; other
targets unpartnered
RIBI-529(TM) adjuvant Enhance efficacy of cancer and Phase III in Argentina Rhein Biotech
infectious disease vaccines
Her-2/neu vaccine Late-stage breast and ovarian Phase I GSK
cancer
Mammaglobin vaccine Breast cancer Preclinical GSK
WT-1 vaccine Leukemia Preclinical Unpartnered
Novel cancer vaccine Prostate cancer Preclinical GSK
MPL(R) adjuvant Enhance efficacy of certain Preclinical GSK holds exclusive
cancer vaccines rights for certain
antigens
CPI-0004 TAP pro-drug Preclinical Unpartnered
Novel cancer vaccines Breast, colon and ovarian cancer Research GSK
Novel cancer vaccine Lung cancer Research Pharmaceutical division
of Japan Tobacco;
Zambon Group
Novel cancer vaccine Leukemia/lymphoma Research Unpartnered
Microsphere-based antigen Lung cancer Research Zambon Group holds
delivery and LeIF certain license rights
adjuvant
Microsphere-based antigen Enhance efficacy of multiple Research GSK hold certain option
delivery and LeIF cancer and infectious disease rights
adjuvant vaccines
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INFECTIOUS DISEASE
MPL(R) adjuvant Enhance efficacy of certain Phase I, II and III Partnered for certain
infectious disease vaccines diseases with GSK;
Wyeth-Lederle Vaccines
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PRODUCTS DISEASE/INDICATION DEVELOPMENT STAGE PARTNER(S)
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Novel infectious disease Human leishmaniasis Phase I IDRI, Gates Foundation
vaccine
Novel infectious disease Tuberculosis Preclinical GSK
vaccine
Novel infectious disease Chlamydia trachomitis and Research GSK
vaccines Chlamydia pneumoniae
Novel infectious disease Herpes virus Research Unpartnered
vaccine
Candida antibody and Systematic and vaginal yeast Research Unpartnered
vaccine products infections
Diagnostic Visceral leishmaniasis Commercialized, Several companies
development
Diagnostic Chagas' Disease Commercialized Diamed
Reference laboratory Certain tick-borne diseases Commercialized Imugen
diagnostic
Rapid diagnostic test Tuberculosis Commercialized ICT Diagnostics, a
subsidiary of AMRAD
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OTHER PARTNERED PROGRAMS
Adoptive Immunotherapy Multiple cancers Phase I IDRI
Cancer gene therapy Multiple cancers Phase I Introgen Therapeutics
(MDA-7)
RC-552 Ischemia-reperfusion injury Preclinical CoPharma Inc.
Phototherapeutics Cancer Phase I QLT PhotoTherapeutics
Certain vaccine and Various indications Diagnostics are Heska
diagnostic technologies commercialized;
for companion animal vaccines are in
health research
Other diagnostic products Multiple cancers Research Unpartnered
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In the column entitled "Development Stage":
- "Research" means the discovery or creation of prototype products and
includes antigen discovery and characterization;
- "Development" means testing of prototype diagnostic assays in a
particular format and testing of such products;
- "Preclinical" means product scale up, formulation and further testing in
animals, including toxicology;
- "Phase I" means products that are currently in Phase I clinical trials,
performed to evaluate the safety of a vaccine and its ability to
stimulate an immune response;
- "Phase I/Phase II" means products that are currently in Phase I/Phase II
clinical testing, being tested to determine safety and preliminary
efficacy;
- "Phase II" means products that are currently in Phase II dose-ranging
clinical testing, being tested to further determine safety and efficacy;
- "Phase III" means products that are currently in Phase III clinical
testing, being tested to determine efficacy;
- "BLA" means the product is currently the subject of a biologics license
application under review by the FDA; and
- "Commercialized" means sales to third parties for use in diagnostic
applications, which have resulted in immaterial revenues to date.
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OUR PRODUCT PIPELINE AND DEVELOPMENT STATUS
AUTOIMMUNE DISEASE
MPL(R) ADJUVANT FOR ALLERGY DESENSITIZATION. Allergies caused by grasses,
trees and house dust mites afflict an estimated 20% of the population in
developed countries. Allergy Therapeutics Ltd., or ATL, and GSK's wholly owned
subsidiary, SmithKline Beecham plc, have each licensed certain rights to our MPL
adjuvant for use in allergen-based allergy desensitization products. Under the
terms of the agreements with ATL and SmithKline Beecham, we may not grant
further rights to MPL adjuvant for allergen-based allergy products. Initially
the ATL collaboration will target products that relieve allergic symptoms caused
by pollens from grasses, trees and house dust mites. Although current
desensitization methods offer some relief to most allergy sufferers, we believe
the addition of MPL adjuvant may allow the development of more effective, and
more easily administered allergy treatments.
In October 1999, ATL presented data from its initial Phase II multi-center
clinical trials for using MPL adjuvant in its allergy product for grass at the
Allergie 2000 meeting in Munich, Germany. The results suggested that adding MPL
adjuvant to desensitization products may result in a more rapid response to
treatment, fewer treatments with decreased dosages, and a higher response rate.
ATL continues to conduct Phase II and Phase III clinical trials to assess
immunologic parameters and safety. In October 1999, ATL launched allergy
products containing MPL adjuvant on a named-patient basis in Germany.
PVAC(TM) TREATMENT FOR PSORIASIS. Psoriasis is a dermatological disorder
that afflicts approximately 1% to 2% of the North American and European
populations. The disease is characterized by chronic inflammatory lesions with
red, scaling plaques and is believed to be an autoimmune phenomenon initiated by
T cells. In collaboration with Genesis Research and Development Corporation, we
are testing PVAC treatment for use as an immunotherapeutic product for
psoriasis. PVAC treatment is based on a proprietary process and formulation
derived from heat-killed Mycobacterium vaccae. We hold exclusive rights under SR
Pharma's intellectual property portfolio for the use of Mycobacterium
vaccae-derived products to treat psoriasis and certain other autoimmune
diseases. We have partnered our PVAC treatment program with Medicis in the
United States and Canada and with Zenyaku Kogyo in Japan. We have recently
completed a Phase II clinical trial of PVAC treatment in the United States and
have a Phase II clinical trial in progress in Brazil under a U.S. IND.
ANERGIX(R) COMPLEX. Each ANERGIX complex is an MHC-class II molecule loaded
with a disease-specific peptide. We have two forms of ANERGIX complex,
ANERGIX.RA(TM) complex for treating RA and ANERGIX.MS(TM) complex for treating
MS.
RA is a chronic, progressive autoimmune disease characterized by
progressive joint destruction, deformity and disability. The disease affects
more than 8 million people worldwide. Most drugs approved for treating RA treat
the symptoms of RA, not its underlying cause. In collaboration with Organon, we
have completed a randomized placebo-controlled Phase I/II clinical trial of
ANERGIX.RA complex in patients with advanced RA. Data from an interim analysis
of this trial was presented at The American College of Rheumatology meetings in
November 1999. This interim analysis demonstrated that ANERGIX.RA complex was
well tolerated by treated patients and indicated potential clinical benefit at
the two top dose levels studied. The interim results also indicated that
clinical results were most pronounced in patients who had peripheral blood T
cells capable of recognizing the synthetic collagen peptide present in the
ANERGIX.RA complex. In December 2000, we amended and restated our agreement with
Organon to include continued development of our recombinant form of ANERGIX.RA.
MS is an autoimmune disease in which the body's T cells recognize the outer
covering of nerves in the central nervous system as foreign and attempt to
destroy this protective neural covering. The severity of MS fluctuates and can
lead to progressive impairment of mobility and paralysis. There are more than
600,000 MS patients in the world, with approximately 350,000 in the United
States. In 1998, we completed a randomized placebo-controlled Phase I/II
clinical trial of ANERGIX.MS complex in patients with secondary progressive MS.
Results of this trial indicated that the product was well tolerated by treated
patients, caused no
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generalized immune suppression and demonstrated some evidence of clinical
efficacy. We are seeking a partner for ANERGIX.MS(TM) complex prior to
initiating additional Phase II trials.
The ANERGIX(R) complex products that we have evaluated in clinical trials
are natural products. Due to the high cost of manufacturing, these natural
products are likely to be difficult to commercialize. Our scientists have
developed recombinant forms of ANERGIX complex products that may be far less
expensive to produce and have demonstrated efficacy in both in vitro and in vivo
models of autoimmune disease. We intend to select one of these recombinant
solutions to use in continuing and expanding clinical evaluation of ANERGIX
complex products.
ANERVAX.RA(TM) VACCINE. ANERVAX.RA vaccine is a therapeutic peptide vaccine
for treating advanced RA. Although results of a 53-patient randomized
placebo-controlled Phase I/II clinical trial demonstrated that the product was
well tolerated by treated patients and reduced disease severity in several
patients, our scientists have been working to improve the ANERVAX.RA vaccine
formulation prior to continuing clinical evaluation. We believe the addition of
one of our proprietary adjuvants to the ANERVAX.RA vaccine may improve its
efficacy in animal models of autoimmune disease. We are reformulating this
peptide vaccine to incorporate this novel adjuvant technology and are seeking to
partner this program before entering into additional clinical trials.
CANCER
BEXXAR(TM). NHLs are blood-borne cancers of the immune system, all of which
involve proliferation of malignant B lymphocytes, or B cells. According to
statistics from the National Cancer Institute, approximately 270,000 people are
afflicted with NHL in the United States. More than [56,000] new cases are
expected to be diagnosed in 2001. NHL is the sixth leading cause of death among
cancers in the United States and has the second fastest growing mortality rate.
NHL is categorized by histology as either low-, intermediate- or high-grade
disease. These classifications differ significantly with respect to the speed of
disease progression, the pattern of response to and relapse after conventional
chemotherapy and the patients average life expectancy. In relapsed low-grade
patients, the disease can transform to an intermediate- or high-grade histology,
referred to as transformed low-grade NHL. In the United States approximately
140,000 patients have low-grade or transformed low-grade NHL, approximately
100,000 have intermediate-grade NHL and approximately 30,000 have high-grade
NHL.
Our most advanced product candidate, BEXXAR (tositumomab, iodine I 131
tositumomab), consists of a monoclonal antibody conjugated with a radioisotope.
BEXXAR is the subject of a collaboration with GSK under which we would comarket
BEXXAR with GSK in the United States if and when the FDA approves BEXXAR for
commercial sale. We are seeking initial approval of BEXXAR for treating
low-grade and transformed low-grade NHL in patients who have relapsed after, or
are refractory to chemotherapy, while simultaneously pursuing clinical trials to
expand the potential use of BEXXAR to other indications.
In September 2000, we submitted a Biological License Application, or BLA,
for BEXXAR to the FDA. In October 2000, the FDA assigned priority review status
to the BEXXAR BLA, and subsequently accepted the application for filing in
November. To date, no radioimmunotherapy products have been approved in the
United States for treating people with cancer.
On March 16, 2001, we received a complete review letter from the FDA
following the agency's 6 month review of the BEXXAR BLA. Issuance of the
complete review letter satisfied the FDA's performance goal for priority review
under the Prescription Drug User Fee Act. In the complete review letter, the FDA
outlined additional clinical and manufacturing information that we must submit
as a result of the review. The FDA requested updated and/or final safety and
efficacy data from ongoing, recently completed and other additional trials to
establish safety and effectiveness. We and GSK believe that safety and efficacy
data from recently completed trials, beyond those contained in the BEXXAR BLA,
may fulfill FDA's requests. Recently completed trials have:
- Examined comparative safety and efficacy in low-grade NHL patients
treated either with BEXXAR or the unlabeled antibody in BEXXAR;
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- Assessed clinical safety and efficacy of BEXXAR treatment of relapsed,
refractory low-grade NHL patients who did not respond to Rituxan(R)
(rituximab); and
- Assessed BEXXAR safety and efficacy as front-line therapy in low-grade
NHL patients.
The FDA also requested:
- Further documentation and analysis of patient diagnosis and confirmation
of response from pivotal and non-pivotal trials that involved treatment
of low-grade lymphoma patients, including those patients with transformed
low-grade lymphoma;
- Additional information or source documentation regarding:
- Certain adverse events,
- Long-term follow-up on patient thyroid function and HAMA response,
- White blood cell counts following BEXXAR administration, and
- Dosimetry calculations on certain patients whose response data was
submitted in the BLA;
- Further documentation and analysis supporting comparability of
tositumomab manufactured by different suppliers during the course of
BEXXAR clinical development; and
- Additional documentation and test results related to validation of
various production processes and release tests as well as additional
information concerning processes and procedures used in drug shipment.
Our current goal is to provide responses to all FDA questions provided in
the six-month complete review letter within three months.
MELACINE(R) VACCINE. Melanoma, if not detected and treated early, can be
highly metastatic and is the most deadly form of skin cancer. Death due to
malignant melanoma is usually caused by complications after the disease has
spread to the lungs, liver, brain or other organs. Standard therapy for primary
skin tumors includes surgery followed by observation.
Our MELACINE melanoma vaccine, a potential therapeutic for treating
melanoma, is available for sale in Canada. MELACINE vaccine consists of lysed
(broken) cells from two human melanoma cell lines combined with our proprietary
DETOX(TM) adjuvant. DETOX adjuvant, named ENHANZYN(TM) adjuvant for other uses,
includes MPL(R) adjuvant and mycobacterial cell wall skeleton, both of which
activate the human immune system in the context of vaccination. MELACINE vaccine
is administered as a two-shot vaccination once a week for five weeks. In
addition, patients may receive a second course of therapy and maintenance
therapy of one vaccination a month. We have granted worldwide distribution
rights for MELACINE vaccine to Schering-Plough Corporation, a leader in cancer
therapy.
In February 2000, the Southwest Oncology Group, or SWOG, released
preliminary data from a Phase III clinical trial, designed to determine the
ability of MELACINE vaccine to prevent recurrence of disease in patients with
Stage II melanoma with primary skin tumors between 1.5 and 4 mm in depth. The
study compared 346 patients who had skin tumors surgically removed and were
treated with MELACINE vaccine to 343 patients who had tumors removed followed by
observation but who did not receive MELACINE vaccine.
Patient accrual in this trial was completed in late 1996. Eighty-nine of
the patients, some from the treatment group and some from the observation group,
were later determined to be ineligible for the clinical trial, in most cases
because tumor size was either less than 1.5 mm (41 cases) or greater than 4 mm
(23 cases) in depth.
The evaluation of disease-free survival was performed on both the eligible
patients and on all 689 randomized patients (the intent-to-treat population). An
analysis of the eligible patient population found no statistically significant
difference in disease-free survival between the patients randomized to be
treated with MELACINE(R) vaccine and patients randomized to observation alone.
However, the results of the intent-
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to-treat analysis on the total population indicated there was a statistically
significant difference in disease-free survival between the patients treated
with MELACINE vaccine and patients randomized to observation alone (p=0.04). The
majority of adverse events reported were mild to moderate with local injection
site reaction as the primary toxic event. We are working with SWOG to update the
database reflecting patient status in 2000.
We have completed a 253 patient Phase III clinical trial comparing
MELACINE(R) + Intron A (alpha interferon) therapy in Stage IV metastatic
melanoma patients to therapy with Intron A alone. Stage IV melanoma is an
aggressive malignancy associated with an extremely high rate of mortality. While
there was no survival advantage noted in the overall trial between the treatment
groups, women treated with MELACINE + Intron A survived significantly longer
than did women treated with Intron A alone (p=0.018). Median duration of
survival in the Intron A group was 187 days, whereas median survival in women
treated with Intron A and MELACINE was 353 days. Response rates (complete and
partial responders) in both treatment arms were similar, ranging from 8% to 10%.
Moreover, in women who responded, the median duration of response was much
longer in women treated with Intron A and MELACINE (668 days) as compared to
women treated with Intron A only (157 days). In part, this may be due to a more
potent immune response against self-antigens in women, given that the rate of
development of autoimmune disease in women is far higher than that observed in
men.
In the first quarter of 1998, we filed a license application for MELACINE
vaccine with the European Agency for the Evaluation of Medicinal Products. We
withdrew the application in November 1998 after the European Agency requested
additional clinical and product data, and we preserved the right to refile the
application later with the requested data. We intend to file a BLA for MELACINE
in the United States in 2001.
ENHANZYN(TM) ADJUVANT. ENHANZYN adjuvant is a composition that we believe
activates the human immune system in the context of vaccination. Human clinical
data have been published that demonstrate that one of our formulations of
ENHANZYN adjuvant, DETOX B-SE(TM) adjuvant, may play an important role in
generating an immune response with the Theratope therapeutic cancer vaccines of
Biomira, Inc. or Biomira. Biomira has licensed DETOX B-SE adjuvant for the
clinical development and potential commercialization of Theratope products. In
1996, Biomira announced that final Phase II clinical data indicated that its
Theratope product for metastatic breast cancer provided a median survival of
more than 26 months compared to less than 10 months achieved historically with
chemotherapy. In November 1998, Biomira announced the start of a pivotal Phase
III clinical trial to evaluate the efficacy of Theratope therapeutic vaccine in
treating metastatic breast cancer. Biomira has announced that the trial will
include 75 to 80 centers worldwide studying approximately 900 evaluable
patients. Primary endpoints for the trial are time to disease progression and
survival. In March 2001, Biomira announced it has recruited 950 patients in its
Phase III clinical trial with Theratope vaccine for metastatic breast cancer.
Biomira has planned two interim analyses for the Theratope vaccine trial to make
this product candidate available to cancer patients as soon as possible, should
the preliminary data demonstrate therapeutic benefit before the final analysis.
We have also supplied QLT with proprietary adjuvants for use in photodynamic
therapy of cancer. Phase I clinical trials of this clinical modality have begun.
HER-2/NEU VACCINE. Her-2/neu is a protein that is normally expressed at
very low levels by cells of the breast, ovaries, skin, lung, liver, intestines
and prostate. In some instances, tumor cells derived from these tissues express
the Her-2/neu protein at an elevated level. Accordingly, we believe Her-2/neu
protein is an appropriate candidate for a vaccine antigen. As a result, we are
conducting a number of Phase I clinical trials designed to test the effects of
various Her-2/neu vaccine product formulations. These trials are evaluating
peptide vaccines based on the Her-2/neu antigen for treating breast and ovarian
cancer. The clinical trials are intended primarily to test the vaccines' safety;
however, we also intend to measure the induction of immune responses to the
Her-2/neu antigen. One of these trials also involves our proprietary microsphere
antigen delivery system. Our Her-2/neu vaccine program is included in our
current collaboration and license agreement with SmithKline Beecham plc.
We are currently engaged in discovering antigens for many of the world's
most widespread forms of cancer, including breast, prostate, lung, colon and
ovarian carcinoma and leukemia. According to the
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American Cancer Society, or ACS, the number of new cases projected for these six
diseases in 2000 was more than 3.2 million patients worldwide, with just over
18%, or 581,200, of these estimated to occur in the United States. Most of these
patients undergo chemotherapy, radiation therapy and surgery, yet the vast
majority of these patients are likely to relapse with malignant disease within
ten years following surgery. We believe that our vaccines will initially be
useful in those patients who have undergone such therapies. Our breast,
prostate, colon and ovarian cancer antigen discovery programs are the subject of
our current collaboration and license agreement with SmithKline Beecham.
We have identified many gene sequences that may be either uniquely
expressed or markedly over-expressed in solid tumors. We have filed patent
applications on a significant number of these tumor gene sequences. We continue
to analyze the immunological characteristics of these tumor gene sequences with
the goal of selecting several antigens for use in vaccines for each of breast,
ovarian, colon and prostate carcinoma.
Building on our progress in cancer antigen discovery, we have initiated
additional discovery programs in several other tumor types, including lung
cancer and leukemia. According to the WHO, lung cancer remains the most common
cancer in terms of worldwide mortality (1.2 million deaths) based on data from
1990. These WHO statistics predicted that in the United States, an estimated
164,100 new cases would be diagnosed in 2000 and an estimated 156,900 people
would die in 2000 from the disease. For leukemia, 30,800 new cases were
projected by the ACS to be diagnosed in the United States in 2000, with 21,700
deaths predicted in the United States in 2000. Due to the magnitude and severity
of these diseases and the lack of effective therapies, we have begun antigen
discovery and vaccine development efforts for lung cancer and leukemia using
approaches similar to those we use for other cancers. Our lung cancer antigen
discovery program is the subject of our May 1999 collaboration agreement with
Zambon Group and our June 1999 collaboration agreement with the pharmaceutical
division of Japan Tobacco. In addition to our internal discovery efforts for
leukemia antigens, we have in-licensed a novel and patented gene from the
Massachusetts Institute of Technology for 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 useful as a vaccine antigen.
INFECTIOUS DISEASES
MPL(R) ADJUVANTS IN INFECTIOUS DISEASE VACCINES. A number of our partners
are evaluating our adjuvants for use in infectious disease vaccines. Several GSK
affiliates and Wyeth-Lederle Vaccines are evaluating MPL adjuvant in a
generation of adult and pediatric vaccines designed to protect against a broader
range of diseases. Vaccines that incorporate MPL adjuvant are in clinical trials
against herpes virus, hepatitis B virus, human papilloma virus, malaria and
respiratory syncytial virus.
In December 1998, GSK's wholly owned subsidiary, GlaxoSmithKline
Biologicals, announced Phase III safety and efficacy results of a hepatitis B
vaccine containing our MPL adjuvant. GlaxoSmithKline Biologicals developed this
vaccine to address low or non-responding patients to GSK's current hepatitis B
vaccine, Engerix-B. Engerix-B is currently the world's leading hepatitis B
vaccine, with over 450 million doses administered worldwide. The new vaccine
combines the antigen from Engerix-B with GSK's adjuvant, SBAS4, which contains
our MPL adjuvant.
In the clinical trial involving nonresponders and comparing Engerix-B with
the new vaccine, investigators measured seroconversion rates (protective
antibody levels) one month after each of three vaccine doses; at zero, one and
six months. After the first dose, 78% of the group given the new vaccine
seroconverted versus 59% of the Engerix-B group. After two doses, 96% versus 76%
seroconverted. After the third and final treatment, 98% of patients receiving
the vaccine containing MPL adjuvant seroconverted compared to only 81% of
patients given Engerix-B.
In a multicenter study of healthy individuals, more than 98% of those
vaccinated with Engerix-B containing MPL adjuvant achieved protective
anti-hepatitis B antibody levels after just two doses, whereas three doses of
the current Engerix-B product were required to obtain a similar level of
protection.
In addition to the hepatitis B vaccine, our MPL adjuvant is included in a
number of other vaccines that GSK is developing. SmithKline Beecham recently
completed a Phase III clinical trial of a genital herpes
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vaccine containing MPL adjuvant in which women were shown to have benefited from
vaccination. Also, GSK has begun clinical trials of vaccines that include MPL
adjuvants to treat papilloma virus, malaria and respiratory syncytial virus
infections. GSK's experience with MPL adjuvant-containing vaccines includes
10,000 subjects receiving over 25,000 doses. GSK has reported positive safety
and immunogenicity results. In addition, Wyeth-Lederle Vaccines is in clinical
development of a pediatric combination vaccine that contains MPL(R)adjuvant.
Our RIBI-529(TM) adjuvant is now in Phase III clinical trials in Argentina
as part of a hepatitis B vaccine that we are developing in collaboration with
Rhein Biotech.
LEISHMANIASIS VACCINE. Leishmaniasis is a skin and visceral disease endemic
in South America, Africa, the Middle East and the Indian sub-continent, and
according to the World Health Organization, or WHO, kills approximately 500,000
people annually. Leishmaniasis is caused by the parasite Leishmania, which is
carried by sand flies. A prototype leishmaniasis vaccine containing antigens
discovered by us has been tested on a compassionate-use basis in Phase I
clinical trials in a small number of leishmaniasis patients in Brazil. In March
2000, the Infectious Disease Research Institute, IDRI, received a $15 million
grant from the Bill & Melinda Gates Foundation to fund its ongoing effort with
us to develop a vaccine to prevent leishmaniasis. We intend to conduct Phase I
clinical trials in the United States as well as larger Phase I/II clinical
trials in Brazil, Peru, Iran and Sudan.
TUBERCULOSIS. Mycobacterium tuberculosis, or Mtb, infection causes 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 United
States. Any of these people may develop active tuberculosis during some stage of
their lives. Each year, approximately 8 million people worldwide contract active
tuberculosis. According to year 2000 statistics, an estimated 2 million die
annually from the disease. Between 2000 and 2020 nearly 1 billion people will be
newly infected with tuberculosis, 200 million people will get sick and 35
million will die. In addition, the WHO estimates that more than 50 million
people worldwide may be infected with drug-resistant strains of Mtb. Our goal is
to develop specific vaccines for both conventional and drug-resistant strains of
Mtb.
From more than 100 candidate Mtb gene products, we have identified as
candidate vaccine antigens a number of antigens that specifically trigger
appropriate helper T cell responses in vitro. The Mtb gene products are the
subject of several of our patent applications covering composition of matter and
vaccine and diagnostic methods of use. We selected several of the candidate
vaccine antigens for skin testing in both infected-healthy and infected-diseased
individuals in South America to determine which of these antigens are recognized
by patients' immune systems. Based on results from these tests and continued
analysis of patient T cell responses in vitro, we have begun preclinical studies
for both therapeutic and prophylactic vaccines in mouse, guinea pig and monkey
models of Mtb infection. We are conducting these preclinical studies in order to
select a vaccine candidate for Phase I clinical trials. We are targeting
initiation of Phase I clinical trials in 2001.
CHLAMYDIA TRACHOMITIS. Chlamydia trachomitis, or C. trachomitis, causes the
most common sexually transmitted disease in the United States. Although C.
trachomitis can be transmitted during sexual contact with an infected partner,
it 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 United States 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, 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. We are currently
identifying candidate C. trachomitis antigens for use in a potential
preventative vaccine for this pathogen. This program is one of the three
infectious disease programs covered under our current collaboration and license
agreement with GSK's wholly owned subsidiary, SmithKline Beecham plc.
CHLAMYDIA PNEUMONIAE. Chlamydia pneumoniae, or C. pneumoniae, is a major
cause of pneumonia, bronchitis and sinusitis. C. pneumoniae is a human pathogen
that is transmitted by the respiratory route.
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Retrospective studies made using serum bank investigations indicate that C.
pneumoniae infection is as prevalent today as it was in 1963. According to the
CDC, more than half of the adults in the United States and many other countries
worldwide have antibodies specific to C. pneumoniae, indicating widespread prior
infection. The incidence of pneumonia in the United States is about one in 80
persons each year, and virtually everyone is infected at some point in life,
with reinfection common. The CDC reports that one effect of C. pneumoniae
infection is atherosclerosis. Seroepidemiological studies have associated C.
pneumoniae infection with the related conditions of coronary artery disease,
myocardial infarction 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. We are now currently engaged
in the discovery of candidate C. pneumoniae antigens for use in a potential
preventative or therapeutic vaccine for this pathogen. This program is one of
the three infectious disease programs covered under our current collaboration
and license agreement with GSK.
OTHER INFECTIOUS DISEASES. We are also discovering candidate antigens with
the goal of developing potential vaccines for infections stemming from Herpes
Virus (Type 1 and Type 2) and Candida. Systemic and vaginal Candida infections
are a recurring and serious problem for many people worldwide. We are
collaborating with an early-stage biotechnology company, LigoCyte
Pharmaceuticals, to develop a novel therapeutic antibody for use in
hospital-based systemic infections, and a vaccine that might reduce the
incidence of vaginal candidiasis in the subset of women who suffer from Candida
infections on a recurring basis. We believe our antigen discovery technology
will be useful in identifying antigens for use in vaccines that may either
prevent or treat the widespread diseases caused by Herpes Virus and Candida,
which afflict over 100 million people world wide. Our efforts with respect to
Herpes Virus and Candida are in early stage research.
OTHER PRODUCTS IN DEVELOPMENT
ADOPTIVE IMMUNOTHERAPY PRODUCTS. T cells, particularly CTL, are generally
believed to be essential to protective immunity against cancer. As a result, for
many years scientists and clinicians have studied the potential of growing a
patient's own CTL or antigen presenting cells, or APC, outside the body, or ex
vivo, and then using those CTL or APC in treating the patient's advanced cancer.
CTL grown ex vivo have been shown to shrink and/or eliminate tumors, both in
animal models and in clinical trials. This therapeutic approach, called adoptive
immunotherapy, is limited by the difficulty of growing sufficient numbers of
tumor antigen reactive CTL or APC ex vivo for re-infusion into cancer patients.
We believe that several of our core technologies may be useful in developing
adoptive immunotherapy procedures for cancer treatment, and we have identified
several tumor antigens that we or our corporate partners may use to stimulate in
vitro growth of tumor-reactive CTL. In addition, we have demonstrated that our
microsphere and adjuvant technologies enhance the in vitro generation and growth
of tumor antigen-reactive CTL. We intend to pursue research and corporate
partnership opportunities in the field of adoptive immunotherapy of cancer. In
March 1999, we entered into a research agreement with IDRI pursuant to which
IDRI will provide us grant funding for three years to fund research and
development of adoptive immunotherapy products for treating cancer.
CANCER GENE THERAPY. In recent years a number of so-called tumor suppressor
genes have been discovered. The expression of tumor suppressor genes in tumor
cells eliminates the malignant phenotype and returns the tumor cell to a state
resembling a normal tissue cell, under the control of cellular processes that
keep the cell from entering a state of rapid division or malignancy. Following
our acquisition of GenQuest in 1998, we obtained rights to a particular tumor
suppressor gene, called MDA-7. Expression of MDA-7 in tumor cells stops tumor
cell growth both in test tube and animal experiments. In 1999, we licensed the
MDA-7 gene to Introgen Therapeutics for use in gene therapy applications for
treating cancer. Introgen Therapeutics commenced a Phase I clinical trial of
MDA-7 in November 2000.
CARDIOPROTECTANT. Ischemia-reperfusion injury is damage that can occur in
tissue during the oxygen deprivation of interrupted blood flow, or ischemia, and
when blood flow is restored after, for example, a heart attack or a planned
event such as cardiovascular surgery, angioplasty or organ transplantation.
Paradoxically, restoring blood flow to ischemic tissue may induce a complex
series of events leading to both reversible and irreversible tissue damage
beyond any damage that may have occurred during the ischemic period. It is
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believed that a significant factor in reperfusion injury is the generation of
free radical molecules, which attack and damage cardiac tissue. Reperfusion
injuries can result in a number of complications, including tissue death,
depression of heart function, irregular heart beat and, in some cases, death.
Our synthetic chemistry program has generated a novel cardioprotectant,
RC-552(TM), which we have demonstrated in preclinical studies to be fast acting
and potent. Potential clinical applications for RC-552 cardioprotectant may
include coronary artery bypass graft surgery, aortic valve replacement,
angioplasty, noncardiac surgery in high-risk patients, unstable angina, acute
myocardial infarction thrombolytic therapy and organ transplantation. In January
2001, we entered into an agreement with CoPharma to develop and commercialize
our cardioprotectant, RC-552. Under the terms of the agreement, CoPharma will
develop and commercialize RC-552 for treating and preventing cardiac disorders,
neuronal damage and ischemia-reperfusion injuries.
ANIMAL HEALTH PRODUCTS. We believe that certain of our human vaccine and
diagnostic products also may have applications in diagnosing and treating
disease in animals. For instance, Europe is the primary market for products
targeting leishmaniasis, which can infect dogs. We are collaborating with Heska,
a developer and marketer of companion animal diagnostics and therapeutics, to
develop and commercialize diagnostics and vaccines for leishmaniasis in dogs.
CORE TECHNOLOGIES
OUR ANTIGEN-DISCOVERY CAPABILITIES
Our ability to discover numerous antigens allows us to select those that
will work most effectively in a given vaccine or as the best targets for
developing antibody-based products. When making this selection, we focus on
antigens that are recognized by the greatest percentage of individuals,
stimulate the strongest immune responses and are expressed by the greatest
percentage of pathogen strains or tumor types. In connection with autoimmune
diseases, we focus on discovering otherwise normal antigens, or auto-antigens,
that trigger autoimmune responses and disrupt the pathway that leads to the
destruction of healthy tissue.
A majority of our scientific personnel are involved in antigen discovery.
We use discovery approaches and technologies that include:
- acquisition of normal and diseased tissue, and related cDNA and protein;
- cDNA subtraction and analysis of differential gene expression;
- quantitative PCR;
- expression cloning of full-length cDNAs;
- immunohistochemistry to determine tissue distribution of candidate
antigens;
- immunological characterization of candidate antigens; and
- analysis of antigens as targets for developing antibody-based products.
Our discovery approach also includes correlating the antigens that we
discover with patient immune responses. In this way, we focus on identifying
proteins that are recognized by the human immune system and are therefore
antigenic.
Our antigen discovery research culminates in the isolation of pathogen,
tumor or auto-antigen genes that encode antigens with significant potential to
be the basis of vaccines or other immunotherapeutic products. These antigens may
be in the form of either recombinant proteins or biosynthetically-produced
peptides. We have discovered multiple pathogen and tumor gene and protein
sequences. As a result, we have filed numerous patent applications seeking both
composition of matter and/or vaccine and diagnostic method of use claims. We
have also filed a number of applications for the potential use of our antigens
or adjuvant-based technology for use in diagnosing, preventing or treating
certain autoimmune diseases.
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OUR NOVEL VACCINE DESIGN
The majority of available vaccines trigger protective antibody responses
that can destroy invading pathogens. Antibodies are protein-based products of
specialized immune system cells called B cells. Antibodies recognize and attach
to a pathogen's 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. Today's vaccines are made of either whole
organisms that contain antigens or the antigens themselves. These antigens can
be peptides, proteins or carbohydrates. Typically these vaccines are formulated
by combining antigens with an adjuvant, an immune system booster.
The antibody responses triggered by available vaccines usually cannot
eliminate tumors or certain infectious diseases. We believe that an effective
immune response against these diseases requires the action of pathogen-reactive
or tumor-reactive T lymphocytes, or T cells. Our vaccine program focuses on
activating specialized T cells known as cytotoxic T lymphocytes, or CTL, that
recognize and kill pathogen-infected tissue or tumor cells.
The body's immune response is a complex series of events that begins when a
specialized immune system cell called an antigen presenting cell, or APC,
processes antigens. Antigens are processed by APCs through two different
pathways, the Class I and Class II Pathways. The antibody response produced by
currently available 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 by major
histocompatibility, or MHC, Class II proteins. Antigen presentation by MHC Class
II proteins results in activation of CD4 positive helper T cells. These helper
cells produce immune system hormones called cytokines that "help" generate
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. In this way, a Th1
response may lead to pathogen elimination.
Th1-induced antibody production can be sufficient to prevent or eliminate
pathogen infection in the case of some diseases. However, antibody responses
alone are not sufficient in other diseases, such as cancer. In these diseases, a
cellular immune response that includes generating CTL is necessary to achieve
protective immunity. Although 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
by MHC Class I proteins. Antigen presentation by MHC Class I proteins results in
CTL generation and activation. We believe that CTL are necessary to eliminate
tumors and various pathogens that antibodies alone cannot destroy.
We have shown in preclinical studies that CTL can eliminate tumors or
certain pathogens in situations in which antibody responses fail. These CTL not
only can prevent disease if they are activated before pathogen infection but
also can eliminate disease once the infection has occurred or, in the case of
cancer, once a tumor has developed. We believe vaccines that activate specific T
cell responses can form the basis for a new class of products that may be used
to treat or prevent disease. Using recent advances in understanding molecular
mechanisms that control how antigens are normally presented to T cells, we are
designing vaccines that incorporate disease-specific antigens into biodegradable
and biocompatible microspheres. We believe that these vaccines may give rise to
potent CTL responses. Through our antigen discovery program, we have identified
antigens from many tumor types and from infectious disease pathogens for which
no vaccines currently exist.
OUR AUTOIMMUNE DISEASE THERAPEUTICS
Autoimmune diseases include psoriasis, RA, MS, myasthenia gravis and
diabetes. Autoimmune diseases are caused by the abnormal destruction of healthy
body tissues when T cells and antibodies react to normal tissue. T cells in the
immune system normally regulate the identification and destruction of foreign
substances and malignant cells. In autoimmune diseases, otherwise normal
antigens, or auto-antigens, trigger autoimmune responses. We are developing
technology that may interrupt the chain of events involved in autoimmune
disease. In contrast to today's therapies for autoimmune diseases, which often
suppress the overall immune
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system, we believe that our technologies may provide a means to target the
disease process while leaving the normal immune system unaffected.
We believe that our ANERGIX(R) complex vaccine technology offers the
potential to treat a number of major autoimmune diseases. The ANERGIX complex
technology may enable the selective destruction or inactivation of T cells
involved in autoimmune disease. Our ANERVAX(TM) vaccine technology may stimulate
the immune system to produce antibodies or T cells that interfere with the
presentation of auto-antigens to destructive T cells.
The ANERGIX(R) complex technology platform is based on creating
therapeutics that are a complex of an MHC or human leukocyte antigen, or
HLA-derived protein and an autoimmune disease-specific auto-antigenic peptide.
Selection of a particular HLA molecule is based on our understanding of
patients' genetic susceptibility to various autoimmune diseases. For instance,
patients with MS predominantly express HLA DR2 and patients with RA
predominantly express HLA DR4. That information guides our selection of relevant
HLA molecules for complexing with suspected disease-causing auto-antigens. Our
scientists have performed research that demonstrates that delivery of the
ANERGIX complex selectively inactivates, or induces anergy in, disease-causing T
cells. We are focusing our efforts on two ANERGIX complex Phase I/II programs,
the first in RA, which we have partnered with Organon, and the second in MS,
which we have presently not partnered.
The ANERVAX(TM) vaccine technology platform is a family of therapeutic
MHC-derived peptide vaccines designed to stimulate production of a neutralizing
immune response to selectively block the autoimmune cascade. The design of an
ANERVAX vaccine molecule is based on knowledge of patients' genetic
susceptibility to autoimmune disease. That susceptibility has been mapped to a
particular region of the MHC molecule in each autoimmune disease. Specifically
blocking or "down-regulating" that region is the basis of the action of ANERVAX
vaccines in RA and Type I diabetes, programs that are in Phase II clinical
trials and preclinical development, respectively.
OUR MONOCLONAL ANTIBODY-BASED THERAPEUTICS
We believe that our antibody products may promote tumor elimination or
shrinkage, which will result in improved cancer patient response or survival
rates. For example, we believe 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.
We believe that we can increase the effectiveness of antibodies by
attaching radioisotopes or other cytotoxic agents to them for use in
"radioimmunotherapy" or "chemoimmunotherapy." The effect of the radiation or
cytotoxic agent can be concentrated in the immediate vicinity of those cells by
using an antibody to deliver a radioisotope or other cytotoxic agent to the
targeted cells. Development of effective radioimmunotherapies, however, presents
an additional set of challenges, including the need to select an appropriate
radioisotope for the intended therapy, to develop a reliable means of linking
the radioisotope to the antibody and to develop a therapeutic protocol that
optimizes therapeutic effect while minimizing undesirable side effects. The
development of effective chemoimmunotherapies presents similar challenges.
We believe that radioimmunotherapies will emerge as important treatments
for blood-borne cancers due to the radiosensitivity of these malignancies and
the ready accessibility of the blood and lymph systems to monoclonal antibodies.
Radioimmunotherapy also may become an important adjunctive therapy for treating
certain solid tumor cancers following surgery, radiation therapy or
chemotherapy, in which instances it may be useful in eliminating circulating and
other undetected malignant cells missed by primary therapies. In the future, we
may use our expertise in conjugated antibodies to expand beyond
radioimmunotherapy to develop potentially effective chemoimmunotherapies for
treating certain cancers.
We believe that many of the antigens we have discovered through our antigen
discovery efforts may also have applications in disease diagnosis. Antigens
themselves may be used in diagnostic tests to determine if antibodies, which
bind to these antigens, are present in patient sera, suggesting infection or
disease. In
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addition, monoclonal antibodies may be useful for diagnostic purposes if used to
determine the presence of target antigens associated with the existence of a
particular disease.
OUR ADJUVANTS
Adjuvants are formulations and/or additives that are routinely combined
with vaccines to boost immune responses directed against the antigens in the
vaccines. Because available vaccines depend on the generation of antibody
responses to injected antigens, commercially available adjuvants have been
developed primarily to enhance these antibody responses. To date, the only
FDA-approved adjuvant for use with human vaccines is aluminum hydroxide, or
alum. Although alum is useful in boosting antibody responses to vaccine
antigens, it has no effect on the immune responses that our T cell vaccines are
meant to generate. As a result, we are interested in discovering new adjuvants
that can be used to boost T cell immune responses after vaccine administration.
Our technology is based on the potent capacities of certain microbial
products to act as adjuvants and modulate the cascade of immune system
regulators, known as cytokines, produced by cells in man and other animals.
Slight modifications of these products and/or their physical and biological
delivery to the immune system can influence the manner in which cytokines are
modulated, as well as the recipient's physiological responses. By activating
macrophages, lymphocytes and other cells relating to the immune system, these
adjuvants stimulate a cascade of cytokines that complements the normal,
protective responses that are initiated during infection or injury. Our
adjuvants include both natural and synthetic derivatives of immunomodulatory
bacterial components. The adjuvants work by activating and focusing key cells
within the immune system to effectively modulate a desired immune response.
MPL(R) adjuvant, our flagship adjuvant, is a derivative of the lipid A
molecule found in gram-negative bacteria, one of the most potent
immunostimulants. We also own patented technology for extracting MPL adjuvant
from bacterial cell walls. A number of our partners are evaluating MPL adjuvant
in vaccines for development in allergy, cancer and infectious disease targets.
ENHANZYN(TM) adjuvant consists of MPL adjuvant and mycobacterial cell wall
skeleton. ENHANZYN adjuvant is a key component of our MELACINE(R) melanoma
vaccine and is a component in Biomira's Theratope vaccine for adenocarcinomas.
We are also conducting research related to the development of synthetic
adjuvants. These synthetic adjuvants are small molecules that may possess a
spectrum of properties, including potent adjuvant and anti-tumor activity. We
hope to develop these synthetic components to build an even broader vaccine
adjuvant platform with considerable potential for preventing and treating human
diseases. The small molecule synthetic adjuvant, RIBI-529(TM) adjuvant, is in
Phase III clinical trials in Argentina as part of a hepatitis B vaccine being
developed by our partner, Rhein Biotech. We are initiating multiple partnership
discussions pertaining to this novel vaccine adjuvant. In January 2001, we
entered into a development and commercialization agreement with CoPharma, Inc.
for a second novel synthetic immunomodulator, RC-552, for potential use as a
cardioprotectant.
OUR MICROSPHERE ANTIGEN DELIVERY SYSTEMS
We believe that microsphere-mediated antigen delivery may be superior to
other approaches used to target antigen presentation pathways in terms of
versatility, stability, safety and cost. These other approaches include, for
example, the use of various gene therapies or liposome or recombinant
protein-lipid formulations. Only APCs take up microspheres of the particular
sizes that we use. 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. Additionally, a single
microsphere formulation may be useful for many vaccine products. In February
1999, we initiated a Phase I clinical trial of a microsphere-encapsulated,
Her-2/neu vaccine for breast and ovarian cancer.
We have an exclusive, worldwide license to a number of patents and pending
patent applications from the Southern Research Institute covering the
composition, use and production of microspheres of a particular size range for
augmenting immune responses. In addition, we have an exclusive, worldwide
license from the Dana-
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Farber Cancer Institute to patents and patent applications claiming the
composition and use of microspheres for the purpose of activating CTL.
Internally, we are also developing additional microsphere technology.
OUR TARGETED ONCOLOGICS
We believe that our TAP pro-drug technology, may lead to significantly
broader therapeutic uses of cytotoxic agents. The TAP pro-drug technology is
based on an understanding of the biochemical mechanisms utilized by cancer cells
to metastasize and the identification of a potential means for exploiting these
mechanisms. Our TAP pro-drug technology is being developed in collaboration with
the Universite Catholique de Louvain, Belgium. TAP pro-drugs are designed to be:
- activated preferentially at the tumor site by enzymes secreted by the
tumor;
- stable in circulation and in normal tissues; and
- unable to penetrate normal cells or malignant cells until activated.
As a result, relatively larger quantities of cytotoxic agents are expected
to reach and enter malignant cells as opposed to normal cells, which permits a
significant increase in maximum tolerated dosages, potentially overcoming drug
resistance in cancer cells. Our lead preclinical pro-drug candidate is a
pro-drug version of doxorubicin known as Super-Leu-Dox. Doxorubicin is an
off-patent chemotherapeutic drug, that is used in treating a number of solid
tumor cancers, including breast, prostate, ovarian and soft-tissue sarcoma
cancers.
ADDITIONAL TECHNOLOGIES
We believe that we or our corporate partners may be able to introduce
certain of our proprietary cancer genes into tumor cells to potentially kill
them or slow their growth. Also, we and our corporate partners may be able to
develop techniques that use our discovery methodologies or gene products to
search for low molecular weight compounds that inhibit tumor cell growth or
metastasis. These compounds may prove useful as cancer therapeutics.
CORPORATE PARTNERSHIPS
Part of our strategy is to establish corporate partnerships with
pharmaceutical, biopharmaceutical and diagnostic companies. We focus our
partnership efforts on broadly partnering our core technologies at various
stages in the research and development process. We target partners that have the
expertise and capability to discover, develop, manufacture and market our
products. In our corporate partnerships we seek to cover our research and
development expenses through research funding, milestone payments and option,
technology or license fees. We also seek to retain significant downstream
participation in product sales through either profit-sharing or product
royalties paid on annual net sales. We have focused on three discrete types of
product collaborations:
- vaccines and immunotherapeutics for autoimmune diseases, cancer and
infectious diseases;
- monoclonal antibody-based therapeutics; and
- adjuvants and delivery systems to increase effectiveness of vaccines and
immunotherapeutics for a wide range of human diseases.
We also intend to initiate partnering efforts designed to develop targeted
oncologics.
VACCINES AND IMMUNOTHERAPEUTICS
MEDICIS PHARMACEUTICAL CORPORATION. In August 2000, we entered into a
multi-year development, commercialization and license agreement covering our
psoriasis immunotherapeutic product, PVAC(TM) treatment with Medicis
Pharmaceutical Corporation, or Medicis. The agreement provides Medicis with
exclusive rights to PVAC treatment in the United States and Canada. We will be
responsible for development and manufacturing, and Medicis will be responsible
for commercialization and distribution. PVAC treatment recently completed Phase
II clinical trials for treating moderate to severe psoriasis. Medicis will pay
us license
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fees, research funding and milestone payments of up to $107 million under the
terms of the agreement. We received a nonrefundable payment of $17 million with
potential development milestone payments of $35 million, and commercialization
and cumulative net sales threshold milestone payments of $55 million.
Additionally, Medicis will purchase inventory from us and pay a royalty on net
sales of the product upon commercial sale of the product. In August 1999, we
entered into a corporate partnership with Zenyaku Kogyo for research and
development related to PVAC treatment. The agreement provides Zenyaku Kogyo with
exclusive development and commercialization rights to PVAC treatment in Japan.
We will receive license fees and research funding of $6.0 million, milestone
payments based on successful clinical and commercial progress, and a royalty
stream on future product sales.
As a result of our acquisition of Coulter, we acquired the 1998
collaboration agreement between Coulter and GSK for the development and
commercialization of BEXXAR(TM), which has completed Phase III clinical trials
in the United States and is the subject of a BLA currently under review by the
FDA for the treatment of NHL. The agreement was amended in April 2000 to reduce
GSK's territory under the agreement to the United States. Under the terms of the
amended agreement, Corixa and GSK will jointly market and sell BEXXAR in the
United States following regulatory approval and the two companies will share
profits and losses equally. The agreement provides for the sharing of certain
costs related to clinical and manufacturing development activities. The
agreement also provided for a $15 million credit line, which was fully drawn in
December 2000.
In September 2000, Coulter announced it had acquired rights to a class of
ultra-potent anti-cancer compounds from Kyowa Hakko Kogyo Co. Ltd. of Japan. We
intend to enhance the potency of these agents by incorporating them into our
proprietary tumor activated pro-drug and tumor specific targeting technologies.
The resulting drug candidates will be designed to target the potent anti-cancer
power of these agents directly to tumor cells to maximize efficacy while
minimizing side-effects to normal tissues. Under the terms of the agreement, we
acquired exclusive worldwide rights to all uses of the ultra-potent agents. The
agreement also included an upfront payment to Kyowa Hakko Kogyo with future
payments committed for certain development milestones and royalties upon
commercialization.
In June 1999, Coulter and Pharma Pacific Pty. Ltd., or Pharma Pacific,
entered into an agreement granting Coulter worldwide rights to Pharma Pacific's
64G12, a therapeutic monoclonal antibody specific for the Type I interferon
receptor, which may represent a new approach to treating autoimmune diseases and
transplant rejection. Under this agreement, Coulter received exclusive worldwide
rights for all human therapeutic and prophylactic uses for 64G12 and related
intellectual property, as well as other antibodies recognizing the Type I
interferon receptor.
ZENYAKU KOGYO. In August 1999, we entered into a corporate partnership with
Zenyaku Kogyo for researching and developing PVAC(TM) treatment. The agreement
grants Zenyaku Kogyo exclusive rights to PVAC treatment in Japan. We and our
discovery partner for PVAC treatment, Genesis Research and Development, retain
exclusive PVAC treatment rights for the rest of the world. Under the terms of
the agreement, we will receive license fees and research funding of $6 million,
milestone payments based on successful clinical and commercial progress, and a
royalty stream on future product sales.
PHARMACEUTICAL DIVISION OF JAPAN TOBACCO. Effective July 1999, we entered
into a license and collaboration research agreement with the pharmaceutical
division of Japan Tobacco for the research, development and commercialization of
vaccine and antibody-based products aimed at the preventing and/or treating lung
cancer. We granted Japan Tobacco an exclusive license to develop and sell the
vaccine products in North America, Japan and all other countries not previously
exclusively licensed to Zambon Group. Japan Tobacco's rights are co-exclusive
with Zambon Group in China. We also granted Japan Tobacco an option to a
nonexclusive license to formulate the vaccines in our microsphere delivery
system with our proprietary protein adjuvants. We also agreed to supply
preclinical and clinical grade materials to Japan Tobacco in connection with the
collaboration. Japan Tobacco may also elect to require us to supply commercial
materials for products licensed to Japan Tobacco under the agreement.
Under the agreement, we could receive over $40 million in license fees,
research funding and clinical and commercial milestone payments. The individual
amounts of the milestone payments vary, depending on the
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milestones achieved and the types of products sold. We are also entitled to
receive future royalties on all product sales, which royalties vary depending on
the amount and type of products sold.
ZAMBON GROUP. In May 1999, we entered into a collaboration agreement with
Zambon Group for the research, development and commercialization of vaccine
products aimed at the preventing and/or treating lung cancer. We granted Zambon
Group an exclusive license to develop and sell these vaccine products and
therapeutic drug monitoring products in Europe, the countries of the former
Soviet Union, Argentina, Brazil and Columbia and a co-exclusive right in China.
We also granted Zambon Group the non-exclusive right to formulate the vaccines
in our microsphere delivery system with our proprietary protein adjuvants and
agreed to supply preclinical and clinical-grade materials, as well as commercial
materials, to Zambon Group in connection with the collaboration.
Under the agreement, we could receive over $21.5 million in license fees,
research funding, equity financing and clinical and commercial milestone
payments. Pursuant to the agreement, Zambon Group purchased 141,576 shares of
our common stock at a premium to its fair market value. The individual amounts
of the milestone payments vary, depending on the milestones achieved and the
types of products sold. We are also entitled to receive future royalty or
profit-sharing payments on all product sales, which royalties vary depending on
the amount and types of products sold.
GSK. Effective September 1998, we entered into a collaboration and license
agreement with GSK's wholly owned subsidiary, SmithKline Beecham plc. This
agreement replaced and significantly expanded the scope of our then-existing
agreements with SmithKline Beecham Manufacturing and SmithKline Beecham
Biologicals. Under the agreement, GSK holds 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, rights are co-exclusive with us in Japan with respect to
tuberculosis.
Under the collaboration and license agreement, GSK is obligated to pay for
work that is performed under:
- our cancer antigen discovery programs in breast, colon, ovarian and
prostate cancer;
- our Her-2/neu breast and ovarian cancer vaccine program;
- our mammaglobin breast cancer vaccine program;
- our infectious disease antigen discovery programs in Chlamydia
pneumoniae, Chlamydia trachomatis and Mycobacterium tuberculosis; and
- one additional antigen discovery program in a disease field to be agreed
upon.
For certain of these disease areas, GSK also holds license rights to
develop, manufacture and sell passive immunotherapy products, such as T cell or
antibody therapeutics, and therapeutic drug monitoring products.
Under the agreement, GSK is obligated to fund $43.6 million for work to be
performed during the initial four-year term of the agreement in the above
programs. We and GSK may mutually agree to extend the research and development
programs beyond the initial four-year term. Pursuant to the agreement, GSK
purchased 427,807 shares of our common stock at a premium to its fair market
value, and we have the right in the future to require GSK to purchase an
additional $2.5 million of our 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 to us of $48.6 million during the
first four years of the agreement. Additionally, with respect to $5.0 million
paid to us by GSK under a prior option agreement, GSK may elect either to have
us repay that amount on September 1, 2003 or convert that amount into our common
stock at a premium to its then-current fair market value. To the extent that
clinical and commercial milestones in the programs are achieved, we are entitled
to receive additional 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. We are also entitled to
receive future royalty payments on all product sales, which royalties vary
depending on the types of products sold.
SCHERING-PLOUGH. In 1998, we entered into a worldwide license granting
exclusive marketing rights for our MELACINE(R) vaccine to Schering-Plough. In
addition to license fees, Schering-Plough will pay us
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transfer payments for supplies of MELACINE vaccine and will be entitled to
royalties upon commercial sale of MELACINE vaccine. See "Product Pipeline and
Development Status -- Cancer -- MELACINE vaccine" for a discussion of the
clinical trial status of this vaccine.
ORGANON. In 1996, we entered into a product development and license
agreement with Organon, the pharmaceutical division of the Akzo-Nobel Group. The
Organon partnership targets the development of an ANERGIX.RA(TM)complex that
incorporates Organon's proprietary RA peptide into our ANERGIX(R) complex. We
have completed a Phase I/II clinical trial of ANERGIX.RA(TM) in patients with
moderate to severe RA. Under the terms of the product development and license
agreement, Organon will pay the majority of current clinical trials costs and in
the event of our success, Organon will pay us milestone and royalty payments.
Effective October 1, 2000, we amended and restated the agreement to cover the
continued development of the recombinant form of our ANERGIX.RA complex treating
RA. Under the terms of the amended agreement, Organon and Corixa will share
ANERGIX.RA complex project costs through Phase II clinical trials. If both
parties agree to share the cost of product development following Phase II,
Corixa and Organon will also share profits if product sales are successful. We
retain the option to co-promote ANERGIX.RA with Organon in the United States.
ADJUVANTS AND DELIVERY SYSTEMS
AUTOIMMUNE DISEASE. We have two corporate partnerships granting rights to
use MPL(R) adjuvant in products to treat and prevent allergies. Our partners are
Allergy Therapeutics, under a 1996 license and supply agreement, and SmithKline
Beecham plc, under a 1999 license and supply agreement. Under each of these
agreements, we will receive annual license fees prior to, and minimum annual
royalties subsequent to, regulatory approval of any allergy vaccine developed
under the applicable agreement. We will also receive supply payments for
clinical and commercial quantities of MPL adjuvant and royalties on any
commercial sales of approved allergy vaccines.
CANCER. In 1995, we entered into a license and supply agreement granting
GSK a nonexclusive, worldwide license to use MPL adjuvants in cancer vaccines.
Under the agreement GSK has an option to obtain exclusivity in connection with a
limited number of GSK's proprietary cancer antigens. GSK will pay us an annual
license fee and milestone payments for each GSK vaccine incorporating MPL
adjuvant that is submitted for regulatory review. GSK will also pay us milestone
payments upon any regulatory approval of such vaccines. In addition to transfer
payments for commercial quantities of MPL adjuvant, GSK will pay us royalties on
any commercial sales of vaccines that incorporate MPL adjuvant.
In 1990, we entered into a collaboration with Biomira covering the use of
one of our formulations of ENHANZYN(TM) adjuvant, DETOX B-SE(TM) adjuvant, in
Biomira's Theratope vaccines for the potential treatment of breast, lung and
gastrointestinal cancers. In 1996, Biomira announced that final Phase II
clinical data demonstrated that its Theratope vaccine for metastatic breast
cancer provided a median survival of more than 26 months compared to less than
10 months achieved historically with chemotherapy. In November 1998, Biomira
announced the start of a pivotal Phase III clinical trial to evaluate the
effectiveness of Theratope vaccine in treating metastatic breast cancer. Under
our agreement with Biomira, Biomira will purchase the ENHANZYN adjuvant
exclusively from us at an agreed upon transfer price.
INFECTIOUS DISEASE VACCINES. We have licensed MPL adjuvant to a number of
our corporate partners for use in infectious disease vaccines. We have licensed
MPL adjuvant to GSK under three separate agreements for use in infectious
disease vaccines. Under the first agreement, entered into in 1991, we granted
GSK exclusive, worldwide rights to use MPL adjuvant in vaccines in a number of
infectious disease fields, including hepatitis B. Under the agreement, GSK will
pay us transfer payments for supplies of MPL adjuvant and royalties upon
commercialization of products developed under the agreement.
Under the second agreement, entered into in 1992, we granted GSK the
co-exclusive right to develop vaccines that include MPL adjuvant against several
bacterial infections as well as combination vaccines that contain diphtheria,
pertussis, tetanus, Haemophilus influenza b and polio antigens. In addition to
an annual license fee, GSK will pay us transfer payments for supplies of MPL
adjuvant and royalties upon commercial sale of the vaccines.
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We are party to a third infectious disease vaccine license agreement,
effective December 31, 1996, with GSK, under which we granted rights to use MPL
adjuvant in an additional group of vaccines against infectious diseases,
including tuberculosis. The license is exclusive for human papilloma virus
vaccines, co-exclusive for tuberculosis vaccines, and nonexclusive license for
specified additional infectious disease vaccines. In addition to annual license
fees, GSK will pay us transfer payments for clinical and commercial quantities
of adjuvant and royalties on any commercial sales of vaccines incorporating MPL
adjuvant.
We are also a party to a license agreement and related supply agreement,
effective April 1, 1993, with American Home Products Corporation, acting through
the Wyeth-Lederle Vaccines business unit of its Wyeth-Ayerst Laboratories
division. Under the license agreement we granted Wyeth-Lederle co-exclusive use
of MPL(R) adjuvant in the infectious disease fields licensed co-exclusively to
SmithKline Beecham under our 1992 agreement with SmithKline Beecham. Under the
supply agreement, we will provide commercial quantities of MPL adjuvant for use
in any vaccines that Wyeth-Lederle may develop under the license agreement. The
agreements with Wyeth-Lederle provide that Wyeth-Lederle will pay us an annual
license fee until a threshold level of earned royalties is met, transfer
payments for supplies of MPL adjuvant and annual minimum and earned royalty
payments when commercial sale of vaccines are made. In March 2000, we expanded
Wyeth-Lederle's access to our MPL adjuvant. We granted Wyeth-Lederle access to
an oil-based formulation of MPL and several additional infectious disease
fields, including HIV.
MONOCLONAL ANTIBODY-BASED THERAPEUTICS
In March 2000, we further extended the reach of immunotherapeutic products
POWERED BY CORIXA(R) technology when we entered into a collaboration with
Abgenix, Inc. to discover and develop human monoclonal antibodies against
selected targets from our library of proprietary autoimmune disease, cancer and
infectious disease antigens. Under the agreement, when we and Abgenix determine
antibodies to be worthy of clinical investigation, a closed auction will be held
between the two parties for the rights to develop the specific antibody-based
product. The party that obtains the right to develop and commercialize a
particular product candidate will pay the other party an up-front fee,
milestones based on clinical development, and royalties on any product sales.
In June 2000, we entered into a collaboration with Medarex, Inc., or
Medarex, to discover and develop human monoclonal antibodies against selected
targets from our library of proprietary autoimmune disease, cancer and
infectious disease antigens. We contributed three targets initially and intend
to contribute up to six or more targets a year during the term of the agreement.
Medarex will contribute its HuMAb-Mouse technology to the multi-year
collaboration, which is targeted to generate, screen and characterize fully
human monoclonal antibodies directed against our antigens. We, and in some
cases, Medarex, will then be responsible for determining whether the
characterized antibodies have an immunotherapeutic effect in tissue culture
experiments and in animal models of human disease. Under the agreement, when we
and Medarex determine antibodies to be worthy of clinical investigation, a
closed auction will be held between the two parties for the rights to develop
the specific antibody-based product. The party that obtains the right to develop
and commercialize a particular product candidate will pay the other party an
up-front fee, milestones based on clinical development, and royalties on any
product sales.
In September 2000, we announced a collaboration with Purdue Pharma L.P. or
Purdue, focused on tumor-antigen research and development. Under the terms of
the agreement, we and Purdue may develop up to four therapeutic antibodies
directed against cell surface antigens chosen from selected tumor-antigen
discovery programs. We will provide Purdue with an opportunity to develop
antibody-based therapeutics against four tumor antigens. Purdue will pay us
guaranteed research funding, and based on the outcome of preclinical studies,
Purdue may purchase a worldwide license from us for the antibodies and targets
under terms that include up-front license fees, milestone payments and
royalties.
In October 1998, we executed an agreement with GSK to jointly commercialize
BEXXAR(TM) worldwide. Under the agreement as amended in April 2000, we and GSK
agreed to co-promote BEXXAR in the United States following regulatory approval,
with each company fielding its own sales force and both companies sharing
profits equally.
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In our current vaccine collaboration and license agreement with GSK, as
well as in our agreement with Zambon and the pharmaceutical division of Japan
Tobacco, our partners have either an option, license or the right to develop
novel antigens discovered under the respective collaboration as targets for
therapeutic monoclonal antibodies. If therapeutic monoclonal antibodies are
developed, we will receive additional funding, milestone payments and royalties
on such products.
ANTIGEN-BASED DIAGNOSTIC PRODUCTS
We have entered into and intend to continue to pursue corporate
partnerships in the fields of cancer and infectious disease diagnostics to
complement our therapeutic research efforts and to expand our scientific
platform. We have established corporate partnerships for the development of
diagnostic products for infectious diseases with several diagnostic companies.
Under these arrangements, we generally grant a nonexclusive license to our
antigens for use in specified infectious disease indications and diagnostic
product formats. In exchange, we generally receive the respective corporate
partner's agreement to make certain payments upon achieving development
milestones, a commitment to purchase a minimum number of reagents and an
agreement to pay royalties on any product sales. In connection with our current
vaccine collaboration and license agreement with GSK and the Zambon Group
collaboration agreement, we granted each of our partner's rights to diagnostic
products for monitoring patient eligibility and response to therapy in
connection with the therapeutic products that may be developed under those
agreements. Under our vaccine collaboration and license agreement, GSK also
holds a right of first refusal on other diagnostic applications.
OTHER PARTNERED PROGRAMS
PHOTODYNAMIC THERAPY. In March 2000, we entered into an agreement with QLT
PhotoTherapeutics, or QLT, under which we granted QLT exclusive rights to use
our proprietary immunotherapeutic compounds called AGPs in combination with
their research and development efforts regarding photodynamic therapy. QLT made
an up-front payment to us and QLT is required, upon achieving certain
development goals, to pay us additional licensing fees and royalties. Under our
agreement with QLT they may be required to purchase our common stock at a
premium to then-current fair market value.
CANCER GENE THERAPY. In August 1999, we entered into a license agreement
with Introgen Therapeutics, pursuant to which we granted an exclusive worldwide
license to MDA-7, a tumor suppressor gene that we in-licensed from Columbia
University, for use in gene therapy. MDA-7 may enhance cancer treatment options
and may be utilized synergistically with the existing therapeutic approaches of
surgery, chemotherapy and radiotherapy. Under the terms of the agreement, we
granted Introgen an exclusive, worldwide license, to the MDA-7 gene for use in
all gene therapy applications with the right to sublicense. In exchange for the
exclusive license and the research and development services that we performed
for Introgen prior to executing the agreement, Introgen paid us an up-front
license fee, and may be required to pay us milestone payments, research and
development payments and royalties on potential product sales.
ADOPTIVE IMMUNOTHERAPY PRODUCTS. In March 1999, we entered into a research
agreement with IDRI, pursuant to which it will provide us $12.0 million in grant
funding over the agreements three year term to fund research and development of
adoptive immunotherapy products for treating cancer. The agreement grants us
ownership of all intellectual property and product rights that we develop. We
will be required to pay IDRI a percentage of proceeds that we receive in
connection with adoptive immunotherapy products resulting from the funded
research and development.
ANIMAL HEALTH PRODUCTS. In March 1996, we entered into a license and
research agreement pursuant to which we granted Heska an exclusive worldwide
license to use leishmaniasis-based technologies in certain of Heska's companion
animal products, including LeIF as a vaccine adjuvant and a stand-alone vaccine
against canine leishmaniasis. In addition, we granted Heska a license to our
diagnostic leishmania antigen, K39, for use in detecting canine leishmaniasis.
The worldwide K39 license is exclusive, except in Central and South America.
Heska paid an up-front license fee and agreed to make future payments when it
achieved certain development milestones, as well as royalty payments on any
product sales. In December 1996, Heska made a payment to us when it achieved a
development milestone for our K39 diagnostic product. In December 1997,
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Heska announced commercial availability of the first product, a diagnostic test
for use in clinical laboratories, and paid us a corresponding milestone payment.
In January 2001, we entered into a license, development and
commercialization agreement with CoPharma for our cardioprotectant, RC-552.
Under the terms of the agreement, CoPharma will develop and commercialize RC-552
for treating and preventing cardiac disorders, neuronal damage and ischemia-
reperfusion injuries.
The agreement provides CoPharma with exclusive rights to develop and market
RC-552 in the licensed indications in the United States, Canada, Japan,
Australia and New Zealand, as well as certain other countries in Asia, the
Middle East and Africa. CoPharma will manage product development, including
clinical trials and regulatory submissions and under the agreement, CoPharma has
an option for product manufacturing. CoPharma will pay us a license fee,
success-based milestone payments and a combination of royalties and profit-share
payments in the event it sells any product. A joint steering committee made up
of representatives from both companies will oversee the collaboration.
Our corporate partnership agreements generally provide us recourse with
respect to our existing product and technology rights in the event the corporate
partner materially breaches its agreement and fails to cure the material breach.
In that event, we generally have the right to terminate the licenses that we
granted to that corporate partner under the applicable agreement. However,
because our strategy for the discovery, research, development, clinical testing
and commercialization of our products is to enter into many corporate
partnerships, our success substantially depends on:
- our ability to enter into and maintain corporate partnerships on
favorable terms;
- our ability to successfully manage current and future corporate
partnerships, if any; and
- our corporate partners' ability to perform their obligations under these
arrangements.
We may be unable to negotiate any additional corporate partnerships on
favorable terms, if at all. Our corporate partnerships may be unsuccessful.
Additionally, our corporate partners may be unable to perform their obligations
under these arrangements in a timely manner, if at all. The failure of our
corporate partnerships or the failure of our corporate partners to perform their
obligations may significantly harm our business.
OTHER STRATEGIC RELATIONSHIPS
We seek to obtain technologies that complement and expand our existing
technology base. When consistent with our strategy, we have licensed and intend
to continue to license product and marketing rights from research and academic
institutions in order to capitalize on the capabilities and technology bases of
these entities. Under our license agreements with research and academic
institutions, we generally seek to obtain unrestricted sublicense rights
consistent with our partner-driven strategy. We are generally obligated under
these license agreements to diligently pursue product development, make
development milestone payments and pay royalties on any product sales.
INCYTE PHARMACEUTICALS. In February 2000, we entered into a collaborative
agreement with Incyte Pharmaceuticals, a California-based genomics company.
Under the agreement, we gained access to Incyte's LifeSeq databases of expressed
human genes. Some of these gene sequences may be useful in our antigen-based
vaccines. Under the terms of the agreement, we have the right to obtain licenses
under Incyte patents and patent applications covering sequences in Incyte's
LifeSeq database. Under these licenses we would be required to pay license fees
and royalties to Incyte.
GENSET. In February 2000, we entered into an agreement with Genset, a
French genomics company. Under the agreement, we provided Genset with an
undisclosed pathogen that we believe is involved in the development of an
infectious disease. Genset has sequenced the genome, and we are engaged in
research using this genomic information, together with our antigen discovery
techniques, to attempt to design novel, antigen-based therapeutic and
prophylactic vaccines targeting the pathogen.
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LIGOCYTE PHARMACEUTICALS. In October 1999, we entered into an exclusive
research and development agreement with LigoCyte Pharmaceuticals, an early-stage
biotechnology company, for the development of its proprietary monoclonal
antibodies against the yeast, Candida albicans. Under the agreement, we agreed
to fund certain of LigoCyte's efforts to develop treatments for hospital-based
systemic Candida infections and to develop a novel vaccine to treat recurring
vaginal candidiasis. Under the agreement, we will make research and development
payments to Ligocyte and, if Ligocyte achieves certain milestones, we will make
additional milestone payments, as well as royalty payments on future product
sales. In addition to the collaborative agreement, we purchased preferred stock
in Ligocyte for $1.0 million. Our senior vice president and general counsel is a
member of Ligocyte's board of directors.
SR PHARMA. In December 1998, we entered into an exclusive worldwide license
agreement with Stanford Rook, or SR Pharma, pursuant to which SR Pharma granted
us rights to its M. vaccae-related intellectual property in connection with the
development and commercialization of PVAC(TM )treatment for treating psoriasis,
RA, MS and diabetes. We also were granted an option to certain additional
autoimmune disease fields which we exercised at the end of 2000. Under the
license agreement, we agreed to pay SR Pharma license fees, milestone payments
and a percentage of any revenues that we receive from product sales. Pursuant to
a February 1999 amendment to the agreement SR Pharma granted us manufacturing
rights. In February 1999, we also entered into a non-exclusive worldwide license
agreement with SR Pharma pursuant to which SR Pharma granted us rights under its
M. vaccae-related intellectual property for the manufacture, development and
commercialization of specified M. vaccae-derived products for use as adjuvants
in our proprietary vaccines other than tuberculosis vaccines.
IMMGENICS PHARMACEUTICALS. In November 1998, we entered into an exclusive
agreement with ImmGenics Pharmaceuticals to utilize ImmGenics' proprietary
Selected Lymphocyte Antibody Method technology to develop therapeutic and
diagnostic monoclonal antibodies specific to our proprietary antigens in cancer
and infectious disease. Under the agreement, we will make research and
development payments to ImmGenics and, if ImmGenics achieves certain milestones,
we will make additional milestone payments and royalty payments on future
product sales. In addition to the collaborative agreement with ImmGenics, in
1998 we purchased preferred stock, convertible debt and warrants, in ImmGenics
and invested an additional $1.25 million in 1999 for a total investment of $3.0
million. In May 2000, we sold 1,058,990 shares of ImmGenics preferred stock and
exercised warrants to acquire and additional 200,000 shares of Class A preferred
stock. In September 2000, we converted $500,000 debenture into shares of
ImmGenics Class A preferred stock. In November 2000, Abgenix Inc. acquired
ImmGenics.
GENESIS RESEARCH AND DEVELOPMENT. In January 1998, we entered into a
collaborative research and development agreement with Genesis Research and
Development to develop and commercialize the M. vaccae-derived product, PVAC
treatment, for psoriasis. Under the agreement, we will share the costs of
product development and the revenue received related to PVAC treatment with
Genesis. If one party incurs more than 50% of product development costs, that
party will receive a pro rata increased portion of revenues related to product
sales. Under the agreement, Genesis also granted us an exclusive worldwide right
to develop the M. vaccae-derived product for certain other autoimmune diseases,
including RA, MS and diabetes. We also entered into a separate agreement with
Genesis, effective in January 1998, to research and develop M. vaccae-derived
products as vaccine adjuvants. Under the agreement Genesis granted us an
exclusive license to use these adjuvant products in our proprietary vaccines.
Our chairman and chief executive officer is a member of Genesis' board of
directors.
INFECTIOUS DISEASE RESEARCH INSTITUTE. In September 1994, we entered into a
research services and intellectual property agreement with IDRI, a
not-for-profit, private research institute. Under this agreement, as amended and
restated effective January 1997, we agreed to provide IDRI with research funding
and administrative and facilities support, including use of a limited amount of
our research laboratory space. IDRI pays us a services fee for the
administrative and facilities support that we provide and rent for the use of
laboratory space. Our funded research that IDRI performs is in the area of
infectious disease. Under the agreement, IDRI must disclose to us all
significant developments relating to information or inventions discovered at
IDRI. Under the research services and intellectual property agreement, we will
own, on a royalty-free basis, all of IDRI's interest in inventions and patent
rights arising out of the research IDRI
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performs with our funding 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 rights arising out of research funded by governmental and
not-for-profit organizations, IDRI granted us a royalty-bearing, worldwide,
perpetual license, exclusive except as to rights held by the governmental or
not-for-profit organizations. In late 1999, IDRI relocated to facilities outside
of our facilities. Since this move, we have provided only limited services to
IDRI. We and IDRI are in the process of amending and restating the research
services and intellectual property agreement to reflect the decrease in services
that we provide.
OTHER LICENSE AGREEMENTS. Additionally, we are party to other exclusive
license agreements with academic institutions, including:
- the University of Washington for the use of Her-2/neu technology in all
fields;
- Washington University in St. Louis, Missouri for the use of mammaglobin,
a breast cancer-related gene and protein, for prophylactic and
therapeutic treatment and diagnosis of adenocarcinoma;
- Health Research for the use of a proprietary mouse model for human
cancer;
- Pharma Pacific Pty. Ltd. and affiliates for interferon receptor
technology;
- Catholique Universite do Louvain, Belgium for intellectual property
underlying TAP pro-drug technology;
- Kyowa Hakko Kogyo Co., Ltd. for certain ultrapotent compounds;
- Dana-Farber Cancer Institute for the use of the anti-B1 antibody used in
BEXXAR(TM) therapy and for certain microsphere technology;
- Massachusetts Institute of Technology for the use of WT-1, a
leukemia-related gene and protein, in therapeutic applications; and
- Southern Research Institute for use of certain microsphere technology.
Some of these agreements require us or other parties to achieve certain
performance obligations in order to retain rights under the agreements or
require us to make payments in order to obtain or maintain rights to the subject
technology.
PATENTS AND PROPRIETARY TECHNOLOGY
Our success depends in large part on our and our licensors' abilities to:
- obtain patent and other proprietary protection for vaccine, other
immunotherapeutic and diagnostic products, targeted oncologics products,
antigens, antibodies, adjuvants and delivery systems;
- defend patents once obtained;
- preserve trade secrets; and
- operate without infringing the patents and proprietary rights of third
parties.
We intend to seek patent protection for our vaccine, immunotherapy,
discovery, targeted oncologics, diagnostic and other proprietary technologies by
filing patent applications in the United States and other countries. As of
December 31, 2000, we owned, had licensed or had options to license 110 issued
U.S. patents that expire at various times between May 2002 and December 2018,
and 392 pending United States patent applications.
Although we believe our patents and patent applications provide a
competitive advantage, the patent positions of pharmaceutical and
biopharmaceutical companies are highly uncertain and involve complex legal and
factual questions. There is substantial uncertainty regarding the potential for
patent protection for gene fragments or genes without known function or
correlation with specific diseases. We and our corporate partners or licensors
may not be able to develop patentable products or processes. We and our
corporate partners or licensors may not be able to obtain patents from pending
patent applications. Even if patent claims are allowed, the claims may not
issue, or in the event of issuance, may not be sufficient to protect the
technology owned by or licensed to us or our corporate partners.
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Our or our corporate partners' current patents, or patents that issue on
pending applications, may be challenged, invalidated, infringed or circumvented,
and the rights granted in those patents may not provide proprietary protection
or competitive advantages to us. Two patent applications that we have licensed
from Southern Research Institute, or SRI, are currently the subject of
opposition hearings before the European Patent Office. In one of the
oppositions, the European Patent Office has revoked a previously issued European
patent. Although SRI has appealed this decision, it is uncertain whether SRI
will ultimately prevail in this or any other opposition proceeding. As a result,
these patents may not issue in Europe, in which case our business may suffer.
Under the publication provisions of the American Inventors Protection Act
of 1999, pending United States patent applications will publish 18 months after
the earliest claimed priority date and the file histories for these applications
will be open for public inspection. Our patent application and the related file
histories that are subject to the American Inventors Protection Act will then be
available for review by others, including our competitors. Pre-issuance
publications would allow us to recover damages from pre-issuance infringers of
published applications that ultimately issue as patents. Pre-issuance damages
will be contingent on publication of claims that are substantially identical to
claims that actually issue and on notifying infringers regarding subject
applications. We may elect not to publish some or all of our pending U.S. patent
applications if we do not file internationally. If we elect not to publish, we
will not be able to seek pre-issuance damages.
Subject to the effect of American Inventors Protection Act of 1999, patent
applications in the United States are presently maintained in secrecy until
patents are issued. Patent applications in certain foreign countries generally
are not published until many months or years after they are filed. Scientific
and patent publication often occurs long after the date of the scientific
developments disclosed in those publications. Accordingly, we cannot be certain
that we or one of our corporate partners was the first to invent the subject
matter covered by any patent application or that we or one of our corporate
partners was the first to file a patent application for any such invention.
Our commercial success depends significantly on our ability to operate
without infringing patents and proprietary rights of third parties. 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 us or our corporate partners. We cannot determine with certainty
whether patents or patent applications of other parties may materially affect us
or our 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 us or our corporate partners and limit our or our corporate partners' ability
to obtain meaningful patent protection. If patents containing competitive or
conflicting claims are issued to third parties, we or our 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. In addition, other parties may duplicate, design around,
or independently develop similar or alternative technologies to ours, our
corporate partners or our licensors. If another party controls patents or patent
applications covering our products, we and our corporate partners may not be
able to obtain the rights we need to those patents or patent applications in
order to commercialize our products.
Litigation may be necessary to enforce patents issued or licensed to us or
our corporate partners or to determine the scope or validity of another party's
proprietary rights. United States Patent and Trademark Office interference
proceedings may be necessary if we and another party both claim to have invented
the same subject matter.
We could incur substantial costs if:
- litigation is required to defend against patent suits brought by third
parties;
- we participate in patent suits brought against or initiated by our
corporate partners;
- we initiate similar suits; or
- we participate in an interference proceeding.
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In addition, we or our corporate partners may not prevail in any of these
actions or proceedings. An adverse outcome in litigation or an interference or
other proceeding in a court or patent office could:
- subject us to significant liabilities;
- require disputed rights to be licensed from other parties; or
- require us or our corporate partners to cease using certain technology.
We also rely on trade secrets and proprietary know-how, especially when we
do not believe that patent protection is appropriate or we do not believe that
we can obtain patent protection. Our policy is to require each of our employees,
consultants and advisors to execute a confidentiality and inventions agreement
before beginning their employment, consulting or advisory relationship with us.
These agreements generally provide that the individual must keep confidential
and not disclose to other parties any confidential information developed or
learned by the individual during the course of their relationship with us except
in limited circumstances. These agreements also generally provide that we own
all inventions conceived by the individual in the course of rendering services
to us.
We work with others in our research, development and commercialization
activities. Disputes may arise about inventorship and corresponding rights in
know-how and inventions resulting from the joint creation or use of intellectual
property by us and our corporate partners, licensors, scientific collaborators
and consultants. In addition, other parties may circumvent any proprietary
protection we do have. As a result, we may not be able to maintain our
proprietary position.
GOVERNMENT REGULATIONS
Our products are subject to extensive regulation by numerous governmental
authorities, principally the FDA, as well as numerous state and foreign
agencies. The FDA is currently reviewing our BLA for BEXXAR(TM). We need to
obtain clearance of our potential products by the FDA before we can market them
in the United States. Other countries also require similar approvals.
Product development and approval within this regulatory framework is
uncertain, can take a number of years and requires the expenditure of
substantial resources. The nature and extent of the governmental premarket
review process for our potential products will vary, depending on the regulatory
categorization of particular products. We believe that the FDA and comparable
regulatory bodies in other countries will regulate our vaccine and other
immunotherapeutic products and related pharmaceutical products as biologics. The
necessary steps before a new biological product may be marketed in the United
States ordinarily include:
- preclinical laboratory and animal studies;
- submission to the FDA of an IND, which must become effective before
clinical trials may commence;
- completion of adequate and well controlled human clinical trials to
establish the safety and efficacy of the proposed drug for its intended
use;
- submission to the FDA of a BLA; and
- FDA review and approval of the BLA before the product is commercially
sold or shipped.
Preclinical tests include evaluating the product in the laboratory, as well
as animal studies to assess the potential safety and efficacy of the product.
Preclinical studies must be conducted by laboratories that comply with FDA
regulations regarding good laboratory practices. The results of preclinical
studies, together with manufacturing information, analytical data and proposed
clinical trial protocols, are submitted to the FDA as part of an IND, which must
become effective before the clinical trials can begin. The IND will
automatically become effective 30 days after the FDA receives it, unless the FDA
indicates prior to the end of the 30-day period that the proposed protocol
raises concerns that must be resolved to the FDA's satisfaction before the
trials may proceed. If the FDA raises concerns, we may be unable to resolve the
proposed protocolto the FDA's approval in a timely fashion, if at all. In
addition, the FDA may impose a clinical hold on an ongoing
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clinical trial if, for example, safety concerns arise, in which case the study
cannot recommence without FDA authorization under terms sanctioned by the
agency.
Clinical trials involve administering the product to healthy volunteers or
to patients being supervised by a qualified principal investigator. Clinical
trials must be conducted according to good clinical practices under protocols
that detail the trial's objectives, 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 at the institutions at which the trial will be
conducted. The institutional review board will consider, among other things,
ethical factors and the safety of human subjects. The institutional review board
may require changes in a protocol, which may delay initiation or completion of a
study.
Clinical trials generally are conducted in three sequential phases that may
overlap. In Phase I, the product is introduced into healthy human 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:
- determine the efficacy for specific, targeted indications;
- determine dosage tolerance and optimum dosage; and
- further identify possible adverse reactions and safety risks.
Once a compound is determined to be effective and to have an acceptable
safety profile in Phase II clinical trials, 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. Phase I, Phase II or Phase III clinical trials may not be completed
successfully within any specific period of time, if at all, with respect to any
of our potential products. Furthermore, we, the FDA or an institutional review
board may suspend a clinical trial at any time for various reasons, including a
finding that the healthy individuals or the patients are being exposed to an
unacceptable health risk.
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 product. The testing and
approval process is likely to require substantial time, effort and resources,
and we may be unable to obtain approval on a timely basis, if at all. Regarding
any BLA, the FDA may take a number of actions, including:
- 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.
In addition, even if marketing approval is granted, the FDA may require
post-marketing clinical trials, which typically entail extensive patient
monitoring and may result in restricted marketing of an approved product for an
extended period of time.
Any diagnostic products developed by us or our 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 GMP quality system regulation, or QSR;
- 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 marketed, its manufacturer generally must obtain
marketing clearance through either a premarket notification under Section 510(k)
of the Federal Food, Drug and Cosmetic Act or
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approval of a premarket approval application, or PMA. 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 a
PMA. 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 trials. 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 clearance of a
510(k) submission. 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 a PMA could delay market introduction of
products that fall into this category. Furthermore, modifications or
enhancements that could significantly affect safety or effectiveness, or
constitute a major change in the intended use of any device, cleared through the
510(k) process would require new 510(k) submissions.
If a device does not qualify for the 510(k) 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 must be supported by valid scientific
evidence that typically includes extensive data, including preclinical and
clinical trial data, to demonstrate the device's safety and efficacy. If
clinical trials are required, and the device presents a "significant risk," an
investigational device exemption 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 institutional review board approval. Clinical
investigation of medical devices may involve risks similar to those involved in
the clinical investigation of pharmaceutical products.
A PMA 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. The PMA review and approval process can be expensive,
uncertain and lengthy, and approvals may not be granted on a timely basis, if at
all.
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 adverse experiences associated with product
use. We and our corporate partners will be required to adhere to applicable
regulations setting forth detailed GMP or QSR requirements, which include
testing, control and documentation requirements. 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, we and our 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 requirements similar to those associated with FDA approval.
Our research and development activities involve the controlled use of
hazardous materials, chemicals and various radioactive materials. We are subject
to federal, state and local laws and regulations governing the use, storage,
handling and disposal of such materials and certain waste products including,
among others, the Occupational Safety and Health Act, the Environmental
Protection Act, the Nuclear Energy and Radiation Control Act, the Toxic
Substances Control Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation, and Liability Act, Title III
of the Superfund Amendments and Reauthorization Act (Community Right-to-Know and
Emergency Response Act), national restrictions on technology transfer, federal
regulations on the protection of human subjects in clinical studies, the
protection of animal welfare in preclinical studies, import, export and customs
regulations and other
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present or possible future local, state or federal regulation. From time to time
Congressional committees and federal agencies have indicated an interest in
implementing further regulation of biotechnology and its applications. Although
we believe that our safety procedures for using, handling, storing and disposing
of such materials comply with the standards required by state and federal laws
and regulations, we are subject to the risk of accidental contamination or
injury from these materials.
COMPETITION
The biotechnology and biopharmaceutical industries are characterized by
rapidly advancing technologies, intense competition and a strong emphasis on
proprietary products. Many third parties compete with us in developing
alternative therapies to treat autoimmune disease, cancer and infectious
diseases, including:
- pharmaceutical companies;
- biotechnology companies;
- academic institutions; and
- other research organizations.
Many of these competitors have significantly greater financial resources
and expertise in research and development, manufacturing, preclinical testing,
conducting clinical trials, obtaining regulatory approvals and marketing than
us. 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 or early-stage
companies may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies. These third
parties compete with us in recruiting and retaining qualified scientific and
management personnel, as well as in acquiring technologies complementary to our
programs.
We expect that competition among products approved for sale will be based,
among other things, on efficacy, reliability, product safety, price and patent
position. Our ability to compete effectively and develop products that can be
manufactured cost-effectively and marketed successfully will depend on our
ability to:
- advance our technology platforms;
- license additional technology;
- maintain a proprietary position in our technologies and products;
- obtain required government and other public and private approvals on a
timely basis;
- availability of reimbursement from third-party payors;
- attract and retain key personnel; and
- enter into corporate partnerships.
RECENT ACQUISITIONS
COULTER PHARMACEUTICAL, INC.
In December 2000, we acquired all of the outstanding shares of common stock
of Coulter in a merger valued at approximately $917.1 million. The merger
combines Corixa's antigen discovery and immunotherapeutic product development
expertise with Coulter's therapeutic antibodies, including BEXXAR(TM), and
targeted oncologics platforms to develop therapies for treating and preventing
autoimmune diseases, cancer and infectious diseases. The combined entity, which
operates under the Corixa Corporation name, creates a comprehensive,
immunotherapy company whose goal is to discover antigens, develop products based
on those antigens and successfully commercialize those products.
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RIBI IMMUNOCHEM RESEARCH
In October 1999, we acquired all of the outstanding shares of common stock
of Ribi ImmunoChem Research, in a merger valued at approximately $57.5 million.
The merger combines our antigen discovery and immunotherapeutic expertise with
Ribi's adjuvant expertise and manufacturing resources to develop therapies for
treating or preventing autoimmune diseases, cancer and infectious diseases. In
addition, the acquisition further expands our technological platform to include
an immunotherapeutic program aimed at reperfusion injury, RC-552.
ANERGEN
In February 1999, we acquired all of the outstanding shares of common stock
of Anergen in a merger valued at approximately $9.6 million. The merger extends
the application of our immunotherapeutic expertise into multiple autoimmune
disease fields and complements our existing programs in autoimmune disease,
cancer and infectious disease. By developing therapeutics that selectively
interrupt the disease process, we believe we will be able to treat a number of
autoimmune diseases including RA, MS, and diabetes.
GENQUEST
In September 1998, we acquired all of the outstanding shares of common
stock of GenQuest in a merger valued at approximately $12.4 million. The merger
enables us to augment our proprietary approaches in antigen discovery by
applying functional genomics technology to discover novel genes and to develop
the potential of such genes and related gene products. These genes and gene
products may be used in diagnosis, drug screening, gene therapy and antibody
development in the areas of prostate, breast, lung, colon, and ovarian cancer.
Prior to the merger, we were a stockholder in GenQuest.
MANUFACTURING
We have manufactured pharmaceutical-grade product to supply some of our
previous and ongoing clinical trials. In addition, we have manufactured
preclinical and clinical supplies of adjuvants and protein for our corporate
partners, for government agencies and for numerous academic researchers. We
believe that our existing facilities will be sufficient to accommodate
manufacturing of initial production quantities of selected product candidates.
Should we require additional capacity in the future, we have space to expand our
manufacturing facility in Hamilton, Montana. We do not intend to manufacture any
radioimmunotherapeutic products.
We intend to use contract manufacturers for most of the preclinical and
clinical requirements for BEXXAR(TM) and for all of our commercial needs with
respect to BEXXAR. We expect this strategy to:
- accelerate the scale-up of manufacturing processes to commercial scale;
- reduce initial capital investment;
- result in competitive manufacturing costs; and
- provide access to a wide range of manufacturing technologies.
However, we may be unable to meet all or any of these expectations. Our
collaboration agreement with GSK provides for GSK participation in the planning,
management and funding of manufacturing development.
We have entered into agreements with Boehringer Ingleheim Pharma KG, or BI
Pharma KG, to manufacture and supply Anti-B1 antibody, a key component for
BEXXAR, for use in ongoing clinical trials and to meet commercial requirements,
as well as provide for fill/finish and packaging services. We have committed to
minimum order quantities of the Anti-B1 antibody from BI Pharma KG. The maximum
penalty that we would be required to pay if we did not place orders to purchase
any antibody from BI Pharma KG is approximately $5.4 million. The material
produced by BI Pharma KG may be suitable for human use or that
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clinical trials or commercial supply will not be delayed or disrupted if BI
Pharma KG is unable to meet the our demand for product.
We conduct radiolabeling at MDS Nordion Inc.'s, or Nordion, centralized
radiolabeling facility. We have several contracts with Nordion that provide for
radiolabeling services for clinical and commercial product. Material produced by
Nordion may be unsuitable for human use or clinical trials or commercial supply
may be delayed or disrupted if Nordion is unable to meet our demand for product.
If the FDA approves BEXXAR(TM) for marketing, we expect that production for
commercialization will consist of (i) producing bulk Anti-B1 Antibody by BI
Pharma KG, (ii) filling and labeling of individual product vials with Anti-B1
Antibody by another third-party supplier and/or BI Pharma KG, and (iii)
radiolabeling of Anti-B1 Antibody at Nordion. Although we plan to develop
additional suppliers of these services, we expect to rely on our current
suppliers for all or a significant portion of our requirements for BEXXAR for
the foreseeable future. Radiolabeled antibody cannot be stockpiled against
future shortages due to the eight-day half-life of the 131I radioisotope.
Accordingly, any change in our existing or planned contractual relationships
with, or interruption in supply from, our third-party suppliers could harm our
ability to complete our ongoing clinical trials and to market BEXXAR, if
approved. Any such change or interruption would harm our business. See
"Important factors that may affect our business, our results of operations and
our stock price -- We have limited experience in manufacturing our products and
may encounter problems or delays that could result in lost revenue."
We believe that it is possible that any products we may develop in our TAP
pro-drug program may be capable of being produced with standard chemical
synthesis processes and if so, we may utilize our manufacturing facility in
Montana or third parties to meet clinical trial and any commercial requirements
for any such potential products. If we determine not to manufacture potential
TAP pro-drug products ourselves, we will need to contract with other companies
to manufacture. We cannot assure you that we will enter into agreements in a
timely manner or under acceptable terms or that the material produced under the
agreements will be suitable for human use.
DISTRIBUTION
The unique properties of BEXXAR therapy require tightly controlled
distribution of the product. Due to its radioactive component, BEXXAR is shipped
in shielded containers and must arrive at its destination within 24 - 48 hours
of production. BEXXAR must also be temperature controlled during shipment. We
will rely on many third party suppliers to process orders and to package, store
and ship BEXXAR. We are working with suppliers to establish a commercial-scale
system for the product that will minimize risk and loss of inventory and provide
efficient service to customers in the event BEXXAR is approved for commercial
sale. These third party suppliers may be unable to handle BEXXAR in a manner
that will minimize loss of or damage to inventory. We have entered into a
contract for storing and shipping of BEXXAR in the United States. We are
negotiating other contracts for handling of BEXXAR before it is delivered to the
customer. We may be unable to enter into these agreements on commercially
reasonable terms, on a timely basis or at all.
EMPLOYEES
As of December 31, 2000, we had 538 employees, 117 of whom hold degrees at
the doctorate level. Of these employees, 330 are engaged in, or directly support
research and development activities, 26 are in production, and 182 are in
administration and business development positions. Each of our employees has
signed a confidentiality agreement and none are covered by a collective
bargaining agreement. We have never experienced employment-related work
stoppages and consider our employee relations to be good. On March 19, 2001, we
announced a reduction of 10% to 15% of our total workforce.
RECENT DEVELOPMENTS
On March 16, 2001, following the receipt of the FDA complete review letter
for BEXXAR, and as a result of the recognition of additional synergies in our
workforce as a result of our acquisition of Coulter, we modified our operating
plan. We initiated immediate expense reductions, including a 10% - 15% reduction
in
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total headcount that includes the elimination of unfilled open positions, as
well as existing positions. The majority of these reductions will take place at
our California operations. These reductions in research and development and
administrative support staff will result in the postponement of further internal
development of certain programs. These programs will become the focus of
potential territory-specific, out-licensing activities as they represent either
clinical stage, or near-clinical stage partnership opportunities. Additionally,
in an effort to minimize expenses during the BEXXAR(TM) delay, we are currently
pursuing several new opportunities in which we would outsource the services of
our sales personnel to promote and sell a potential partner's products. Under
such an agreement, our sales and marketing personnel would be partnered until
these resources were required to support BEXXAR commercialization. If we are
unable to establish such an agreement, we may be required to make additional
headcount reductions within the direct sales and marketing groups. The headcount
reductions announced will result in a first quarter restructuring charge of
approximately $1.5 million, and could result in an annualized cost savings of
approximately $6 million. Following these reductions, we will have approximately
512 people employed at three different locations.
ITEM 2. PROPERTIES
We currently operate at four sites. Our headquarters are in Seattle,
Washington, where we lease approximately 77,000 square feet of laboratory,
discovery, research and development, manufacturing and general administration
space. We maintain an additional 31,000 square feet of laboratory and research
and development space in Redwood City, California and 98,000 square feet of
laboratory, research and development, and general administration space in South
San Francisco, California. In addition, we own a 35 acre complex near Hamilton,
Montana which includes a 60,000 square foot building containing laboratory,
pilot plant, commercial manufacturing, marketing and administrative facilities.
The lease for the Seattle facility expires in January 2005, with an option to
renew for two additional five-years periods. In early 2001, we initiated
construction of a 48,000 square foot facility located immediately adjacent to
our existing facility in South San Francisco. The lease for the South San
Francisco facility expires in 2010, with an option to renew for two additional
five-years periods. We believe our existing facilities are adequate to meet our
immediate needs and that suitable additional space will be available in the
future on commercially reasonable terms as needed.
ITEM 3. LEGAL PROCEEDINGS
GROUNDWATER CONTAMINATION
Following the Ribi acquisition, we initiated settlement discussions with
the United States and the state of Montana related to pending environmental
litigation concerning alleged groundwater contamination at the Bitterroot Valley
Sanitary Landfill in Ravalli County, Montana. On February 26, 2000, we agreed in
principle to settle this litigation. Final settlement of the litigation will
occur upon motion of dismissal by the plantiff and an order of dismissal issued
by the U.S. District Court. The liability of $2.65 million was included in the
purchase price allocation of Ribi as of December 31, 1999.
A complaint was filed in Montana district court in February 2000 by a
former Ribi employee claiming damages associated with working conditions while
she was employed at Ribi. Although we have not yet been served with the
complaint, based on our current understanding and initial investigation of the
matter, we believe the claim to be without merit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At a special meeting of the stockholders of Corixa, held on December 21,
2000, holders representing a total of 14,970,553 shares of Corixa common stock
entitled to vote, constituting a quorum, voted to approve the issuance of shares
of Corixa common stock in connection with the merger of Clearwater Acquisitions
Corporation, a Delaware corporation and wholly owned subsidiary of Corixa, with
and into Coulter, in which, among other things, each outstanding share of
Coulter common stock was converted into 1.0003 shares of Corixa common stock. In
connection with the approval of the merger of Clearwater with and into Coulter,
holders representing 14,943,869 shares of common stock present or represented by
Proxy at the meeting voted in favor, 15,702 voted against and 10,982 abstained.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Price range of common stock
Our common stock has been quoted on Nasdaq under the symbol "CRXA" since
our initial public offering in October 1997. Prior to this date our common stock
did not trade publicly.
The following table shows our high and low sales prices of our common stock
as quoted on Nasdaq for each of the quarters indicated.
HIGH LOW
------- ------
1999
First Quarter............................................... 9.8750 7.500
Second Quarter.............................................. 17.8125 7.875
Third Quarter............................................... 17.1250 12.250
Fourth Quarter.............................................. 17.3125 11.000
2000
First Quarter............................................... 70.1250 17.250
Second Quarter.............................................. 47.4375 22.875
Third Quarter............................................... 53.6250 31.750
Fourth Quarter.............................................. 51.9375 20.000
2001
First Quarter (through March 15)............................ 30.125 7.75
On March 15, 2001, the last reported sales price of our common stock on
Nasdaq was $12.938 per share. As of March 15, 2001 we had 1,343 holders of
record of our common stock.
Dividend Policy
We have never paid cash dividends on our common stock and have no plans to
do so in the foreseeable future.
Recent Issuance of Unregistered Securities
On December 29, 2000, we drew down the remaining $37.5 million on a $50
million equity line of credit originally entered into with Castle Gate, L.L.C.,
or Castle Gate, on April 8, 1999. On the draw down of the funds under the equity
line of credit, we issued to Castle Gate shares of Series B preferred stock at a
price of $1,000 per share and warrants to purchase shares of our common stock.
The Series B preferred stock has an annual cumulative dividend of 5% and we
may pay the dividends, at our option, in cash or in shares of our common stock.
Castle Gate may convert the shares of Series B preferred stock at their option
at any time following the issuance of the shares. Shares of Series B preferred
stock that have been outstanding for at least four years will be converted into
common stock automatically on the fourth anniversary or any subsequent
anniversary of the issuance of shares of Series B preferred stock if Castle Gate
would receive a specified return on its equity investment. Additionally, any
unconverted shares of Series B preferred stock will automatically convert on the
seven-year anniversary of the initial issuance of the shares of Series B
preferred stock.
We made the draw-down under the equity line of credit of $37.5 million and
issued Castle Gate 37,500 shares of Series B preferred stock and a warrant to
purchase up to 50,000 shares of common stock at an exercise price of $18.22
pursuant to two amendments to the equity line of credit, the first dated
December 21, 2000 and the second dated December 29, 2000. In addition, 187,500
shares issuable to Castle Gate under a warrant issued April 8, 1999, also vested
at an exercise price of $18.22. The terms of the warrant issued on April 8, 1999
determined the exercise price for the warrant issued April 8, 1999 and the
warrant issued December 29, 2000. The conversion price for the Series B
preferred stock issued in the December 29, 2000 draw is $25.58 per share.
The Series B preferred stock and warrants issued to Castle Gate were sold
as a self-managed private placement and are exempt from registration under Rule
506 of Regulation D of the Securities Act of 1933.
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Pursuant to a registration rights agreement entered into between Corixa and
Castle Gate, we committed to register the underlying shares of common stock for
resale after certain conversions of the Series B preferred stock. We may use the
funds obtained pursuant to the draw down on the equity line of credit for
expenses associated with various technology or company acquisitions. See "Note 6
to Notes to Consolidated Financial Statements" for additional information with
respect to our agreement with Castle Gate.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and related notes
included in this Annual Report, as well as the section of this report entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". Historical results are not necessarily indicative of future
results.
YEAR ENDED DECEMBER 31,
---------------------------------------------------
2000 1999 1998 1997 1996
--------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
Collaborative agreements................ $ 34,643 $ 25,035 $ 17,003 $13,390 $ 4,402
Government grants....................... 2,331 1,463 1,267 977 1,403
--------- -------- -------- ------- -------
Total revenue...................... 36,974 26,498 18,270 14,367 5,805
Operating expenses:
Research and development................ 61,911 41,962 27,436 16,398 9,995
Sales, general and administrative....... 6,694 3,743 2,672 2,033 781
Intangible amortization................. 4,499 587 -- -- --
Acquired in-process research and
development........................... 629,700 37,637 12,021 -- --
--------- -------- -------- ------- -------
Total operating expenses........... 702,804 83,929 42,129 18,431 10,776
--------- -------- -------- ------- -------
Loss from operations......................... (665,830) (57,431) (23,859) (4,064) (4,971)
Interest and other income, net............... 4,999 2,673 2,543 1,388 824
--------- -------- -------- ------- -------
Loss before cumulative effect of change in
accounting principle....................... (660,831) (54,758) (21,316) (2,676) (4,147)
Cumulative effect of change in accounting
principle.................................. (6,338) -- -- -- --
--------- -------- -------- ------- -------
Net loss..................................... (667,169) (54,758) (21,316) (2,676) (4,147)
Preferred stock dividend..................... (9,887) (6,008) -- -- --
Net loss applicable to common stockholders... $(677,056) $(60,766) $(21,316) $(2,676) $(4,147)
========= ======== ======== ======= =======
Basic and diluted loss per share before
cumulative effect of change in accounting
principle(1)............................... $ (32.00) $ (3.91) $ (1.75) $ (0.55) $ (1.65)
Cumulative effect of change in accounting
principle per share........................ (0.30) -- -- -- --
--------- -------- -------- ------- -------
Basic and diluted net loss per common
share(2)................................... $ (32.30) $ (3.91) $ (1.75) $ (0.55) $ (1.65)
========= ======== ======== ======= =======
Shares used in computation of basic and
diluted net loss per common share.......... 20,961 15,528 12,172 4,891 2,521
========= ======== ======== ======= =======
Pro forma amounts assuming the accounting
change is applied retroactively:
Net loss................................... $(54,042) $(28,370)
======== ========
Net loss per common share.................. $ (3.87) $ (2.33)
======== ========
- ---------------
(1) Effective January 1, 2000, we changed our method of accounting for
nonrefundable up-front license fees. See Note 1 of Notes to Consolidated
Financial Statements.
(2) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the computation of the number of shares and the method used to calculate
basic and diluted net loss per share.
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DECEMBER 31,
----------------------------------------------------
2000 1999 1998 1997 1996
--------- -------- -------- -------- -------
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and securities
available-for-sale........................ $ 197,078 $ 45,553 $ 45,141 $ 56,318 $11,933
Working capital............................. 146,844 20,919 36,979 53,962 10,101
Total assets................................ 504,880 92,480 61,184 61,807 15,185
Long-term obligations, less current
portion................................... 33,422 11,426 11,835 6,924 1,175
Redeemable common stock..................... 2,000 2,000 -- -- --
Accumulated deficit......................... (755,205) (88,036) (33,278) (11,962) (9,286)
Total stockholders' equity.................. 404,575 58,781 42,184 51,285 11,226
QUARTERLY FINANCIAL DATA:
(in thousands, except per share data)
Q1 Q2 Q3 Q4
---------- ---------- ---------- ---------
(RESTATED) (RESTATED) (RESTATED)
2000
Revenue.............................................. $ 9,513 $ 7,889 $ 7,997 $ 11,575
Loss before cumulative effect of change in accounting
principle.......................................... (8,295) (8,660) (6,554) (637,322)
Cumulative effect of change in accounting
principle.......................................... 6,338 -- -- --
Net loss(3).......................................... (14,633) (8,660) (6,554) (637,322)
Basic and diluted loss per share before cumulative
effect of change in accounting principle........... (0.45) (0.43) (0.32) (27.81)
Basic and diluted net loss per common share.......... (0.79) (0.43) (0.32) (27.81)
2000 AS PREVIOUSLY REPORTED(4)
Revenue.............................................. $ 8,908 $ 7,283 $17,390 --
Net loss............................................. (8,900) (9,266) (2,611) --
Basic and diluted net loss per common share.......... (0.48) (0.46) (0.13) --
1999
Revenue.............................................. $ 3,134 $ 6,020 $ 8,224 $ 9,120
Net loss(3).......................................... (17,386) (4,005) (1,173) (32,194)
Basic and diluted net loss per common share.......... (1.23) (0.66) (0.09) (1.76)
- ---------------
(3) The quarters ended December 31, 2000, December 31, 1999 and March 31, 1999
include in-process research and development charges of $629.7 million, $26.0
million and $11.6 million, respectively.
(4) As a result of our change in accounting method (see Note 1 of Notes to
Consolidated Financial Statements), certain fees recognized in prior periods
have been deferred and are being amortized over the terms of the related
agreements. During the first three quarters of 2000, revenue was recognized
under our previous method of accounting. Accordingly, revenue and net loss
for these quarters have been restated to reflect our new method of
recognizing nonrefundable up-front license fees.
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ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read together with our consolidated
financial statements and the accompanying notes included elsewhere in this
Annual Report and contains forward-looking statements that involve substantial
risks and uncertainties. Our actual results could differ materially from those
expressed or implied in these forward-looking statements as a result of various
factors, including those discussed in Factors Affecting Future Results elsewhere
in this Annual Report.
OVERVIEW
Our objective is to be a leader in the development and commercialization of
products used to prevent and treat autoimmune diseases, cancer and infectious
diseases. Our strategy consists of integrating our core antigen, monoclonal
antibody, adjuvant, antigen delivery and tumor-activated, or TAP pro-drug
technologies into a strong product pipeline. To implement this strategy, we
develop select technologies and potential products ourselves and establish
corporate collaborations for other select technologies at various stages in the
research and development process, including partnerships for discovery, clinical
development, manufacturing and marketing. We believe that this development and
partner-driven approach will create significant scientific, operational and
financial advantages and accelerate the commercial development of new
therapeutic and prophylactic immunotherapeutic products. For the years ended
December 31, 2000, 1999 and 1998, approximately 94%, 94% and 93%, respectively,
of our revenue resulted from collaborative agreements, and approximately 6%, 6%
and 7%, of our revenue resulted from funds awarded through government grants. As
of December 31, 2000, we had total stockholders' equity of $404.6 million.
We have entered into, and intend to continue to enter into, collaborative
agreements at various stages in the research and development process. We believe
that this active corporate partnering strategy enables us to:
- maintain our focus on our fundamental strengths in discovery and research
of immunotherapeutic products;
- focus on selected technologies and potential products that we elect to
develop ourselves;
- capitalize on our corporate partners' strengths in product development,
manufacturing and commercialization;
- retain significant downstream participation in product sales; and
- reduce our financing requirements.
When entering into corporate partnering relationships, we seek to cover our
research and development expenses through research funding, milestone payments,
collaborative agreement credit lines, and technology and license fees. We also
endeavor to retain significant downstream participation in product sales through
either profit-sharing or product royalties paid on annual net sales. Our
significant collaborative agreements include the following:
- Medicis and Zenyaku Kogyo. In August 2000, we entered into a multi-year
development, commercialization and license agreement covering our
psoriasis immunotherapeutic product, PVAC(TM) treatment, with Medicis
Pharmaceutical Corporation (Medicis). The agreement provides Medicis with
exclusive rights to PVAC treatment in the United States and Canada. We
will be responsible for development and manufacturing, and Medicis will
be responsible for commercialization and distribution. Under the terms of
the agreement, Medicis will pay us license fees, research funding and
milestone payments of up to $107 million. Upon effectiveness of the
agreement, we received a nonrefundable payment of $17 million with
additional potential development milestone payments of $35 million, and
commercialization and cumulative net sales threshold milestone payments
of $55 million. Additionally, upon commercial sale of the product,
Medicis will purchase inventory from us and pay a royalty on net sales of
the product. In August 1999, we entered into a corporate partnership with
Zenyaku Kogyo for research and development related to PVAC treatment. The
agreement provides Zenyaku Kogyo with exclusive rights to PVAC treatment
in Japan. Under the terms of the agreement, we will receive license fees
and research funding of $6 million, milestone
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payments based on successful clinical and commercial progress, and a royalty
stream on future product sales.
- Zambon Group and the Pharmaceutical Division of Japan Tobacco. During May
and June 1999, we entered into corporate partnerships with Zambon Group,
or Zambon and the pharmaceutical division of Japan Tobacco, respectively,
for the research, development and commercialization of vaccine products
aimed at preventing and/or treating lung cancer. Zambon has exclusive
rights to develop and sell vaccine products in Europe, the former
countries of the Soviet Union, Argentina, Brazil and Columbia and
co-exclusive rights with Japan Tobacco in China. Japan Tobacco has
exclusive rights to develop and sell vaccine products outside of the
territory licensed to Zambon, including the United States and Japan, and
co-exclusive rights to develop and sell vaccine products in China. We
also granted Zambon a nonexclusive license and Japan Tobacco an option to
formulate vaccines that may result from the collaboration using our
microsphere delivery system with our proprietary adjuvants. The
agreements have three-year terms and, in the aggregate, provide for
committed research funding of $16.5 million, as well as milestone
payments that vary depending on the milestones achieved. In addition,
Zambon purchased $2.0 million of our common stock. The agreement allows
Zambon to sell the common stock back to us at the original price at the
end of the research program term if Zambon determines that a commercial
product is not viable.
- Infectious Disease Research Institute. In March 1999, we entered into a
research agreement with the IDRI, to research and develop ex vivo
therapies for treating cancer. Pursuant to the terms of the agreement,
IDRI committed $12 million of research funding over the agreement's
three-year term. The agreement provides us with exclusive rights to all
resulting intellectual property and product rights. IDRI will receive a
percentage of our proceeds related to ex vivo therapy products resulting
from such research and development.
- GlaxoSmithKline. During 1998, we entered into a broad corporate
partnership with GlaxoSmithKline's, or GSK's, wholly owned subsidiary,
SmithKline Beecham plc, for vaccine discovery for breast, prostate,
ovarian and colon cancer, tuberculosis vaccine discovery and development
programs, and vaccine discovery programs for two chronic infectious
pathogens, chlamydia trachomatis and chlamydia pneumoniae. We also
granted GSK an exclusive worldwide license to develop, manufacture and
sell vaccine products resulting from our clinical program based on Her-
2/neu for treating breast and ovarian cancer, as well as our preclinical
program based on Mammaglobin, a novel gene product associated with breast
cancer. For certain of these disease areas, we granted GSK rights to
develop, manufacture and sell passive immunotherapy products. These
products include T cell, dendritic cell and antibody therapeutics and
therapeutic drug monitoring products. GSK has committed $43.6 million to
fund work in such discovery programs during the agreement's four-year
research term.
We have several license and supply agreements with GSK, granting GSK
licenses to certain adjuvants for use in vaccines for infectious
diseases, cancer and allergy that GSK is developing. These agreements
grant GSK exclusive and co-exclusive license rights depending on the
disease field and territory. Under the terms of the agreement, GSK pays
annual license fees, milestones, transfer payments and future royalty
payments.
As a result of our acquisition of Coulter, we acquired the 1998
collaboration agreement between Coulter and GSK's wholly owned
subsidiary, SmithKline Beecham Corporation, for developing and
commercializing BEXXAR, which has completed Phase III clinical trials in
the United States and is the subject of a BLA currently under review by
the Food and Drug Administration, or FDA, for treating non-Hodgkin's
lymphoma, or NHL. The agreement was amended in April 2000 to reduce GSK's
territory under the agreement to the United States. Under the terms of
the amended agreement, we and GSK will jointly market and sell BEXXAR in
the United States following regulatory approval, and the two companies
will share profits and losses equally. The agreement provides for the
sharing of certain costs related to clinical and manufacturing
development activities. The agreement also provides for a $15 million
credit line, which was fully drawn in December 2000.
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We may receive additional payments if we achieve certain clinical
development and regulatory milestones. As of December 31, 2000, no milestone
payments have been earned or received. We and GSK will annually prepare a joint
profit and loss statement to account for the sharing of revenue, costs of goods
sold and costs relating to selling, marketing, and distribution, and certain
other BEXXAR-related activities. Development expenses for BEXXAR will generally
be shared by both companies, although we retain responsibility to fully fund
certain development costs.
We have acquired the following companies:
- Coulter. On December 22, 2000, we acquired Coulter, a biopharmaceutical
company engaged in developing novel drugs and therapies for treating
cancer and autoimmune diseases. We purchased Coulter for approximately
$917.1 million, which consideration consisted of approximately 19,114,649
shares of our common stock valued at $806.8 million, assumed Coulter
stock options valued at $132.4 million, less $29.2 million associated
with the intrinsic value of unvested options, and transaction costs of
approximately $7.1 million. The $29.2 million was recorded as deferred
compensation and will be amortized as compensation expense over the
remaining vesting periods of up to four years. As a result of the
acquisition, we recorded an acquired in-process research and development
charge of $629.7 million and acquisition-related intangibles of $223.9
million, which includes goodwill of $204.6 million, an assumed lease
arrangement of $15.4 million and an assembled workforce charge of $3.9
million. The FDA accepted the BLA filing for Coulter's lead product,
BEXXAR, in November 2000. If we do not receive FDA approval for BEXXAR, a
significant portion of the value assigned to acquired in-process research
and development will not be realized and the value assigned to the
intangible assets related to this acquisition will be impaired.
- Ribi. On October 6, 1999, we completed the acquisition of Ribi, a
pharmaceutical company focused on developing novel agents that modulate
the human immune response to prevent or treat certain diseases, including
cancer, infectious diseases and cardiovascular injury. We purchased Ribi
for approximately $57.5 million, which consideration consisted of
3,610,766 shares of our common stock and stock options valued at $47.9
million, cash of $7.9 million paid by us to Ribi for the redemption of
Ribi Series A preferred stock and transaction costs of approximately $1.7
million. As a result of the acquisition, we recorded an in-process
research and development charge of $26.0 million and acquisition-related
intangibles of $15.1 million, which includes goodwill of $11.0 million,
adjuvant know-how of $3.1 million and workforce charge of $1.0 million.
On February 26, 2001 we agreed in principle to settle lawsuits with the
United States and the State of Montana related to groundwater
contamination for $2.65 million.
- Anergen. On February 10, 1999, we acquired all of the outstanding shares
of common stock of Anergen, a biotechnology company focused on treating
autoimmune diseases through the discovery and development of proprietary
therapeutics that selectively interrupt the disease process. We purchased
Anergen for approximately $9.6 million, which consideration consisted of
1,058,031 shares of our common stock with a market value of approximately
$8.7 million, approximately $200,000 in cash and approximately $700,000
in transaction costs. We recorded an acquired in-process research and
development charge of $11.6 million as a result of the acquisition.
- GenQuest. On September 15, 1998, we completed the acquisition of
GenQuest, 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 in
diagnosis, drug screening, gene therapy and antibody development in the
areas of prostate, breast, lung, colon and ovarian cancer. We purchased
GenQuest for approximately $12.4 million, which consideration consisted
of 1,063,695 shares of our common stock, with a market value of
approximately $7.3 million, approximately $4.5 million in cash, and
transaction costs of approximately $600,000. An acquired in-process
research and development charge of $12.0 million was recorded as a result
of the acquisition.
As of December 31, 2000, our accumulated deficit was approximately $755.2
million, of which $679.4 million is attributable to the write-off of acquired
in-process research and development costs associated with the acquisitions of
Coulter, Ribi, Anergen and GenQuest. We may incur substantial additional
operating
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losses over, the next several years. Such losses have been and may continue to
be principally the result of various costs associated with our discovery,
research and development programs and the purchase of technology. Substantially
all of our revenue to date has resulted from corporate partnerships, other
research, development and licensing arrangements, research grants and interest
income. Our ability to achieve a consistent, profitable level of operations
depends in large part on entering into collaborative agreements with corporate
partners for product discovery, research, development and commercialization,
obtaining regulatory approvals for our products and successfully manufacturing
and marketing commercial products. We may be unable 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. Therefore, our operating results for any period may fluctuate
significantly and may not be comparable to the operating results for any other
period.
RESULTS OF OPERATIONS
FISCAL YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
TOTAL REVENUE
Our revenue increased to $37.0 million for the year ended December 31,
2000, from $26.5 million in 1999 and from $18.3 million in 1998. The 2000
increase is primarily due to revenue recognized from collaborative agreements
with GSK, the pharmaceutical division of Japan Tobacco, Medicis and Purdue
Pharma. We attribute the 1999 increase compared with 1998 primarily to revenue
from collaborative agreements with the pharmaceutical division of Japan Tobacco,
Zambon, Zenyaku Kogyo and IDRI. Revenue under government grants in 2000 was $2.3
million, up from $1.5 million in 1999 and $1.3 million in 1998. We expect
revenue to fluctuate in the future depending on our ability to enter into new
collaboration agreements and uncertainty surrounding potential product sales.
Effective January 1, 2000, we changed our method of accounting for
nonrefundable up-front license fees. Revenue for 1999 and 1998 was recognized
under our previous method of accounting. See "Change in Accounting Principle"
below.
RESEARCH AND DEVELOPMENT EXPENSES
Our research and development expenses increased to $61.9 million for the
year ended December 31, 2000, up from $42.0 million in 1999 and from $27.4
million in 1998. The 2000 increase is primarily the result of increased payroll
and personnel expenses attributable in part to our acquisitions, new technology
acquisition expenses, increased clinical trial expenses related to PVAC
treatment, MELACINE and ANERGIX and increased preclinical research activities.
The 1999 increase compared with 1998 is primarily attributable to increased
payroll and personnel expenses, increased collaboration expenses, increased
costs associated with preclinical research activities and increased facilities
costs as a result of the completion of our Seattle facility expansion in late
1998. We expect research and development expenses to increase in the future as
the level of clinical and preclinical research activities continue to expand, in
addition to our expanded operations resulting from the Coulter acquisition.
We recorded deferred compensation of $29.2 million associated with the
Coulter acquisition, which represents the amortization of the value of the
unearned options of Coulter employees existing at the date of acquisition.
Deferred compensation will be amortized over the remaining vesting period with
approximately $17.9 million of amortization expected to be included in research
and development expense in 2001.
SALES, GENERAL AND ADMINISTRATIVE EXPENSES
Our sales, general and administrative expenses increased to $6.7 million
for the year ended December 31, 2000, from $3.7 million in 1999 and from $2.7
million in 1998. The increases were primarily attributable to increased payroll
and personnel expenses due in part to acquisitions and legal fees. We expect
sales, general and administrative expenses to increase in the future to support
the expansion of our business activities as we expand our sales and marketing
capabilities, and as a result of the Coulter acquisition.
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We expect approximately $2.0 million of deferred compensation amortization
related to the Coulter acquisition to be included in sales, general and
administrative expense in 2001.
AMORTIZATION OF ACQUISITION-RELATED INTANGIBLES
Our intangible amortization increased to $4.5 million for the year ended
December 31, 2000 from $587,000 in 1999. The intangible amortization for 2000
consisted of $3.1 million associated with the Ribi acquisition and $1.4
associated with the Coulter acquisition for the period December 22, 2000 through
December 31, 2000. We expect approximately $57.6 million of intangible
amortization in 2001 as a result of the acquisitions of Coulter and Ribi.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
For the year ended December 31, 2000, acquired in-process research and
development (IPR&D) expense increased to $629.7 million from $37.6 million in
1999 and from $12.0 million in 1998. The $629.7 million reflects the amount
allocated to IPR&D that we acquired in the Coulter acquisition compared with
$37.6 million in the Ribi and Anergen acquisitions in 1999 and $12.0 million in
the GenQuest acquisition in 1998.
Acquired IPR&D for each of the above acquisitions represents the present
value of the estimated after-tax cash flows expected to be generated by the
purchased technology, which, at the acquisition dates, had not yet reached
technological feasibility. The cash flow projections for revenues were based on
estimates of growth rates and the aggregate size of the respective markets for
each product; probability of technical success given the stage of development at
the time of acquisition; royalty rates based on prior licensing agreements;
product sales cycles; and the estimated life of a product's underlying
technology. Estimated operating expenses and income taxes were deducted from
estimated revenue projections to arrive at estimated after-tax cash flows.
Projected operating expenses include general and administrative expenses, and
research and development costs. The rate utilized to discount projected cash
flows ranged from 30% to 55% for in-process technologies and was based primarily
on venture capital rates of return and the weighted average cost of capital for
us at the time of acquisition.
At the acquisition date, Coulter's IPR&D projects consisted of the
following:
- BEXXAR, which consists of a radioisotope, (131)Iodine, or (131)I,
combined with a monoclonal antibody that recognizes and binds to the CD20
antigen, an antigen commonly expressed on the surface of B-cells
primarily during that stage of their life cycle when NHL arises. BEXXAR
is administered to patients in a proprietary therapeutic protocol
consisting of a single, two-dose regimen. Coulter previously estimated
that research and development costs to complete individual BEXXAR
development projects would be approximately $12.0 million, net of
reimbursements from GSK. The most advanced application of BEXXAR is for
treating relapsed and refractory low-grade and transformed low-grade NHL
for which Phase III clinical trials have been completed, and a BLA was
accepted for review by the FDA in November 2000. Additional indications
include first-line low-grade NHL treatment and intermediate-grade NHL,
which are estimated to be completed in 2002. Significant risk remains in
relation to FDA approval of BEXXAR.
- 64G12 is a monoclonal antibody that binds to sub-unit one of the type I
interferon receptor and neutralizes the activity of all type I
interferons. This antibody, or a derivative, may provide therapeutic
benefit in a number of autoimmune diseases, including rheumatoid
arthritis, systemic lupus erythematosus, Crohn's disease,
graft-versus-host disease and solid organ transplantation rejection.
Coulter previously estimated that an individual 64G12 project may be
completed by 2006 with an additional $40.0 million required in research
and development expenditures. Prior to the acquisition, Coulter had made
progress demonstrating efficacy of 64G12 in preclinical studies using
animal models for rheumatoid arthritis and tissue transplantation
rejection.
- CPI-0004 is a tumor activated peptide, or TAP, pro-drug version of
doxorubicin. Doxorubicin is an off-patent chemotherapeutic drug that
currently is used in treating a number of solid tumor cancers,
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including breast, prostate, ovarian and soft-tissue sarcoma cancers.
CPI-0004 is a proprietary molecule based on a peptide of four amino acids
that is linked to doxorubicin. CPI-0004 is designed to deliver
significantly higher levels of doxorubicin to a tumor site relative to
normal tissues. The TAP pro-drug approach is also designed to achieve a
higher dose of active drug at the tumor site than can be achieved using
unconjugated drug. Coulter previously estimated that the CPI-0004 project
may be completed by 2005 with an additional $33.0 million in research and
development expenditures. This project is currently scheduled to complete
preclinical development and to be ready to commence Phase I clinical
trials in the second half of 2001.
At the acquisition date, Ribi's IPR&D projects consisted of MPL, an
adjuvant immunostimulant for potential application in improving the efficacy of
a variety of vaccines that are at various stages of preclinical and clinical
development; RC-529, a next-generation synthetic adjuvant; MELACINE, a
therapeutic vaccine to treat melanoma; ENHANZYN(TM), which is being developed by
Biomira for use in MELACINE vaccine and in Theratope, as a therapeutic vaccine
for breast, lung, gastrointestinal and colon cancer; and RC-552, a synthetic
compound that is being developed for use in protecting against reperfusion
injury in patients undergoing cardiac surgery or angioplasty. In November 1999,
we received approval of MELACINE for treating Stage IV malignant melanoma in
Canada. In March 2000, we also received data from U.S. Phase III clinical trials
for MELACINE for treating Stage II and Stage IV malignant melanoma. In January
2000, we entered into a license, development and commercialization agreement for
our cardioprotectant, RC-552(TM). Under the terms of the agreement, CoPharma
will develop and commercialize RC-552 for treating and preventing cardiac
disorders, neuronal damage and ischemia-reperfusion injuries.
At the acquisition date, Anergen's IPR&D projects were potential therapies
for treating autoimmune diseases that focus on destroying or inactivating T
cells without affecting the protective functions of the immune system and/or
stimulating the immune system to produce antibodies that may interfere with the
presentation of auto-antigens to destructive T cells. ANERGIX.RA, under
development in partnership with Organon, is the most advanced product.
ANERGIX.RA is a soluble version of the human leucocyte antigen (HLA) Class II
containing an autoantigenic peptide known to interact with T cells involved in
the development of arthritis. ANERGIX.RA is designed to inactivate T cells
responsible for developing arthritic lesions. ANERGIX.RA completed a randomized,
double-blinded, controlled Phase I/II clinical trial in 2000. ANERVAX.RA is a
synthetic peptide vaccine consisting of a small portion of the HLA Class II
molecule. ANERVAX.RA has completed a 53 patient randomized Phase II double
blinded clinical trial.
At the date of acquisition, GenQuest's primary IPR&D projects related to
functional genomics technology to discover and develop novel genes and related
gene products to be used in diagnostics and therapeutic monoclonal antibodies.
These potential products are in the areas of prostate, breast, lung, colon and
ovarian cancer.
We based all of the estimates and projections related to the IPR&D projects
for Coulter, Ribi, Anergen and GenQuest on assumptions we believed to be
reasonable at the time of each acquisition but that are inherently uncertain and
unpredictable. If we do not successfully develop these projects, our business,
operating results, and financial condition may be adversely affected. As of the
date of each acquisition, we concluded that once completed, the technologies
under development can only be economically used for their specific and intended
purposes and that such in-process technologies have no alternative future use
after taking into consideration the overall objectives of the project, progress
toward the objectives, and uniqueness of developments to these objectives. If
the projects fail, the economic contribution expected to be made by the
in-process research and development will not materialize. The risk of untimely
completion includes the risk that competitors will develop alternative products.
Interest Income
Our interest income increased to $5.4 million for the year ended December
31, 2000, from $2.8 million in 1999 and from $3.0 million in 1998. The change in
interest income is based on average investment balances during the year and
market interest rates.
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Interest Expense
Our interest expense increased to $810,000 for the year ended December 31,
2000, from $797,000 for the same period in 1999 and from $767,000 in 1998. The
increase was primarily attributable to higher loan and capital lease financing
balances.
Other Income
Our other income was $431,000 for the year ended December 31, 2000 compared
with $677,000 in 1999 and $294,000 in 1998. Other income for 2000 includes a
gain of $216,000 on the partial sale of our investment in Immgenics and $208,000
in sublease rental receipts. Other income for 1999 includes $400,000 and
$250,000 in proceeds from the recovery of a collaboration receivable that was
previously charged to expense and sublease rental receipts, respectively. The
1998 amount includes $204,000 and $90,000 in proceeds from management and
administrative service agreements with GenQuest and IDRI, respectively. During
1998, we provided services to IDRI with respect to corporate management,
accounting and financial matters, record keeping, personnel administration and
human resources, and treasury services. Similar services were performed under
the GenQuest agreement, which ended upon our acquisition of GenQuest.
Change in Accounting Principle
Effective January 1, 2000, we changed our method of accounting for
nonrefundable up-front license fees to recognize such fees over the term of the
related research and development collaboration arrangement on a straight-line
basis, as this method best matches the effort provided. The $6.3 million
cumulative effect of the change in accounting principle, calculated as of
January 1, 2000, was reported as a charge in the year ended December 31, 2000.
The cumulative effect was initially recorded as deferred revenue and will be
recognized as revenue over the remaining term of the research and development
collaboration agreements. In September 2000, we recognized a multi-million
dollar nonrefundable up-front license fee. This amount has been reversed and
will be recognized over the term of the related research and development
arrangements. For the year ended December 31, 2000, the impact of the change in
accounting was to increase net loss by $13.1 million, or $0.63 per share,
comprised of the $6.3 million cumulative effect of the change as described above
($0.30 per share) and $9.2 million of revenue recognized in the third quarter of
2000 and subsequently reversed ($0.44 per share) less $2.4 million of the
deferred revenue related to the cumulative effect adjustment that was recognized
as revenue during the year ($0.11 per share). The remainder of the related
deferred revenue will be recognized as follows: $5.7 million in 2001, $4.7
million in 2002 and $2.7 million in 2003. Had the change in accounting been in
effect retroactively as of January 1, 1998, net loss for the years ended
December 31, 1999 and 1998 would have been $54.0 million, or $3.87 per share,
and $28.4 million, or $2.33 per share, respectively.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations primarily through funding from
collaborative agreements and the issuance of equity securities and debt
instruments. Our October 1997 initial public offering and preceding private
placements of equity securities have provided us with aggregate net proceeds of
approximately $61.1 million. Net proceeds of $56.6 million were generated by our
follow-on public offering in April 2000 through the issuance of 1,900,000 shares
of our common stock at $32 per share. For the previous three years, we have
received cash of approximately $101.0 million from collaborative research
agreements and grants, $50.0 million from the issuance of Series A and Series B
preferred stock under an equity line of credit, $11.0 million from a bank loan
and $2.0 million from credit lines under collaborative agreements.
In April 1999, we entered into an agreement with Castle Gate, an investment
partnership focused primarily on health-care and biomedical companies, to
provide us with an equity line of credit of up to $50.0 million. Under the
agreement, Castle Gate was obligated to provide the equity line through March
2001. At the time we executed the agreement, we completed an initial draw-down
of $12.5 million and a corresponding issuance to Castle Gate of 12,500 shares of
Series A preferred stock, which are convertible into common stock at $8.50 per
share, and warrants to purchase 1,037,137 shares of our common stock. The
warrants have exercise prices of $8.28 and $8.50 per share. On December 29,
2000, we drew down the remaining
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$37.5 million under the equity line of credit, and in exchange for the funds,
issued to Castle Gate 37,500 shares of our Series B preferred stock, which are
convertible into common stock at $25.58 per share, and warrants to purchase
50,000 and 187,500 shares of our common stock, each at an exercise price of
$18.22 per share.
On the date of the initial draw, the effective conversion price of the
preferred stock (after allocating a portion of the proceeds to the common stock
warrants based on the relative fair values) was at a discount to the price of
the common stock into which the preferred stock is convertible. The discount of
$5.5 million was recorded as a preferred stock dividend.
On the date of the second draw, the effective conversion price of the
preferred stock (after allocating a portion of the proceeds to the common stock
warrants based on the relative fair values) was at a discount to the price of
the common stock into which the preferred stock is convertible. The discount of
$9.3 million was recorded as a preferred stock dividend. In addition, we have
paid preferred stock dividends of $625,000 to date related to the 5% annual
cumulative dividend and have accrued a 5% dividend of $469,000 at December 31,
2000, payable in April 2001.
During the year ended December 31, 2000, we used $21.3 million of cash in
our operations, compared with $5.7 million in 1999 and $7.5 million in 1998. Our
investing activities used $30.7 million, compared to $16.4 million in 1999 and
$8.5 million in 1998. The increases in cash used in investing activities were
primarily due to the increased use of cash to purchase
available-for-sale-securities. Our financing activities provided cash of $100.7
million in 2000 compared with $13.8 million in 1999 and $8.7 million in 1998.
The increase in 2000 was primarily due to proceeds of $56.6 million from our
follow-on public offering of common stock, our issuance of Series B preferred
stock of $37.5 million and proceeds from long-term and short-term obligations of
$3.0 million and $1.0 million, respectively. The 1999 increase is primarily the
result of our issuance of Series A preferred stock, partially offset by a
decrease in borrowings. As of December 31, 2000, we had approximately $197.1
million in cash, cash equivalents and securities available-for-sale. Working
capital increased to $146.8 million at December 31, 2000 from $20.9 million in
1999 and $37.0 million in 1998.
For the years ended December 31, 2000, 1999 and 1998, we invested $3.0
million, $3.1 million and $5.6 million, respectively, in property and equipment.
We believe that our existing capital resources, committed payments under
our existing collaborative agreements and licensing arrangements, equipment
financing and interest income will be sufficient to fund our current and planned
operations over at least the next 12 months. However, we cannot assure you that
these sources of capital will be sufficient for such period of time. Our future
capital requirements will depend on many factors, including, among others:
- continued scientific progress in our discovery, research and product
development programs;
- the magnitude and scope of these activities;
- our ability 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 associated with potential commercial activities;
- 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 our control.
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We intend 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. However, we cannot
assure you that additional financing will be available on acceptable terms, if
at all. If sufficient capital is not available, we may be required to delay,
reduce the scope of, eliminate or divest one or more of our discovery, research
or development programs, any of which could harm our business.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which is effective for fiscal
years beginning after June 15, 2000. The statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. We do not expect the adoption of SFAS
133 to have a significant impact on our financial position or results of
operations.
RECENT DEVELOPMENTS
On March 19, 2001, after receipt of a complete review letter from the FDA,
we announced a delay in the potential launch of BEXXAR. Consequently, we have
modified our 2001 operating plan and initiated expense reductions, including a
reduction in our workforce. As a result of this workforce reduction, we expect
to incur a restructuring charge of approximately $1.5 million in the first
quarter of 2001.
MARKET RISK DISCLOSURES
Interest Rate Risk
The table below summarizes the estimated effects on certain assets and
liabilities based on 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
available prepayment options. The fair value of such instruments could be
affected and, therefore, actual results might differ from those reflected in the
following table:
ESTIMATED
HYPOTHETICAL FAIR VALUE AFTER HYPOTHETICAL
CHANGE IN HYPOTHETICAL PERCENTAGE
FAIR VALUE AT INTEREST RATE CHANGE IN DECREASE IN
DECEMBER 31, 2000 (BP=BASIS POINTS) INTEREST RATE STOCKHOLDERS' EQUITY
----------------- ----------------- ---------------- --------------------
(IN THOUSANDS)
Assets:
U.S. government
agencies and
corporate
obligations......... $147,665 100 bp decrease $149,778 *
100 bp increase 145,610 *
200 bp increase 143,602 1.0%
300 bp increase 141,655 1.5%
Liabilities:
Debt obligations....... $ 25,990 100 bp decrease $ 26,552 *
100 bp increase 25,444 *
200 bp increase 24,918 *
300 bp increase 24,407 *
- ---------------
* Less than 1%
IMPORTANT FACTORS THAT MAY AFFECT OUR BUSINESS, OUR RESULTS OF OPERATIONS AND
OUR STOCK PRICE.
You should carefully consider the risks described below, together with all
other information contained and the documents incorporated by reference in this
Annual Report. If any of the following risks actually
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occur, our business, financial condition or operating results may be seriously
harmed. In that case, the trading price of our common stock may decline.
OUR SUCCESS DEPENDS ON OUR PRODUCTS BEING APPROVED THROUGH A GOVERNMENT
REGULATORY APPROVAL PROCESS THAT IS UNCERTAIN, TIME-CONSUMING AND EXPENSIVE, AND
IF ANY OF OUR PRODUCTS ARE NOT APPROVED, OUR BUSINESS MAY SUFFER.
Any products that we or our corporate partners develop are subject to
regulation by federal, state and local governmental authorities in the United
States, including the FDA, and by similar agencies in other countries. Any
product that we or our corporate partners develop must receive all relevant
regulatory approvals or clearances before it may be marketed in a particular
country. If any of our products are not approved by the regulatory authorities
in the jurisdictions in which we are seeking to market our products, our
business may suffer.
The regulatory process, which includes extensive preclinical studies and
clinical trials of each product in order to study its safety and efficacy, is
uncertain, can take many years and requires the expenditure of substantial
resources.
The timing and completion of current and planned clinical trials of our
products depend on, among other factors, the rate at which patients are
enrolled, which is a function of many factors, including:
- the size of the patient population;
- the proximity of patients to the clinical sites;
- the number of clinical sites;
- the eligibility criteria for the study; and
- the existence of competing clinical trials.
We cannot assure you that delays in patient enrollment in clinical trials
will not occur. Any delays may result in increased costs, program delays or
both, which may harm our business.
The FDA accepted the BEXXAR(TM) BLA on November 15, 2000, and assigned the
application six-month priority review status. The FDA granted BEXXAR orphan drug
designation in May 1994, as well as fast track designation announced in December
1998. On March 16, 2001, we received a complete review letter from the FDA
following the agency's review of the BEXXAR BLA. Issuance of the complete review
letter satisfied the FDA's performance goal for priority review under the
Prescription Drug User Fee Act. In the complete review letter, the FDA outlined
additional clinical and manufacturing information that Corixa must submit as a
result of the review. The FDA requested updated and/or final safety and efficacy
data from ongoing, recently completed, and other additional trials to establish
safety and effectiveness. Our inability to complete further studies or gather
further evidence, or a failure of any clinical trials to yield acceptable
results may further delay approval of BEXXAR. Any such delays may result in
increased costs or further delays to approval or both, which may harm our
business.
Data obtained from preclinical and clinical activities are susceptible to
varying interpretations, which could delay, limit or prevent regulatory
approval. Data from a Phase III clinical trial of MELACINE(R), our melanoma
vaccine, with the primary endpoint being the comparison of disease-free survival
between patients with Stage II melanoma who, following surgical removal,
received MELACINE vaccine versus observation only, found no statistically
significant difference in disease-free survival of the eligible patient
population. However, the results of the intent-to-treat analysis on the total
population indicated that there was a statistically significant difference in
disease-free survival. In September 2000, we announced our intent to file a BLA
for the use of MELACINE vaccine for treating Stage II melanoma.
In addition, we recently completed a Phase II clinical trial for our
PVAC(TM) treatment for the treatment of moderate to severe psoriasis. We are
currently developing a new set of trials to further study the effectiveness of
PVAC treatment for the treatment of psoriasis. We cannot assure you that PVAC
treatment will prove to be an effective treatment for psoriasis, or even if
efficacy is demonstrated in clinical trial, that it will be approved by the FDA
for commercial sale.
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In addition, delays or rejections may be encountered based on changes in
regulatory policy during the period of product development, extension of the
period of review of any application for regulatory approval or other factors
beyond our control. Delays in obtaining regulatory approvals:
- would adversely affect the marketing of any products we or our corporate
partners develop;
- could impose significant additional costs on us or our corporate
partners;
- would diminish any competitive advantages that we or our corporate
partners may attain; and
- could adversely affect our ability to receive royalties and generate
revenues and profits.
Regulatory approval, if granted, may entail limitations on the indicated
uses for which the approved product may be marketed. These limitations could
reduce the size of the potential market for the product. Product approvals, once
granted, may be withdrawn if problems occur after initial marketing. Further,
manufacturers of approved products are subject to ongoing regulation, including
compliance with detailed FDA regulations governing Good Manufacturing Practices,
or GMP. Failure to comply with manufacturing regulations 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.
WE MAY BE REQUIRED TO PERFORM ADDITIONAL CLINICAL TRIALS OR CHANGE THE LABELING
OF OUR PRODUCTS IF WE OR OTHERS IDENTIFY SIDE EFFECTS AFTER OUR PRODUCTS ARE ON
THE MARKET, WHICH COULD ADVERSELY AFFECT SALES OF THE AFFECTED PRODUCTS.
If we or others identify side effects after any of our products are on the
market, or if manufacturing problems occur,
- regulatory approval may be withdrawn;
- reformulation of our products, additional clinical trials, changes in
labeling of our products or changes to or re-approvals of our
manufacturing facilities may be required;
- sales of the affected products may drop significantly;
- our reputation in the marketplace may suffer; and
- lawsuits, including class action suits, may be brought against us.
Any of the above occurrences could harm our business.
ACCEPTANCE OF BEXXAR(TM) IN THE MARKETPLACE IS UNCERTAIN AND FAILURE TO ACHIEVE
MARKET ACCEPTANCE WILL HARM OUR BUSINESS.
If our most advanced product candidate, BEXXAR, is approved, it would
represent a significant departure from currently approved methods of treatment
for NHL and would require medical personnel to handle radioactive materials.
Accordingly, BEXXAR may experience under-utilization by oncologists and
hematologists who are unfamiliar with the application of BEXXAR in treating NHL.
Further, oncologists and hematologists are not typically licensed to administer
radioimmunotherapies such as BEXXAR and will need to engage a nuclear medicine
physician or receive specialty training to administer BEXXAR. Nuclear Regulatory
Commission regulations permit BEXXAR to be administered on an outpatient basis
in most cases as is currently contemplated by us. However, market acceptance
could be affected adversely because some hospitals may be required to administer
the therapeutic dose of BEXXAR on an in-patient basis under applicable state,
local or individual hospital regulations. As with any new drug, doctors may be
inclined to continue to treat patients with conventional therapies, in this case
chemotherapy and biologics. Market acceptance also could be affected by the
availability of third-party reimbursement. Failure of BEXXAR to achieve market
acceptance would harm our business.
WE ARE AT AN EARLY STAGE OF DEVELOPMENT AND HAVE LIMITED SOURCES OF REVENUE.
We are at an early stage in the development of the majority of our
therapeutic, prophylactic and diagnostic products. To date, almost all of our
revenue has resulted from payments made under agreements
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with our corporate partners, and we expect that most of our revenue will
continue to result from corporate partnerships until therapeutic product
approval and commercialization. Since our inception, we have generated only
minimal revenue from diagnostic product sales and no revenue from therapeutic or
prophylactic product sales. With the exception of MELACINE(R), which is
available for sale in Canada, we cannot predict when, if ever, our research and
development programs will result in commercially available immunotherapeutic
products. We do not know when, if ever, we will receive any significant revenue
from commercial sales of these products. We may not receive anticipated revenue
under existing corporate partnerships, and we may be unable to enter into any
additional corporate partnerships.
WE MAY BE UNABLE TO DEVELOP PRODUCTS SUCCESSFULLY.
The development of safe and effective therapies for treating people with
autoimmune diseases, cancer or infectious diseases is highly uncertain and
subject to numerous risks. Product candidates that may appear to be promising at
early stages of development may not reach the market for a number of reasons.
Product candidates may be found ineffective or cause harmful side effects during
clinical trials, may take longer to progress through clinical trials than had
been anticipated, may fail to receive necessary regulatory approvals, may prove
impracticable to manufacture in commercial quantities at reasonable cost and
with acceptable quality or may fail to achieve market acceptance.
We are at an early stage in the development of the majority of our
products, and we cannot assure you that clinical trials of our product
candidates under development will demonstrate the safety and efficacy of those
products to the extent necessary to obtain regulatory approvals for the
indications being studied, if at all. Companies in the pharmaceutical and
biotechnology industries have suffered significant setbacks in advanced clinical
trials, even after obtaining promising results in earlier trials. The failure to
demonstrate adequately the safety and efficacy of any of the products under
development by us could delay or prevent regulatory approval of the product and
may harm our business.
We have several preclinical programs and several potential products in
clinical trials. We also have two potential products, MELACINE vaccine and
BEXXAR therapy, that have completed clinical trials. We cannot assure you that
any of these programs will yield products that are approved for commercial sale
or that any of these potential products, with the exception of MELACINE vaccine,
which has been approved for sale in Canada, will ever be approved for commercial
sale.
WE WILL NEED ADDITIONAL CAPITAL AND OUR ABILITY TO SECURE ADDITIONAL FUNDING IS
UNCERTAIN.
We will continue to require substantial capital resources to conduct our
operations. Our future capital requirements will depend on many factors,
including:
- continued scientific progress in our discovery and research programs;
- progress with preclinical studies and clinical trials;
- the magnitude and scope of our discovery, research and development
programs;
- our ability to maintain existing, and establish additional, corporate
partnerships and licensing arrangements;
- the time and costs involved in obtaining regulatory approvals;
- the time and costs involved in expanding and maintaining our
manufacturing facilities;
- 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 beyond our control.
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We intend to seek additional funding through corporate partnerships, and
also may seek additional funding through:
- public or private equity financings, which could result in significant
dilution to our stockholders;
- public or private debt financings; and
- capital lease transactions.
Additional financing may not be available on acceptable terms, if at all.
If sufficient capital is not available, we may be required to delay, reduce the
scope of, eliminate or divest one or more of our discovery, research,
preclinical or clinical programs or manufacturing efforts. We believe that our
existing capital resources, committed payments under existing corporate
partnerships and licensing arrangements, bank credit arrangements, equity credit
lines, equipment financing and interest income will be sufficient to fund our
current and planned operations over at least the next 12 months. However, a
substantial number of the payments to be made by our corporate partners and
other licensors depend on us achieving development and regulatory milestones.
Failure to achieve these milestones may significantly harm our future capital
position.
OUR BUSINESS WILL NOT SUCCEED IF OUR TECHNOLOGY AND PRODUCTS ARE REJECTED BY THE
MARKETPLACE.
Our technological approach to the development of immunotherapeutic products
based on targeted antigens for autoimmune diseases, cancer and infectious
diseases is unproven in humans. With the exception of our MELACINE(R) vaccine,
products based on our technologies are currently in the research, preclinical or
clinical investigation stages. Currently, only a small number of our
immunotherapeutic products have advanced to clinical trials. Only one of our
corporate partners is conducting clinical trials that incorporate our
proprietary microsphere delivery system.
Other than an immunotherapeutic product incorporating MPL(R) adjuvant that
has been approved for sale on a named-patient basis in Germany, and MELACINE,
which includes the ENHANZYN adjuvant, and is approved for sale in Canada,
neither we nor any of our corporate partners has commercialized any products
that incorporate our proprietary adjuvants. In addition, neither we nor any
other company has successfully commercialized any therapeutic vaccines for
cancer or the infectious or autoimmune diseases that we target. We may be unable
to develop effective vaccines for these diseases in a reasonable time frame, if
ever, and the vaccines may not be capable of being commercialized.
Most of our programs are currently in the discovery stage or in preclinical
development. Currently, 16 of our immunotherapeutic programs have advanced to
clinical trials. With the exception of MELACINE, which is available for sale in
Canada and which has completed Phase III clinical trials in Canada and the
United States, our vaccines have not completed clinical trials. Our programs may
not move beyond their current stages of development. Even if approved for
marketing, our or our corporate partners' products may not be as effective as
competing products or alternative treatment methods and may never achieve market
acceptance. Physicians, patients or the medical community generally may not
accept or utilize any products that may be developed by us or our corporate
partners.
IF WE DO NOT SUCCESSFULLY MANAGE OUR GROWTH, OUR BUSINESS WILL SUFFER.
We have experienced rapid growth through acquisitions. We will need to
continue to grow to successfully complete our research and development efforts
and plans for commercializing our products. Managing this growth will entail
numerous operational and financial risks and strains, including:
- inability to attract enough qualified personnel to staff any new or
expanded operations;
- impairment of relationships with employees or corporate partners as we
focus on different or additional projects;
- risks of entering new markets in which we have little or no prior
experience;
- inability of management to maintain uniform standards, controls,
procedures and policies;
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- disruption of our ongoing business; and
- diversion of our resources.
Recently, as a result of our receipt of the FDA complete review letter for
BEXXAR(TM), and the recognition of additional synergies in the workforce as a
result of our acquisition of Coulter, we modified our operating plan. We will
initiate immediate expense reductions, including a 10% - 15% reduction in total
headcount that includes the elimination of unfilled open positions, as well as
existing positions. These reductions in research and development and
administrative support staff will result in the postponement of further internal
development of certain programs. Additionally, we are attempting to outsource
our sales and marketing personnel. If we are unable to establish such
agreements, we may be required to make additional headcount reductions.
IF WE DO NOT SUCCESSFULLY INTEGRATE OUR RECENT OR POTENTIAL FUTURE ACQUISITIONS,
OUR BUSINESS WILL SUFFER.
We have recently completed several acquisitions of complementary
technologies, product candidates and businesses, including our acquisition of
Coulter, our largest acquisition to date. In the future, we may acquire
additional complementary companies, products or technologies. Managing these
acquisitions has entailed and may in the future entail, both in connection with
the Coulter acquisition and other potential acquisitions, numerous operational
and financial risks and strains, including:
- exposure to unknown liabilities of acquired companies;
- higher than expected acquisition and integration costs, which may
adversely effect our quarterly and annual operating results;
- difficulty and cost in combining the operations and personnel of acquired
businesses with our operations and personnel;
- disruption of our business and diversion of our management's time and
attention to integrating or completing the development or
commercialization of any acquired technologies;
- impairment of relationships with key customers of acquired businesses due
to changes in management and ownership of the acquired businesses;
- inability to retain key employees of any acquired businesses; and
- increased amortization expenses if an acquisition results in significant
goodwill or other intangible assets.
If we do not successfully integrate Coulter and any future acquisition, our
business will suffer.
WE EXPECT TO INCUR FUTURE OPERATING LOSSES.
We have experienced significant operating losses in each year since our
inception on September 8, 1994. As of December 31, 2000, our accumulated deficit
was approximately $755.2 million, of which $679.4 million is attributable to the
write-off of in-process research and development costs associated with the
acquisitions of Coulter, Ribi, Anergen and GenQuest. We may incur substantial
additional operating losses over at least the next several years. These losses
have been and may continue to be principally the result of the various costs
associated with our acquisition activities, including the expenses associated
with the write-off of in-process research and development, research and
development programs, preclinical studies and clinical activities. Substantially
all of our revenue and other income to date have resulted from corporate
partnerships, other research, development and licensing arrangements, research
grants and interest income.
We may never achieve profitability, and our ability to achieve a
consistent, profitable level of operations depends in large part on our:
- entering into agreements with corporate partners for product discovery,
research, development and commercialization;
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- obtaining regulatory approvals for our products, such as BEXXAR(TM); and
- successfully manufacturing and marketing commercial products.
However, our operations may not be profitable even if any of our products
under development are commercialized.
OUR RESULTS OF OPERATIONS ARE UNCERTAIN AND MAY FLUCTUATE SIGNIFICANTLY, WHICH
COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DECREASE.
Payments under corporate partnerships and licensing arrangements, from
which we receive substantially all of our revenue, are subject to significant
fluctuations in both timing and amounts. As a result, our results of operations
have varied significantly from quarter to quarter and year to year in the past
and are expected to continue to fluctuate. Because of these fluctuations, we
believe that period-to-period comparisons of our results of operations are not
meaningful. In addition, our results of operations for a particular quarter or
year may fall below the expectations of securities analysts and investors, which
could result in a decrease in our stock price.
IF OUR CORPORATE PARTNERSHIPS ARE NOT SUCCESSFUL OR IF WE ARE UNABLE TO FIND
CORPORATE PARTNERSHIPS IN THE FUTURE, OUR BUSINESS MAY SUFFER.
The success of our business strategy largely depends on our ability to
enter into multiple corporate partnerships and to manage effectively the
numerous relationships that may result from this strategy. We derived 94%, 94%
and 93% of our revenue for the years ended December 31, 2000, 1999 and 1998 from
research and development and other funding under our existing corporate
partnerships.
We have established relationships with various corporate partners,
including Medicis, GlaxoSmithKline and several of its affiliates, the
pharmaceutical division of Japan Tobacco, Zambon, Zenyaku Kogyo, Schering
Corporation and Schering-Plough, and Organon, among others. The process of
establishing corporate partnerships is difficult, time-consuming and involves
significant uncertainty.
Our discussions with potential partners may not lead to the establishment
of new corporate partnerships on favorable terms, if at all. If we successfully
establish new corporate partnerships, such partnerships may never result in the
successful development of our products or the generation of significant revenue.
Some of our corporate partners have options to license aspects of our
technology. Any of these corporate partners may not exercise its option to
license this technology. We have also entered into corporate partnerships with
several companies for the development, commercialization and sale of diagnostic
products incorporating our proprietary antigen technology. These diagnostic
corporate partnerships may never generate significant revenue.
Because we generally enter into research and development collaborations
with corporate partners at an early stage of product development, our success
largely depends on the performance of our corporate partners. We do not directly
control the amount or timing of resources devoted by our corporate partners to
collaborative activities. As a result, our corporate partners may not commit
sufficient resources to our research and development programs or the
commercialization of our products. If any corporate partner fails to conduct its
activities in a timely manner, if at all, our preclinical or clinical
development related to the corporate partnership could be delayed or terminated.
Also, our current corporate partners or future corporate partners, if any, may
pursue existing or other development-stage products or alternative technologies
in preference to those being developed in collaboration with us. Finally, our
corporate partners may terminate any of our current partnerships, and we may be
unable to negotiate additional corporate partnerships in the future on
acceptable terms, if at all.
Management of our relationships with our corporate partners will require:
- significant time and effort from our management team;
- coordination of our research with the research priorities of our
corporate partners;
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- effective allocation of our resources to multiple projects; and
- an ability to attract and retain key management, scientific and other
personnel.
OUR INABILITY TO LICENSE TECHNOLOGY FROM THIRD PARTIES OR OUR INABILITY TO
MAINTAIN EXCLUSIVE LICENSES MAY IMPAIR OUR ABILITY TO DEVELOP AND COMMERCIALIZE
OUR PRODUCTS.
Our success also depends on our ability to enter into licensing
arrangements with commercial or academic entities to obtain technology that is
advantageous or necessary to developing and commercializing our or our partners'
products. We have various license agreements that provide us rights to use
technologies owned or licensed by third parties. These license agreements
generally allow us and our corporate partners to use the licensed technology in
research, development and commercialization activities. Additionally, many of
our in-licensing agreements contain milestone-based termination provisions, in
which case our failure or the failure of any of our corporate partners to meet
any agreed milestones may allow the licensor to terminate an agreement.
We may be unable to negotiate additional license agreements in the future
on acceptable terms, if at all. In addition, our current license agreements may
be terminated, and we may be unable to maintain the exclusivity of our exclusive
licenses. Commercialization of monoclonal antibody-based products may require
licensing or cross-licensing of one or more patents with other organizations in
the field. If we cannot obtain or maintain licenses to technologies advantageous
or necessary to develop and commercialize our products, our corporate partners
and we may be required to expend significant time and resources to develop or
in-license similar technology. If we are unable to do so, we may be prevented
from commercializing our products and our business may suffer. If we are unable
to maintain the exclusivity of our exclusive licenses our competitive position
may be harmed and our business may suffer.
IF WE ARE UNABLE TO GAIN ACCESS TO PATENT AND PROPRIETARY RIGHTS OR TO PROTECT
AND ENFORCE OUR PATENTS AND PROPRIETARY RIGHTS, WE MAY BE UNABLE TO COMPETE
EFFECTIVELY.
Our success depends in part on our ability to:
- obtain commercially valuable patents;
- protect trade secrets;
- operate without infringing the proprietary rights of others; and
- prevent others from infringing our proprietary rights.
We will only be able to protect our proprietary rights from unauthorized
use to the extent that these rights are covered by valid and enforceable patents
or are effectively maintained as trade secrets. We try to protect our
proprietary positions by filing U.S. and foreign patent applications related to
our proprietary technology, inventions and improvements that are important to
developing our business. As of December 31, 2000, we owned, licensed or had the
option to license 110 issued U.S. patents that expire at various times between
May 2002 and August 2018, as well as 392 pending U.S. patent applications.
Our patent position is generally uncertain and involves complex legal and
factual questions. Legal standards relating to the validity and scope of claims
in the biotechnology and biopharmaceutical fields are still evolving.
Accordingly, the degree of future protection for our proprietary rights is
uncertain. The risks and uncertainties that we face with respect to our patents
and other proprietary rights include the following:
- the pending patent applications we have filed or to which we have
exclusive rights may not result in issued patents or may take longer than
we expect to result in issued patents;
- the claims of any patents that issue may not provide meaningful
protection;
- we may be unable to develop additional proprietary technologies that are
patentable;
- the patents licensed or issued to us or our corporate partners may not
provide a competitive advantage;
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- other companies may challenge patents licensed or issued to us or our
corporate partners;
- patents issued to other companies may harm our ability to do business;
- disputes may arise regarding the invention and corresponding ownership
rights in inventions and know-how resulting from the joint creation or
use of intellectual property by us, our licensors, corporate partners and
other scientific collaborators;
- other companies may independently develop similar or alternative
technologies or duplicate our technologies; and
- other companies may design around technologies we have licensed or
developed.
We also rely on trade secret protection and confidentiality agreements to
protect our interests in proprietary know-how that is not patentable and for
processes for which patents are difficult to enforce. We have taken security
measures to protect our proprietary know-how and confidential data and continue
to explore further methods of protection. Although we require all employees,
consultants, partners and customers to enter into confidentiality agreements, we
cannot be certain that we will be able to meaningfully protect our trade
secrets. Any material leak of confidential data into the public domain or to
third parties could cause our business to suffer.
IF THIRD PARTIES CHALLENGE THE VALIDITY OF OUR PATENTS OR PROPRIETARY RIGHTS,
OUR BUSINESS MAY SUFFER.
A substantial number of patents have issued, and an even larger number of
patent applications have been filed, in the fields of immunology and molecular
biology. Our commercial success depends significantly on our ability to operate
our business without infringing the patents and other proprietary rights of
third parties. However, our technologies may infringe the patents or violate
other proprietary rights of third parties. This could result in our corporate
partners and us being prevented from pursuing product development or
commercialization of our technologies and product candidates. This result would
harm our business.
Our registered trademarks, MPL(R) and MELACINE(R), are currently the
subjects of opposition proceedings before the Office for the Harmonization in
the Internal Market, which handles initial prosecution and opposition of
European trademarks. It is uncertain whether we will ultimately prevail in these
opposition proceedings. As a result, we may not receive trademark protection for
MPL and MELACINE in Europe, in which case our business may suffer.
We have licensed several patent applications from Southern Research
Institute, or SRI, related to our microsphere encapsulation technology. Two of
these patent applications are currently the subject of opposition proceedings
before the European Patent Office. In one of the oppositions, the European
Patent Office has revoked a previously issued European patent. Although SRI has
appealed this decision, it is uncertain whether SRI will ultimately prevail in
this or any other opposition proceeding. As a result, these patents may not
issue in Europe, in which case our business may suffer.
LITIGATION REGARDING INTELLECTUAL PROPERTY RIGHTS OWNED OR USED BY US MAY BE
COSTLY AND TIME-CONSUMING, AND MAY HARM OUR BUSINESS.
The defense and prosecution of intellectual property rights, United States
Patent and Trademark Office interference proceedings and related legal and
administrative proceedings in the United States and elsewhere involve complex
legal and factual questions. As a result, these proceedings are costly and
time-consuming, and their outcome is uncertain. Litigation may be necessary to:
- assert claims of infringement;
- enforce our issued and licensed patents;
- protect our trade secrets or know-how; or
- determine the enforceability, scope and validity of the proprietary
rights of others.
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If we become involved in any litigation, interference or other
administrative proceedings, we will incur substantial expense and it will divert
the efforts of our technical and management personnel. An adverse determination
may subject us to significant liabilities or require us to seek licenses that
may not be available from third parties on commercially reasonable terms, if at
all. We may be restricted or prevented from developing and commercializing our
products, if any, in the event of an adverse determination in a judicial or
administrative proceeding, or if we fail to obtain necessary licenses. Any of
these outcomes could harm our business.
WE DEPEND HEAVILY ON THE PRINCIPAL MEMBERS OF OUR MANAGEMENT AND SCIENTIFIC
STAFF, THE LOSS OF WHOM COULD IMPAIR OUR ABILITY TO COMPETE.
The loss of the services of any of the principal members of our management
and scientific staff could significantly delay or prevent the achievement of our
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 our success. We may
be unable to attract and retain these individuals currently or in the future on
acceptable terms, if at all, and the failure to do so would harm our business.
In addition, we do not maintain "key person" life insurance on any of our
officers, employees or consultants.
We also have relationships with scientific collaborators at academic and
other institutions, some of whom conduct research at our request or assist us in
formulating our research, development or clinical strategy. These scientific
collaborators are not our employees and may have commitments to, or consulting
or advisory contracts with, other entities that may limit their availability to
us. We have limited control over the activities of these scientific
collaborators and can generally expect these individuals to devote only limited
amounts of time to our activities. Failure of any of these persons to devote
sufficient time and resources to our programs could harm our business. In
addition, these collaborators may have arrangements with other companies to
assist the companies in developing technologies that may compete with our
products.
MANY OF OUR COMPETITORS HAVE GREATER FINANCIAL RESOURCES AND EXPERTISE IN
DISCOVERY, RESEARCH AND DEVELOPMENT, OBTAINING REGULATORY APPROVAL AND MARKETING
THAN US.
The biotechnology and biopharmaceutical industries are intensely
competitive. Many companies and institutions compete with us in developing
alternative therapies to treat or prevent autoimmune diseases, cancer and
infectious diseases, including:
- pharmaceutical companies;
- biotechnology companies;
- academic institutions; and
- research organizations.
Moreover, technology controlled by third parties that may be advantageous
to our business may be acquired or licensed by our competitors, thereby
preventing us from obtaining technology on commercially reasonable terms, if at
all.
Many of the companies developing competing technologies and products have
significantly greater financial resources and expertise in research and
development, manufacturing, preclinical and clinical development, obtaining
regulatory approvals and marketing than we or our corporate partners do. 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 for research and development, manufacturing,
preclinical and clinical development, obtaining regulatory approval and
marketing of products similar to ours. These companies and institutions compete
with us in recruiting and retaining qualified scientific and management
personnel as well as in acquiring and
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developing technologies complementary to our programs. We and our corporate
partners will face competition with respect to:
- product efficacy and safety;
- timing and scope of regulatory approvals;
- availability of resources;
- reimbursement coverage;
- product price; and
- patent position, including potentially dominant patent positions.
Competitors may develop more effective or more affordable products, or may
achieve earlier patent protection or product commercialization than us and our
corporate partners. These competitive products may achieve a greater market
share or render our products obsolete.
WE HAVE LIMITED EXPERIENCE IN MANUFACTURING OUR PRODUCTS AND MAY ENCOUNTER
PROBLEMS OR DELAYS THAT COULD RESULT IN LOST REVENUE.
Our current manufacturing facilities may not be sufficient to support our
or our corporate partners' needs for clinical quantities of our products or
commercial quantities of our current adjuvant products. We have limited
experience producing commercial quantities of any product, or in producing
clinical-grade or commercial amounts of our proprietary antigen-based products,
including recombinant proteins or antibodies. Although we currently manufacture
limited quantities of some antigens and several adjuvants, and are capable of
clinical GMP manufacturing of both adjuvants and some finished vaccine products,
we intend to rely on third-party contract manufacturers to produce larger
quantities of recombinant protein or other cell culture-based biologicals for
clinical trials and product commercialization. These contract manufacturers and
we may be unable to manufacture our proprietary antigen vaccines at a cost or in
quantities necessary to make them commercially viable. Third-party manufacturers
also may be unable to meet our needs with respect to timing, quantity or
quality. If we are unable to contract for a sufficient supply of required
products on acceptable terms, or if we encounter delays or difficulties in our
relationships with these manufacturers, our preclinical and clinical testing
would be delayed, thereby delaying submission of products for regulatory
approval, or the market introduction and commercial sale of the products.
Moreover, contract manufacturers that we may use must continually adhere to
current GMP regulations enforced by the FDA through its facilities inspection
program. If the facilities of those manufacturers cannot pass a pre-approval
plant inspection, the FDA approval of our products will not be granted.
We have no existing internal capacity or experience with respect to
manufacturing radiolabeled antibody products for large-scale clinical trials or
commercial purposes. We rely on BI Pharma KG to produce Anti-B1 Antibody. We
have entered into an agreement with BI Pharma KG to produce bulk Anti-B1
Antibody and fill the individual product vials with Anti-B1 Antibody. We have
contracted with BI Pharma KG and a third-party supplier for labeling and
packaging services. These manufacturers have limited experience producing,
labeling and packaging the Anti-B1 Antibody, and we cannot assure you that they
will be able to produce our requirements in commercial quantities or with
acceptable quality.
We rely on Nordion for radiolabeling the Anti-B1 Antibody at Nordion's
centralized radiolabeling facility. We have entered into an agreement with
Nordion for supply of the radiolabeled Anti-B1 Antibody for both clinical trials
and commercial sale. Given the eight-day half-life of the (131)I radioisotope,
Nordion currently is producing radiolabeled Anti-B1 Antibody in a clinical-scale
facility sufficient to support on-going clinical trials. Nordion is
transitioning the production of radiolabeled Anti-B1 Antibody to a
commercial-scale facility prior to potential FDA approval in support of
potential product launch. However, we cannot assure you that Nordion will be
able to successfully transition to the commercial-scale facility and, if
BEXXAR(TM) is approved and is successful in the market, we cannot assure you
that Nordion's capacity to radiolabel antibodies will be sufficient to meet all
of our commercial requirements.
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We are aware of only a limited number of manufacturers capable of producing
the Anti-B1 Antibody in commercial quantities or radiolabeling the antibody with
the (131)I radioisotope on a commercial scale. To establish and qualify a new
facility to centrally radiolabel antibodies could take three years or longer.
Further, radiolabeled antibody cannot be stockpiled against future shortages due
to the eight-day half-life of the (131)I radioisotope. Accordingly, any change
in our existing contractual relationships with, or interruption in supply from,
our producer of unlabeled antibody or our radiolabeler would affect adversely
our ability to complete our ongoing clinical trials and to market BEXXAR, if
approved. Any change or interruption would harm our business. Although we are
evaluating additional sources of supply for production and radiolabeling of the
Anti-B1 Antibody, we cannot assure you that these sources will be secured on
commercially reasonable terms or on a timely basis, if at all.
Nordion intends to change its source of (131)I radioisotope from
tellurium-derived (131)I to fission-derived (131)I. We will need to obtain FDA
approval of the fission-derived (131)I radioisotope prior to using it in
clinical trials or commercial supply. Although fission-derived (131)I
radioisotope has been approved for human use in other applications, we cannot
assure you that the fission-derived (131)I labeled Anti-B1 Antibody will be
suitable for human use, and that clinical trials or commercial supply will not
be delayed or disrupted if we are unable to obtain FDA approval for this
product.
BECAUSE WE HAVE LIMITED SALES, MARKETING AND DISTRIBUTION CAPABILITIES, OUR
BUSINESS MAY SUFFER.
As a result of the Coulter acquisition, we have a sales and marketing force
focused on BEXXAR(TM) sales and marketing in the United States. We cannot assure
you that we will be able to manage effectively these sales and marketing
operations. We intend to rely on our corporate partners to market our products
outside the United States and, in the case of autoimmune and infectious disease
products, worldwide. Our corporate partners may not have effective sales forces
and distribution systems. If we are unable to maintain or establish
relationships and are required to market any of our products directly, we will
need to build a marketing and sales force with technical expertise and with
supporting distribution capabilities. We may be unable to maintain or establish
relationships with third parties or build in-house sales and distribution
capabilities.
We have hired direct sales and marketing personnel in preparation for the
market launch of BEXXAR; however, the ability to market BEXXAR, if approved,
will be contingent upon recruiting, training and deploying the remainder of the
necessary sales and marketing force as well as GSK's performance under the
collaboration agreement. Developing an effective sales force will require
significant financial resources and time. We cannot assure you that we will be
able to establish an effective sales force in a timely or cost-effective manner,
if at all, or that our sales force will be capable of generating demand for
BEXXAR or other product candidates.
On March 19, 2001, we announced the receipt of a complete review letter
from the FDA and that because of the resulting delay in potential BEXXAR
approval we are seeking to contract out the services of our sales and marketing
personnel during the delay period. If we are unable to contract out the services
of our sales and marketing personnel in a timely manner we may be required to
make additional headcount reductions.
OUR STOCK PRICE COULD BE VERY VOLATILE AND YOUR SHARES MAY SUFFER A DECLINE IN
VALUE.
The market prices for securities of biotechnology companies have in the
past been, and are likely to continue in the future to be, very volatile. The
market price of our common stock may be subject to substantial volatility
depending on numerous factors, many of which are beyond our control, including:
- announcements regarding the results of discovery efforts and preclinical
and clinical activities by us or our competitors;
- progress of our regulatory approvals;
- announcements regarding the acquisition of technologies or companies by
us or our competitors;
- changes in our existing corporate partnerships or licensing arrangements;
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- establishment of additional corporate partnerships or licensing
arrangements by us or our competitors;
- technological innovations or new commercial products developed by us or
our competitors;
- changes in our intellectual property portfolio;
- developments or disputes concerning our proprietary rights;
- issuance of new or changed securities analysts' reports and
recommendations regarding us or our competitors;
- changes in government regulations;
- economic and other external factors;
- additions or departures of any of our key personnel;
- operating losses by us; and
- actual or anticipated fluctuations in our quarterly financial and
operating results and degree of trading liquidity in our common stock.
ANY CLAIMS RELATING TO OUR IMPROPER HANDLING, STORAGE OR DISPOSAL OF HAZARDOUS
MATERIALS COULD BE TIME-CONSUMING, COSTLY AND MAY ADVERSELY AFFECT OUR BUSINESS.
Our research and development involves the controlled use of hazardous and
radioactive materials and biological waste. We are subject to federal, state and
local laws and regulations governing the use, manufacture, storage, handling and
disposal of these materials and waste products. Although we believe that our
safety procedures for handling and disposing of these materials comply with
legally prescribed standards, we cannot completely eliminate the risk of
accidental contamination or injury from these materials. In the event of an
accident, we could be held liable for damages or penalized with fines, and this
liability could exceed our resources. We may have to incur significant costs to
comply with future environmental laws and regulations.
The manufacture and administration of BEXXAR(TM) requires the handling, use
and disposal of (131)I, a radioactive isotope of iodine. These activities must
comply with various state and federal regulations. Violations of these
regulations could significantly delay completion of clinical trials and
commercialization of BEXXAR. For our ongoing clinical trials and for
commercial-scale production, we rely on Nordion to radiolabel the Anti-B1
Antibody with (131)I at a single location in Canada. Violations of safety
regulations could occur with this manufacturer, and, therefore, there is a risk
of accidental contamination or injury. In the event of any regulatory
noncompliance or accident, the supply of radiolabeled Anti-B1 Antibody for use
in clinical trials or commercially could be interrupted, which could harm our
business.
In addition, we cannot predict the extent of government regulations or the
impact of new governmental regulations that might have an adverse effect on the
research, development, production and marketing of our products. We may be
required to incur significant costs to comply with current or future laws or
regulations. Our business may be harmed by the cost of compliance.
WE FACE PRODUCT LIABILITY EXPOSURE AND POTENTIAL UNAVAILABILITY OF INSURANCE.
We may experience losses due to product liability claims. We have obtained
limited product liability insurance coverage. Our coverage may not be adequate
or may not continue to be available in sufficient amounts or at an acceptable
cost, if at all. We may be unable to obtain commercially reasonable product
liability insurance for any product approved for marketing. A product liability
claim, as well as any claims for uninsured liabilities or in excess of insured
liabilities, may harm our business.
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WE FACE UNCERTAINTY RELATED TO PRICING AND REIMBURSEMENT AND HEALTHCARE REFORM.
In both domestic and foreign markets, sales of our or our corporate
partners' products 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 healthcare-related organizations.
Federal and state governments in the United States and foreign governments
continue to propose and pass new legislation designed to contain or reduce the
cost of healthcare. Existing regulations affecting the pricing of
pharmaceuticals and other medical products may also change before any of our
corporate partners' or our products are approved for marketing. Cost control
initiatives could decrease the price that we receive for any product we or any
of our corporate partners may develop in the future. 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 healthcare products, including pharmaceuticals. BEXXAR,
as potentially the first radioimmunotherapy for cancer, faces particular
uncertainties due to the absence of a comparable, approved therapy to serve as a
model for pricing and reimbursement decisions. Further, if BEXXAR is not
administered in most cases on an outpatient basis, as is contemplated currently
by us, the projected cost of the therapy will be higher than we anticipate. We
or our corporate partners' products, if any, may not be considered cost
effective or adequate third-party reimbursement may not be available to enable
us or our corporate partners to maintain price levels sufficient to realize a
return on our investment.
OUR STOCKHOLDERS FACE IMMEDIATE AND POTENTIAL DILUTION.
You will suffer immediate and substantial dilution of your investment if:
- we issue additional shares of our common stock under the terms of the
September 1998 multi-field collaboration and license agreement with GSK;
- we issue additional shares of our common stock in connection with
entering into new corporate partnerships or acquiring additional
technologies or companies; or
- we issue additional shares of our common stock as reimbursement of
royalties prepaid by Beckman Coulter, Inc. to Dana-Farber Cancer
Institute, Inc. that Beckman Coulter, Inc. can elect to receive as stock.
STATE LAWS AND PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS MAY
INHIBIT POTENTIAL ACQUISITION BIDS THAT COULD BE BENEFICIAL TO OUR STOCKHOLDERS.
Provisions of our amended and restated certificate of incorporation and
bylaws, as well as provisions of Delaware and Washington law, will make it more
difficult for a third party to acquire us, even if doing so would be beneficial
for our stockholders.
At our 2001 annual meeting, we are asking our stockholders to approve a
classified board provision. This classified board provision will divide the
board of directors into three classes with the directors' terms ranging from one
to three years. Beginning with our 2002 annual meeting, all future directors
will serve from the time of election until the third annual meeting following
election or until their successors have been duly elected and qualified.
Should our stockholders approve of this classified board provision, it may
combine with certain other provisions of our certificate of incorporation and
bylaws to have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, control of
Corixa. This could limit
62
64
the price that certain investors might be willing to pay in the future for our
shares of common stock. Certain provisions of our certificate of incorporation
and bylaws:
- allow our board to issue preferred stock without any vote or further
action by the stockholders;
- eliminate the right of stockholders to act by written consent without a
meeting;
- eliminate cumulative voting in the election of directors;
- specify a supermajority requirement for stockholders to call a special
meeting;
- specify restrictive procedures for director nominations by stockholders;
- specify that directors may be removed only with cause; and
- specify a supermajority requirement for stockholders to change the number
of directors.
We are subject to certain provisions of Delaware law, which could also
delay or make more difficult a merger, tender offer or proxy contest involving
us. In particular, Section 203 of the Delaware General Corporation Law prohibits
a Delaware corporation from engaging in certain business combinations with any
interested stockholder for a period of three years unless specific conditions
are met.
The proposed classified board provision; the possible issuance of preferred
stock; the inability of stockholders to act by written consent; the lack of
cumulative voting in the election of directors; the procedures required for
director nominations, special stockholder meetings and changing the number of
directors; the ability to remove directors only with cause; and Delaware and
Washington law could have the effect of delaying, deferring or preventing a
change in control of us, including without limitation, discouraging a proxy
contest or making more difficult the acquisition of a substantial block of our
common stock. The provisions could also limit the price that investors might be
willing to pay in the future for shares of our common stock.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Corixa Corporation
We have audited the accompanying consolidated balance sheets of Corixa
Corporation as of December 31, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 2000. 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 auditing standards generally
accepted in the United States. 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 consolidated financial position of Corixa
Corporation at December 31, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States.
As discussed in Note 1 to the financial statements, in 2000, the Company
changed its method of accounting for revenue recognition.
ERNST & YOUNG LLP
Seattle, Washington
February 9, 2001
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CORIXA CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
DECEMBER 31,
---------------------
2000 1999
---------- -------
Current assets:
Cash and cash equivalents................................. $ 49,413 $ 780
Securities available-for-sale............................. 127,163 33,425
Accounts receivable....................................... 14,382 2,792
Interest receivable....................................... 2,055 759
Prepaid expenses and other current assets................. 6,848 1,779
Deposits.................................................. 1,759 1,657
---------- -------
Total current assets.............................. 201,620 41,192
Property and equipment, net................................. 39,276 21,281
Securities available-for-sale, noncurrent................... 20,502 11,348
Investments................................................. 2,461 4,000
Acquisition-related intangible assets, net.................. 234,076 14,516
Deferred charges and deposits............................... 6,945 143
---------- -------
Total assets...................................... $ 504,880 $92,480
========== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 27,863 $ 8,701
Dividend payable.......................................... 469 469
Deferred revenue.......................................... 20,117 8,236
Current portion of long-term obligations.................. 6,327 2,867
---------- -------
Total current liabilities......................... 54,776 20,273
Deferred revenue, less current portion...................... 10,107 --
Long-term obligations, less current portion................. 33,422 11,426
Commitments and contingencies
Redeemable common stock..................................... 2,000 2,000
Stockholders' equity:
Convertible preferred stock, $0.001 par value:
Authorized -- 10,000,000 shares Designated Series
A -- 50,000 shares;
Issued and outstanding -- 12,500 in 2000 and 1999...... -- --
Designated Series B -- 37,500 shares; issued and
outstanding -- 37,500 in 2000 and none in 1999........ -- --
Common stock, $0.001 par value:
Authorized -- 100,000,000 shares
Issued and outstanding -- 40,458,100 in 2000 and
18,627,225 in 1999 (including 141,576 redeemable
common shares)........................................ 40 19
Additional paid-in-capital................................ 1,188,524 147,926
Deferred compensation..................................... (28,758) (441)
Accumulated other comprehensive loss...................... (26) (687)
Accumulated deficit....................................... (755,205) (88,036)
---------- -------
Total stockholders' equity........................ 404,575 58,781
---------- -------
Total liabilities and stockholders' equity........ $ 504,880 $92,480
========== =======
See accompanying notes
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CORIXA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
-------------------------------
2000 1999 1998
--------- -------- --------
Revenue:
Collaborative agreements.................................. $ 34,643 $ 25,035 $ 17,003
Government grants......................................... 2,331 1,463 1,267
--------- -------- --------
Total revenue..................................... 36,974 26,498 18,270
Operating expenses:
Research and development.................................. 61,911 41,962 27,436
Sales, general and administrative......................... 6,694 3,743 2,672
Intangible amortization................................... 4,499 587 --
Acquired in-process research and development.............. 629,700 37,637 12,021
--------- -------- --------
Total operating expenses.......................... 702,804 83,929 42,129
--------- -------- --------
Loss from operations........................................ (665,830) (57,431) (23,859)
Interest income............................................. 5,378 2,793 3,016
Interest expense............................................ (810) (797) (767)
Other income................................................ 431 677 294
--------- -------- --------
Loss before cumulative effect of change in accounting
principle................................................. (660,831) (54,758) (21,316)
Cumulative effect of change in accounting principle......... (6,338) -- --
--------- -------- --------
Net loss.................................................... (667,169) (54,758) (21,316)
Preferred stock dividend.................................... (9,887) (6,008) --
--------- -------- --------
Net loss applicable to common stockholders.................. $(677,056) $(60,766) $(21,316)
========= ======== ========
Basic and diluted loss per share before cumulative effect of
change in accounting principle............................ $ (32.00) $ (3.91) $ (1.75)
Cumulative effect of change in accounting principle per
share..................................................... (0.30) -- --
--------- -------- --------
Basic and diluted net loss per common share................. $ (32.30) $ (3.91) $ (1.75)
========= ======== ========
Shares used in computation of basic and diluted net loss per
common share.............................................. 20,961 15,528 12,172
========= ======== ========
Pro forma amounts assuming the accounting change is applied
retroactively:
Net loss attributable to common stockholders................ $(54,042) $(28,370)
======== ========
Net loss per common share................................... $ (3.87) $ (2.33)
======== ========
See accompanying notes
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CORIXA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE OTHER
--------------- --------------- PAID-IN FOR DEFERRED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL WARRANTS COMPENSATION INCOME (LOSS)
------ ------ ------ ------ ---------- ---------- ------------ -------------
Balance at January 1, 1998......... -- $-- 11,774 $12 $ 66,467 $(652) $ (2,575) $ (5)
Warrants payment received......... -- -- -- -- -- 652 -- --
Stock options exercised........... -- -- 106 -- 59 -- -- --
Issuance of common stock under the
employee stock purchase plan.... -- -- 6 -- 32 -- -- --
Issuance of common stock in
GenQuest acquisition............ -- -- 1,064 1 7,350 -- -- --
Issuance of common stock in
exchange for technology and
services........................ -- -- 23 -- 131 -- -- --
Amortization of deferred
compensation.................... -- -- -- -- -- -- 1,395 --
Issuance of common stock for
cash............................ -- -- 428 -- 2,500 -- -- --
Comprehensive loss:
Net unrealized gain on
securities
available-for-sale........ -- -- -- -- -- -- -- 95
Net loss.................... -- -- -- -- -- -- -- --
Comprehensive loss..........
-- -- ------ --- ---------- ----- -------- -----
Balance at December 31, 1998....... -- -- 13,401 13 76,539 -- (1,180) 90
Issuance of Series A convertible
preferred stock and common stock
warrants (net of offering cost
of $16)......................... 12 -- -- -- 12,484 -- -- --
Preferred stock dividend.......... -- -- -- -- (469) -- -- --
Stock options exercised........... -- -- 97 -- 263 -- -- --
Issuance of common stock under the
employee stock purchase plan.... -- -- 26 -- 134 -- -- --
Issuance of common stock and
options in exchange for
technology and services......... -- -- 20 -- 866 -- -- --
Issuance of common stock for
acquisitions.................... -- 4,839 6 58,109 -- --
Stock warrants net exercised...... -- -- 103 -- -- -- -- --
Amortization of deferred
compensation.................... -- -- -- -- -- -- 739 --
Comprehensive loss:
Net unrealized loss on
securities
available-for-sale........ -- -- -- -- -- -- -- (777)
Net loss.................... -- -- -- -- -- -- -- --
Comprehensive loss..........
-- -- ------ --- ---------- ----- -------- -----
Balance at December 31, 1999....... 12 -- 18,486 19 147,926 -- (441) (687)
Issuance of Series B convertible
preferred stock and common stock
warrants........................ 38 -- -- 37,500 -- -- --
Preferred stock dividend.......... -- -- -- -- (625) -- -- --
Issuance of common stock (net of
offering costs of $4,198)....... -- -- 1,900 2 56,600 -- -- --
Stock options exercised........... -- -- 592 -- 5,296 -- -- --
Issuance of common stock under the
employee stock purchase plan.... -- -- 63 -- 948 -- -- --
Issuance of common stock options
exchange for technology and
services........................ -- -- 24 -- 1,700 -- -- --
Issuance of common stock for
acquisitions.................... -- 19,115 19 939,179 (29,212) --
Stock warrants net exercised...... -- -- 137 -- -- -- -- --
Amortization of deferred
compensation.................... -- -- -- -- -- -- 895 --
Comprehensive loss:
Net unrealized gain on
securities
available-for-sale........ -- -- -- -- -- -- -- 661
Net loss.................... -- -- -- -- -- -- -- --
Comprehensive loss..........
-- -- ------ --- ---------- ----- -------- -----
Balance at December 31, 2000....... 50 $-- 40,317 $40 $1,188,524 $ -- $(28,758) $ (26)
== == ====== === ========== ===== ======== =====
TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
----------- -------------
Balance at January 1, 1998......... $ (11,962) $ 51,285
Warrants payment received......... -- 652
Stock options exercised........... -- 59
Issuance of common stock under the
employee stock purchase plan.... -- 32
Issuance of common stock in
GenQuest acquisition............ -- 7,351
Issuance of common stock in
exchange for technology and
services........................ -- 131
Amortization of deferred
compensation.................... -- 1,395
Issuance of common stock for
cash............................ -- 2,500
Comprehensive loss:
Net unrealized gain on
securities
available-for-sale........ -- 95
Net loss.................... (21,316) (21,316)
---------
Comprehensive loss.......... (21,221)
--------- ---------
Balance at December 31, 1998....... (33,278) 42,184
Issuance of Series A convertible
preferred stock and common stock
warrants (net of offering cost
of $16)......................... -- 12,484
Preferred stock dividend.......... -- (469)
Stock options exercised........... -- 263
Issuance of common stock under the
employee stock purchase plan.... -- 134
Issuance of common stock and
options in exchange for
technology and services......... -- 866
Issuance of common stock for
acquisitions.................... -- 58,115
Stock warrants net exercised...... -- --
Amortization of deferred
compensation.................... -- 739
Comprehensive loss:
Net unrealized loss on
securities
available-for-sale........ -- (777)
Net loss.................... (54,758) (54,758)
---------
Comprehensive loss.......... (55,535)
--------- ---------
Balance at December 31, 1999....... (88,036) 58,781
Issuance of Series B convertible
preferred stock and common stock
warrants........................ -- 37,500
Preferred stock dividend.......... -- (625)
Issuance of common stock (net of
offering costs of $4,198)....... -- 56,602
Stock options exercised........... -- 5,296
Issuance of common stock under the
employee stock purchase plan.... -- 948
Issuance of common stock options
exchange for technology and
services........................ -- 1,700
Issuance of common stock for
acquisitions.................... -- 909,986
Stock warrants net exercised...... -- --
Amortization of deferred
compensation.................... -- 895
Comprehensive loss:
Net unrealized gain on
securities
available-for-sale........ -- 661
Net loss.................... (667,169) (667,169)
---------
Comprehensive loss.......... (666,508)
--------- ---------
Balance at December 31, 2000....... $(755,205) $ 404,575
========= =========
See accompanying notes
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CORIXA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-------------------------------
2000 1999 1998
--------- -------- --------
OPERATING ACTIVITIES
Net loss.................................................... $(667,169) $(54,758) $(21,316)
Adjustments to reconcile net loss to net cash used in
operating activities:
Acquired in-process research and development.............. 629,700 37,637 12,021
Cumulative effect of accounting change.................... 6,338 -- --
Amortization of deferred compensation..................... 895 739 1,395
Depreciation and amortization............................. 8,268 3,801 1,609
Equity instruments issued in exchange for technology and
services............................................... 1,700 866 620
Changes in certain assets and liabilities:
Accounts receivable....................................... (3,995) 1,357 (2,805)
Interest receivable....................................... (734) (192) (433)
Prepaid expenses and other current assets................. (9,966) 512 175
Accounts payable and accrued expenses..................... (2,034) (759) 2,305
Deferred revenue.......................................... 15,650 5,090 (1,097)
--------- -------- --------
Net cash used in operating activities....................... (21,347) (5,707) (7,526)
INVESTING ACTIVITIES
Purchases of securities available-for-sale................ (92,608) (43,791) (86,844)
Proceeds from maturities of securities
available-for-sale..................................... 29,589 15,096 63,751
Proceeds from sale of securities.......................... 29,429 19,226 27,004
Purchases of property and equipment....................... (3,019) (3,090) (5,590)
Net cash received(paid) in acquisitions................... 4,397 (1,609) (4,737)
Investments............................................... 1,539 (2,250) (1,750)
Anergen preacquisition cost............................... -- -- (345)
--------- -------- --------
Net cash used in investing activities....................... (30,673) (16,418) (8,511)
FINANCING ACTIVITIES
Proceeds from issuance of redeemable common stock......... -- 2,000 --
Proceeds from issuance of common stock.................... 62,846 397 2,591
Proceeds from issuance of preferred stock................. 37,500 12,484 --
Principal payments on capital leases...................... (937) (1,059) (1,077)
Principal payments made on long-term obligations.......... (2,131) (2,015) --
Borrowings from collaborative agreements.................. -- -- 2,000
Proceeds from short-term obligations...................... 1,000 -- --
Proceeds from long-term obligations....................... 3,000 2,000 5,000
Dividends paid............................................ (625) -- --
Payments on receivables for warrants...................... -- -- 163
--------- -------- --------
Net cash provided by financing activities................... 100,653 13,807 8,677
Net increase (decrease) in cash and cash equivalents........ 48,633 (8,318) (7,360)
Cash and cash equivalents at beginning of period............ 780 9,098 16,458
--------- -------- --------
Cash and cash equivalents at end of period.................. $ 49,413 $ 780 $ 9,098
========= ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid............................................. $ 607 $ 844 $ 706
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Equity instruments issued for acquisitions................ $ 939,198 $ 58,109 $ 7,352
Assets acquired pursuant to capital leases................ -- -- 308
See accompanying notes
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
We are a developer of immunotherapies with a commitment to treating and
preventing autoimmune diseases, cancer and infectious diseases by understanding
and directing the immune system. We exploit our expertise in immunology and our
proprietary technology platforms to discover and develop vaccines, antigen-
based products, including therapeutic antibodies, novel adjuvants and targeted
oncologics. The consolidated financial statements include the accounts of the
Corixa and its wholly owned subsidiaries, Anergen, Inc. and Coulter
Pharmaceutical, Inc. All significant intercompany account balances and
transactions have been eliminated in consolidation.
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
Our investment portfolio is classified as available-for-sale and is
segregated into current and non current portions based on the remaining term of
the instrument. Investments with outstanding maturity dates of two years or
longer are classified as non current. Our primary investment objectives are
preservation of principal, a high degree of liquidity and a maximum total
return. We invest 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.
Securities available-for-sale includes $5.5 million at December 31, 2000 that is
restricted for use in connection with a financing agreement.
CERTAIN CONCENTRATIONS
Credit Risk. We are subject to concentration of credit risk, primarily from
our 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.
Suppliers. We have contracted with a third-party manufacturer, Boehringer
Ingleheim Pharma KG (BI Pharma KG) to produce the Anti-B1 antibody monoclonal
antibody in BEXXAR. We have also contracted with a third-party manufacturer, MDS
Nordion, Inc. (Nordion) for the radiolabeling of the Anti-B1 Antibody in a
centralized facility. However, if we are unable to obtain sufficient quantities
of the Anti-B1 antibody from BI Pharma KG or radiolabeled Anti-B1 Antibody from
Nordion, or additional suppliers, certain research and development activities
may be delayed or sufficient quantities of commercial inventory may not be
available in future periods.
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 five 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.
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ACQUISITION-RELATED INTANGIBLE ASSETS
Intangible assets consist of acquired workforce, adjuvant know-how and
goodwill and are amortized on the straight-line method over periods of four to
seven years. In accordance with Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," the carrying value of intangible assets
and other long-lived assets is reviewed on a regular basis for the existence of
facts or circumstances, both internal and external, that may suggest impairment.
To date, no such impairment has been indicated. Should there be impairment in
the future, we will measure the amount of the impairment based on discounted
future cash flows from the impaired assets. The cash flow estimates that will be
used will contain management's best estimates, using assumptions and projections
appropriate and customary at the time.
STOCK-BASED COMPENSATION
We have adopted the disclosure-only provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation" and apply Accounting Principles Board Opinion No.
25 (APB 25) and related interpretations in accounting for our stock option
plans. Accordingly, our 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 SFAS 123 is provided in Note
6.
Stock compensation expense for options granted to nonemployees has been
determined in accordance with SFAS 123 and Emerging Issues Task Force (EITF)
96-18, "Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services," as
the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measured. The fair value of
options granted to nonemployees is periodically re-measured as the underlying
options vest.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
OTHER FINANCIAL INSTRUMENTS
As of December 31, 2000 and December 31, 1999, 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 their fair values
because the underlying interest rates approximate market rates at the balance
sheet dates.
REVENUE
We generate revenue from technology licenses, collaborative research and
development arrangements, and cost reimbursement contracts. Revenue under
technology licenses and collaborative agreements typically consists of
nonrefundable and/or guaranteed technology license fees, collaborative research
funding, technology access fees, and various milestone and future product
royalty or profit-sharing payments.
Revenue from collaborative research and development funding and technology
access payments is recognized ratably over the term of the collaborative
agreement. Revenue from substantive at-risk milestones and future product
royalties is recognized as earned based on the completion of the milestones and
product sales, as defined in the respective agreements. Revenue under cost
reimbursement contracts is recognized as the related costs are incurred.
Payments received in advance of recognition as revenue are recorded as deferred
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
revenue. We recognized 68% of our revenue in 2000 and 73% of our revenue in
1999, from three collaborative partners and 76% of our revenue in 1998 from two
collaborative partners.
We previously recognized nonrefundable up-front license fees as revenue
when the technology was transferred and when all significant contractual
obligations relating to the fees had been fulfilled. Effective January 1, 2000,
we changed our method of accounting for non refundable up-front license fees to
recognize such fees over the period of our continuing involvement, generally the
term of the related research and development collaboration arrangement on a
straight-line basis, as this method best matches the effort provided. We believe
the change in accounting principle is preferable based on guidance provided in
SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements." The $6.3 million cumulative effect of the change in accounting
principle, calculated as of January 1, 2000, was reported as a charge in the
year ended December 31, 2000. The cumulative effect was initially recorded as
deferred revenue and will be recognized as revenue over the remaining term of
the research and development collaboration agreements. In September 2000, we
recognized a multi-million dollar nonrefundable up-front license fee. This
amount has been reversed and will be recognized over the term of the related
research and development arrangement. For the year ended December 31, 2000, the
impact of the change in accounting was to increase net loss by $13.1 million, or
$0.63 per share, composed of the $6.3 million cumulative effect of the change as
described above ($0.30 per share) and $9.2 million of revenue recognized in 2000
and subsequently reversed ($0.44 per share) less $2.4 million of the deferred
revenue resulting from the cumulative effect adjustment that was recognized as
revenue during the year ($0.11 per share). The remainder of the related deferred
revenue will be recognized as follows: $5.7 million in 2001, $4.7 million 2002
and $2.7 million 2003. Had the change in accounting been in effect retroactively
as of January 1, 1998, net loss for the year ended December 31, 1999 and 1998
would have been $54.0 million, or $3.87 per share, and $28.4 million, or $2.33
per share, respectively. The pro forma amounts shown on the statement of
operations have been adjusted for the effects of retroactive application on
revenue that would have been made had the new method been in effect during the
periods presented.
RESEARCH AND DEVELOPMENT EXPENSES
Pursuant to SFAS No. 2, "Accounting for Research and Development Costs,"
our research and development costs are expensed as incurred. The value of
acquired in-process research and development is charged to expense.
NET LOSS PER SHARE
Basic net loss per share is calculated by dividing net loss applicable to
common stockholders by the weighted average number of common shares outstanding.
Diluted net loss per share is calculated by dividing the net loss by the
weighted average common shares outstanding plus the dilutive effect of
outstanding stock options, stock warrants and preferred stock. Because we report
a net loss, diluted net loss per share is the same as basic net loss per share
because the effect of outstanding stock options, stock warrants and preferred
stock being added to weighted average shares outstanding would reduce the loss
per share. Therefore, outstanding stock options, stock warrants and preferred
stock are not included in the calculation.
SEGMENT INFORMATION
In January 1998, we adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." This standard established interim and
annual reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas and major customers.
We currently operate as a single segment.
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
is effective for fiscal years beginning after June 15, 2000. The statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities. We do not
expect the adoption of SFAS 133 to have a significant impact on our financial
position or results of operations.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' financial
statements to conform to the 2000 presentation.
2. SCIENTIFIC COLLABORATIVE AND LICENSE AGREEMENTS
2000 AGREEMENTS
In August 2000, we entered into a development, commercialization and
license agreement with Medicis Pharmaceutical Corporation covering our novel
psoriasis immunotherapeutic product, PVAC(TM) treatment. The agreement provides
Medicis with exclusive rights to PVAC treatment in the United States and Canada.
We will be responsible for development and manufacturing, and Medicis will be
responsible for commercialization and distribution. Under the terms of the
agreement, Medicis will pay us license fees, research funding and milestone
payments of up to $107 million. Upon effectiveness of the agreement, we received
a nonrefundable payment of $17 million with additional potential development
milestone payments of $35 million, and commercialization and cumulative net
sales threshold milestone payments of $55 million. Additionally, upon commercial
sale of the product, Medicis will purchase inventory from us and pay a royalty
on net sales of the product. Research and development funding payments received
are being recognized over the estimated research and development period of
approximately three years. We recognized revenue of $1.4 million from this
agreement in 2000.
We developed PVAC treatment in collaboration with New Zealand-based Genesis
Research and Development Corporation. We paid Genesis $8.1 million during 2000
as a result of payments received from Medicis. We also paid $900,000 to SR
Pharma, our licensor for certain intellectual property related to PVAC
treatment. These payments will be amortized over the estimated research and
development period of approximately three years.
1999 AGREEMENTS
In August 1999, we entered into a corporate partnership with Zenyaku Kogyo
Co. Ltd for research and development related to PVAC(TM) treatment. The
agreement provides Zenyaku Kogyo with exclusive rights to PVAC in Japan. Under
the terms of the agreement, we will receive license fees and research funding of
$6 million, milestone payments based on successful clinical and commercial
progress, and a royalty stream on future product sales. We recognized revenue of
$969,000 in 2000 and $531,000 in 2000 and 1999, in connection with the
agreement.
During May and June 1999, we entered into corporate partnerships with
Zambon Group spa and the pharmaceutical division of Japan Tobacco, respectively,
for the research, development and commercialization of vaccine and
antibody-based products aimed at preventing and/or treating lung cancer. Zambon
has exclusive rights to develop and sell products in Europe, the former
countries of the Soviet Union, Argentina, Brazil and Columbia and co-exclusive
rights in China. Japan Tobacco has exclusive rights to develop and sell vaccine
products outside of the territory licensed to Zambon, including the United
States and Japan, and co-exclusive rights to develop and sell vaccine products
in China. We also granted Zambon a nonexclusive
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
license and Japan Tobacco an option to formulate vaccines that may result from
the collaboration in our microsphere delivery system with our proprietary
protein adjuvants. The agreements have three-year terms and, in the aggregate,
provide for committed research funding of $16.5 million, as well as milestone
payments that vary depending on the milestones achieved. In addition, Zambon
purchased $2.0 million of our common stock. The collaboration agreement allows
Zambon to sell the common stock back to us at the original price under certain
conditions (see Note 6). We recognized revenue of $6.7 million which includes
$500,000 recognized as a result of the cumulative effect adjustment and $4.7
million in connection with the Zambon and Japan Tobacco agreements in 2000 and
1999, respectively.
In March 1999, we entered into a research agreement with the Infectious
Disease Research Institute (IDRI) to research and develop ex vivo therapies for
treating cancer. Pursuant to the terms of the agreement, IDRI committed $12.0
million of research funding over the agreement's three-year term. The agreement
provides us exclusive rights to resulting intellectual property and product
rights, while IDRI will receive a percentage of our proceeds related to ex vivo
therapy products resulting from such research and development. We recognized
revenue of $3.8 million in connection with this agreement in 2000 and $4.5
million in 1999.
AGREEMENTS IN 1998 AND PRIOR
GlaxoSmithKline
In October 1998, we entered into a collaboration and license agreement
effective September 1, 1998 with GSK's wholly owned subsidiary, SmithKline
Beecham plc. GSK has committed to funding $43.6 million for research work that
is performed in multiple discovery programs during the four-year term. Extended
research and development programs beyond the initial four-year term may be
agreed upon by GSK and us. We recognized revenue of $12.7 million (which
includes $1.9 million recognized as a result of the cumulative effect
adjustment), $10.6 million and $9.0 million in 2000, 1999 and 1998,
respectively, from this agreement.
In addition, GSK purchased $2.5 million of our common stock in 1998 at a
premium to our fair market value, and we have the right in the future to require
GSK to purchase an additional $2.5 million of our common stock at a premium to
our then-current fair market value. Additionally, with respect to the $5.0
million previously paid to us by GSK under a prior collaboration agreement, GSK
may elect to have us repay such amount on September 1, 2003 or convert such
amounts into the purchase of our common stock at a premium to our then-current
fair market value. This amount is recorded as a long-term obligation at December
31, 2000 and 1999.
We have several license and supply agreements with several GSK whereby we
have licensed certain adjuvants for use in vaccines that GSK is developing for
infectious diseases, cancer and allergy. These agreements grant GSK exclusive
and co-exclusive license rights depending on the disease field and territory.
Under the terms of the agreements, GSK pays annual license fees, milestones,
transfer payments and future royalty payments. We recognized revenue of $3.5
million in 2000 and $298,000 in 1999 in connection with these agreements.
As a result of our acquisition of Coulter, we acquired a collaborative
agreement with GlaxoSmithKline (GSK), a wholly owned subsidiary of SmithKline
Beecham Corporation for developing and commercializing BEXXAR, which is in
late-stage development for treating non-Hodgkin's lymphoma (NHL). The agreement
was executed in 1998 and amended in April 2000 to reduce GSK's territory to the
United States. Under the terms of the amended agreement, we and GSK will jointly
market and sell BEXXAR in the United States following regulatory approval, and
the two companies will share profits and losses equally.
Under the terms of the agreement, we may receive additional payments if we
achieve certain clinical development and regulatory milestones. As of December
31, 2000, no milestone payments have been earned or received. We and GSK will
annually prepare a joint profit and loss statement to account for the sharing of
revenue, costs of goods sold and costs relating to selling, marketing, and
distribution, and certain other
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
BEXXAR-related activities. Development expenses for BEXXAR will generally be
shared by both companies, although we retain responsibility for funding certain
predetermined development costs. Reimbursements owed to GSK are classified as
accounts payable. Amounts receivable from GSK were $7.5 million at December 31,
2000 and $4.5 million at December 31, 1999. Amounts payable to GSK were $823,000
and $1.5 million at December 31, 2000 and 1999, respectively.
The agreement also provided for a $15.0 million credit line, which was
fully drawn by Coulter in December 2000 prior to the acquisition. No amounts
remain available under the credit line. Borrowings under the credit line are due
in December 2003; however, a portion of the then-outstanding balance may come
due and payable at each of December 2001 and December 2002 if certain financial
earnings targets, as defined in the loan agreement, are not achieved by us.
Quarterly interest payments, due in arrears, are at a fixed interest rate of
9.5%. At our sole discretion, we may repay the principal in either cash or
common stock.
OTHER AGREEMENTS
We have various other collaborative research agreements with academic
universities and research institutions, which expire at various intervals
through 2001. Certain agreements stipulate the reimbursement by us of research
costs incurred by these universities and institutions on our behalf. Included in
research and development expenses for the years ended December 31, 2000, 1999
and 1998 are reimbursements approximating $4.6 million, $2.9 million and $2.3
million, respectively. Certain 2000 collaborative agreements extend into fiscal
years 2001 and 2002, and as of December 31, 2000, we are committed to reimburse
these universities and institutions approximately $907,000 in 2001 and $40,000
in 2002.
We have entered into certain license agreements and obtained options to
negotiate license agreements under the terms of which we received license,
technology and patent rights. During 2000, 1999 and 1998, we paid initial
license and/or option fees approximating $3.4 million, $1.8 million and $1.8
million, respectively. In addition, we issued 23,809, 19,697 and 22,724 shares
of common stock and options valued at $1,022,275, $270,000 and $131,000 during
2000, 1999 and 1998, respectively, in exchange for such rights. All such amounts
were expensed when paid and are included in research and development expense as
the related technology was in development, and did not have alternative future
uses.
Certain agreements call for royalty and milestone payments to be paid by
us. 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, we have entered into research and license and supply
agreements and granted rights to other parties to negotiate license agreements
under the terms of which we provide license, technology and patent rights and
quantities of product for research and clinical development purposes. Under the
terms of the agreements, we will receive additional license fees, option fees
and/or reimbursement of certain research and development costs and product sales
revenue. The agreements may also provide for one-time payments upon achieving
certain milestones and the payment of royalties based on product sales.
3. BUSINESS COMBINATIONS
ACQUISITION OF COULTER PHARMACEUTICAL, INC.
On December 22, 2000, we acquired all of the outstanding shares of common
stock of Coulter, a development-stage company focused on developing products for
treating cancer. The acquisition was accounted for as a purchase transaction.
Aggregate consideration was approximately $917.1 million, which consisted of
19,114,649 shares of our common stock, with a market value of approximately
$806.8 million, assumed Coulter stock options valued at approximately $132.4
million, less $29.2 million associated with the intrinsic value of unvested
options and transaction cost of $7.1 million. The $29.2 million was recorded as
deferred compensation and will be amortized to compensation expense over the
remaining vesting periods.
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The aggregate purchase price was allocated, based on estimated fair values on
the acquisition date, as follows (in thousands):
Assets acquired............................................. $108,807
Liabilities assumed......................................... (45,296)
Acquired in-process research and development................ 629,700
Assumed lease............................................... 15,405
Assembled workforce......................................... 3,900
Goodwill.................................................... 204,556
--------
Total purchase price allocation................... $917,072
========
Certain Coulter employees were granted shares of common stock that will
vest upon Food and Drug Administration approval of BEXXAR, Coulter's lead
product candidate. Vesting will occur regardless of employment status at the
time of approval. These shares will be valued at the time of approval and
recorded as an adjustment to the purchase price.
ACQUISITION OF RIBI IMMUNOCHEM RESEARCH, INC.
On October 6, 1999, we acquired all of the outstanding shares of common
stock of Ribi, a company focused on developing novel agents that modulate the
human immune response to prevent or treat certain diseases including cancer,
infectious diseases and cardiovascular injury. The acquisition was accounted for
as a purchase transaction. Aggregate consideration for the acquisition was
approximately $57.5 million, which consisted of 3,610,766 shares of our common
stock and stock options valued at $47.9 million, cash of $7.9 million paid by us
to Ribi for the redemption of Ribi Series A preferred stock and transaction
costs of approximately $1.7 million. The aggregate purchase price was allocated,
based on estimated fair values on the acquisition date, as follows (in
thousands):
Acquired in-process research and development................ $26,024
Assets acquired............................................. 23,868
Liabilities assumed......................................... (7,505)
Assembled workforce......................................... 1,033
Adjuvant know-how........................................... 3,076
Goodwill.................................................... 11,033
-------
Total purchase price.............................. $57,529
=======
ACQUISITION OF ANERGEN, INC.
On February 10, 1999, we acquired all of the outstanding shares of common
stock of Anergen, a biotechnology company focused on treating autoimmune
diseases through the discovery and development of proprietary therapeutics that
selectively interrupt the disease process. The acquisition was accounted for as
a purchase transaction. Aggregate consideration for the acquisition was
approximately $9.6 million, which consisted of 1,058,031 shares of our common
stock, with a market value of approximately $8.7 million, approximately $200,000
in cash, and approximately $700,000 in acquisition costs. The aggregate purchase
price exceeded the fair value of net tangible assets by approximately $11.6
million, which amount was allocated to acquired in-process research and
development (IPR&D) during the first quarter of 1999. On January 5, 2001,
Anergen merged into Coulter Pharmaceutical, Inc., a wholly owned subsidiary of
Corixa Corporation in a direct merger in which Coulter was the surviving entity.
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ACQUISITION OF GENQUEST, INC.
On September 15, 1998, we acquired all of the outstanding shares of common
stock of GenQuest, 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 in diagnosis, drug
screening, gene therapy and antibody development in the areas of prostate,
breast, lung, colon and ovarian cancer. Prior to the acquisition, we were a
stockholder in GenQuest. The acquisition was accounted for as a purchase
transaction. Aggregate consideration for the acquisition was approximately $12.4
million, which consisted of 1,063,695 shares of our common stock, with a market
value of approximately $7.3 million, approximately $4.5 million in cash, and
transaction cost of approximately $600,000. The aggregate purchase price
exceeded the fair value of net tangible assets by approximately $12.0 million,
which amount was allocated to IPR&D during the third quarter of 1998. On
December 26, 2000, GenQuest merged into Corixa, in a direct merger in which
Corixa was the surviving entity.
In conjunction with the relationship between Corixa and GenQuest, we issued
warrants to purchase 454,533 shares of our common stock at a price of $9.90 per
share. The warrants expire on the earlier of December 23, 2001 and 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.
In conjunction with a collaborative agreement with GenQuest, our December
31, 1998 results include collaborative revenue expense of approximately $1.0
million and research and development expense of approximately $1.9 million.
Additionally, we recognized $652,000 in warrant amortization during the year
ended December 31, 1998.
For each of the above acquisitions, acquired IPR&D represents the present
value of the estimated after-tax cash flows expected to be generated by the
purchased technology, which, at the acquisition dates, had not yet reached
technological feasibility. The cash flow projections for revenues were based on
estimates of growth rates and the aggregate size of the respective market for
each product, probability of technical success given the stage of development at
the time of acquisition, royalty rates based on prior licensing agreements,
products sales cycles; and the estimated life of a product's underlying
technology. Estimated operating expenses and income taxes were deducted from
estimated revenue projections to arrive at estimated after-tax cash flows.
Projected operating expenses include general and administrative expenses, and
research and development costs. The rates utilized to discount projected cash
flows were 30% to 55% for in-process technologies used, depending on the
relative risk of each in-process technology, and were based primarily on venture
capital rates of return and the weighted average cost of capital for us at the
time of acquisition.
All of the foregoing estimates and projections regarding the Coulter, Ribi,
Anergen and GenQuest acquisitions were based on assumptions we believed to be
reasonable at the time of the acquisitions, but which are inherently uncertain
and unpredictable. If these projects are not successfully developed, our
business, operating results and financial condition may be adversely affected.
As of the date of each acquisition, we concluded that once completed, the
technologies under development can only be economically used for their specific
and intended purposes and that such in-process technology has no alternative
future use after taking into consideration the overall objectives of the
project, progress toward the objectives, and uniqueness of developments to these
objectives. If we fail in our efforts, no alternative economic value will
result. If the projects fail, the economic contribution expected to be made by
the IPR&D will not materialize. The risk of untimely completion includes the
risk that alternative vaccines, immunotherapeutics or diagnostics will be
developed by competitors.
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PRO FORMA INFORMATION
The acquired assets and liabilities assumed from Coulter, Ribi and Anergen
have been recorded on our books at their fair market values. The operating
results of the acquired businesses have been included in the consolidated
statements of operations from December 22, 2000, October 6, 1999 and February
10, 1999, the respective effective dates of the acquisitions.
For pro forma purposes:
- Our operating results and the operating results of Coulter for the year
ended December 31, 2000 have been combined as if the merger had occurred
on January 1, 2000.
- Our operating results and the operating results of Coulter, Ribi and
Anergen for the year ended December 31, 1999 have been combined as if the
mergers had occurred on January 1, 1999.
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 acquired IPR&D of $629.7 million for Coulter in 2000 and $37.6
million associated with the acquisitions of Ribi or Anergen in 1999.
FOR THE YEAR ENDED
DECEMBER 31,
----------------------
2000 1999
--------- ---------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
Total revenue............................................... $ 46,891 $ 36,062
Net loss.................................................... $(183,288) $(156,947)
Net loss per common share................................... $ (4.63) $ (4.03)
4. SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale consists of the following (in thousands):
GROSS GROSS
UNREALIZED UNREALIZED MARKET
AMORTIZED COST GAIN LOSS VALUE
-------------- --------------- --------------- --------
December 31, 2000
U.S. government agencies........... $ 29,135 $ 67 $ (20) $ 29,182
U.S. corporate obligations......... 114,556 414 (487) 114,483
Other.............................. 4,000 -- -- 4,000
-------- ---- ----- --------
$147,691 $481 $(507) $147,665
======== ==== ===== ========
December 31, 1999
U.S. government agencies........... $ 15,109 $ -- $(243) $ 14,866
U.S. corporate obligations......... 30,351 9 (453) 29,907
-------- ---- ----- --------
$ 45,460 $ 9 $(696) $ 44,773
======== ==== ===== ========
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Our gross realized gains or losses were immaterial on sales of
available-for-sale securities for fiscal 2000 and 1999 and are therefore not
shown. The contractual maturities of our available-for-sale securities are shown
below (in thousands):
ESTIMATED
AMORTIZED FAIR MARKET
COST VALUE
--------- -----------
December 31, 2000
Due in one year or less................................... $ 90,849 $ 91,851
Due in one year through three years....................... 56,842 55,814
-------- --------
$147,691 $147,665
======== ========
December 31, 1999
Due in one year or less................................... $ 19,145 $ 19,049
Due in one year through three years....................... 26,315 25,724
-------- --------
$ 45,460 $ 44,773
======== ========
5. BALANCE SHEET ACCOUNTS
PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
DECEMBER 31,
-------------------
2000 1999
-------- -------
Laboratory equipment........................................ $ 16,017 $ 9,949
Land and buildings.......................................... 7,942 7,767
Leasehold improvements...................................... 15,770 6,889
Computers and office equipment.............................. 10,358 3,285
-------- -------
50,087 27,890
Accumulated depreciation and amortization................... (10,811) (6,609)
-------- -------
$ 39,276 $21,281
======== =======
At December 31, 2000 and 1999, we held equipment under capitalized leases
with an original cost of approximately $6.8 million and $5.2 million,
respectively, and a net book value of approximately $826,000 and $1.4 million,
respectively. These leases are secured by the underlying assets.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following (in
thousands):
DECEMBER 31,
-----------------
2000 1999
------- ------
Trade accounts payable...................................... $10,547 $1,664
Accrued clinical fees....................................... 2,508 266
Employee compensation and related expenses.................. 6,337 1,891
Accrued legal fees.......................................... 890 724
Accrued research and development expenses................... 2,587 883
Environmental contingency................................... 2,600 2,600
Other....................................................... 2,394 673
------- ------
$27,863 $8,701
======= ======
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY
PREFERRED STOCK
In April 1999, we entered into an agreement with Castle Gate, L.L.C., an
investment partnership focused primarily on health-care and biomedical
companies, to provide us with an equity line of credit of up to $50 million (the
Line). Upon execution of the agreement, we completed an initial draw under the
Line of $12.5 million (the Initial Draw) and issued Castle Gate 12,500 shares of
Series A preferred stock and warrants to purchase 1,037,137 shares of common
stock (the Initial Closing Warrants). The Initial Closing Warrants consist of
warrants to purchase 312,500 and 724,637 shares of common stock at an exercise
price of $8.50 per share and $8.28 per share, respectively. The conversion price
for the Series A preferred stock issued in the Initial Draw is $8.50 per share.
On the date of the Initial Draw, the effective conversion price of the Series A
preferred stock (after allocating a portion of the proceeds to the common stock
warrants based on the relative fair values) was at a discount to the price of
the common stock into which the preferred stock is convertible. The discount of
$5.5 million was recorded as a preferred stock dividend.
In addition, on the first and second anniversaries of the Line, we are
obligated to issue additional warrants equal to $1.125 million and $1.0 million
of common stock respectively, based on the value of our common stock. These
warrants had a value of $5.3 million, which is included in equity. Accordingly,
on April 8, 2000, we issued a warrant to purchase 30,540 shares of common stock
at $36.84 per share.
On December 29, 2000, we drew down the remaining $37.5 million under the
Line by issuing 37,500 shares of Series B preferred stock. With the exception of
the conversion price, the Series B Preferred Stock has the same rights and
preferences as the Series A preferred stock issued at the time of the Initial
Draw in April 1999. In addition, we issued warrants to purchase 237,500 shares
of common stock, consisting of a warrant to purchase 187,500 shares of common
stock as required under the terms of the Line and an additional warrant to
purchase 50,000 shares of common stock, at an exercise price of $18.22 per
share.
On the date of the remaining draw, the effective conversion price of the
Series B preferred stock (after allocating a portion of the proceeds to the
common stock warrants based on the relative fair values) was at a discount to
the price of the common stock into which the preferred stock is convertible. The
discount of $9.3 million was recorded as a preferred stock dividend.
The preferred stock has an annual cumulative dividend rate of 5% and may be
paid, at our option, in cash or in shares of our common stock. We have accrued
the dividend ratably during the year. The Preferred Stock may be converted into
common stock at the option of Castle Gate at any time following issuance.
Beginning on the fourth anniversary of issuance, shares of outstanding preferred
stock will be converted into common stock if the price of our common stock
exceeds the preferred stock conversion price by at least 30%, as specified in
the agreement. Additionally, any shares of Preferred Stock that have not been
converted previously will be converted automatically on the seventh anniversary
of issuance. Series A and Series B preferred shares have voting rights based on
the number of common shares into which the preferred shares are convertible. In
the event of liquidation, the preferred stockholders share pro rata with common
stockholders.
COMMON STOCK
In April 2000, we completed a follow-on public offering by issuing
1,900,000 shares of common stock at $32 per share. We received net proceeds of
approximately $57.1 million, after deducting underwriting discounts and
commissions and before deducting expenses payable by us.
REDEEMABLE COMMON STOCK
In May 1999, we issued 141,576 shares of our common stock for $2,000,000,
or $14.13 per share, to Zambon in connection with a collaboration agreement.
Under the terms of the collaboration agreement, Zambon may sell the common stock
back to us for the original purchase price at the end of the research program
term if Zambon determines that a commercial product is not viable. Accordingly,
we have not
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
included the common shares in stockholders' equity. The aggregate amount paid
represented a premium of approximately $230,000 over the fair market value of
the stock at the time of issuance and was included with the amount of redeemable
common stock.
STOCK OPTION PLANS
As of December 31, 2000, 5,825,050 shares of common stock were reserved for
grant to employees, directors and consultants under our Amended and Restated
1994 Stock Option Plan (the 1994 Plan). On June 9, 1999, we amended the 1994
Plan, to increase the number of shares authorized under the plan by 2,500,000.
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). The number of shares reserved for grant is subject to an 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 750,000 shares each year over the ten-year period.
Under the terms of the merger agreement with Coulter, we assumed their
stock option plans. As a result, we assumed approximately 5,614,535 options, of
which 4,262,041 were outstanding and 1,352,494 were available for grant.
Generally, options become exercisable over a four-year period with 25%
vesting on the first year anniversary of the date of grant 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 plan administrator has the discretion to grant options
that are exercisable for unvested shares of common stock and, to the extent that
an optionee holds options for such unvested shares upon termination, we have 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.
We adopted the 1997 Directors' Stock Option Plan (the Directors' Plan) on
July 25, 1997. As of December 31, 2000, 350,000 shares of common stock were
reserved for issuance under the Directors' Plan. The number of shares reserved
for issuance is subject to an 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 or such lesser amount as the board of directors
may establish. The Directors' Plan provides for the grant of nonqualified stock
options to nonemployee directors. The Directors' Plan provides that each person
who first became a nonemployee director 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 in fiscal 1998,
each nonemployee 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 our 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 our common stock on the date of grant. The
Directors' Plan has a 10-year term, unless terminated earlier.
EMPLOYEE STOCK PURCHASE PLAN
On July 25, 1997, we adopted the 1997 Employee Stock Purchase Plan (the
Purchase Plan). As of December 31, 2000, 125,000 shares of common stock were
reserved for issuance under the Purchase Plan. The Purchase Plan permits
eligible employees to purchase shares of our common stock through payroll
deductions at a price equal to 85% of the fair market value of our 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
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 shares 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 under the Purchase Plan. The
Purchase Plan has a 20-year term, unless terminated earlier.
Under the terms of the agreement with Coulter, we assumed their employee
stock purchase plan. The number of shares of common stock eligible to be
purchased under Coulter's plan was approximately 152,548.
In 2000, 1999 and 1998, 62,969, 25,826 and 5,887 shares were issued under
the Purchase Plan at prices ranging from $10.61 to $23.69, $4.89 to $7.33 and
$4.89 to $7.65, respectively.
A summary of our stock option activity and related information follows:
WEIGHTED
AVERAGE
OPTIONS EXERCISE
OUTSTANDING PRICE PER SHARE PRICE
----------- ---------------- --------
Balance at January 1, 1998.......................... 1,169,089 $ 0.33 - $ 13.50 $ 1.40
Options granted................................... 433,775 5.00 - 9.50 8.22
Options assumed in acquisition.................... 12,325 0.77 - 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
Options granted................................... 1,816,779 8.63 - 17.81 12.03
Options assumed in acquisitions................... 371,937 6.15 - 178.83 33.66
Options exercised................................. (96,578) 0.33 - 14.84 2.73
Options canceled.................................. (114,908) 0.33 - 178.83 30.83
----------
Balance at December 31, 1999........................ 3,416,556 0.33 - 169.89 10.39
Options granted................................... 3,157,393 19.00 - 69.44 27.15
Options assumed in acquisition.................... 4,262,041 0.30 - 42.87 20.65
Options exercised................................. (591,322) 0.33 - 47.48 8.94
Options canceled.................................. (98,328) 0.99 - 71.53 15.68
----------
Balance at December 31, 2000........................ 10,146,340 $ 0.33 - $169.89 $19.89
==========
The following table summarizes information about the stock options
outstanding at December 31, 2000:
OPTIONS OUTSTANDING
---------------------------------------- OPTIONS EXERCISABLE
WEIGHTED --------------------
NUMBER AVERAGE WEIGHTED WEIGHTED
OUTSTANDING REMAINING AVERAGE AVERAGE
RANGE OF ON DECEMBER 31, CONTRACTUAL EXERCISE EXERCISE
EXERCISE PRICES 2000 LIFE PRICE SHARES PRICE
- --------------- --------------- ----------- -------- --------- --------
$ 0.30 - $ 1.20.. 707,205 5.71 $ 0.80 663,118 $ 0.79
$ 2.24 - $ 9.50.. 1,732,241 7.30 $ 8.08 1,074,343 $ 7.99
$ 8.85 - $ 15.95.. 1,303,541 8.49 $14.88 417,451 $14.30
$17.70 - $ 25.13.. 4,760,723 9.20 $23.89 814,319 $22.80
$25.17 - $169.89.. 1,642,630 9.19 $32.94 202,751 $35.48
---------- ---------
$ 0.30 - $169.89.. 10,146,340 8.54 $19.89 3,171,982 $12.87
========== =========
At December 31, 1999 and 1998, we had 1,305,736 and 660,877 options
exercisable, respectively.
Deferred compensation of approximately $29.2 million was recorded at
December 31, 2000 as a result of the merger with Coulter. Deferred compensation
of approximately $3.9 million was recorded during 1997,
81
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
which represented the difference between the exercise prices of options granted
during that period and the deemed fair market value. Deferred compensation
expense of approximately $895,000, $738,000 and $1.4 million was amortized for
the years ended December 31, 2000, 1999 and 1998, respectively.
During the year ended December 31, 2000, no options exercised or shares
outstanding were subject to restrictions. Options for 4,873 and 17,095 shares
had been exercised during the years ended December 31, 1999 and 1998,
respectively, for which the underlying stock is subject to restrictions. The
restrictions lapse over the vesting term of the original option. During 1998 we
repurchased 1,042 of unvested shares that were previously outstanding.
Included in options outstanding at December 31, 2000 are 48,000 options
granted to consultants for services. Expense of $678,000 and $596,000 was
recorded in 2000 and 1999, respectively, related to options granted to
consultants.
PRO FORMA INFORMATION
Pro forma information regarding net loss and loss per share required by
SFAS 123 has been determined as if we had accounted for our employee stock
options under the fair value method of SFAS 123. 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
----------------------- --------------------
2000 1999 1998 2000 1999 1998
----- ----- ----- ---- ---- ----
Expected life (years)..................... 4 4 4 1 1 1
Expected volatility....................... 80% 67% 67% 80% 67% 67%
Risk-free interest rate................... 5.2% 4.9% 5.5% 5.2% 5.2% 5.4%
Expected dividend yield................... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
The weighted average fair value of options granted during 2000, 1999 and
1998 was $19.86, $7.95 and $5.59, respectively.
Under SFAS 123, if we had elected to recognize the compensation cost based
on 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):
YEAR ENDED DECEMBER 31,
---------------------------------------
2000 1999 1998
----------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net loss:
As reported..................................... $(677,056) $(60,766) $(21,316)
Pro forma....................................... (684,610) (64,066) (22,395)
Net loss per share:
As reported..................................... $ (32.30) $ (3.91) $ (1.75)
Pro forma....................................... (32.66) (4.13) (1.84)
STOCK WARRANTS
We had common stock warrants outstanding to purchase 1,454,512 shares of
common stock as of December 31, 2000 at a weighted average exercise price of
approximately $10.34 per warrant, which warrants expire between 2001 and 2009.
Included in this total are 146,540 warrants issued prior to 1997, in connection
with certain collaborative agreements with exercise prices ranging from $0.0033
to $9.90. Vesting of 68,182
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
warrants is contingent upon the achievement of certain scientific milestones.
Outstanding warrants also include 2,795 warrants assumed in the Anergen
acquisition.
COMMON STOCK RESERVED
Common stock was reserved for the following purposes at December 31, 2000:
Stock options outstanding................................... 10,146,340
Warrants to purchase common stock........................... 1,454,512
Employee stock purchase plan................................ 214,579
Stock options available for grant........................... 969,657
Conversion of preferred stock............................... 2,936,577
----------
Total............................................. 15,721,665
==========
7. INCOME TAXES
At December 31, 2000 and 1999, we had net operating loss carryforwards of
approximately $337.1 million and $150.5 million, respectively, and research and
experimentation credit carryforwards of approximately $13.8 million and $9.5
million, respectively, which begin to expire in 2009. Utilization of net
operating loss and research and development tax credit carryforwards is subject
to change of certain limitations under Section 382 of the Internal Revenue Code
(the Code). During the period 1995 through 2000, we experienced ownership
changes as defined by the Code. Accordingly, our use of losses incurred through
the date of any ownership changes will be limited on an annual basis during the
carryforward period, therefore some of the carryforwards will expire without
being fully utilized.
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. We have 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 $73.1 million during 2000 and $50.2 million during 1999. The
effects of temporary differences and carryforwards that give rise to deferred
tax assets and liabilities are as follows (in thousands):
DECEMBER 31,
---------------------
2000 1999
--------- --------
Deferred tax assets:
Net operating loss carryforwards.......................... $ 112,475 $ 51,188
Research and experimentation credit and foreign tax credit
carryforwards.......................................... 13,852 9,553
Depreciation.............................................. 739 301
Deferred revenue.......................................... 6,840 159
Financial statement expenses not deducted on tax return... 682 147
--------- --------
134,588 61,348
Deferred tax liabilities:
Tax return expenses not charged against financial
statements............................................. (250) (153)
--------- --------
(250) (153)
--------- --------
Net deferred tax assets................................... 134,338 61,195
Less valuation allowance.................................. (134,338) (61,195)
--------- --------
Net deferred tax assets..................................... $ -- $ --
========= ========
83
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. 401(K) PLAN
We have a tax-qualified employee savings and retirement plan (the 401(k)
Plan) covering all of our employees. Pursuant to the 401(k) Plan, employees may
elect to reduce their current compensation by up to the statutorily prescribed
annual limit ($10,500 in 2000) and to have the amount of such reduction
contributed to the 401(k) Plan. Effective January 1, 1998, we implemented a
401(k) matching program whereby we contribute 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 Code so that
contributions by employees or by us 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 us, if any, will be deductible by us
when made. At the direction of each participant, we invest the assets of the
401(k) Plan in any of eleven investment options. Our contributions under the
401(k) Plan were approximately $280,000 in 2000, $224,000 in 1999 and $98,000 in
1998.
9. LONG-TERM OBLIGATIONS AND LEASE OBLIGATIONS
Long-term obligations consist of the following (in thousands):
DECEMBER 31,
------------------
2000 1999
------- -------
Credit line from corporate partners......................... $20,000 $ 5,000
Bank loans.................................................. 18,447 7,819
Capital lease obligations................................... 1,193 1,474
Other....................................................... 109 --
------- -------
39,749 14,293
Less current portion of obligations......................... 6,327 2,867
------- -------
$33,422 $11,426
======= =======
The credit line from corporate partners consists of two arrangements at
December 31, 2000, as follows:
A $20 million credit line from a corporate partner includes a $5 million
payment received in exchange for options to license two of our early-stage
cancer vaccines and a $15 million credit line related to the commercialization
of BEXXAR (refer to Note 2 with regard to the terms and conditions of the credit
lines). The $15 million line matures in October 2003 and accrues interest at a
fixed rate per annum equal to the prime rate in effect on the date the loan is
advanced, or the maximum permissible by law, whichever is less. Under the terms
of the note, we are required to meet the following minimum covenants: (i)
remaining months' liquidity, (ii) debt service coverage ratio, (iii)
consolidated tangible net worth, and (iv) consolidated leverage ratio. As of
December 31, 2000, we were in compliance with the notes covenants.
As of December 31, 2000, we had outstanding bank loans of $18.4 million.
This amount is composed of an unsecured bank loan of $9.7 million, which matures
in September 2004, and a bank loan of $8.7 million, which matures in November
2003. The $9.7 million loan bears 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, we are required to meet the following minimum covenants: (i) tangible
net worth, (ii) net cash calculated based on the sum of the principal balance
under the note plus a multiple of our actual cash burn or $10,000,000, whichever
is greater, (iii) total debt to net worth ratios, and (iv) current ratio. The
note requires quarterly interest and principal payments. As of December 31,
2000, we were in compliance with the notes covenants. The bank loan of $8.7
million bears interest at a fixed rate of 9.3%. The bank loan requires monthly
principal and interest payments and has a balloon payment of approximately $5.3
million due in October 2003. The bank loan was
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86
CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
paid off on February 27, 2001. Securities available-for-sale includes $5.5
million at December 31, 2000 that is restricted for use in connection with a
financing agreement.
Capital lease obligations are secured by the underlying equipment.
We rent office and research facilities for our Seattle operations under a
noncancelable operating lease that expires in January 2005. We have issued an
irrevocable standby letter of credit in the amount of $750,000 as a security
deposit on the lease. We have the option to renew the lease for two additional
five-year terms. We rent office and research facilities for our South San
Francisco operations under an operating lease that expires in November 2010. We
have issued a standby letter of credit in the amount of $2.3 million and have a
security deposit of $225,000 in connection with this lease.
Minimum future rental payments under all lease agreements at December 31,
2000 are as follows (in thousands):
CAPITAL OPERATING
YEAR ENDED DECEMBER 31, LEASES LEASES
----------------------- ------- ---------
2001........................................................ $1,131 $ 5,329
2002........................................................ 119 6,490
2003........................................................ -- 6,575
2004........................................................ -- 6,662
2005........................................................ -- 3,787
Thereafter.................................................. -- 17,831
------ -------
Total minimum payments............................ 1,250 $46,674
=======
Less interest............................................... 57
------
Present value of minimum lease payments..................... 1,193
Less current portion........................................ 1,128
------
Capital lease obligations, less current portion............. $ 65
======
Rent expense was $3.7 million in 2000, $3.5 million in 1999, and $2.3
million in 1998.
10. RELATED-PARTY TRANSACTIONS
Under the terms of the merger agreement with Coulter, we assumed employee
loans totaling $634,000 that are included in other assets on the accompanying
balance sheet as of December 31, 2000. The loans are non-interest-bearing with
various terms ranging from four to ten years and are secured by a second deed of
trust on the employee's residence. The forgiven amount and the repaid amount is
calculated on a pro-rata basis over years one through ten of continued
employment. In the event the employee ceases to be employed by us, the loan
becomes interest-bearing and due within a reasonable period not to exceed three
months. There were no employee loans outstanding at December 31, 1999.
11. INVESTMENTS
IMMGENICS PHARMACEUTICALS INC.
In November 1998, we signed an exclusive agreement with ImmGenics, a
privately held biotechnology company, to utilize ImmGenics' proprietary Selected
Lymphocyte Antibody Method technology to develop high-potency therapeutic and
diagnostic monoclonal antibodies targeting our proprietary antigens in cancer
and infectious disease. In addition to the collaborative agreement, we purchased
an aggregate of 859,000 shares of ImmGenics Class A preferred stock for $1.25
million, entered into a $500,000 non-interest-bearing convertible debenture and
invested an additional $1.25 million in 1999 for a total investment of $3.0
million. Additionally, we received warrants to acquire ImmGenics Class A
preferred stock.
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CORIXA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In May 2000, we sold 1,058,990 shares of Immgenics Class A preferred stock
to holders of Immgenics Class B preferred stock for $1.8 million, resulting in a
gain of approximately $216,000, and exercised warrants to acquire an additional
200,000 shares of Class A preferred stock. In September 2000, we converted the
$500,000 debenture into 343,595 shares of Immgenics Class A preferred stock.
In November 2000, Immgenics was acquired by Abgenix Inc. In February 2001,
in conjunction with the acquisition of Immgenics, we exercised our option to
sell 601,302 of the newly issued shares to Abgenix for approximately $4.97 per
share. The remaining 601,303 newly issued shares will be sold to Abgenix in
accordance with the terms of the acquisition.
LIGOCYTE PHARMACEUTICALS, INC.
In October 1999, we signed a licensing and collaborative research agreement
with LigoCyte to utilize LigoCyte technology for developing of therapeutic and
vaccine products that target infections arising from Candida albicans.
Under the terms of the agreement and related agreements, we paid a one-time
license fee of $250,000 and research funding of $225,000 over a one-year period.
We will also make milestone payments based on successful clinical trial and
product commercialization progress, as well as royalties on future product
sales. We also purchased 293,255 shares of Series B preferred stock for $1.0
million and have the option to purchase an additional 146,628 shares for
$500,000 subsequent to the one-year anniversary of the agreement, contingent on
LigoCyte's meeting certain conditions of the agreement.
We account for our investments in Immgenics and LigoCyte on the cost
method.
12. COMMITMENTS AND CONTINGENCIES
As a result of our acquisition of Ribi we were named a defendant in
litigation related to groundwater contamination at the Bitterroot Valley
Sanitary Landfill. The plaintiffs in the lawsuits are the state of Montana and
the United States. On February 26, 2001, we agreed in principle to settle this
litigation. Final settlement of the litigation will occur upon motion of
dismissal by the plantiff and an order of dismissal issued by the U.S. District
Court. The liability of $2.65 million was included in the purchase price
allocation of Ribi as of December 31, 1999.
We are party to routine claims and litigation incidental to our business.
We believe the ultimate resolution of these routine matters will not have a
material adverse effect on our financial position and results of operations or
cash flows.
We have entered into agreements with BI Pharma KG to manufacture and supply
Anti-B1 Antibody for use in ongoing clinical trials and to meet commercial
requirements, as well as provide for fill/finish and packaging services. We have
committed to purchase minimum antibody quantities of the Anti-B1 Antibody from
BI Pharma KG. The maximum penalty that we would pay if we did not place orders
to purchase any antibody is approximately $5.4 million.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE
None.
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 our 2001 Proxy
Statement to be filed within 120 days after the end of our fiscal year ended
December 31, 2000.
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
our 2001 Proxy Statement to be filed within 120 days after the end of our fiscal
year ended December 31, 2000.
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 our 2001 Proxy Statement to be filed within
120 days after the end of our fiscal year ended December 31, 2000.
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 our 2001 Proxy Statement to be filed within 120 days after the
end of our fiscal year ended December 31, 2000.
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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, 2000, 1999 and 1998.
Statement of Operations -- Years Ended December 31, 2000, 1999 and
1998.
Statement of Stockholders' Equity -- Years Ended December 31, 2000,
1999 and 1998.
Statement of Cash Flows -- Years Ended December 31, 2000, 1999 and
1998.
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 filed in response to Item 601 of Regulation S-K are
set forth below.
EXHIBIT
NUMBER EXHIBIT DESCRIPTION REFERENCE
- ------- ------------------- ---------
2.01+ Agreement and Plan of Reorganization dated December 11, 1998
by and between the Registrant, Yakima Acquisition
Corporation and Anergen, Inc. (E)
2.02 Form of Certificate of Merger between Yakima Acquisition
Corporation and Anergen, Inc. (E)
2.1+ Agreement and Plan of Merger dated June 22, 1998 by and
among the Registrant, Chinook Acquisition Corporation and
GenQuest, Inc. (C)
2.2 Form of Certificate of Merger between Chinook Acquisition
Corporation and GenQuest, Inc. (C)
2.3+ Agreement and Plan of Merger dated October 15, 2000 by and
among the Registrant, Clearwater Acquisitions Corporation
and Coulter Pharmaceutical, Inc. (H)
2.4 Certificate of Designation of Corixa Corporation (I)
3.1 Amended and Restated Certificate of Incorporation of Corixa
Corporation. (A)
3.2 Bylaws of Corixa Corporation.
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. (D)
10.8 Multi-Field Vaccine Discovery Collaboration and License
Agreement between Corixa Corporation and SmithKline Beecham,
dated September 1, 1998. (F)
10.9 Confirmation Letter, Purchase of $7,000,000 Loan Facility,
dated August 21, 1998 to Corixa Corporation from Banque
Nationale de Paris. (D)
10.10 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. (D)
10.11+ Equity Line of Credit and Securities Purchase Agreement
between Corixa Corporation and Castle Gate, L.L.C., dated
April 8, 1999. (G)
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90
EXHIBIT
NUMBER EXHIBIT DESCRIPTION REFERENCE
- ------- ------------------- ---------
10.12+ Registration Rights Agreement between Corixa Corporation and
Castle Gate, L.L.C., dated April 8, 1999. (G)
10.13+ Standstill Agreement between Corixa Corporation and Castle
Gate, L.L.C., dated April 8, 1999. (G)
10.14+ Warrant Number CG-1 issued by Corixa Corporation to Castle
Gate, L.L.C. on April 8, 1999. (G)
10.15+ Warrant Number CG-2 issued by Corixa Corporation to Castle
Gate, L.L.C. on April 8, 1999. (G)
10.16+ Form of Warrant Number CG-3 to be issued by Corixa
Corporation to Castle Gate, L.L.C. on the occurrence of
certain events in accordance with the terms of the Equity
Line of Credit and Securities Purchase Agreement. (G)
10.17+ Form of Warrant Number CG-4 to be issued by Corixa
Corporation to Castle Gate, L.L.C. on the occurrence of
certain events in accordance with the terms of the Equity
Line of Credit and Securities Purchase Agreement. (G)
10.18+ Amendment No. 1, dated December 21, 2000, to the Equity Line
of Credit and Securities Purchase Agreement, dated April 8,
1999, by and between Corixa Corporation and Castle Gate,
L.L.C. (I)
10.19+ Amendment No. 2, dated December 29, 2000, to the Equity Line
of Credit and Securities Purchase Agreement, dated April 8,
1999, by and between Corixa Corporation and Castle Gate,
L.L.C. (I)
10.20+ Warrant Number CG-5 issued by Corixa Corporation to Castle
Gate on December 29. (I)
10.21* Distribution and Supply Agreement, dated March 11, 1998, by
and between Corixa Corporation, Schering Corporation and
RibiImmunoChem Research, Inc., as amended.
10.22* Distribution and Supply Agreement, dated March 11, 1998, by
and between Corixa Corporation, Schering-Plough Ltd. and
RibiImmunoChem Research, Inc., as amended.
10.23 Separation Agreement between Corixa Corporation and Mark
McDade, dated November 27, 2000.
10.24+ Development, Commercialization and License Agreement, dated
August 15, 2000 by and between Corixa and Medicis
Pharmaceutical Corporation. (T)
10.25 Coulter Pharmaceutical, Inc. 1996 Employee Stock Purchase
Plan (L)
10.26 Coulter Pharmaceutical, Inc. 1995 Equity Incentive Plan (L)
10.27 Coulter Pharmaceutical, Inc. 1996 Equity Incentive Plan (L)
Assignment Agreement between Coulter Pharmaceutical, Inc.,
Beckman Coulter and certain investors, dated February 24,
1995. (M)
10.28+ Development Agreement between Coulter Pharmaceutical, Inc.
and MDS Nordion Inc., dated November 15, 1995. (M)
10.29+ Contract Research and Development Agreement, by and between
Coulter Pharmaceutical, Inc. and Dr. Karl Thomae GmbH, dated
October 22, 1997. (P)
10.30+ Supply Agreement between Coulter Pharmaceutical, Inc. and
MDS Nordion Inc., dated August 31, 1998. (R)
10.31+ Facilities Agreement between Coulter Pharmaceutical, Inc.
and MDS Nordion Inc., dated August 31, 1998. (R)
10.32+ Stock Purchase Agreement between Coulter Pharmaceutical,
Inc. and SmithKline Beecham Corporation, dated October 23,
1998. (S)
10.33+ Security Agreement between Coulter Pharmaceutical, Inc. and
SmithKline Beecham Corporation, dated October 23, 1998. (S)
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91
EXHIBIT
NUMBER EXHIBIT DESCRIPTION REFERENCE
- ------- ------------------- ---------
10.34+ Grant of Security Interest between Coulter Pharmaceutical,
Inc. and SmithKline Beecham Corporation, dated October 23,
1998. (S)
10.35+ Loan Agreement between Coulter Pharmaceutical, Inc. and
SmithKline Beecham Corporation, dated October 23, 1998. (S)
10.36+ Collaboration Agreement between Coulter Pharmaceutical, Inc.
and SmithKline Beecham Corporation, dated October 23, 1998. (S)
10.37+ Supply Agreement between Coulter Pharmaceutical, Inc and
Boehringer Ingelheim Pharma KG, dated November 3, 1998. (S)
10.38+ Amendment No. 1, dated November 30, 1998, to the
Collaboration Agreement between Coulter Pharmaceutical, Inc.
and SmithKline Beecham, dated October 23, 1998. (S)
10.39+ Loan and Security Agreement between Coulter Pharmaceutical,
Inc. and Silicon Valley Bank, dated October 29, 1998. (S)
21.1 Subsidiaries of Corixa Corporation
22.1 Vote of the stockholders of Corixa Corporation to approve
the issuance of shares of Corixa common stock in connection
with the merger of Clearwater Acquisitions Corporation with
and into Coulter Pharmaceutical, Inc. (H)
23.1 Consent of Ernst and Young, LLP, Independent Auditors
24.1 Power of Attorney (K)
- ---------------
+ Registrant agrees to furnish to the Commission a copy of any omitted
schedule of these Exhibits on a request of the Commission.
(A) Incorporated herein by reference Corixa's Form S-1, as amended, (File No.
333-32147), filed with the Commission on September 30, 1997.
(B) Incorporated herein by reference to Corixa's Form 10-Q (File No.
333-32147), filed with the Commission on August 11, 1998.
(C) 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.
(D) Incorporated herein by reference to Corixa's Form 10-Q (File No. 333-32147),
filed with the Commission on November 12, 1998.
(E) Incorporated herein by reference to Corixa's Form S-4 (File No. 333-69679),
filed with the Commission on January 12, 1999.
(F) Incorporated herein by reference to Corixa's Form 8-K (File No. 0-22891),
filed with the Commission on October 28, 1998.
(G) Incorporated herein by reference to Corixa's Form 8-K (File No. 0-22891),
filed with the Commission on April 23, 1999.
(H) Incorporated herein by reference to Corixa's Form S-4/A (File No.
333-49490), filed with the Commission on November 17, 2000.
(I) Incorporated herein by reference to Corixa's Form 8-K (File No. 0-22891),
filed with the Commission on January 4, 2001.
(J) Incorporated herein by reference to Item 4 of this report on Form 10-K.
(K) Incorporated herein by reference to the "Power of Attorney" granted below in
this report on Form 10-K.
(L) Incorporated herein by reference to Corixa's Registration Statement on Form
S-8 (File No. 333-52968), filed with the Commission on December 29, 2000
(M) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s
Registration Statement on Form S-1 (File No. 333-17661), as amended, filed
with the Commission on September 29, 1997.
(N) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s Form
10-Q (File No. 000-21905), filed with the Commission on August 5, 1997.
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(O) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s Form 8-K
(File No. 000-21905), filed with the Commission on September 29, 1997.
(P) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s Form
10-K (File No. 000-21905), filed with the Commission on March 27, 1998.
(Q) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s Form
10-Q (File No. 000-21905), filed with the Commission on August 13, 1998
(R) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s Form
10-Q (File No. 000-21905), filed with the Commission on November 13, 1998.
(S) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s Form
10-K,(File No. 000-21905), filed with the Commission on March 30, 1999.
(T) Incorporated herein by reference to Corixa's Form 10-Q (File No.
000-22891), filed with the Commission on November 6, 2000.
+ Confidential treatment granted by order of the SEC.
* Confidential treatment sought by Corixa Corporation from the SEC
(b) REPORTS ON FORM 8-K
On March 26, 2001 Corixa filed a Current Report on Form 8-K stating
under "Item 5. Other Events" that on March 19, 2001 Corixa announced (i)
the receipt of a complete review letter from the FDA following the FDA's
review of the BLA for BEXXAR and (ii) a modified operating plan, and
associated workforce reduction, adopted after the receiving the complete
review letter.
On January 4, 2001 Corixa filed a Current Report on Form 8-K stating
under "Item 5. Other Events" that on December 29, 2000 Corixa had drawn
down the remaining $37.5 million on a $50 million equity line of
credited entered into with Castle Gate, L.L.C.
On December 29, 2000 Corixa filed a Current Report on Form 8-K stating
under "Item 2. Acquisition or Disposition of Assets" that on December
22, 2000 Corixa acquired Coulter Pharmaceutical, Inc.
On November 3, 2000 Corixa filed a Current Report on Form 8-K stating
under "Item 5. Other Events" that Corixa filed updated historical
financial statements for Ribi ImmunoChem Research, Inc.
On October 31, 2000 Corixa filed a Current Report on Form 8-K/A stating
under "Item 5. Other Events" that on August 15, 2000 Corixa entered into
a multi-year development, commercialization and license agreement with
Medicis Pharmaceutical Corporation, and under "Item 7(c). Financial
Statements, Pro Forma Financial Information and Exhibits" filed copies
of the agreement with Medicis and the press release announcing the
agreement with Medicis.
On October 16, 2000 Corixa filed a Current Report on Form 8-K stating
under "Item 5. Other Events" that on October 15, 2000 Corixa entered
into an agreement and plan of merger with Coulter Pharmaceutical, Inc.
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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 30, 2001
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, the
following persons on behalf of the registrant and in the capacities and on the
dates indicated have signed this report below.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ STEVEN GILLIS Chairman and Chief March 28, 2001
- -------------------------------------------------------- Executive Officer
Steven Gillis (Principal Executive Officer)
/s/ MICHELLE BURRIS Senior Vice President and March 28, 2001
- -------------------------------------------------------- Chief Financial Officer
Michelle Burris (Principal Financial and
Accounting Officer)
/s/ MARK MCDADE Director March 28, 2001
- --------------------------------------------------------
Mark McDade
/s/ MICHAEL F. BIGHAM Director March 28, 2001
- --------------------------------------------------------
Michael F. Bigham
/s/ JOSEPH L. LACOB Director March 28, 2001
- --------------------------------------------------------
Joseph L. Lacob
/s/ ARNOLD ORONSKY Director March 28, 2001
- --------------------------------------------------------
Arnold Oronsky
/s/ JAMES YOUNG Director March 28, 2001
- --------------------------------------------------------
James Young
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SIGNATURE TITLE DATE
--------- ----- ----
/s/ ROBERT MOMSEN Director March 28, 2001
- --------------------------------------------------------
Robert Momsen
/s/ SAMUEL R. SAKS Director March 28, 2001
- --------------------------------------------------------
Samuel R. Saks
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EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ----
2.01+ Agreement and Plan of Reorganization dated December 11, 1998
by and between the Registrant, Yakima Acquisition
Corporation and Anergen, Inc. (E)
2.02 Form of Certificate of Merger between Yakima Acquisition
Corporation and Anergen, Inc. (E)
2.1+ Agreement and Plan of Merger dated June 22, 1998 by and
among the Registrant, Chinook Acquisition Corporation and
GenQuest, Inc. (C)
2.2 Form of Certificate of Merger between Chinook Acquisition
Corporation and GenQuest, Inc. (C)
2.3+ Agreement and Plan of Merger dated October 15, 2000 by and
among the Registrant, Clearwater Acquisitions Corporation
and Coulter Pharmaceutical, Inc. (H)
2.4 Certificate of Designation of Corixa Corporation (I)
3.1 Amended and Restated Certificate of Incorporation of Corixa
Corporation. (A)
3.2 Bylaws of Corixa Corporation.
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. (D)
10.8 Multi-Field Vaccine Discovery Collaboration and License
Agreement between Corixa Corporation and SmithKline Beecham,
dated September 1, 1998. (F)
10.9 Confirmation Letter, Purchase of $7,000,000 Loan Facility,
dated August 21, 1998 to Corixa Corporation from Banque
Nationale de Paris. (D)
10.10 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. (D)
10.11+ Equity Line of Credit and Securities Purchase Agreement
between Corixa Corporation and Castle Gate, L.L.C., dated
April 8, 1999. (G)
10.12+ Registration Rights Agreement between Corixa Corporation and
Castle Gate, L.L.C., dated April 8, 1999. (G)
10.13+ Standstill Agreement between Corixa Corporation and Castle
Gate, L.L.C., dated April 8, 1999. (G)
10.14+ Warrant Number CG-1 issued by Corixa Corporation to Castle
Gate, L.L.C. on April 8, 1999. (G)
10.15+ Warrant Number CG-2 issued by Corixa Corporation to Castle
Gate, L.L.C. on April 8, 1999. (G)
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EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ----
10.16+ Form of Warrant Number CG-3 to be issued by Corixa
Corporation to Castle Gate, L.L.C. on the occurrence of
certain events in accordance with the terms of the Equity
Line of Credit and Securities Purchase Agreement. (G)
10.17+ Form of Warrant Number CG-4 to be issued by Corixa
Corporation to Castle Gate, L.L.C. on the occurrence of
certain events in accordance with the terms of the Equity
Line of Credit and Securities Purchase Agreement. (G)
10.18+ Amendment No. 1, dated December 21, 2000, to the Equity Line
of Credit and Securities Purchase Agreement, dated April 8,
1999, by and between Corixa Corporation and Castle Gate,
L.L.C. (I)
10.19+ Amendment No. 2, dated December 29, 2000, to the Equity Line
of Credit and Securities Purchase Agreement, dated April 8,
1999, by and between Corixa Corporation and Castle Gate,
L.L.C. (I)
10.20+ Warrant Number CG-5 issued by Corixa Corporation to Castle
Gate on December 29. (I)
10.21* Distribution and Supply Agreement, dated March 11, 1998, by
and between Corixa Corporation, Schering Corporation and
RibiImmunoChem Research, Inc., as amended.
10.22* Distribution and Supply Agreement, dated March 11, 1998, by
and between Corixa Corporation, Schering-Plough Ltd. and
RibiImmunoChem Research, Inc., as amended.
10.23 Separation Agreement between Corixa Corporation and Mark
McDade, dated November 27, 2000.
10.24+ Development, Commercialization and License Agreement, dated
August 15, 2000 by and between Corixa and Medicis
Pharmaceutical Corporation. (T)
10.25 Coulter Pharmaceutical, Inc. 1996 Employee Stock Purchase
Plan (L)
10.26 Coulter Pharmaceutical, Inc. 1995 Equity Incentive Plan (L)
10.27 Coulter Pharmaceutical, Inc. 1996 Equity Incentive Plan (L)
Assignment Agreement between Coulter Pharmaceutical, Inc.,
Beckman Coulter and certain investors, dated February 24,
1995. (M)
10.28+ Development Agreement between Coulter Pharmaceutical, Inc.
and MDS Nordion Inc., dated November 15, 1995. (M)
10.29+ Contract Research and Development Agreement, by and between
Coulter Pharmaceutical, Inc. and Dr. Karl Thomae GmbH, dated
October 22, 1997. (P)
10.30+ Supply Agreement between Coulter Pharmaceutical, Inc. and
MDS Nordion Inc., dated August 31, 1998. (R)
10.31+ Facilities Agreement between Coulter Pharmaceutical, Inc.
and MDS Nordion Inc., dated August 31, 1998. (R)
10.32+ Stock Purchase Agreement between Coulter Pharmaceutical,
Inc. and SmithKline Beecham Corporation, dated October 23,
1998. (S)
10.33+ Security Agreement between Coulter Pharmaceutical, Inc. and
SmithKline Beecham Corporation, dated October 23, 1998. (S)
10.34+ Grant of Security Interest between Coulter Pharmaceutical,
Inc. and SmithKline Beecham Corporation, dated October 23,
1998. (S)
10.35+ Loan Agreement between Coulter Pharmaceutical, Inc. and
SmithKline Beecham Corporation, dated October 23, 1998. (S)
10.36+ Collaboration Agreement between Coulter Pharmaceutical, Inc.
and SmithKline Beecham Corporation, dated October 23, 1998. (S)
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97
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ----
10.37+ Supply Agreement between Coulter Pharmaceutical, Inc and
Boehringer Ingelheim Pharma KG, dated November 3, 1998. (S)
10.38+ Amendment No. 1, dated November 30, 1998, to the
Collaboration Agreement between Coulter Pharmaceutical, Inc.
and SmithKline Beecham, dated October 23, 1998. (S)
10.39+ Loan and Security Agreement between Coulter Pharmaceutical,
Inc. and Silicon Valley Bank, dated October 29, 1998. (S)
21.1 Subsidiaries of Corixa Corporation
22.1 Vote of the stockholders of Corixa Corporation to approve
the issuance of shares of Corixa common stock in connection
with the merger of Clearwater Acquisitions Corporation with
and into Coulter Pharmaceutical, Inc. (H)
23.1 Consent of Ernst and Young, LLP, Independent Auditors
24.1 Power of Attorney (K)
- ---------------
+ Registrant agrees to furnish to the Commission a copy of any omitted
schedule of these Exhibits on a request of the Commission.
(A) Incorporated herein by reference Corixa's Form S-1, as amended, (File No.
333-32147), filed with the Commission on September 30, 1997.
(B) Incorporated herein by reference to Corixa's Form 10-Q (File No.
333-32147), filed with the Commission on August 11, 1998.
(C) 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.
(D) Incorporated herein by reference to Corixa's Form 10-Q (File No. 333-32147),
filed with the Commission on November 12, 1998.
(E) Incorporated herein by reference to Corixa's Form S-4 (File No. 333-69679),
filed with the Commission on January 12, 1999.
(F) Incorporated herein by reference to Corixa's Form 8-K (File No. 0-22891),
filed with the Commission on October 28, 1998.
(G) Incorporated herein by reference to Corixa's Form 8-K (File No. 0-22891),
filed with the Commission on April 23, 1999.
(H) Incorporated herein by reference to Corixa's Form S-4/A (File No.
333-49490), filed with the Commission on November 17, 2000.
(I) Incorporated herein by reference to Corixa's Form 8-K (File No. 0-22891),
filed with the Commission on January 4, 2001.
(J) Incorporated herein by reference to Item 4 of this report on Form 10-K.
(K) Incorporated herein by reference to the "Power of Attorney" granted below in
this report on Form 10-K.
(L) Incorporated herein by reference to Corixa's Registration Statement on Form
S-8 (File No. 333-52968), filed with the Commission on December 29, 2000
(M) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s
Registration Statement on Form S-1 (File No. 333-17661), as amended, filed
with the Commission on September 29, 1997.
(N) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s Form
10-Q (File No. 000-21905), filed with the Commission on August 5, 1997.
(O) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s Form 8-K
(File No. 000-21905), filed with the Commission on September 29, 1997.
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98
(P) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s Form
10-K (File No. 000-21905), filed with the Commission on March 27, 1998.
(Q) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s Form
10-Q (File No. 000-21905), filed with the Commission on August 13, 1998
(R) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s Form
10-Q (File No. 000-21905), filed with the Commission on November 13, 1998.
(S) Incorporated herein by reference to Coulter Pharmaceutical, Inc.'s Form
10-K,(File No. 000-21905), filed with the Commission on March 30, 1999.
(T) Incorporated herein by reference to Corixa's Form 10-Q (File No.
000-22891), filed with the Commission on November 6, 2000.
+ Confidential treatment granted by order of the SEC.
* Confidential treatment sought by Corixa Corporation from the SEC
97