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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 1997
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 [SEC FILE NUMBER]
CORIXA CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C> <C>
DELAWARE 2836 91-1654387
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
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1124 COLUMBIA STREET, SUITE 200
SEATTLE, WA 98104
(206) 667-5711
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
STEVEN GILLIS, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CORIXA CORPORATION
1124 COLUMBIA STREET, SUITE 200
SEATTLE, WA 98104
(206) 667-5711
(Name, Address Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
-------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ ] No |X|*
As of October 31, 1997, there were 11,774,214 shares of the
registrant's Common Stock outstanding.
*The Registrant has been subject to the filing requirements of the Securities
Exchange Act of 1934 since the effective date of its Registration Statement on
Form S-1 on October 2, 1997 and has filed all such reports since such effective
date.
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Corixa Corporation
INDEX
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Page
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS.
Balance Sheets as of September 30, 1997(unaudited) and December 31. 1996.............3
Statements of Operations (unaudited) for the three months
and nine months ended September 30, 1997 and 1996 and
period from September 8, 1994 (Date of Inception) to
September 30,
1997.................................................................................4
Statements of Cash Flows (unaudited) for the nine months
ended September 30, 1997 and 1996 for the period from
September 8, 1994 (Date of Inception) through September 30,
1997.................................................................................5
Notes to the Financial Statements....................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..................................................7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.................19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
ITEM 2. CHANGES IN SECURITIES.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 5. OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
SIGNATURES
INDEX TO EXHIBITS
EXHIBIT 11.1
EXHIBIT 27.1
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CORIXA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
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<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------- ------------
1997 1996
----------- ------------
(UNAUDITED)
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Current assets:
Cash and cash equivalents ............................................................... $285,822 $2,088,226
Securities available-for-sale ........................................................... 14,030,122 9,845,180
Accounts receivable (including $74,640 and $166,640
receivable from an affiliated company at September 30,
1997 and December 31, 1996, respectively) ............................................ 195,052 687,048
Prepaid expenses ........................................................................ 767,302 264,859
----------- ------------
Total current assets....................................................................... 15,278,298 12,885,313
Property and equipment, net ............................................................... 3,938,533 2,237,196
Other assets, net ......................................................................... 940,989 62,402
----------- -----------
Total assets .............................................................................. $20,157,820 $15,184,911
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities ................................................ $1,585,238 $978,738
Deferred revenue ........................................................................ 1,345,101 1,318,130
Current portion of obligations .......................................................... 867,109 487,758
----------- ------------
Total current liabilities ................................................................. 3,797,448 2,784,626
Long-term obligations and commitments, less current portion ............................... 4,997,887 1,175,354
Stockholders' equity:
Convertible preferred stock, $0.001 par value:
Authorized shares -- 23,100,000 (16,100,000
designated as Series A and 1,666,667 designated as
Series B);
Issued and outstanding Series A shares -- 4,646,131 .................................. 4,646 4,646
Issued and outstanding Series B shares -- 505,050 .................................... 505 505
Common stock, $0.001 par value:
Authorized shares -- 40,000,000
Issued and outstanding shares -- 2,727,894 at
September 30, 1997, and 2,594,137, at December 31, 1996 .............................. 2,728 2,594
Additional paid-in capital .............................................................. 25,692,793 21,655,080
Receivable for warrants ................................................................. (791,631) (1,140,000)
Deferred compensation ................................................................... (3,053,767) --
Deficit accumulated during development stage............................................. (10,492,789) (9,297,894)
----------- ------------
Total stockholders' equity ................................................................ 11,362,485 11,224,931
----------- ------------
Total liabilities and stockholders' equity...................................... .......... $20,157,820 $15,184,911
=========== ===========
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CORIXA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
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<CAPTION>
PERIOD FROM
SEPTEMBER 8,
1994
THREE MONTHS ENDED NINE MONTHS ENDED (DATE OF
SEPTEMBER 30, SEPTEMBER 30, INCEPTION) TO
--------------------------- --------------------------- SEPTEMBER 30,
1997 1996 1997 1996 1997
----------- ---------- ----------- ----------- ------------
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Revenues:
Collaborative agreements .......... $3,097,335 $1,290,200 $10,036,923 $3,020,940 $16,849,317
Government grants ................. 179,707 428,387 733,278 1,055,130 2,440,286
----------- ---------- ----------- ----------- ------------
Total revenues .................. 3,277,042 1,718,587 10,770,201 4,076,070 19,289,603
Operating expenses:
Research and development .......... (4,271,159) (2,403,401) (11,375,213) (7,111,636) (28,848,549)
In-process research and development -- -- -- -- (428,059)
General and administrative ........ (487,901) (331,190) (1,266,948) (769,549) (2,785,265)
----------- ---------- ----------- ----------- ------------
Total operating expenses ........ (4,759,060) (2,734,591) (12,642,161) (7,881,185) (32,061,873)
----------- ---------- ----------- ----------- ------------
Loss from operations ................ (1,482,018) (1,016,004) (1,871,960) (3,805,115) (12,772,270)
Interest income, net ................ 128,049 133,896 363,130 346,686 1,613,055
Other income ........................ 124,751 87,000 312,025 261,000 676,424
=========== ========== =========== =========== ============
Net loss ............................ $(1,229,218) $(795,108) $(1,196,805) $(3,197,429) $(10,482,791)
=========== ========== =========== =========== ============
Historical net loss
per share (unaudited) ............. $(0.36) $(0.24) $(0.35) $(0.95)
=========== ========== =========== ===========
Shares used in computation
of historical net loss
per share ......................... 3,388,727 3,382,436 3,386,341 3,369,880
=========== ========== =========== ===========
Pro forma net loss
per share (unaudited) ............. $(0.14) $(0.09) $(0.14) $(0.39)
=========== ========== =========== ===========
Shares used in computation
of pro forma net loss
per share ......................... 8,539,923 8,533,632 8,537,536 8,278,726
=========== ========== =========== ===========
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CORIXA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
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<CAPTION>
NINE MONTHS ENDED PERIOD FROM
SEPTEMBER 30, SEPTEMBER 8, 1994
------------------------------- (DATE OF INCEPTION)
1997 1996 TO SEPTEMBER 30, 1997
------------ ------------ ---------------------
(UNAUDITED) (UNAUDITED)
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OPERATING ACTIVITIES
Net loss ............................. $(1,196,805) $(3,197,429) $(10,482,791)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization ...... 770,065 406,094 1,638,061
In-process research and
development ...................... -- -- 428,059
Equity instruments granted in
exchange for services and
technology ....................... 64,981 97,352 176,270
Amortization of deferred
compensation ..................... 850,027 -- 850,027
Changes in certain assets and
liabilities:
Accounts receivable .............. 491,996 (22,702) (195,052)
Prepaid expenses ................. (502,443) (119,278) (765,737)
Other assets ..................... (878,587) (198,480) (851,471)
Accounts payable and accrued
expenses ........................ 606,499 145,953 1,361,434
Deferred revenue ................. 26,971 595,833 1,345,101
------------ ------------ ------------
Net cash provided by (used in)
operating activities ............... 232,704 (2,292,657) (6,496,099)
INVESTING ACTIVITIES
Purchases of securities
available-for-sale ................. (9,714,584) (10,985,271) (38,139,423)
Proceeds from maturities of securities
available-for-sale ................. 5,531,553 7,238,338 24,099,304
Purchases of property and equipment .. (685,080) (236,976) (1,526,541)
Cash acquired in acquisitions ........ -- -- 29,939
------------ ------------ ------------
Net cash provided by (used in)
investing activities ............... (4,868,111) (3,983,909) (15,536,721)
FINANCING ACTIVITIES
Proceeds from issuance of convertible
preferred stock .................... -- 5,000,001 20,125,456
Borrowings from collaborative
agreement .......................... 3,000,000 -- 3,000,000
Proceeds from issuance of common
stock .............................. 69,071 10,940 145,106
Proceeds from issuance of warrants ... 1,364
Repurchase of common stock ........... (55)
Payments on receivables for warrants . 348,369 348,369
Principal payments on capital leases . (584,437) (300,052) (1,161,119)
Payments on notes due to
stockholders ....................... -- -- (140,479)
------------ ------------ ------------
Net cash provided by financing
activities ......................... 2,833,003 4,710,889 22,318,642
Net increase (decrease) in cash and
cash equivalents ................... (1,802,404) (1,565,677) 285,822
Cash and cash equivalents at
beginning of period ................ 2,088,226 3,003,938 --
------------ ------------ ------------
Cash and cash equivalents at end of
period ............................. $285,822 $1,438,261 $285,822
============ ============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH
OPERATING, INVESTING, AND FINANCING
ACTIVITIES
Assets acquired pursuant to captial
leases ........................... $1,786,321 $897,353 $4,026,115
Warrants and stock issued in
exchange for technology .......... 64,995 97,352 162,347
Amortization of deferred
compensation ..................... 850,027 -- 850,027
Interest paid ...................... 241,645 117,356 489,282
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CORIXA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Corixa Corporation (the Company), a development stage company, is focused on
the discovery and early clinical development of vaccine products that induce
specific and potent pathogen- or tumor-reactive T lymphocyte (T cell)
responses for the treatment and prevention of cancers and certain infectious
diseases.
The accompanying unaudited financial statements of Corixa Corporation have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions for Form 10-Q.
Accordingly, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. In the opinion of management, the information reflects all
adjustments and estimates necessary for a fair presentation of the results of
operations for the interim period presented. Interim results are not
necessarily indicative of results for a full year. The accompanying financial
statements and related footnotes should be read in conjunction with the
audited financial statements and footnotes thereto for the year ended
December 31, 1996, included in the Company's prospectus dated October 2,
1997, filed with the Securities and Exchange Commission.
Historical and Pro Forma Net Loss Per Share
Historical net loss per share is based on the weighted average number of
common and common equivalent shares outstanding during each period. Common
equivalent shares from preferred stock, stock options, and warrants are not
included in the per share calculation when the effect of their inclusion
would be antidilutive, except that, in accordance with Securities and
Exchange Commission requirements, for pro forma purposes, common and common
equivalent shares issued during the 12-month period immediately preceding the
Company's initial public offering have been included in the calculation as if
they were outstanding for all periods prior to the initial public offering
using the treasury stock method, even though their inclusion would be
antidilutive. In addition, for pro forma purposes, all outstanding shares of
convertible preferred stock are assumed to have been converted to common
stock at the time of issuance.
Subsequent Events
On October 2, 1997, the Company completed an initial public offering of
3,000,000 shares of common stock at $13.00 per share, with the Company
receiving proceeds, net of underwriting discounts and commissions, of $36.27
million. On October 22, 1997, the Company sold an additional 450,000 shares
of common stock in connection with the exercise of the over-allotment option
granted to the underwriters with gross proceeds to the Company of $5.44
million, resulting in total net proceeds of approximately $41.7 million.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Form 10-Q, including management's discussion and analysis of
financial condition and results of operations contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
including, without limitation, statements regarding regulatory approvals,
operating results and capital requirements. Except for historical information,
the matters discussed in this Form 10-Q, are forward looking statements that are
subject to certain risks and uncertainties that could cause the actual results,
performance or achievements of Corixa or its corporate partners, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, uncertainties related to the early stage of the Company's research and
development programs; uncertainties related to the effectiveness of the
Company's technology and the development of its products; dependence on and
management of existing and future corporate partnerships; dependence on
in-licensed technology; dependence on proprietary technology and uncertainty of
patent protection; management of growth; history of operating losses; future
capital needs and uncertainty of additional funding; dependence on key
personnel; intense competition; the Company's lack of manufacturing and
marketing experience and reliance on third parties to perform such functions;
existing government regulations and changes in, or the failure to comply with,
government regulations, as well as the risk factors discussed below in "Factors
Affecting Future Results" and those listed from time to time in the Company's
public disclosure filings with the Securities and Exchange Commission. The
Company assumes no obligation to update the forward-looking statements included
in this Form 10-Q.
OVERVIEW
Corixa's objective is to be the leader in the discovery and
commercialization of T cell vaccine products for the treatment and prevention of
cancer and certain infectious diseases. The Company's strategy is to dedicate
its resources to vaccine discovery and to establish corporate collaborations as
early in the development process as possible for all aspects of product
development and commercialization, including research, clinical development,
obtaining regulatory approval, manufacturing and marketing. Corixa believes that
this research- and partner-driven approach creates significant scientific,
operational and financial advantages for the Company and accelerates the
commercial development of new therapeutic and prophylactic T cell vaccines. To
date, approximately 87% of the Company's revenue has resulted from payments from
such collaborative agreements. In particular, the Company has entered into
significant corporate partnerships with SmithKline Beecham Biologicals S.A.
("SmithKline Beecham") with respect to tuberculosis and cancer vaccine products
pursuant to which the Company will receive up to an aggregate of $65.3 million,
of which up to $23 million is payable under the breast cancer collaboration, up
to $23 million is payable under the prostate cancer collaboration and up to
$19.3 million is payable under the tuberculosis collaboration. A substantial
amount of such funding is required to be used for research and development
activities pursuant to the terms of such collaborations. SmithKline Beecham
Biologicals S.A. may terminate either or both of the breast and prostate cancer
programs in the event the Company does not meet certain scientific milestones
after the second anniversary of the effective date of the respective agreements
and may terminate the tuberculosis research program by failing to exercise the
extension thereunder. Additionally, approximately 13% of the Company's revenue
has resulted from funds awarded through government grants. As of September 30,
1997, the Company had total stockholders' equity of $11.4 million.
Corixa has entered, and intends to continue to enter, into
collaborative agreements as early in the vaccine development stage as possible.
The Company believes that this active corporate partnering strategy enables
Corixa to maintain its focus on its fundamental strengths in vaccine discovery
and research,
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capitalizes on its corporate partners' strengths in product development,
manufacturing and commercialization, and significantly diminishes the Company's
financing requirements. When entering into such corporate partnering
relationships, the Company seeks to cover its research and development expenses
through research funding, milestone payments and option, technology or license
fees, while retaining significant downstream participation in product sales
through either profit-sharing or product royalties paid on annual net sales.
Revenues recognized from inception through September 30, 1997 under the
Company's collaborative agreements were approximately $16.9 million.
The Company has experienced significant operating losses in each year
since its inception. As of September 30, 1997, the Company's accumulated deficit
was approximately $10.5 million. The Company may incur substantial additional
operating losses over at least the next several years. Such losses have been and
may continue to be principally the result of the various costs associated with
the Company's discovery, research and development programs, and preclinical and
clinical activities. Substantially all of the Company's revenues to date have
resulted from corporate partnerships, other research, development and licensing
arrangements, research grants and interest income. The Company's ability to
achieve a consistent, profitable level of operations is dependent in large part
upon entering into collaborative agreements with corporate partners for product
discovery, research, development and commercialization, obtaining regulatory
approvals for its products and successfully manufacturing and marketing
commercial products. There can be no assurance that the Company will be able to
achieve consistent profitability. In addition, payments under collaborative
agreements and licensing arrangements will be subject to significant
fluctuations in both timing and amounts, resulting in quarters of profitability
and quarters of losses by the Company. Therefore, the Company's results of
operations for any period may fluctuate and may not be comparable to the results
of operations for any other period.
ZymoGenetics, Inc., with whom the Company has a collaboration in the
field of autoimmune diseases that is terminable as of September 30, 1997, has
notified the Company that it will terminate the collaboration as of January 28,
1998. Thereafter the Company will recognize no further research revenues from
the ZymoGenetics collaboration.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Total Revenues
Revenues increased to $3.3 million for the three months ended
September 30, 1997, from $1.7 million for the same period in 1996. Revenues
increased to $10.8 million for the nine months ended September 30, 1997, from
$4.1 million for the same period in 1996. This increase was attributable
primarily to license revenues resulting from the agreements with SmithKline
Beecham. Revenue of approximately $559,000 and $1.4 million were recognized
during the three and nine months ended September 30, 1997 in conjunction with
the collaboration agreement with GenQuest, Inc. ("GenQuest"). Revenue under
government grants received in 1997 is expected to be slightly less than that
received in 1996.
Research and Development Expenses
Research and development expenses increased to $4.3 million for the
three months ended September 30, 1997, from $2.4 million for the same period in
1996. Research and development expenses increased to $11.4 million for the nine
months ended September 30, 1997, from $7.1 million for the same period in 1996.
The increase was primarily attributable to increased payroll and personnel
expenses incurred as the Company hired additional research and development
personnel, increased purchases of laboratory supplies, increased equipment
depreciation and facilities expenses in connection with the expansion of the
Company's research efforts, and the inclusion of the research and development
portion of amortized deferred compensation expense associated with the grant of
certain stock options. This non-cash
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compensation expense will continue to be recognized over the vesting period of
such options, typically four years. Research and development expenses of
approximately $559,000 and $1.4 million were incurred during the three and nine
months ended September 30, 1997 in conjunction with the GenQuest collaboration
agreement. The Company expects research and development expenses to increase in
the future to support the expansion of its research and development activities.
The Company and GenQuest and certain shareholders have entered into a
call option agreement under which the Company has the right to purchase a
significant majority of the outstanding capital stock of GenQuest in exchange
for shares of the Company's Common Stock at a purchase price determined in
accordance with a formula specified in the call option agreement. The Company
has not made a decision as to whether it will exercise the option. If the
Company were to exercise the option, the Company would be required to fund any
future development efforts of GenQuest which might result in the Company
incurring research and development expenses without the corresponding revenue
currently provided by GenQuest.
General and Administrative Expenses
General and administrative expenses increased to $488,000 for the
three months ended September 30, 1997, from $331,000 for the same period in
1996. General and administrative expenses increased to $1.3 million for the nine
months ended September 30, 1997, from $770,000 for the same period in 1996. The
increase was primarily due to increased expenses related to business development
and the general and administrative portions of the amortized deferred
compensation expense associated with the grant of certain stock options. The
Company expects general and administrative expenses to increase in the future to
support the expansion of its business development activities, and as a result of
additional expenses associated with being a public company.
Interest Income, Net
Interest income, net decreased to $128,000 for the three months ended
September 30, 1997, from $134,000 for the same period in 1996. Interest income,
net increased to $363,000 for the nine months ended September 30, 1997, from
$347,000 for the same period in 1996. This increase resulted from higher average
cash balances in the first nine months of 1997 which was partially offset by an
increase in interest expense resulting from higher capital lease balances
outstanding in 1996. The Company expects interest income, net to increase in
1997 due to an increase in average cash balances as a result of the proceeds of
the initial public offering.
Other Income
Other income increased to $125,000 for the three months ended
September 30, 1997, from $87,000 for the same period in 1996. Other income
increased to $312,000 for the nine months ended September 30, 1997, from
$261,000 for the same period in 1996. The balance through September 30, 1997
consists of $244,000 and $68,000 in proceeds from management and administrative
services agreements with GenQuest and the Infectious Disease Research Institute
("IDRI"), a not-for-profit, grant-funded private research institute,
respectively, pursuant to which the Company provides services with respect to
corporate management, accounting and financial matters, record keeping,
personnel administration and human resources, and treasury services as required
by such agreements.
Deferred Compensation
Deferred compensation of approximately $3.9 million was recorded in
the nine months ended September 30, 1997, representing the difference between
the exercise prices of 645,000 shares of Common Stock subject to options granted
during the six months ended June 30,1997 and the deemed fair value of the
Company's Common Stock on the grant dates. Deferred compensation expense of
approximately $479,000 and $850,000 was amortized for the three and nine months
ended September 30, 1997, respectfully.
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LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception through
collaborative agreements, government grants, private placements of equity
securities, capital leases and an initial public offering of its Common Stock.
From inception through September 30, 1997, the Company's operations have used
cash of $6.6 million. The private placements of equity securities have provided
the Company with aggregate gross proceeds of approximately $20.1 million. The
Company has drawn down $4.0 million through capital lease financings and $3.0
million from an advance under a collaborative agreement. The October 1997
closing of the initial public offering and the exercise of the over-allotment
has provided the Company with aggregate gross proceeds of approximately $41.7
million. As of September 30, 1997, the Company had approximately $14.3 million
in cash, cash equivalents and securities available-for-sale, which increased to
approximately $56.0 million upon receipt of the proceeds of the initial public
offering.
The Company has invested $5.5 million in property and equipment since
inception, including equipment acquired under capital lease financings of $4.0
million. The Company expects capital expenditures to increase over the next
several years as it expands its facilities and acquires scientific equipment to
support the planned expansion of research and development efforts.
The Company believes that the proceeds from the initial public
offering, its existing capital resources, committed payments under its existing
collaborative agreements and licensing arrangements, equipment financing and
interest income will be sufficient to fund its current and planned operations
until at least March 31, 1999. The Company intends to enter into additional
corporate collaborations which will provide funding for all or a part of the
Company's research and development activities. The Company's future capital
requirements will depend on many factors, including, among others, the
following: continued scientific progress in its discovery, research and
development programs; the magnitude and scope of these activities; the ability
of the Company to maintain existing, and enter into additional, corporate
collaborations and licensing arrangements; progress with preclinical studies and
clinical trials; the time and costs involved in obtaining regulatory approvals;
the costs involved in preparing, filing, prosecuting, maintaining, defending and
enforcing patent claims; and the potential need to develop, acquire or license
new technologies and products and other factors not within the Company's
control. The Company intends to seek additional funding through corporate
collaborations, licensing arrangements, public or private equity or debt
financings and capital lease transactions; however, there can be no assurance
that additional financing will be available on acceptable terms, if at all. If
sufficient capital is not available, the Company may be required to delay,
reduce the scope of, eliminate, or divest one or more of its discovery, research
or development programs, any of which could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Factors Affecting Future Results-- Future Capital Needs; Uncertainty of
Additional Funding."
FACTORS AFFECTING FUTURE RESULTS
UNCERTAINTIES RELATED TO EARLY STAGE OF DEVELOPMENT
Corixa is at an early stage in the development of its therapeutic,
prophylactic and diagnostic products. To date, almost all of the Company's
revenues have resulted from payments made under agreements with its corporate
partners, and the Company expects that most of its revenues for the foreseeable
future will continue to result from existing and future corporate partnerships,
if any. The Company has generated only minimal revenues from diagnostic product
sales and no revenues from therapeutic product sales since inception. Vaccine
products that may result from the Company's research and development programs
are not expected to be commercially available for a number of years, if at all,
and it will be a number of years, if ever, before Corixa will receive any
significant revenues from commercial sales of such products. There can be no
assurance that the Company will receive anticipated revenues under existing
corporate partnerships, that the Company will be able to enter into any
additional corporate partnerships or that the Company will ever achieve
consistent profitability.
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UNCERTAINTIES RELATED TO TECHNOLOGY AND PRODUCT DEVELOPMENT
The Company's technological approach to the development of
therapeutic and prophylactic vaccines for cancers and certain infectious
diseases is unproven in humans. Products based on the Company's technologies are
currently in the discovery, preclinical or early clinical investigation stages,
and to date, neither the Company nor any of its corporate partners have
conducted any clinical trials that incorporate the Company's proprietary
microsphere delivery systems or its proprietary adjuvants. In addition, no
therapeutic vaccines for cancer or infectious diseases targeted by the Company
have been successfully commercialized by the Company or others. There can be no
assurance that the Company will be able to successfully develop effective
vaccines for such diseases in a reasonable time frame, if ever, or that such
vaccines will be capable of being commercialized. In addition to its internal
development programs, the Company in-licenses and acquires technologies to
enhance its product pipeline. There can be no assurance that any in-licensed
technologies will prove to be effective or will result in the successful
development of commercial products.
A majority of Corixa's programs are currently in the discovery stage
or in preclinical development, and only two of the Company's therapeutic vaccine
products have advanced to Phase I clinical trials. The Company's vaccines have
not been demonstrated to be safe or effective in clinical settings. There can be
no assurance that any of the Company's programs will move beyond its current
stage of development. For example, in a Company-funded early safety trial of the
Muc-1 antigen conducted by the University of Pittsburgh, the Company did not
observe a level of efficacy sufficient to support further product development.
Assuming the Company's research does advance, certain preclinical development
efforts will be necessary to determine whether any product is safe to enter
clinical trials. Under certain of the Company's existing corporate partnerships,
the respective corporate partner has primary responsibility for the clinical
development of a product. There can be no assurance that any such corporate
partner will pursue clinical development in a timely or effective manner, if at
all. If such a product receives authorization from the United States Food and
Drug Administration ("FDA") to enter clinical trials, then it may be, and in the
case of vaccine products will be, subjected to a multi-phase, multi-center
clinical study to determine its safety and efficacy. It is difficult to predict
the number or extent of clinical trials required or the period of mandatory
patient follow-up. Assuming clinical trials of any product are successful and
other data are satisfactory, the Company or its applicable corporate partner
will submit an application to the FDA and appropriate regulatory bodies in other
countries to seek permission to market the product. Typically, the review
process at the FDA takes several years, and there can be no assurance that the
FDA will approve the Company's or its corporate partner's application or will
not require additional clinical trials or other data prior to approval.
Furthermore, even if regulatory approval is ultimately obtained, delays in the
approval process could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, there can be no
assurance that any product can be produced in commercial quantities at a
reasonable cost or that such product will be successfully marketed.
DEPENDENCE ON AND MANAGEMENT OF EXISTING AND FUTURE CORPORATE
PARTNERSHIPS
The success of Corixa's business strategy is largely dependent on its
ability to enter into multiple corporate partnerships and to effectively manage
the numerous relationships that may exist as a result of this strategy. Corixa
has established significant relationships with several corporate partners as of
the date of this Prospectus. For example, the Company has entered into three
collaboration and license agreements with SmithKline Beecham for the research,
development and commercialization of vaccine products aimed at the prevention
and/or treatment of tuberculosis, breast cancer and prostate cancer. In
addition, Corixa has established corporate partnerships with CellPro,
Incorporated and GenQuest, among others. A large percentage of the Company's
revenues during the year ended December 31, 1997 will be derived from research
and development and other funding under such corporate partnerships, and the
termination of any of these corporate partnerships would have a material adverse
effect on the Company's business, financial condition and results of operations.
Several of the Company's corporate partners have entered into agreements
granting them options to license certain aspects of the Company's technology.
There can be no assurance that any such corporate partner will exercise its
option to license such technology. The Company has also entered into corporate
partnerships with several companies for the development, commercialization
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and sale of diagnostic products incorporating the Company's proprietary antigen
technology. There can be no assurance that any such diagnostic corporate
partnership will ever generate significant revenues. Furthermore, Corixa is
currently engaged in discussions with a number of pharmaceutical and diagnostic
companies with respect to potential corporate partnering arrangements covering
various aspects of the Company's technologies. However, due in part to the early
stage of Corixa's technologies, the process of establishing corporate
partnerships such as the Company's collaborations with SmithKline Beecham is
difficult, time-consuming and involves significant uncertainty, and there can be
no assurance that such discussions will lead to the establishment of any new
corporate partnership on favorable terms, or at all, or that if established, any
such corporate partnership will result in the successful development of the
Company's products or the generation of significant revenues.
Because Corixa enters into research and development collaborations
with corporate partners at an early stage of product development, the Company's
success is highly reliant upon the performance of its corporate partners. Under
existing corporate partnership arrangements, the Company's corporate partners
are generally required to undertake and fund certain research and development
activities with the Company, make payments upon achievement of certain
scientific milestones and pay royalties or make profit-sharing payments when and
if a product is commercialized. The amount and timing of resources to be devoted
to activities by its existing or future corporate partners are not within the
direct control of the Company, and there can be no assurance that any of the
Company's existing or future corporate partners will commit sufficient resources
to Corixa's research and development programs or the commercialization of its
products. If any corporate partner fails to conduct its activities in a timely
manner, or at all, the Company's preclinical or clinical development related to
such corporate partnership could be delayed or terminated. There can be no
assurance that the Company's corporate partners will perform their obligations
as expected. There can also be no assurance that the Company's current corporate
partners or future corporate partners, if any, will not pursue existing or other
development-stage products or alternative technologies in preference to those
being developed in collaboration with the Company, or that disputes will not
arise with respect to ownership of technology developed under any such corporate
partnership. Finally, there can be no assurance that any of the Company's
current corporate partnerships will not be terminated by its corporate partners
or that the Company will be able to negotiate additional corporate partnerships
in the future on acceptable terms, or at all.
Because the success of the Company's business is largely dependent
upon its ability to enter into multiple corporate partnerships and to
effectively manage the numerous issues that arise from such partnerships,
management of these relationships will require, at a minimum, significant time
and effort from Corixa's management team and effective allocation of the
Company's resources to multiple projects, as well as an ability to obtain and
retain management, scientific and other personnel sufficient to accomplish the
foregoing. There can be no assurance that Corixa's need to simultaneously manage
a number of corporate partnerships will be successful, and the failure to
effectively manage such corporate partnerships would have a material adverse
effect on the Company's business, financial condition and results of operations.
DEPENDENCE ON IN-LICENSED TECHNOLOGY
In addition to its dependence on existing and future corporate
partnerships, Corixa's success is also dependent on its ability to enter into
licensing arrangements with commercial or academic entities to obtain technology
that is advantageous or necessary to the development and commercialization of
Corixa's products. The Company is party to various license agreements that give
it rights to use certain technologies in its and its corporate partners'
discovery, research, development and commercialization activities. Disputes may
arise as to the inventorship and corresponding rights in inventions and know-how
resulting from the joint creation or use of intellectual property by the Company
and its licensors or scientific collaborators. Additionally, many of the
Company's in-licensing agreements contain milestone-based termination
provisions. The Company's failure to meet any significant milestones in a
particular agreement could allow the licensor to terminate such agreement. There
can be no assurance that the Company will be able to negotiate additional
license agreements in the future on acceptable terms, if at all, that any of its
current license agreements will not be terminated or that it will be able to
maintain the exclusivity of its exclusive licenses. In the event the Company is
unable to obtain or maintain licenses to technology
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advantageous or necessary to the Company's business, Corixa and its corporate
partners may be required to expend significant time and resources to develop or
in-license similar technology, and there can be no assurance that the Company
and its corporate partners will be successful in this regard. If the Company
cannot acquire or develop necessary technology, it may be prevented from
commercializing certain of its products. Any such event would have a material
adverse effect on the Company's business, financial condition and results of
operations.
DEPENDENCE ON PROPRIETARY TECHNOLOGY AND UNCERTAINTY OF PATENT
PROTECTION
Corixa's success will depend in part on its ability and that of its
corporate partners to obtain and enforce their respective patents and maintain
trade secrets, both in the United States and in other countries. As of September
30, 1997, Corixa owned or had licensed eight issued United States patents that
expire at various times between December 2008 and February 2014, 55
corresponding issued foreign patents, 76 pending United States patent
applications, as well as 19 corresponding international filings under the Patent
Cooperation Treaty and 111 pending foreign national patent applications. There
can be no assurance that the Company, its corporate partners or its licensors
have or will develop or obtain rights to products or processes that are
patentable, that patents will issue from any of the pending applications owned
or licensed by the Company or its corporate partners, that any claims allowed
will issue, or in the event of issuance, will be sufficient to protect the
technology owned by or licensed to the Company or its corporate partners. The
Company has licensed certain patent applications from Southern Research
Institute ("SRI") related to the Company's microsphere encapsulation technology,
one of which is currently the subject of an opposition proceeding before the
European Patent Office. There can be no assurance that SRI will prevail in this
opposition proceeding or that any patents will issue in Europe related to such
technology. There can also be no assurance that the Company's or its corporate
partners' current patents, or patents that issue on pending applications, will
not be challenged, invalidated, infringed or circumvented, or that the rights
granted thereunder will provide proprietary protection or competitive advantages
to Corixa. Patent applications in the United States are maintained in secrecy
until patents issue, patent applications in certain foreign countries are not
generally published until many months or years after they are filed, and
publication of technological developments in the scientific and patent
literature often occurs long after the date of such developments. Accordingly,
the Company cannot be certain that it or one of its corporate partners was the
first to invent the subject matter covered by any patent application or that it
or one of its corporate partners was the first to file a patent application for
any such invention.
Patent law relating to the scope and enforceability of claims in the
fields in which Corixa operates is still evolving. The patent positions of
biotechnology and biopharmaceutical companies, including the Company, are highly
uncertain and involve complex legal and technical questions for which legal
principles are not firmly established. The degree of future protection for the
Company's proprietary rights, therefore, is highly uncertain. In this regard,
there can be no assurance that independent patents will issue from each of the
76 pending United States patent applications referenced above, which include
many interrelated applications directed to common or related subject matter. In
addition, there may be issued patents and pending applications owned by others
directed to technologies relevant to the Company's or its corporate partners'
research, development and commercialization efforts. There can be no assurance
that Corixa's or its corporate partners' technology can be developed and
commercialized without a license to such patents or that such patent
applications will not be granted priority over patent applications filed by
Corixa or one of its corporate partners.
The commercial success of Corixa depends significantly on its ability
to operate without infringing the patents and proprietary rights of third
parties, and there can be no assurance that the Company's and its corporate
partners' technologies do not or will not infringe the patents or proprietary
rights of others. A number of pharmaceutical companies, biotechnology companies,
universities and research institutions may have filed patent applications or may
have been granted patents that cover technologies similar to the technologies
owned, optioned by or licensed to the Company or its corporate partners. In
addition, the Company is unable to determine the patents or patent applications
that may materially affect the Company's or its corporate partners' ability to
make, use or sell any products. The existence of third party patent applications
and patents could significantly reduce the coverage of the patents owned,
optioned by or
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licensed to the Company or its corporate partners and limit the ability of the
Company or its corporate partners to obtain meaningful patent protection. If
patents containing competitive or conflicting claims are issued to third
parties, the Company or its corporate partners may be enjoined from pursuing
research, development or commercialization of products or be required to obtain
licenses to these patents or to develop or obtain alternative technology. There
can be no assurance that the Company or its corporate partners will not be so
enjoined or will be able to obtain any license to the patents and technologies
of third parties on acceptable terms, if at all, or will be able to obtain or
develop alternative technologies. If the Company or any of its corporate
partners is enjoined from pursuing its research, development or
commercialization activities or if any such license is or alternative
technologies are not obtained or developed, the Company or such corporate
partner may be delayed or prevented from commercializing its products, which
would have a material adverse effect on the Company's business, financial
condition and results of operations.
There can be no assurance that third parties will not independently
develop similar or alternative technologies to those of the Company, duplicate
any of the technologies of the Company, its corporate partners or its licensors,
or design around the patented technologies developed by the Company, its
corporate partners or its licensors. The occurrence of any of these events would
have a material adverse effect on the Company's business, financial condition
and results of operations.
Litigation may also be necessary to enforce patents issued or
licensed to the Company or its corporate partners or to determine the scope and
validity of a third party's proprietary rights. Corixa could incur substantial
costs if litigation is required to defend itself in patent suits brought by
third parties, if Corixa participates in patent suits brought against or
initiated by its corporate partners or if Corixa initiates such suits, and there
can be no assurance that funds or resources would be available to the Company in
the event of any such litigation. Additionally, there can be no assurance that
the Company or its corporate partners would prevail in any such action. An
adverse outcome in litigation or an interference to determine priority or other
proceeding in a court or patent office could subject the Company to significant
liabilities, require disputed rights to be licensed from other parties or
require the Company or its corporate partners to cease using certain technology,
any of which may have a material adverse effect on the Company's business,
financial condition and results of operations. Corixa also relies on trade
secrets and proprietary know-how, especially in circumstances in which patent
protection is not believed to be appropriate or obtainable. Corixa attempts to
protect its proprietary technology in part by confidentiality agreements with
its employees, consultants and advisors. These agreements generally provide that
all confidential information developed or made known to the individual by Corixa
during the course of the individual's relationship with the Company will be kept
confidential and not disclosed to third parties except in specific
circumstances. These agreements also generally provide that all inventions
conceived by the individual in the course of rendering services to the Company
shall be the exclusive property of the Company. There can be no assurance,
however, that these agreements will provide meaningful protection or adequate
remedies for any breach, or that the Company's trade secrets will not otherwise
become known or be independently discovered by its competitors, any of which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
MANAGEMENT OF GROWTH
The Company's future growth may cause a significant strain on its
management, operational, financial and other resources. The Company's ability to
manage its growth effectively will require it to implement and improve its
operational, financial, manufacturing and management information systems and to
expand, train, manage and motivate its employees. These demands may require the
addition of new management personnel and the development of additional expertise
by management. Any increase in resources devoted to product development and
marketing and sales efforts without a corresponding increase in the Company's
operational, financial, manufacturing and management information systems could
have an adverse effect on the Company's performance. The failure of the
Company's management team to effectively manage growth could have a material
adverse effect on the Company's business, financial condition and results of
operations.
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HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; FLUCTUATIONS IN
FUTURE EARNINGS
Corixa has experienced significant operating losses in each year
since its inception on September 8, 1994. As of September 30, 1997, the
Company's accumulated deficit was approximately $10.5 million. The Company may
incur substantial additional operating losses over at least the next several
years. Such losses have been and may continue to be principally the result of
the various costs associated with the Company's discovery, research and
development programs, preclinical studies and clinical activities. Substantially
all of the Company's revenues to date have resulted from corporate partnerships,
other research, development and licensing arrangements, research grants and
interest income. The Company's ability to achieve a consistent, profitable level
of operations is dependent in large part upon entering into agreements with
corporate partners for product discovery, research, development and
commercialization, obtaining regulatory approvals for its products and
successfully manufacturing and marketing commercial products. There can be no
assurance that the Company will be able to achieve consistent profitability. In
addition, payments under corporate partnerships and licensing arrangements will
be subject to significant fluctuations in both timing and amounts, resulting in
quarters of profitability and quarters of losses by the Company. Therefore, the
Company's results of operations for any period may fluctuate and may not be
comparable to the results of operations for any other period.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company will require substantial capital resources in order to
conduct its operations. The Company's future capital requirements will depend on
many factors, including, among others, the following: continued scientific
progress in its discovery, research and development programs; the magnitude and
scope of these activities; the ability of the Company to maintain existing and
establish additional corporate partnerships and licensing arrangements; progress
with preclinical studies and clinical trials; the time and costs involved in
obtaining regulatory approvals; the costs involved in preparing, filing,
prosecuting, maintaining, defending and enforcing patent claims; the potential
need to develop, acquire or license new technologies and products; and other
factors not within the Company's control. The Company intends to seek such
additional funding through corporate partnerships, public or private equity or
debt financings and capital lease transactions; however, there can be no
assurance that additional financing will be available on acceptable terms, if at
all. Additional equity financings could result in significant dilution to
stockholders. If sufficient capital is not available, the Company may be
required to delay, reduce the scope of, eliminate or divest one or more of its
discovery, research or development programs, any of which could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company believes that its existing capital resources, committed
payments under its existing corporate partnerships and licensing arrangements,
equipment financing and interest income will be sufficient to fund its current
and planned operations until at least March 31, 1999. However, there can be no
assurance that such funds will be sufficient to meet the capital needs of the
Company. In addition, a substantial number of the payments to be made by
Corixa's corporate partners and other licensors are dependent upon the
achievement by the Company of development and regulatory milestones. Failure to
achieve such milestones would have a material adverse effect on the Company's
future capital needs. In addition, the Company has entered into an option
agreement with one of its corporate partners pursuant to which such corporate
partner has agreed to pay certain consideration in exchange for exclusive
options to license two of Corixa's early-stage antigen discovery programs in two
cancer targets. If such options are exercised, then at the election of the
corporate partner, such consideration will either be credited against future
milestone payments or converted into Common Stock of Corixa. In the event either
or both of such options are not exercised or extended prior to February 28, 1998
with respect to one cancer target and August 31, 1998 with respect to the other
cancer target, the Company will be required to repay the amounts paid by such
corporate partner for such option(s) over a three-year period beginning in March
2000.
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DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on the principal members of its
scientific and management staff, the loss of whose services might significantly
delay or prevent the Company's achievement of its scientific or business
objectives. Competition among biotechnology and biopharmaceutical companies for
qualified employees is intense, and the ability to retain and attract qualified
individuals is critical to the Company's success. There can be no assurance that
the Company will be able to attract and retain such individuals currently or in
the future on acceptable terms, or at all, and the failure to do so would have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company does not maintain "key person"
life insurance on any officer, employee or consultant of the Company.
Corixa also has relationships with scientific collaborators at
academic and other institutions, some of whom conduct research at the Company's
request or assist the Company in formulating its research and development
strategy. These scientific collaborators are not employees of the Company and
may have commitments to, or consulting or advisory contracts with, other
entities that may limit their availability to the Company. The Company has
limited control over the activities of these scientific collaborators and,
except as otherwise required by its license, consulting and sponsored research
agreements, can expect only limited amounts of time to be dedicated to the
Company's activities by such individuals. Failure of any such persons to devote
sufficient time and resources to the Company's programs could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, these collaborators may have arrangements with other
companies to assist such companies in developing technologies that may prove
competitive to those of Corixa.
INTENSE COMPETITION
The biotechnology and biopharmaceutical industries are intensely
competitive. Several biotechnology and biopharmaceutical companies, as well as
certain research organizations, currently engage in or have in the past engaged
in efforts related to the development of vaccines for the treatment and
prevention of cancer and various infectious diseases, as well as the development
of diagnostic products for infectious disease indications.
Many companies, including Corixa's corporate partners, as well as
academic and other research organizations, are also developing alternative
therapies to treat cancer and infectious diseases and, in this regard, are
competitive with the Company. Moreover, technology controlled by third parties
that may be advantageous to the Company's business may be acquired or licensed
by competitors of the Company, thereby preventing the Company from obtaining
such technology on favorable terms, or at all.
Many of the companies developing competing technologies and products
have significantly greater financial resources and expertise in discovery,
research and development, manufacturing, preclinical and clinical testing,
obtaining regulatory approvals and marketing than Corixa or its corporate
partners. Other smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and established
companies. Academic institutions, government agencies and other public and
private research organizations may also conduct research, seek patent protection
and establish collaborative arrangements for discovery, research, clinical
development and marketing of products similar to those of the Company. These
companies and institutions compete with the Company in recruiting and retaining
qualified scientific and management personnel as well as in acquiring
technologies complementary to the Company's programs. Corixa and its corporate
partners will face competition with respect to product efficacy and safety, the
timing and scope of regulatory approvals, availability of resources,
reimbursement coverage, price and patent position, including potentially
dominant patent positions of others. There can be no assurance that competitors
will not develop more effective or more affordable products, or achieve earlier
patent protection or product commercialization than the Company and its
corporate partners, or that such competitive products will not render the
Company's products obsolete.
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LACK OF MANUFACTURING EXPERIENCE; RELIANCE ON CONTRACT MANUFACTURERS
Corixa does not have significant manufacturing facilities. Although
the Company currently manufactures limited quantities of certain antigens and
adjuvants, including LeIF, to conduct preclinical studies and to supply
corporate partners, the Company intends to rely on third party contract
manufacturers to produce large quantities of such substances for clinical trials
and product commercialization. Additionally, the Company may be required to rely
on contract manufacturers to produce antigens, adjuvants and other components of
its products for research and development, preclinical and clinical purposes.
Corixa's vaccines and other products have never been manufactured on a
commercial scale, and there can be no assurance that such products can be
manufactured at a cost or in quantities necessary to make them commercially
viable. There can be no assurance that third party manufacturers will be able to
meet the Company's needs with respect to timing, quantity or quality. If the
Company is unable to contract for a sufficient supply of required products and
substances on acceptable terms, or if it should encounter delays or difficulties
in its relationships with manufacturers, the Company's preclinical and clinical
testing would be delayed, thereby delaying the submission of products for
regulatory approval or the market introduction and subsequent sales of such
products. Any such delay may have a material adverse effect on the Company's
business, financial condition and results of operations. Moreover, contract
manufacturers that the Company may use must continually adhere to current Good
Manufacturing Practices ("GMP") regulations enforced by the FDA through its
facilities inspection program. If the facilities of such manufacturers cannot
pass a pre-approval plant inspection, the FDA premarket approval of the
Company's products will not be granted.
LACK OF MARKETING EXPERIENCE; DEPENDENCE ON THIRD PARTIES
The Company currently has no sales, marketing or distribution
capability. The Company intends to rely on its current and future corporate
partners, if any, to market its products; however, there can be no assurance
that such corporate partners have effective sales forces and distribution
systems. If the Company is unable to maintain or establish such relationships
and is required to market any of its products directly, the Company will have to
develop a marketing and sales force with technical expertise and with supporting
distribution capabilities. There can be no assurance that the Company will be
able to maintain or establish such relationships with third parties or develop
in-house sales and distribution capabilities. To the extent that the Company
depends on its corporate partners or third parties for marketing and
distribution, any revenues received by the Company will depend upon the efforts
of such corporate partners or third parties, and there can be no assurance that
such efforts will be successful.
GOVERNMENT REGULATION
The preclinical testing and clinical trials of any products developed
by the Company or its corporate partners and the manufacturing, labeling, sale,
distribution, export or import, marketing, advertising and promotion of any new
products resulting therefrom are subject to regulation by federal, state and
local governmental authorities in the United States, the principal one of which
is the FDA, and by similar agencies in other countries. Any product developed by
the Company or its corporate partners must receive all relevant regulatory
approvals or clearances before it may be marketed in a particular country. The
regulatory process, which includes extensive preclinical studies and clinical
trials of each product in order to establish its safety and efficacy, is
uncertain, can take many years and requires the expenditure of substantial
resources. Data obtained from preclinical and clinical activities are
susceptible to varying interpretations which could delay, limit or prevent
regulatory approval or clearance. In addition, delays or rejections may be
encountered based upon changes in regulatory policy during the period of product
development and/or the period of review of any application for regulatory
approval or clearance for a product. Delays in obtaining regulatory approvals or
clearances would adversely affect the marketing of any products developed by the
Company or its corporate partners, impose significant additional costs on the
Company and its corporate partners, diminish any competitive advantages that the
Company or its corporate partners may attain and adversely affect the Company's
ability to receive royalties and generate revenues and profits. There can be no
assurance that, even after such time and expenditures, any required regulatory
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approvals or clearances will be obtained for any products developed by or in
collaboration with the Company.
Regulatory approval, if granted, may entail limitations on the
indicated uses for which the new product may be marketed that could limit the
potential market for such product, and product approvals, once granted, may be
withdrawn if problems occur after initial marketing. Furthermore, manufacturers
of approved products are subject to pervasive review, including compliance with
detailed regulations governing GMP. Failure to comply with applicable regulatory
requirements can result in, among other things, warning letters, fines,
injunctions, civil penalties, recall or seizure of products, total or partial
suspension of production, refusal of the government to renew marketing
applications and criminal prosecution.
The Company is also subject to numerous federal, state and local
laws, regulations and recommendations relating to safe working conditions,
laboratory and manufacturing practices, the experimental use of animals, the
environment and the use and disposal of hazardous substances, used in connection
with the Company's discovery, research and development work, including
radioactive compounds and infectious disease agents. In addition, the Company
cannot predict the extent of government regulations or the impact of new
governmental regulations which might have an adverse effect on the discovery,
development, production and marketing of the Company's products, and there can
be no assurance that the Company will not be required to incur significant costs
to comply with current or future laws or regulations or that the Company will
not be adversely affected by the cost of such compliance.
PRODUCT LIABILITY EXPOSURE AND POTENTIAL UNAVAILABILITY OF INSURANCE
Inherent in the use of the Company's product candidates in clinical
trials, as well as in the manufacturing and distribution of any approved
products, is the risk of financial exposure to product liability claims in the
event that the use of such products results in personal injury. There can be no
assurance that the Company will not experience losses due to product liability
claims in the future. Corixa has obtained limited product liability insurance
coverage; however, there can be no assurance that such coverage is adequate or
will continue to be available in sufficient amounts or at an acceptable cost, or
at all. There can also be no assurance that the Company will be able to obtain
commercially reasonable product liability insurance for any product approved for
marketing. A product liability claim, product recall or other claim, as well as
any claims for uninsured liabilities or in excess of insured liabilities, may
have a material adverse effect on the Company's business, financial condition
and results of operations.
NO ASSURANCE OF MARKET ACCEPTANCE
There can be no assurance that any products successfully developed by
the Company or its corporate partners, if approved for marketing, will ever
achieve market acceptance. The Company's products, if successfully developed,
will compete with a number of traditional drugs and therapies manufactured and
marketed by major pharmaceutical and other biotechnology companies, as well as
new products currently under development by such companies and others. The
degree of market acceptance of any products developed by the Company or its
corporate partners will depend on a number of factors, including the
establishment and demonstration of the clinical efficacy and safety of the
product candidates, their potential advantage over alternative treatment methods
and reimbursement policies of government and third-party payors. There can be no
assurance that physicians, patients or the medical community in general will
accept and utilize any products that may be developed by the Company or its
corporate partners, and the lack of such market acceptance would have a material
adverse effect on the Company's business, financial condition and results of
operations.
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UNCERTAINTY RELATED TO PRICING AND REIMBURSEMENT; UNCERTAINTY RELATED
TO HEALTH CARE REFORM
In both domestic and foreign markets, sales of the Company's or its
corporate partners' products, if any, will depend in part on the availability of
reimbursement from third-party payors such as government health administration
authorities, private health insurers, health maintenance organizations, pharmacy
benefit management companies and other organizations. Both the federal and state
governments in the United States and foreign governments continue to propose and
pass legislation designed to contain or reduce the cost of health care, and
regulations affecting the pricing of pharmaceuticals and other medical products
may change or be adopted before any of the Company's or its corporate partners'
products are approved for marketing. Cost control initiatives could decrease the
price that the Company receives for any product it or any of its corporate
partners may develop in the future and may have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
third-party payors are increasingly challenging the price and cost-effectiveness
of medical products and services. Significant uncertainty exists as to the
reimbursement status of newly approved health care products, including
pharmaceuticals. There can be no assurance that the Company's or its corporate
partners' products, if any, will be considered cost effective or that adequate
third-party reimbursement will be available to enable Corixa or its corporate
partners to maintain price levels sufficient to realize a return on their
investment. In any such event, the Company may be materially adversely affected.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
19
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On October 2, 1997, the Company's Registration Statement on Form S-1,
SEC File No. 333-32147 (the "Registration Statement"), with respect to the
Company's initial public offering of 3,000,000 shares of the Company's common
stock (the "IPO") was declared effective by the Securities and Exchange
Commission. These shares carry the same voting rights as previously issued
shares of common stock of the Company. Effective upon the closing of the
Company's IPO, all outstanding shares of preferred stock were automatically
converted into shares of the Company's common stock, and following such date,
the Company amended its Certificate of Incorporation to delete reference to such
preferred stock.
Pursuant to the Registration Statement, the Company registered
3,000,000 shares of its Common Stock, $0.001 par value per share, for its own
account. The Company also registered 450,000 shares pursuant to an overallotment
option granted to the underwriters which was exercised on October 22, 1997. The
offering commenced on October 2, 1997 and did not terminate until all of the
registered shares had been sold. The aggregate offering price of the registered
shares was $44.9 million. The managing underwriters of the offering were Lehman
Brothers Inc., Invemed Associates, Inc. and Vector Securities International,
Inc.
The Company did not recognize any expenses in connection with the IPO
during the quarter ended September 30, 1997. These expenses, consisting of
underwriting discounts and commissions and other expenses, approximate $4.1
million and will be recognized in the quarter ending December 31, 1997. The net
offering proceeds to the Company after deducting the total expenses above were
approximately $40.8 million. The Company did not use any of such net offering
proceeds during the quarter ended September 30, 1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On September 23, 1997, the Company obtained written stockholder
consent to the following matters:
<TABLE>
<CAPTION>
Shares Shares Shares
For Against Not Voted
<S> <C> <C> <C> <C>
Amendment to Amended and Restated
1994 Stock Plan to increase shares
reserved 1994 Stock Plan to
2,010,982 shares 6,299,843 30,000 1,521,784
Approval of 1997 Employee Stock
Purchase Plan with 125,000 shares
reserved for issuance 6,329,843 0 1,521,784
</TABLE>
20
<PAGE> 21
<TABLE>
<S> <C> <C> <C> <C>
Approval of 1997 Directors' Stock
Option Plan with 200,000 shares
reserved for issuance 6,329,529 314 1,521,784
Approval of Company's Amended and
Restated Certificate of Incorporation
filed prior to the IPO 6,291,911 37,932 1,521,784
Approval of Company's Amended and
Restated Certificate of Incorporation
filed following the IPO 6,291,597 0 1,560,030
</TABLE>
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - See Index to Exhibits.
(b) No reports on Form 8-K were filed by the Registrant
during the quarter ended September 30, 1997.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORIXA CORPORATION
By: /S/ Michelle Burris
------------------------------------------------
MICHELLE BURRIS
VICE PRESIDENT OF FINANCE AND ADMINISTRATION AND
CHIEF ACCOUNTING OFFICER
Date: November 13, 1997
22
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ---------- -------------------
<S> <C>
11.1 Statement Regarding Computation of Net Loss Per Share
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET INCOME (LOSS)................................................... ($1,229,218) ($795,108) ($1,196,805) ($3,197,429)
=========== =========== =========== ==========
NET INCOME (LOSS) PER SHARE
Weighted average common shares
outstanding ....................................................... 2,672,976 2,526,872 2,630,019 2,512,795
Net effect of stock issued, stock options exercised
and stock options and warrants granted during the
12-month period prior to the Company's filing of
its initial public offering at less than the assumed
offering price, calculated using the treasury stock
method at the assumed offering price of $13 per share,
and treated as outstanding for all periods presented .............. 715,751 855,564 756,322 857,085
----------- ----------- ----------- -----------
Shares used in computation of net income
(loss) per share ................................................. 3,388,727 3,382,436 3,386,341 3,369,880
=========== =========== =========== ===========
=========== =========== =========== ==========
Net income (loss) per share ........................................ ($0.36) ($0.24) ($0.35) ($0.95)
=========== =========== =========== ===========
NET INCOME ......................................................... ($1,229,218) ($795,108) ($1,196,805) ($3,197,429)
=========== =========== =========== ===========
PROFORMA NET INCOME PER SHARE
Weighted average common shares
outstanding ...................................................... 2,672,976 2,526,872 2,630,019 2,512,795
Weighted average common shares giving effect to
conversion of convertible
preferred stock to common stock at the time of
preferred stock issuance ......................................... 5,151,196 5,151,196 5,151,196 4,908,845
Net effect of stock issued, stock options exercised
and stock options and warrants granted during the
12-month period prior to the Company's filing of
its initial public offering at less than the assumed
offering price, calculated using the treasury stock
method at the assumed offering price of $13 per share,
and treated as outstanding for all periods presented .............. 715,751 855,564 756,322 857,085
----------- ----------- ----------- ------------
Total.......................................................... 8,539,923 8,533,632 8,537,536 8,278,726
=========== =========== =========== ===========
PRO FORMA NET INCOME PER SHARE ..................................... ($0.14) ($0.09) ($0.14) ($0.39)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 285,822
<SECURITIES> 14,030,122
<RECEIVABLES> 195,052
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,278,298
<PP&E> 5,576,594
<DEPRECIATION> 1,638,061
<TOTAL-ASSETS> 20,157,820
<CURRENT-LIABILITIES> 3,797,448
<BONDS> 0
0
5,151
<COMMON> 2,728
<OTHER-SE> 25,692,793
<TOTAL-LIABILITY-AND-EQUITY> 20,157,820
<SALES> 0
<TOTAL-REVENUES> 10,770,201
<CGS> 0
<TOTAL-COSTS> 12,642,161
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 241,645
<INCOME-PRETAX> (1,196,805)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,196,805)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,196,805)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
