<PAGE> 1
================================================================================
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 quarterly period ended March 31, 1999
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 0-22891
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 Number)
1124 COLUMBIA STREET, SUITE 200
SEATTLE, WA 98104
(206) 754-5711
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
-------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of March 31, 1999, there were approximately 14,669,385 shares of the
Registrant's common stock outstanding.
================================================================================
<PAGE> 2
Corixa Corporation
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 1999 (unaudited) and
December 31,1998 ................................................. 1
Consolidated Statements of Operations (unaudited) for the three
months ended March 31, 1999 and 1998 ............................. 2
Consolidated Statements of Cash Flows (unaudited) for the three
months ended March 31, 1999 and 1998 ............................. 3
Notes to Unaudited Consolidated Financial Statements ............. 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ........................................ 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ......................................... 22
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ................. 22
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ........................... 22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ....... 22
ITEM 5. OTHER INFORMATION ......................................... 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K .......................... 23
SIGNATURES ...................................................................... 26
</TABLE>
<PAGE> 3
CORIXA CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................... $ 7,160 $ 9,098
Securities available-for-sale ........................... 39,321 36,043
Accounts receivable (including $333 and $161
receivable from an affiliated
company at March 31, 1999
and December 31, 1998, respectively) ................. 1,712 3,449
Interest receivable ..................................... 680 567
Prepaid expenses ........................................ 798 516
-------- --------
Total current assets ................................. 49,671 49,673
Property and equipment, net ............................... 9,962 8,831
Investments ............................................... 3,000 2,544
Deferred charges and deposits ............................. 178 136
-------- --------
Total assets ......................................... $ 62,811 $ 61,184
======== ========
Current liabilities:
Accounts payable and accrued liabilities ................ $ 6,199 $ 4,368
Deferred revenue ........................................ 7,309 100
Current portion of obligations .......................... 2,674 2,697
-------- --------
Total current liabilities ............................ 16,182 7,165
Commitments ............................................... -- --
Long-term obligations and commitments, less current portion 11,292 11,835
Stockholders' equity:
Convertible preferred stock, $.001 par value:
Authorized shares - 10,000,000 (1999 and 1998) ....... -- --
Common stock, $0001 par value:
Authorized shares -- 40,000,000
Issued and outstanding shares -- 14,669,385 in 1999
and 13,400,895 in 1998 .............................. 15 13
Additional paid-in capital .............................. 86,772 76,539
Deferred compensation ................................... (928) (1,180)
Accumulated comprehensive income ........................ 141 90
Accumulated deficit ..................................... (50,663) (33,278)
-------- --------
Total stockholders' equity ........................... 35,337 42,184
-------- --------
Total liabilities and stockholders' equity ........... $ 62,811 $ 61,184
======== ========
</TABLE>
1
<PAGE> 4
CORIXA CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
Revenue:
Collaborative agreements ................. $ 2,828 $ 2,626
Government grants ........................ 306 171
-------- --------
Total revenue .......................... 3,134 2,797
Operating expenses:
Research and development ................. 8,624 5,893
General and administrative ............... 590 547
In-process research and development ...... 11,612 --
-------- --------
Total operating expenses ............... 20,826 6,440
-------- --------
Loss from operations ....................... (17,692) (3,643)
Interest income ............................ 468 828
Interest expense ........................... (202) (147)
Other income ............................... 40 125
-------- --------
Net loss ................................... $(17,386) $ (2,837)
======== ========
Basic and diluted net loss
per share ................................ $ (1.23) $ (0.24)
======== ========
Shares used in computation
of basic and diluted net loss
per share ................................ 14,097 11,775
======== ========
</TABLE>
2
<PAGE> 5
CORIXA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss .................................................................. $(17,386) $ (2,837)
Adjustments to reconcile net loss to net cash used in operating activities:
In-process research and development ..................................... 11,612 --
Amortization of deferred compensation ................................... 252 482
Depreciation and amortization ........................................... 647 343
Equity instruments issued in exchange for technology and services ....... -- 56
Changes in certain assets and liabilities:
Accounts receivable ................................................... 1,810 31
Interest receivable ................................................... (113) (539)
Prepaid expenses ...................................................... (225) (94)
Deferred charges and deposits ......................................... (6) 18
Accounts payable and accrued expenses ................................. (381) 426
Deferred revenue ...................................................... 6,760 (187)
-------- --------
Net cash provided by (used in) operating activities ...................... 2,970 (2,301)
INVESTING ACTIVITIES
Purchases of securities available-for-sale ................................ (20,502) (38,515)
Proceeds from maturities of securities available-for-sale ................. 8,225 19,323
Proceeds from sale of securities .......................................... 9,050 9,552
Purchases of property and equipment ....................................... (831) (78)
Cash acquired from acquisition ............................................ 442 --
-------- --------
Net cash used in investing activities ..................................... (3,616) (9,718)
FINANCING ACTIVITIES
Net proceeds from issuance of stock ...................................... 71 1
Proceeds from long term obligations ....................................... -- 4,000
Principal payments made on long term obligations .......................... (1,084)
Principal payments on capital leases ...................................... (279) (239)
Payments on receivables for warrants ...................................... -- 81
-------- --------
Net cash provided by (used in) financing activities ....................... (1,292) 3,843
Net decrease in cash and cash equivalents ................................. (1,938) (8,176)
Cash and cash equivalents at beginning of period .......................... 9,098 16,458
-------- --------
Cash and cash equivalents at end of period ................................ $ 7,160 $ 8,282
======== ========
SUPPLEMENTAL DISCLOSURES
Interest paid ........................................................... $ 222 $ 106
SUPPLEMENTAL SCHEDULE OF NONCASH OPERATING, INVESTING, AND
FINANCING ACTIVITIES
Common stock issued-Anergen acquisition .................................. $ 8,664 $ --
Assets acquired pursuant to capital leases ............................... -- 308
Equity instruments issued in exchange for technology and services ........ -- 56
Equity instruments issued to relieve acquisition-related debt ............ 1,500 --
</TABLE>
3
<PAGE> 6
CORIXA CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Corixa Corporation is focused on the discovery and early clinical
development of products useful in preventing, treating or diagnosing cancer and
certain infectious diseases as well as immunotherapeutic products for the
treatment of certain autoimmune diseases.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Corixa
Corporation ("Corixa" or the "Company") include the accounts of its wholly-owned
subsidiaries, Chinook Corporation and Anergen, Inc., both Delaware corporations.
Pursuant to the terms set forth in the Agreement and Plan of Merger by and among
the Company, Yakima Acquisition Corporation (a wholly-owned subsidiary of Corixa
created to effect the merger with Anergen) ("Yakima") and Anergen, Inc., Anergen
merged with and into Yakima and the separate corporate existence of Yakima
ceased, with Anergen surviving as a wholly-owned subsidiary of Corixa. These
statements have been prepared in accordance with Generally Accepted Accounting
Principles ("GAAP") and the rules and regulations of the Securities and Exchange
Commission (the "SEC") for interim financial information. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed or omitted pursuant to such
rules and regulations.
In the opinion of management, the accompanying consolidated balance
sheets and related interim consolidated statements of operations and cash flows
reflect all normal recurring adjustments necessary for their fair presentation
in conformity with GAAP. Interim results are not necessarily indicative of
results for a full year. The accompanying consolidated financial statements and
related footnotes should be read in conjunction with the audited consolidated
financial statements and footnotes thereto for the year ended December 31, 1998,
included in the Company's Form 10-K filed with the SEC.
PRINCIPLES OF CONSOLIDATION
The merger with Anergen was accounted for as a purchase transaction. The
assets and liabilities of Anergen have been recorded on the books of the Company
at their fair market values. The operating results of the acquired business have
been included in the consolidated statements of operations from February 10,
1999, the effective date of the acquisition. All significant intercompany
account balances and transactions have been eliminated in consolidation.
Finalization of certain aspects of the accounting treatment of the transaction
is pending and such treatment may be subject to revision in the second quarter
of 1999.
SECURITIES AVAILABLE-FOR-SALE
The Company's investment portfolio is classified as available-for-sale.
The Company's main investment objectives are preservation of principal, a high
degree of liquidity and a maximum total return. The Company invests primarily in
(U.S. denominated only): commercial paper; short and mid-term corporate
notes/bonds, with no more than 10% of the portfolio in any one corporate issuer;
and Federal agencies with terms not exceeding four years. Such securities are
stated at fair value, with the unrealized gains and losses reflected in
stockholders' equity. Interest earned on securities is included in interest
income. The amortized cost of investments is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization and
accretions are included in interest income. The cost of securities sold is
calculated using the specific identification method.
MANAGEMENT OF CREDIT RISK
The Company is subject to concentration of credit risk, primarily from
its investments. Credit risk for investments is managed by purchase of
investment grade securities, A1/P1 for money market instruments and A or better
for debt instruments, and diversification of the investment portfolio among
issuers and maturities.
4
<PAGE> 7
REVENUE
Revenue under collaborative agreements typically consists of
nonrefundable up-front fees, ongoing research and development funding,
technology access payments, and milestone and royalty payments. Revenue from
nonrefundable up-front fees is recognized upon satisfaction of related
obligations. Revenue from ongoing research and co-development payments is
recognized ratably over the term of the agreement, as the Company believes such
payments approximate the research and development expense being incurred
associated with the agreement. Revenue from milestone, royalty, and other
contingent payments will be recognized as earned. Advance payments received
under any agreements in excess of amounts earned are recorded as deferred
revenue. Revenue under cost reimbursement contracts is recognized as the related
costs are incurred. The Company recognized 90% and 94% of its revenue in the
first three months of 1999 and 1998, respectively, from collaborative partners.
Grant revenue represented 10% of the Company's revenue during the three-month
period ended March 31, 1999 and 6% during the same period in 1998.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' financial
statements to conform to the 1999 presentation.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
Laboratory equipment $ 5,809 $ 4,985
Computers and office equipment 2,482 2,182
Leasehold improvements 5,761 4,111
Manufacturing equipment 103 0
Construction in progress 0 1,099
-------- --------
14,155 12,377
Accumulated depreciation and amortization (4,193) (3,546)
-------- --------
Total property and equipment $ 9,962 $ 8,831
======== ========
</TABLE>
3. COMPREHENSIVE LOSS
For the three months ended March 31, 1999 and 1998, the Company's
comprehensive loss was as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended
--------------------------
March 31, March 31,
1999 1998
--------- ---------
<S> <C> <C>
Net Loss $(17,386) $ (2,837)
Other comprehensive income:
Unrealized holding gains (losses)
arising during period 51 (37)
-------- --------
Total comprehensive loss $(17,335) $ (2,874)
======== ========
</TABLE>
4. ACQUISITION OF ANERGEN
On February 10, 1999, the Company acquired all of the outstanding shares
of common stock of Anergen. Anergen is a biotechnology company focused on the
treatment of autoimmune diseases through the discovery and development of
proprietary therapeutics that selectively interrupt the disease process.
Aggregate consideration for the acquisition was approximately $9.6
million, which consisted of 1,058,031 shares of Corixa common stock, with a
market value of approximately $8.7
5
<PAGE> 8
million, approximately $200,000 in cash, and approximately $800,000 of
acquisition costs. The aggregate purchase price exceeded the fair value of
tangible assets by approximately $11.6 million, and this amount was allocated to
in-process research and development during the first quarter of 1999. The
allocation of the purchase price is, however, still being finalized and may be
subject to change. The aggregate purchase price was allocated, based on
estimated fair values on the acquisition date, as follows (in thousands):
<TABLE>
<S> <C>
In-process research and development $ 11,612
Assets acquired 1,684
Liabilities assumed (3,663)
--------
Total purchase price $ 9,633
========
</TABLE>
The following table reflects unaudited consolidated pro forma results of
operations of Corixa and Anergen on the basis that the acquisition had taken
place at the beginning of each period presented. Such pro forma amounts are not
necessarily indicative of what the actual consolidated results of operations
might have been if the acquisition had been effective at the beginning of the
respective periods. The following pro forma information does not include the
one-time charges for purchased in-process research and development or other
transaction-related costs relating to the acquisition of Anergen (in thousands):
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
1999 1998
------- -------
<S> <C> <C>
Revenue $ 3,266 $ 3,794
Net loss (6,877) (4,916)
Basic and diluted net loss
per share $ (0.47) $ (0.38)
</TABLE>
5. CONTRACTS
In March 1999, Corixa and the Infectious Disease Research Institute
("IDRI") signed an agreement to research and develop ex vivo therapies for the
treatment of cancer. Pursuant to the terms of the agreement, effective March 30,
1999, IDRI will commit $12 million over the next three years to help support the
Company's research and development of such ex vivo therapies. The agreement
provides the Company exclusive rights to all intellectual property and product
rights while IDRI will receive a percentage of certain Corixa proceeds related
to ex vivo therapy products resulting from such research and development.
In March 1999, Corixa purchased an additional $1.25 million of Class A
Preferred Stock of ImmGenics Pharmaceuticals, Inc. ("ImmGenics") , pursuant to
the terms and conditions of the Investment Agreement between Corixa and
ImmGenics, dated as of November 4, 1998. Subsequent to the additional
investment, Corixa's ownership of ImmGenics remains below 20%, and therefore is
recorded under the cost method of accounting.
6. NEW ACCOUNTING STANDARDS
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 1999. Earlier application is encouraged but is
permitted only as of the beginning of any fiscal quarter that begins after June
1998. 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. The Company will be required to adopt SFAS No. 133 as of the quarter
ended March 31, 2000. The impact of the adoption of the provisions of this
statement on the Company's financial position or results of operations has not
been determined.
7. SUBSEQUENT EVENTS
6
<PAGE> 9
On April 9, 1999 Corixa Corporation, a Delaware Corporation (the
"Company"), announced that on April 8, 1999, it entered into an agreement (the
"Agreement") with Castle Gate, L.L.C., a Northwest investment partnership
focusing primarily on health care and biomedical companies ("Castle Gate"), to
provide Corixa with an equity line of credit of up to $50 million (the "Equity
Line of Credit"). Under the Agreement, Castle Gate is obligated to provide the
Equity Line of Credit to the Company for a period of two years. The Company may
draw down funds pursuant to the Equity Line of Credit at its sole option and may
use such funds for expenses associated with various technology or company
acquisitions. When funds are drawn down under the Equity Line of Credit, the
Company will issue to Castle Gate shares of Series A Preferred Stock ("Preferred
Stock") at a price of $1,000 per share and warrants to purchase shares of the
Company's Common Stock ("Common Stock") as described below.
The Preferred Stock has an annual cumulative dividend of 5% and may be
paid, at the Company's option, in cash or in shares of the Company's Common
Stock. The Preferred Stock may be converted at the option of Castle Gate at any
time following issuance thereof. Shares of 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 such shares in the event Castle Gate would receive a specified
return on its equity investment. Additionally, any shares of Preferred Stock
that have not been converted previously will be converted automatically on the
seven-year anniversary of the initial issuance of such shares of Preferred
Stock. Other rights, preferences and privileges of the Preferred Stock are set
forth in the Certificate of Designation filed by the Company with the Secretary
of State of Delaware on April 7, 1999.
Upon execution of the Agreement, the Company consummated an initial
draw-down under the Equity Line of Credit of $12.5 million (the "Initial Draw")
and issued Castle Gate 12,500 shares of Preferred Stock and warrants to purchase
an aggregate of up to 1,037,137 shares of Common Stock (the "Initial Closing
Warrants"). The conversion price for the Preferred Stock issued in the Initial
Draw is $8.50 per share. The conversion price for all other shares of Preferred
Stock that may be issued as the result of optional subsequent draw-downs by the
Company under the Equity Line of Credit (each a "Subsequent Draw") will be equal
to the average daily closing price of the Company's Common Stock for a
designated period before and after the consummation of such Subsequent Draw,
provided that such conversion price cannot exceed certain specified amounts.
Initial Closing Warrants to purchase 312,500 shares have an exercise price of
$8.50 per share and Initial Closing Warrants to purchase 724,637 shares have an
exercise price of $8.28 per share. Under the Agreement, the Company is obligated
to issue to Castle Gate certain additional warrants (the "Additional Warrants")
upon the occurrence of certain events. The Additional Warrants will become
exercisable either on a pro-rata basis upon the consummation of Subsequent
Draw(s), if any, and corresponding issuances of Preferred Stock by the Company
under the Equity Line of Credit, or upon certain specified dates, and will have
exercise prices that are determined in accordance with specified formulas at the
time of their respective issuances. If all Additional Warrants are issued, they
will be exercisable for an aggregate maximum of 187,500 shares of Common Stock
plus Common Stock worth up to $2,125,000.
The Preferred Stock, the Initial Closing Warrants and the Additional
Warrants issued or issuable to Castle Gate under the Agreement were sold as a
self-managed private placement and are exempt from registration under the
Securities Act of 1933, as amended. However, pursuant to a registration rights
agreement entered into between the Company and Castle Gate in connection with
the Equity Line, the Company has committed to register the underlying shares of
Common Stock for resale after certain conversions of the Preferred Stock.
Additionally, the Company and Castle Gate entered into a standstill agreement in
connection with the Equity Line of Credit pursuant to which there are certain
restrictions on Castle Gate's ability to purchase shares of the Company's
capital stock other than pursuant to the Agreement. See the Form 8-K filed by
the Company on April 23, 1999.
7
<PAGE> 10
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; failure of the Company
to acquire additional companies or technologies to expand or support the growth
of the Company's business; failure of the Company to successfully manage any
future growth; dependence on and management of existing and future corporate
partnerships; failure of the Company to establish corporate collaborations
either at all or early in the development process for all aspects of product
development and commercialization; dependence on in-licensed technology;
dependence on proprietary technology and uncertainty of patent protection;
history of operating losses; possible volatility of stock price; future capital
needs and uncertainty of additional funding; 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; impact of alternative technological
advances and competition on the collaborative relationships between the Company
and its corporate partners; the potential dilutive effect of equity purchases by
SmithKline Beecham plc ("SmithKline Beecham") and Castle Gate, L.L.C. to other
Corixa stockholders; and the impact of the Chinook and Anergen acquisition and
other acquisitions or equity purchases, if any, of early stage companies such as
ImmGenics, 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 SEC, including the Company's Final Prospectus for
its initial public offering filed with the SEC on October 2, 1997, the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, the
Company's Registration Statement Form S-4, as amended, filed with the SEC on
January 12, 1999 and the Company's Report on Form 8-K, filed with the SEC on
April 23, 1999. The Company assumes no obligation to update the forward-looking
statements included in this Form 10-Q.
OVERVIEW
Corixa's objective is to be a leader in the discovery and commercialization of
products useful in preventing, treating or diagnosing cancer, certain infectious
diseases and certain autoimmune diseases. Corixa's strategy is to dedicate its
resources to the discovery of vaccines and other antigen-based products and to
establish corporate collaborations early in the development process for all
aspects of product development and commercialization, including research,
clinical development, obtaining regulatory approval, manufacturing and
marketing. Corixa believes that this research-and partner-driven approach
creates significant scientific, operational and financial advantages for the
Company and accelerates the commercial development of new therapeutic and
prophylactic T cell vaccines and other immunotherapeutic products. For the
quarter ended March 31, 1999, approximately 90% of Corixa's revenue resulted
from such collaborative agreements. In particular, Corixa entered into
significant corporate partnerships with SmithKline Beecham Biologicals and
SmithKline Beecham Manufacturing in 1995 and 1996, respectively, with respect to
tuberculosis, breast cancer and prostate cancer. In October 1998, SmithKline
Beecham and the Company entered into a multi-field agreement which expanded the
previous collaborations to include payment for work that is performed in
additional programs in the following areas: (i) ovarian and colon carcinoma
vaccine discovery and development programs and (ii) vaccine discovery programs
for two chronic
8
<PAGE> 11
infectious pathogens, Chlamydia trachomitis and Chlamydia pneumoniae. The
discovery phase of the expanded collaboration agreement also allows for the
selection of one additional disease field to be agreed upon at a future date.
The Company has also granted SmithKline Beecham an exclusive worldwide license
to develop, manufacture, and sell vaccine products resulting from the Company's
clinical program based on Her-2/neu for the treatment of breast and ovarian
cancer as well as the Company's preclinical program based on Mammoglobin, a
novel gene product associated with breast cancer. For certain of these disease
areas, the Company granted SmithKline Beecham certain rights to develop,
manufacture and sell passive immunotherapy products such as T cell or antibody
therapeutics and therapeutic drug monitoring products. SmithKline Beecham has
committed $43.6 million to fund work in such discovery programs through August
2002. For the quarter ended March 31, 1999, approximately 10% of Corixa's
revenue has resulted from funds awarded through government grants. As of March
31, 1999, Corixa had total stockholders' equity of $35.3 million.
Corixa has entered, and currently intends to continue to enter, into
collaborative agreements early in the development process. Corixa believes that
this active corporate partnering strategy enables the Company to maintain its
focus on its fundamental strengths in vaccine discovery and research,
capitalizes on its corporate partners' strengths in product development,
manufacturing and commercialization, and significantly diminishes Corixa's
financing requirements. When entering into such corporate partnering
relationships, Corixa seeks to cover its research and development expenses
through research funding, milestone payments and collaboration agreement credit
lines, technology or license fees, while retaining significant downstream
participation in product sales through either profit-sharing or product
royalties paid on annual net sales.
On September 15, 1998, the Company completed an acquisition of GenQuest,
Inc., a Delaware corporation ("GenQuest"). Chinook Corporation, a Delaware
corporation (formerly known as Chinook Acquisition Corporation) ("Chinook") was
created to effect the merger with GenQuest. Pursuant to the terms set forth in
the Agreement and Plan of Merger by and among the Company, Chinook and GenQuest,
GenQuest merged with and into Chinook and the separate corporate existence of
GenQuest ceased, with Chinook surviving as a wholly-owned subsidiary of Corixa.
All significant intercompany balances and transactions have been eliminated in
consolidation.
On February 10, 1999, the Company completed an acquisition of Anergen,
Inc., a Delaware corporation ("Anergen"). Pursuant to the terms set forth in the
Agreement and Plan of Merger by and among the Company, Yakima Acquisition
Corporation, a Delaware corporation (and a wholly-owned subsidiary of Corixa
created to effect the merger with Anergen) ("Yakima') and Anergen, Inc., Anergen
merged with and into Yakima and the separate corporate existence of Yakima
ceased, with Anergen surviving as a wholly-owned subsidiary of Corixa. All
significant intercompany balances and transactions have been eliminated in
consolidation. Corixa's income statement for the period in which the acquisition
of Anergen occurred includes a write-off of approximately $11.6 million,
representing the values determined by management to be attributable to the
in-process research and development assets associated with the technology
acquired in acquisition of Anergen. This amount is allocated amongst two
technology platforms, AnergiX and AnervaX, and disease related products. This
represents the value ascribed to these programs by Corixa's management, based on
the discounted cash flows management currently expects from the technologies
acquired. The allocation of the purchase price is, however, still being
finalized and may be subject to change. There can be no guarantee, however, that
any particular acquired technology will result in a particular product or
treatment or that any of the technologies acquired in the acquisition of Anergen
will result in any products. See "Factors Affecting Future Results--Corixa's
Integration of Operations and Scientific Cultures Related to Acquisitions May be
Difficult and Lead to Adverse Affects."
Corixa remains focused on the discovery and early clinical development
of proprietary vaccine products that induce specific and potent pathogen- or
tumor-reactive T cell responses for the treatment and prevention of cancer,
infectious diseases and certain autoimmune diseases. Corixa also intends to
broaden its scope to include other strategic relationships that complement its
approach to immune system based therapies for cancer, infectious diseases and
autoimmune diseases.
Corixa has experienced significant operating losses in each year since
its inception. As of March 31, 1999, Corixa's accumulated deficit was
approximately $50.7 million. Corixa may incur substantial additional operating
losses over, at a minimum, the next several years. Such losses have
9
<PAGE> 12
been and may continue to be principally the result of various costs associated
with Corixa's discovery, research and development programs, preclinical and
clinical activities and the purchase of technologies or companies, such as the
GenQuest and Anergen acquisitions. Substantially all of Corixa's revenue to date
has resulted from corporate partnerships, other research, development and
licensing arrangements, research grants and interest income. Corixa's ability to
achieve a consistent, profitable level of operations is dependent in large part
upon entering into collaborative agreements with corporate partners for product
discovery, research, development and commercialization, obtaining regulatory
approvals for its products and successfully manufacturing and marketing
commercial products. There can be no assurance that Corixa will be able to
achieve consistent profitability. In addition, payments under collaborative
agreements and licensing arrangements will be subject to significant
fluctuations in both timing and amounts, resulting in quarters of profitability
and quarters of losses by Corixa. Therefore, Corixa's results of operations for
any period may fluctuate significantly and may not be comparable to the results
of operations for any other period.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
Total Revenue
Revenue increased to $3.1 million for the three months ended March
31,1999 from $2.8 million for the same period in 1998. This increase was
primarily attributable to revenue recognition from the multi-field agreement
with SmithKline Beecham, which consisted primarily of ongoing research and
development revenue. Revenue of approximately $500,000 was recognized during the
three months ended March 31, 1998 in conjunction with the then-existing
collaboration agreement with GenQuest while no revenue was recognized in 1999
due the acquisition of GenQuest. Revenue under government grants received in
1999 was $306,000, an increase over the $171,000 received under government
grants in 1998.
Research and Development Expenses
Research and development expenses increased to $8.6 million for the
three months ended March 31, 1999 from $5.9 million for the same period in 1998.
The increase was primarily attributable to increased payroll and personnel
expenses incurred as the Company hired additional research and development
personnel, increased rent expense, patent and license fees, depreciation,
increased purchases of laboratory supplies and the additional research and
development expenses incurred by the Company's subsidiaries. Research and
development expense of approximately $500,000 was recognized during the three
months ended March 31, 1998 in conjunction with the then-existing collaboration
agreement with GenQuest while no research and development expense was recognized
in 1999 due the acquisition of GenQuest. In March 31, 1998, research and
development expenses reflected a $333,000 charge associated with the termination
of the Company's collaboration with CellPro, Incorporated. Corixa expects
research and development expenses to increase in the future to support the
expansion of its research and development activities.
General and Administrative Expenses
General and administrative expenses increased to $590,000 for the three
months ended March 31, 1999, from $547,000 for the same period in 1998. The
increase was primarily due to the additive administrative expense incurred from
Anergen offset by lower 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 activities.
In-Process Research and Development
For the three months ended March 31, 1999, in-process research and
development expenses reflect the amount allocated to in-process technology
acquired in the Anergen acquisition. There were no in-process research and
development expenses incurred in the same period of 1998.
Interest Income
Interest income decreased to $468,000 for the three months ended March
31, 1999 from $828,000 for the same period in 1998. The decrease for the three
months ended March 31, 1999
10
<PAGE> 13
resulted from lower average cash balances in such period in 1999 as compared to
1998. The 1998 cash balance was higher as a result of Corixa's initial public
offering completed on October 2, 1997.
Interest Expense
Interest expense increased to $202,000 for the three months ended March
31, 1999 from $147,000 for the same period in 1998. The increase for the three
months ended March 31, 1999 resulted from higher loan and capital lease
financing balances.
Other Income
Other income decreased to $40,000 for the three months ended March 31,
1999 from $125,000 for the same period in 1998. The balance for 1999 includes
sublease rent paid to the Company. 1998 includes other income of $102,000 and
$23,000 for management and administrative agreements with GenQuest and sublease
rent from IDRI, respectively. The Company provides services to IDRI with respect
to administration, record keeping, personnel administrative and human resources
as required by the agreements with IDRI. Similar services were performed under
the GenQuest agreement, which ended upon the acquisition of GenQuest by Corixa.
Deferred Compensation
Amortization of deferred compensation of approximately $251,000 and
$482,000 was recorded in the three months ended March 31, 1999 and 1998,
respectively. Deferred compensation represents the amortization of the
difference between the exercise prices of options for 645,000 shares of Common
Stock granted during the year ended December 31, 1997 and the deemed fair value
of the Company's Common Stock on the grant dates. The remaining balance of
$900,000 will be amortized over fiscal years 2000 and 2001 as the subject
options vest.
Year 2000 Compliance
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Beginning in
the year 2000, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. If noncompliant systems
are not modified, the result could be a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. Corixa has largely completed its assessment of its internal
systems affected by the Year 2000 issue and anticipates that it will not be
required to modify or replace significant portions of its software to cause its
computer systems will properly utilize dates past December 31, 1999.
Corixa has initiated communications, in the form of questionnaires, with
its significant suppliers and customers to determine the extent to which Corixa
is vulnerable to those third parties' failure to solve their own Year 2000
issues. At this time, Corixa cannot predict the level of Year 2000 readiness
with respect to its significant suppliers and customers. Corixa intends to
continue to monitor the progress of these third parties and will develop
contingency plans during the fiscal year 1999 in the event Corixa becomes aware
that one or more of these third parties fails to solve their Year 2000 issues in
such a way as to materially adversely affect the operations of Corixa. The total
exposure of the Year 2000 issue is estimated to be less than $100,000 and will
be funded through operating cash flows. To date Corixa has not incurred
significant costs related to the assessment of, and preliminary efforts in
connection with, its Year 2000 project and the development of a remediation
plan. Management does not currently expect Corixa's financial condition or
results of operations will be materially adversely affected by the Year 2000
issue. There can be no guarantee that the systems of other companies on which
Corixa's systems rely will be timely converted, or that a failure to convert by
another company, or a conversion that is incompatible with Corixa's systems,
would not have a material adverse effect on Corixa.
Corixa intends to complete its contingency planning based upon analysis
of results of questionnaires received from customers and suppliers.
LIQUIDITY AND CAPITAL RESOURCES
Corixa has financed its operations primarily through the issuance of
equity securities, collaborative agreements and debt instruments. The October
1997 initial public offering and
11
<PAGE> 14
preceding private placements of equity securities have provided Corixa with
aggregate proceeds of approximately $61.1 million. Through March 31, 1999,
Corixa recognized approximately $44.0 million of revenue under corporate
partnerships and grants and has drawn $7.0 million on a bank loan and $5.0
million from credit lines under collaborative agreements. Through March 31, 1999
(since inception), Corixa's operations have used cash of approximately $11.5
million.
Corixa has invested $8.1 million in property and equipment and has
acquired an additional $4.6 million of equipment through capital lease financing
since inception. Corixa expects capital expenditures to stabilize because the
facility expansion was completed in the March 1999.
During the three months ended March 31, 1999, net cash provided by
Corixa's operations was $3.0 million, compared to net cash used of $2.3 million
in 1998. The positive net change in cash from operations was primarily due to
advance payments received under collaborative agreements. Investing activities
used $3.6 million, compared to $9.7 million over the same period in 1998
primarily due to lower cash invested in marketable securities. As of March 31,
1999, Corixa had approximately $46.4 million in cash, cash equivalents and
securities available-for-sale compared to $45.1 million at December 31, 1998.
Working capital decreased to $33.5 million at March 31, 1999 from $42.5 million
at December 31, 1998.
Corixa believes that its existing capital resources, committed payments
under its existing collaborative agreements and licensing arrangements,
equipment financing and interest income will be sufficient to fund its current
and planned operations until at least June 2000. There is, however, no assurance
such sources of capital will be sufficient for such period of time. Corixa
intends to enter into additional corporate collaborations that will provide
funding for all or a part of Corixa's research and development activities.
Corixa's future capital requirements will depend on many factors, including,
among others, continued scientific progress in its discovery, research and
development programs; the magnitude and scope of these activities; the ability
of Corixa to maintain existing, and enter into additional, corporate
partnerships and licensing arrangements; the costs involved in potential
acquisitions of additional companies; progress with preclinical studies and
clinical trials; the time and costs involved in obtaining regulatory approvals;
the costs of acquiring companies with complementary technology; the costs
involved in preparing, filing, prosecuting, maintaining, defending and enforcing
patent claims; and the potential need to develop, acquire or license new
technologies and products and other factors not within Corixa's control. Corixa
intends to seek additional funding through some or all of the following methods:
corporate collaborations, licensing arrangements, public or private equity or
debt financings, and capital lease transactions. There can be no assurance,
however, that additional financing will be available on acceptable terms, if at
all. If sufficient capital is not available, Corixa may be required to delay,
reduce the scope of, eliminate or divest one or more of its discovery, research
or development programs, any of which could have a material adverse effect on
Corixa's business, financial condition and results of operations.
FACTORS AFFECTING FUTURE RESULTS
There are Uncertainties Related to Corixa's Early Stage of Development.
Corixa is at an early stage in the development of its therapeutic, prophylactic
and diagnostic products. To date, almost all of Corixa's revenues have resulted
from payments made under agreements with its corporate partners. Corixa expects
that most of its revenues for the foreseeable future will continue to result
from existing and future corporate partnerships, if any. Corixa has generated
only minimal revenues from diagnostic product sales and no revenues from
therapeutic product sales since inception. Vaccine products that may result from
Corixa's research and development programs are not expected to be commercially
available for a number of years, if at all. It will be a number of years, if
ever, before Corixa will receive any significant revenues from commercial sales
of such products. Corixa may not receive anticipated revenues under existing
corporate partnerships, and Corixa may not be able to enter into any additional
corporate partnerships. Thus, Corixa may not ever achieve consistent
profitability.
There are Uncertainties Related to Corixa's Technology and Product
Development. Corixa's technological approach to the development of therapeutic
and prophylactic vaccines and other immunotherapeutic products for cancers and
certain infectious and autoimmune diseases is unproven in humans. Products based
on Corixa's technologies are currently in the discovery, preclinical or early
12
<PAGE> 15
clinical investigation stages, and to date, neither Corixa nor any of its
corporate partners have concluded any clinical trials that incorporate Corixa's
proprietary microsphere delivery systems or its proprietary adjuvants. In
addition, neither Corixa nor any other Company has successfully commercialized
any therapeutic vaccines for cancer or infectious or autoimmune diseases
targeted by Corixa. Corixa may not be able to successfully develop effective
vaccines for such diseases in a reasonable time frame, if ever, and such
vaccines may not be capable of being commercialized. In addition to its internal
development programs, Corixa in-licenses and acquires technologies to enhance
its product pipeline. Any in-licensed technologies or technologies acquired as a
result of the GenQuest or Anergen merger or otherwise may not prove to be
effective or may not result in the successful development of commercial
products.
A majority of Corixa's programs are currently in the discovery stage or
in preclinical development. Only six of Corixa's therapeutic vaccine products
have advanced to Phase I clinical trials. Corixa's vaccines have not been
demonstrated to be safe and effective in clinical settings. Corixa's programs
may not move beyond their respective current stages of development. Assuming
Corixa's research does advance, certain preclinical development efforts will be
necessary to determine whether any product is safe to enter clinical trials.
Under certain of Corixa's existing corporate partnerships, the respective
corporate partner has primary responsibility for the clinical development of a
product. Any such corporate partner may not pursue clinical development in a
timely or effective manner, if at all. If such a product receives authorization
from the 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 studies to determine its safety and
efficacy. It is difficult to predict the number or extent of clinical trials
required or the period of mandatory patient follow-up. Assuming clinical trials
of any product are successful and other data are satisfactory, Corixa or its
applicable corporate partner will submit an application to the FDA and
appropriate regulatory bodies in other countries to seek permission to market
the product. Typically, the review process at the FDA takes several years, and
the FDA may not approve Corixa's or its corporate partner's application or may
require additional clinical trials or other data prior to approval. Furthermore,
even if regulatory approval is ultimately obtained, delays in the approval
process could have a material adverse effect on Corixa's business, financial
condition and results of operations. In addition, Corixa may not be able to
produce any products in commercial quantities at a reasonable cost or may not be
able to market successfully such products.
Corixa is Dependent on Existing and Future Corporate Partnerships. The
success of Corixa's business strategy is largely dependent on its ability to
enter into multiple corporate partnerships and to manage effectively the
numerous relationships that may exist as a result of this strategy. Corixa has
established significant relationships with various corporate partners as of
March 31, 1999. For example, in October 1998 Corixa entered into a strategic
collaboration and license agreement with SmithKline Beecham for the research,
development and commercialization of vaccine products aimed at the prevention
and/or treatment of tuberculosis, Chlamydia trachomatis infection, Chlamydia
pneumoniae infection, breast cancer, prostate cancer, ovarian cancer and colon
cancer. Corixa derived 90% and 94% of its revenues during the three-month period
ended March 31, 1999 and March 31, 1998, respectively, from research and
development and other funding under its existing corporate partnerships. The
termination of any of these corporate partnerships would have a material adverse
effect on Corixa's business, financial condition and results of operations.
Certain of Corixa's corporate partners have entered into agreements granting
them options to license certain aspects of Corixa's technology. Any such
corporate partner may not exercise its option to license such technology. Corixa
has also entered into corporate partnerships with several companies for the
development, commercialization and sale of diagnostic products incorporating
Corixa's proprietary antigen technology. Any such diagnostic corporate
partnership may not ever generate significant revenues. Furthermore, Corixa is
currently engaged in discussions with a number of pharmaceutical and diagnostic
companies with respect to potential corporate partnering arrangements covering
various aspects of Corixa's technologies. However, due in part to the early
stage of Corixa's technologies, the process of establishing corporate
partnerships is difficult and time-consuming and involves significant
uncertainty. Such discussions may not lead to the establishment of any new
corporate partnership on favorable terms, or at all. If established, any such
corporate partnership may not result in the successful development of Corixa's
products or the generation of significant revenues.
13
<PAGE> 16
Because Corixa enters into research and development collaborations with
corporate partners at an early stage of product development, Corixa's success is
highly reliant upon the performance of its corporate partners. Under existing
corporate partnership arrangements, Corixa's corporate partners are generally
required to undertake and fund certain research and development activities with
Corixa, make payments upon achievement of certain scientific milestones and pay
royalties or make profit-sharing payments when and if a product is
commercialized. Corixa does not directly control the amount or timing of
resources to be devoted to activities by its existing or future corporate
partners. Any of Corixa's existing or future corporate partners may not commit
sufficient resources to Corixa's research and development programs or the
commercialization of its products. If any corporate partner fails to conduct its
activities in a timely manner, or at all, Corixa's preclinical or clinical
development related to such corporate partnership could be delayed or
terminated. Corixa's corporate partners may not perform their obligations as
expected. Also, Corixa's current corporate partners or future corporate
partners, if any, may pursue existing or other development-stage products or
alternative technologies in preference to those being developed in collaboration
with Corixa. Further, disputes may arise with respect to ownership of technology
developed under any such corporate partnership. Finally, any of Corixa's current
corporate partnerships may be terminated by its corporate partner, and Corixa
may not be able to negotiate additional corporate partnerships in the future on
acceptable terms, or at all.
Because the success of Corixa's business is largely dependent upon its
ability to enter into multiple corporate partnerships and to manage effectively
the numerous issues that arise from such partnerships, management of these
relationships will require significant time and effort from Corixa's management
team, effective allocation of Corixa's resources to multiple projects and an
ability to obtain and retain management, scientific and other personnel
sufficient to accomplish the foregoing. Corixa's need to manage simultaneously a
number of corporate partnerships may not be successful, and the failure to
manage effectively such corporate partnerships would have a material adverse
effect on Corixa's business, financial condition and results of operations.
Corixa's Stockholders Face Potential Significant Dilution. Corixa's
stockholders experienced substantial dilution as a result of issuance of 12,500
shares of Corixa Series A Preferred Stock to Castle Gate, L.L.C. in connection
with the equity line of credit established on April 8, 1999 and subsequent
conversion of such shares. Additional dilution may also occur upon future
issuances of Series A Preferred Stock to Castle Gate, L.L.C. under the equity
line of credit and upon exercise, if at all, of outstanding options and warrants
to purchase Corixa Common Stock assumed by Corixa in the merger with Anergen and
of warrants issued to Castle Gate, L.L.C. Additionally, if Corixa elects to put
the sale of shares of Corixa Common Stock to SmithKline Beecham under the
multi-field agreement, Corixa will issue additional shares of its Common Stock
to SmithKline Beecham, which issuance will result in additional dilution to
Corixa's stockholders. See "Part I--Note 7 to Notes to Unaudited Consolidated
Financial Statements."
Corixa's Integration of Operations and Scientific Cultures Related to
Acquisitions May Be Difficult and Lead to Adverse Effects. Corixa believes that
the mergers with GenQuest and Anergen will result in long-term benefits. These
anticipated benefits will depend in part on whether the companies can integrate
their operations in an efficient and effective manner. This may not occur.
Integrating distinctive operations and scientific cultures will be a complex,
time consuming and expensive process, in addition to the resulting direct and
indirect transaction costs. Successful integration requires integration of the
companies' respective research efforts and scientific cultures and coordination
of the companies' respective business development efforts. This integration may
not be accomplished smoothly or successfully. The diversion of the attention of
management and any difficulties encountered in the process of combining
operations could cause the interruption of, or a loss of momentum in, Corixa's
business activities. Furthermore, there could be a material adverse effect on
employee morale and on the ability of Corixa to retain key scientific and
managerial personnel. Combining operations may be more difficult because of the
necessity to consolidate geographically separate facilities. If Corixa has
difficulty integrating the operations of Anergen and GenQuest into Corixa, a
material adverse effect may result on Corixa's business, operating results and
financial condition. In addition, failure to achieve synergies may lead to a
decline in Corixa's stock price.
14
<PAGE> 17
Corixa May Not Manage Its Growth Successfully or Integrate Successfully
Potential Future Acquisitions. In the future, Corixa may make additional
acquisitions of complementary companies, products or technologies. Managing
acquired businesses entails numerous operational and financial risks and
strains, including difficulties in assimilating acquired operations and
scientific cultures, diversion of management's attention to other business
concerns, amortization of acquired intangible assets and potential loss of key
employees or strategic relationships of acquired entities. Corixa may not be
able to effectively manage growth, and failure to do so could have a material
adverse effect on the Company's business, financial condition and results of
operation. Additionally, Corixa may be unsuccessful in acquiring any further
companies, products or technologies. Such failure may have a material adverse
affect on the Company's business, financial condition and results of operations.
Corixa is Dependent on In-Licensed Technology. Corixa's success is also
dependent on its ability to enter into licensing arrangements with commercial or
academic entities to obtain technology that is advantageous or necessary to the
development and commercialization of Corixa's products. Corixa is party to
various license agreements that give it rights to use certain technologies in
its and its corporate partners' discovery, research, development and
commercialization activities. Disputes may arise as to the inventorship and
corresponding rights in inventions and know-how resulting from the joint
creation or use of intellectual property by Corixa and its licensors or
scientific collaborators. Additionally, many of Corixa's in-licensing agreements
contain milestone-based termination provisions. Corixa's failure to meet any
significant milestones in a particular agreement could allow the licensor to
terminate such agreement. There can be no assurance that Corixa 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, and it
may not be able to maintain the exclusivity of its exclusive licenses. In the
event Corixa is unable to obtain or maintain licenses to technology advantageous
or necessary to Corixa's business, Corixa and its corporate partners may be
required to expend significant time and resources to develop or in-license
similar technology. Corixa and its corporate partners may not be successful in
this regard. If Corixa cannot acquire or develop necessary technology, it may be
prevented from commercializing certain of its products. Any such event would
have a material adverse effect on Corixa's business, financial condition and
results of operations.
Corixa is Dependent on Proprietary Technology and Its Patent Protection
Is Uncertain. Corixa's success will depend in part on its ability and that of
its corporate partners to obtain and enforce their respective patents and
maintain trade secrets, both in the United States and in other countries. As of
March 31, 1999, Corixa owned or had licensed 52 issued United States patents
that expire at various times between December 2004 and August 2016, and 152
pending United States patent applications. Corixa, its corporate partners or its
licensors may not have or may not develop or obtain rights to products or
processes that are patentable. Patents may not issue from any of the pending
applications owned or licensed by Corixa or its corporate partners. Any claims
allowed may not issue, or in the event of issuance, may not be sufficient to
protect the technology owned by or licensed to Corixa or its corporate partners.
Corixa has licensed certain patent applications from SRI related to Corixa's
microsphere encapsulation technology, one of which is currently the subject of
an opposition proceeding before the European Patent Office. SRI may not prevail
in this opposition proceeding and patents may not issue in Europe related to
such technology. In addition, through its acquisition of Anergen, Corixa assumed
responsibility for a currently pending opposition proceeding directed toward a
third party European patent. There is no guarantee Corixa will prevail in this
opposition proceeding. Also, Corixa's or its corporate partners' current
patents, or patents that issue on pending applications, may be challenged,
invalidated, infringed or circumvented, or the rights granted thereunder may not
provide proprietary protection or competitive advantages to Corixa. Patent
applications in the United States are maintained in secrecy until patents issue
and patent applications in certain foreign countries are not generally published
until many months or years after they are filed. Publication of technological
developments in the scientific and patent literature often occurs long after the
date of such developments. Accordingly, Corixa cannot be certain that it or one
of its corporate partners was the first to invent the subject matter covered by
any patent application or that it or one of its corporate partners was the first
to file a patent application for any such invention.
Patent law relating to the scope and enforceability of claims in the
fields in which Corixa operates is still evolving. The patent positions of
biotechnology and biopharmaceutical companies, including Corixa, are highly
uncertain and involve complex legal and technical questions for which
15
<PAGE> 18
legal principles are not firmly established. For example, there is substantial
uncertainty regarding the potential for patent protection for gene fragments or
genes without known function or correlation with specific diseases. The degree
of future protection for Corixa's proprietary rights, therefore, is highly
uncertain. In this regard, independent patents may not issue from each of the
152 pending United States patent applications referenced above, which include
many interrelated applications directed to common or related subject matter. In
addition, there may be issued patents and pending applications owned by others
directed to technologies relevant to Corixa's or its corporate partners'
research, development and commercialization efforts. Corixa's or its corporate
partners' technology may not be able to be developed and commercialized without
a license to such patents. Also, such patent applications may be granted
priority over patent applications filed by Corixa or one of its corporate
partners.
The commercial success of Corixa depends significantly on its ability to
operate without infringing the patents and proprietary rights of third parties,
and Corixa's and its corporate partners' technologies may, or in the future may,
infringe the patents or proprietary rights of others. A number of pharmaceutical
companies, biotechnology companies, universities and research institutions may
have filed patent applications or may have received patent grants that cover
technologies similar to the technologies owned, optioned by or licensed to
Corixa or its corporate partners. In addition, Corixa is unable to determine the
patents or patent applications that may materially affect Corixa's or its
corporate partners' ability to make, use or sell any products. The existence of
third party patent applications and patents could significantly reduce the
coverage of the patents owned, optioned by or licensed to Corixa or its
corporate partners and limit the ability of Corixa or its corporate partners to
obtain meaningful patent protection. If patents containing competitive or
conflicting claims are issued to third parties, Corixa or its corporate partners
may be enjoined from pursuing research, development or commercialization of
products or be required to obtain licenses to these patents or to develop or
obtain alternative technology. Corixa or its corporate partners may be so
enjoined or may not be able to obtain any license to the patents and
technologies of third parties on acceptable terms, if at all. Corixa or its
corporate partners may not be able to obtain or develop alternative
technologies. If Corixa or any of its corporate partners is enjoined from
pursuing its research, development or commercialization activities or if any
such license is not, or alternative technologies are not, obtained or developed,
Corixa or such corporate partner may be delayed or prevented from
commercializing its products, which would have a material adverse effect on
Corixa's business, financial condition and results of operations.
Third parties may independently develop similar or alternative
technologies to those of Corixa, duplicate any of the technologies of Corixa,
its corporate partners or its licensors, or design around the patented
technologies developed by Corixa, its corporate partners or its licensors. The
occurrence of any of these events would have a material adverse effect on
Corixa's business, financial condition and results of operations.
Litigation may also be necessary to enforce patents issued or licensed
to Corixa or its corporate partners or to determine the scope and validity of a
third party's proprietary rights. Corixa could incur substantial costs if
litigation is required to defend itself in patent suits brought by third
parties, if Corixa participates in patent suits brought against or initiated by
its corporate partners or if Corixa initiates such suits. Funds or resources may
not be available to Corixa in the event of any such litigation. Additionally,
Corixa or its corporate partners may not prevail in any such action. An adverse
outcome in litigation or an interference to determine priority or other
proceeding in a court or patent office could subject Corixa to significant
liabilities, require disputed rights to be licensed from other parties or
require Corixa or its corporate partners to cease using certain technology, any
of which may have a material adverse effect on Corixa's business, financial
condition and results of operations.
Corixa also relies on trade secrets and proprietary know-how, especially
in circumstances in which patent protection is not believed to be appropriate or
obtainable. Corixa attempts to protect its proprietary technology in part by
confidentiality agreements with its employees, consultants and advisors. These
agreements generally provide that all confidential information developed or made
known to the individual by Corixa during the course of the individual's
relationship with Corixa will be kept confidential and not disclosed to third
parties except in specific circumstances. These agreements also generally
provide that all inventions conceived by the individual in the course of
16
<PAGE> 19
rendering services to Corixa shall be the exclusive property of Corixa. These
agreements may not provide meaningful protection or adequate remedies for any
breach, and Corixa's trade secrets may otherwise become known or be
independently discovered by its competitors, any of which could have a material
adverse effect on Corixa's business, financial condition and results of
operations.
Clinical Results of Acquired Technology May Not Be Reproducible.
Clinical results from trials of companies acquired or from technology acquired
through in-licensing may not be reproducible by the Company. As a result, the
Company may not realize the expected value from the acquired company or
technology. Inability to reproduce such clinical results could have a material
adverse effect on Corixa's business, financial condition and results of
operations.
Corixa Has a History of Operating Losses. Corixa has experienced
significant operating losses in each year since its inception on September 8,
1994. As of March 31, 1998, Corixa's accumulated deficit was approximately $50.7
million. Corixa may incur substantial additional operating losses over at least
the next several years. Such losses have been and may continue to be principally
the result of the various costs associated with Corixa's discovery, research and
development programs, preclinical studies and clinical activities. Substantially
all of Corixa's revenues to date have resulted from corporate partnerships,
other research, development and licensing arrangements, research grants and
interest income. Corixa's ability to achieve a consistent, profitable level of
operations is dependent in large part upon entering into agreements with
corporate partners for product discovery, research, development and
commercialization, obtaining regulatory approvals for its products and
successfully manufacturing and marketing commercial products. Corixa may not be
able to achieve consistent profitability. In addition, payments under corporate
partnerships and licensing arrangements will be subject to significant
fluctuations in both timing and amounts, resulting in quarters of profitability
and quarters of losses by Corixa. Therefore, Corixa's results of operations for
any period may fluctuate and may not be comparable to the results of operations
for any other period.
Corixa's Need for, and Ability to Secure, Additional Funding is
Uncertain. The Company will require substantial capital resources in order to
conduct its operations. The Company's future capital requirements will depend on
many factors, including, among others, the following:
- continued scientific progress in its discovery, research and development
programs;
- the magnitude and scope of its discovery, research and development
programs;
- the ability of the Company to maintain existing, and establish
additional, corporate partnerships and licensing arrangements;
- the potential to acquire additional companies;
- the potential need to develop, acquire or license new technologies and
products; and
- 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;
- other factors not within the Company's control.
The Company intends to seek such additional funding through corporate
partnerships, public or private equity or debt financings and capital lease
transactions. Additional financing, however, may not be available on acceptable
terms, if at all. Additional equity financings could result in
17
<PAGE> 20
significant dilution to stockholders. If sufficient capital is not available,
the Company may be required to delay, reduce the scope of, eliminate or divest
one or more of its discovery, research or development programs, any of which
could have a material adverse effect on the Company's business, financial
condition and results of operations. Corixa believes that following the Anergen
merger, the Company's existing capital resources, committed payments under
existing corporate partnerships and licensing arrangements, bank credit
arrangements, equipment financing and interest income will be sufficient to fund
the Company's current and planned operations over at least the next 12 months.
Such funds, however, may not be sufficient to meet the capital needs of the
Company. In addition, a substantial number of the payments to be made by
Corixa's corporate partners and other licensors are dependent upon the
achievement by Corixa of development and regulatory milestones. Failure to
achieve such milestones would have a material adverse effect on the Company's
future capital needs.
Corixa is Dependent on Key Personnel. Corixa is highly dependent on the
principal members of its scientific and management staff, the loss of whose
services might significantly delay or prevent Corixa's achievement of its
scientific or business objectives. Competition among biotechnology and
biopharmaceutical companies for qualified employees is intense, and the ability
to retain and attract qualified individuals is critical to Corixa's success.
Corixa may not be able to attract and retain such individuals currently or in
the future on acceptable terms, or at all, and the failure to do so would have a
material adverse effect on Corixa's business, financial condition and results of
operations. In addition, Corixa does not maintain "key person" life insurance on
any officer, employee or consultant of Corixa. Corixa also has relationships
with scientific collaborators at academic and other institutions, some of whom
conduct research at Corixa's request or assist Corixa in formulating its
research and development strategy. These scientific collaborators are not
employees of Corixa and may have commitments to, or consulting or advisory
contracts with, other entities that may limit their availability to Corixa.
Corixa has limited control over the activities of these scientific collaborators
and, except as otherwise required by its license, consulting and sponsored
research agreements, can expect only limited amounts of time to be dedicated to
Corixa's activities by such individuals. Failure of any such persons to devote
sufficient time and resources to Corixa's programs could have a material adverse
effect on Corixa's business, financial condition and results of operations. In
addition, these collaborators may have arrangements with other companies to
assist such companies in developing technologies that may prove competitive to
those of Corixa.
Corixa Faces Intense Competition. The biotechnology and
biopharmaceutical industries are intensely competitive. Several biotechnology
and biopharmaceutical companies, as well as certain research organizations,
currently engage in, or have in the past engaged in, efforts related to the
development of vaccines for the treatment and prevention of cancers and various
infectious diseases, as well as the development of diagnostic products for
infectious disease indications. Many companies, including Corixa's corporate
partners as well as academic and other research organizations, are also
developing alternative therapies to treat cancers, infectious diseases and
autoimmune diseases and in this regard compete with Corixa. Moreover, technology
controlled by third parties that may be advantageous to Corixa's business may be
acquired or licensed by competitors of Corixa, thereby preventing Corixa from
obtaining such technology on favorable terms, or at all.
Many of the companies developing competing technologies and products
have significantly greater financial resources and expertise in discovery,
research and development, manufacturing, preclinical and clinical testing,
obtaining regulatory approvals and marketing than Corixa or its corporate
partners. Other smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and established
companies. Academic institutions, government agencies and other public and
private research organizations may also conduct research, seek patent protection
and establish collaborative arrangements for discovery, research, clinical
development and marketing of products similar to those of Corixa. These
companies and institutions compete with Corixa in recruiting and retaining
qualified scientific and management personnel as well as in acquiring
technologies complementary to Corixa's programs. Corixa and its corporate
partners will face competition with respect to product efficacy and safety, the
timing and scope of regulatory approvals, availability of resources,
reimbursement coverage, price and patent position, including potentially
dominant patent positions of others. Competitors may develop more effective or
18
<PAGE> 21
more affordable products, or may achieve earlier patent protection or product
commercialization than Corixa and its corporate partners. Such competitive
products may render Corixa's products obsolete.
Corixa Lacks Manufacturing Experience and Relies on Contract
Manufacturers. Corixa does not have significant manufacturing facilities.
Although Corixa currently manufactures limited quantities of certain antigens
and adjuvants, including Corixa's novel LeIF adjuvant, to conduct preclinical
studies and to supply corporate partners, Corixa intends to rely on third party
contract manufacturers to produce large quantities of such substances for
clinical trials and product commercialization. Additionally, Corixa may be
required to rely on contract manufacturers to produce antigens, adjuvants and
other components of its products for research and development, preclinical and
clinical purposes. Corixa's vaccines and other products have never been
manufactured on a commercial scale. Such products may not be able to be
manufactured at a cost or in quantities necessary to make them commercially
viable. Third party manufacturers may not be able to meet Corixa's needs with
respect to timing, quantity or quality. If Corixa is unable to contract for a
sufficient supply of required products and substances on acceptable terms, or if
it should encounter delays or difficulties in its relationships with
manufacturers, Corixa's preclinical and clinical testing would be delayed,
thereby delaying the submission of products for regulatory approval or the
market introduction and subsequent sales of such products. Any such delay may
have a material adverse effect on Corixa's business, financial condition and
results of operations. Moreover, contract manufacturers that Corixa may use must
continually adhere to current Good Manufacturing Practices ("GMP") regulations
enforced by the FDA through its facilities inspection program. If the facilities
of such manufacturers cannot pass a pre-approval plant inspection, the FDA
premarket approval of Corixa's products will not be granted.
Corixa Lacks Marketing Experience and is Dependent on Third Parties.
Corixa currently has no sales, marketing or distribution capability. Corixa
intends to rely on its current and future corporate partners, if any, to market
its products. Such corporate partners, however, may not have effective sales
forces and distribution systems. If Corixa is unable to maintain or establish
such relationships and is required to market any of its products directly,
Corixa will have to develop a marketing and sales force with technical expertise
and with supporting distribution capabilities. Corixa may not be able to
maintain or establish such relationships with third parties or develop in-house
sales and distribution capabilities. To the extent that Corixa depends on its
corporate partners or third parties for marketing and distribution, any revenues
received by Corixa will depend upon the efforts of such corporate partners or
third parties. Such efforts may not be successful.
Corixa Faces Much Government Regulation. The preclinical testing and
clinical trials of any products developed by Corixa or its corporate partners
and the manufacturing, labeling, sale, distribution, export or import,
marketing, advertising and promotion of any new products resulting therefrom are
subject to regulation by federal, state and local governmental authorities in
the United States, the principal one of which is the FDA, and by similar
agencies in other countries. Any product developed by Corixa or its corporate
partners must receive all relevant regulatory approvals or clearances before it
may be marketed in a particular country. The regulatory process, which includes
extensive preclinical studies and clinical trials of each product in order to
establish its safety and efficacy, is uncertain, can take many years and
requires the expenditure of substantial resources. Data obtained from
preclinical and clinical activities are susceptible to varying interpretations
which could delay, limit or prevent regulatory approval or clearance. In
addition, delays or rejections may be encountered based upon changes in
regulatory policy during the period of product development and/or the period of
review of any application for regulatory approval or clearance for a product.
Delays in obtaining regulatory approvals or clearances would adversely affect
the marketing of any products developed by Corixa or its corporate partners,
impose significant additional costs on Corixa and its corporate partners,
diminish any competitive advantages that Corixa or its corporate partners may
attain and adversely affect Corixa's ability to receive royalties and generate
revenues and profits. Even after such time and expenditures, any required
approvals or clearances may not be obtained for any products developed by or in
collaboration with Corixa.
Regulatory approval, if granted, may entail limitations on the indicated
uses for which the new product may be marketed that could limit the potential
market for such product, and product approvals, once granted, may be withdrawn
if problems occur after initial marketing. Furthermore,
19
<PAGE> 22
manufacturers of approved products are subject to pervasive review, including
compliance with detailed regulations governing GMP. The FDA has recently revised
the GMP regulations. The new Quality System Regulation imposes design controls
and makes other significant changes in the requirements applicable to
manufacturers. Failure to comply with applicable regulatory requirements can
result in, among other things, warning letters, fines, injunctions, civil
penalties, recall or seizure of products, total or partial suspension of
production, refusal of the government to renew marketing applications and
criminal prosecution.
Corixa is also subject to numerous federal, state and local laws,
regulations and recommendations relating to safe working conditions, laboratory
and manufacturing practices, the experimental use of animals, the environment
and the use and disposal of hazardous substances used in connection with
Corixa's discovery, research and development work, including radioactive
compounds and infectious disease agents. In addition, Corixa cannot predict the
extent of government regulations or the impact of new governmental regulations
which might have an adverse effect on the discovery, development, production and
marketing of Corixa's products. Corixa may be required to incur significant
costs to comply with current or future laws or regulations. Corixa may be
adversely affected by the cost of such compliance.
Corixa Faces Product Liability Exposure and Potential Unavailability of
Insurance. Corixa risks financial exposure to product liability claims in the
event that the use of products developed by it or its corporate partners, if
any, results in personal injury. Corixa may experience losses due to product
liability claims in the future. Corixa has obtained limited product liability
insurance coverage. Such coverage, however, may not be adequate or may not
continue to be available in sufficient amounts or at an acceptable cost, or at
all. Corixa may not be able to obtain commercially reasonable product liability
insurance for any product approved for marketing. A product liability claim,
product recalls or other claim, as well as any claims for uninsured liabilities
or in excess of insured liabilities, may have a material adverse effect on
Corixa's business, financial condition and results of operations.
Corixa's Products May Not be Accepted by the Market. Any products
successfully developed by Corixa or its corporate partners, if approved for
marketing, may never achieve market acceptance. Corixa's products, if
successfully developed, will compete with a number of traditional drugs and
therapies manufactured and marketed by major pharmaceutical and other
biotechnology companies, as well as new products currently under development by
such companies and others. The degree of market acceptance of any products
developed by Corixa or its corporate partners will depend on a number of
factors, including the establishment and demonstration of the clinical efficacy
and safety of the product candidates, their potential advantage over alternative
treatment methods and reimbursement policies of government and third-party
payors. Physicians, patients or the medical community in general may not accept
and utilize any products that may be developed by Corixa or its corporate
partners. The lack of such market acceptance would have a material adverse
effect on Corixa's business, financial condition and results of operations.
Corixa Faces Potential Volatility in Its Stock Price. The market prices
for securities of biotechnology companies have in the past been, and can in the
future be expected to be, especially volatile. The market price of Corixa's
Common Stock may be subject to substantial volatility depending upon many
factors, including:
- Announcements regarding the results of discovery efforts, preclinical
and clinical activities;
- Announcements regarding the acquisition of technologies or companies,
including the GenQuest and Anergen mergers;
- Announcements regarding financing obtained by Corixa, such as the equity
line of credit with Castle Gate, L.L.C.;
- Technological innovations or new commercial products developed by Corixa
or its competitors;
20
<PAGE> 23
- Changes in government regulations;
- Changes in Corixa's patent portfolio;
- Developments or disputes concerning proprietary rights, changes in
existing corporate partnerships or licensing arrangements;
- Establishment of additional corporate partnerships or licensing
arrangements;
- Progress of regulatory approvals;
- Issuance of new or changed stock market analyst reports and/or
recommendations;
- Economic and other external factors;
- Operating losses by Corixa; and
- Fluctuations in Corixa's financial results and degree of trading
liquidity in its Common Stock.
These factors could have a material adverse effect on Corixa's business,
financial condition and results of operations and the price of its Common Stock
in the public market.
Corixa Faces Uncertainty Related to Pricing and Reimbursement and Health
Care Reform. In both domestic and foreign markets, sales of Corixa's or its
corporate partners' products, if any, will depend in part on the availability of
reimbursement from third-party payors such as government health administration
authorities, private health insurers, health maintenance organizations, pharmacy
benefit management companies and other organizations. Both the federal and state
governments in the United States and foreign governments continue to propose and
pass legislation designed to contain or reduce the cost of health care, and
regulations affecting the pricing of pharmaceuticals and other medical products
may change or be adopted before any of Corixa's or its corporate partners'
products are approved for marketing. Cost control initiatives could decrease the
price that Corixa receives for any product it or any of its corporate partners
may develop in the future and may have a material adverse effect on Corixa's
business, financial condition and results of operations. In addition,
third-party payors are increasingly challenging the price and cost-effectiveness
of medical products and services. Significant uncertainty exists as to the
reimbursement status of newly approved health care products, including
pharmaceuticals. Corixa's or its corporate partners' products, if any, may not
be considered cost effective or that adequate third-party reimbursement will be
available to enable Corixa or its corporate partners to maintain price levels
sufficient to realize a return on their investment. In any such event, Corixa's
business, financial condition and results of operations may be materially
adversely affected.
21
<PAGE> 24
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In connection with its initial public offering of Common Stock (the
"Offering") in 1997, the Company filed a Registration Statement (the
"Registration Statement") on Form S-1, SEC File No 333-32147, which was
declared effective by the Commission on October 2, 1997. The net
offering proceeds to the Company after deducting the total expenses was
$40,778,100. The entire amount of the net proceeds has been allocated
for general corporate purposes, including working capital requirements
of the Company. None of the net proceeds of the Offering were paid
directly or indirectly to any director, officer, general partner of the
Company or their associates, persons owning ten percent or more of any
class of equity securities of the Company, or an affiliate of the
Company. This use of proceeds does not represent a material change in
the use of proceeds described in the prospectus of the Registration
Statement.
On April 8, 1999, the Company entered into an agreement with Castle
Gate, L.L.C. to provide Corixa with a two-year equity line of credit of
up to $50 million. Upon the execution of this agreement, the Company
consummated an initial draw-down under the equity line of credit of
$12.5 million and issued Castle Gate 12,500 shares of Series A Preferred
Stock at a purchase price of $1,000 per share and warrants to purchase
an aggregate of up to 1,037,137 shares of Corixa Common Stock. The
conversion price for such shares of Series A Preferred Stock is $8.50
per share. Warrants to purchase 312,500 shares have an exercise price of
$8.50 per share and warrants to purchase 724,637 shares have an exercise
price of $8.28 per share. The Company may use funds obtained pursuant to
the equity line of credit for expenses associated with various
technology or company acquisitions.
The Series A Preferred Stock may be converted at the option of Castle
Gate, L.L.C. at any time following the issuance thereof, and shares of
Series A 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 of the issuance of such shares in the
event Castle Gate, L.L.C. would receive a specified return on its equity
investment. Additionally, any shares of Series A Preferred Stock that
have not been converted previously will be converted automatically on
the seven-year anniversary of the initial issuance of such shares of
Series A Preferred Stock. The warrants are immediately exercisable.
The Series A Preferred Stock and warrants issued to Castle Gate, L.L.C.
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, as amended. However, pursuant to a registration rights agreement
entered into between the Company and Castle Gate, L.L.C. in connection
with the equity line of credit, the Company has committed to register
the underlying shares of Common Stock for resale after certain
conversions of the Series A Preferred Stock. See "Part I--Note 7 to
Notes to Unaudited Consolidated Financial Statements" for additional
information with respect to the Company's agreement with Castle Gate,
L.L.C.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
22
<PAGE> 25
ITEM 5. OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Index to Exhibits.
(b) No reports on Form 8-K were filed by the Registrant during
the quarter ended March 31, 1999.
23
<PAGE> 26
Index to Exhibits for Form 10-Q for the quarter ended March 31, 1999
(a) The following documents are filed as part of this report:
(1) Consolidated Balance Sheets as of March 31, 1999 (unaudited), and
December 31, 1998. Consolidated Statements of Operations
(unaudited) Three Months Ended March 31, 1999 and 1998.
Consolidated Statements of Cash Flows (unaudited) Three Months
Ended March 31, 1999 and 1998. Notes to the unaudited
Consolidated Financial Statements.
(2) Financial Statement Schedules
All schedules are omitted because they are not applicable or the
required information is shown in the financial statements or
notes thereto.
(3) Index to Exhibits for Form 10-Q for the quarter ended March 31,
1999
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Description Page
- ------- ------------------- ----
<S> <C> <C>
2.01 Agreement and Plan of Reorganization dated December 11, 1998 by and
among the Registrant, Yakima Acquisition Corporation and Anergen,
Inc. Registrant agrees to furnish supplementally to the Commission
upon request a copy of any omitted schedule. (G)
2.02 Form of Certificate of Merger between Yakima Acquisition
Corporation and Anergen, Inc. (G)
2.1 Agreement and Plan of Merger dated June 22, 1998 by and among the
Registrant, Chinook Acquisition Corporation and Chinook, Inc.
Registrant agrees to furnish supplementally to the Commission upon
request a copy of any omitted schedule. (E)
2.2 Form of Certificate of Merger between Chinook Acquisition
Corporation and GenQuest, Inc. (E)
3.1 Amended and Restated Certificate of Incorporation of Corixa
Corporation. (A)
3.2 Bylaws of Corixa Corporation. (A)
4.1 Amended and Restated Investors' Rights Agreement dated as of
May 10, 1996 between Corixa Corporation and certain holders of its
capital stock. (A)
10.1 1994 Amended and Restated Stock Option and Restricted Stock Plan and
forms of stock purchase and stock option agreement. (A)
10.2 1997 Directors' Stock Option Plan and form of stock option agreement. (A)
10.3 1997 Employee Stock Purchase Plan and form of subscription agreement. (A)
10.4 Corixa Corporation 401(k) Savings & Retirement Plan. (A)
10.5 Form of Indemnification Agreement. (A)
10.6 Lease Agreement dated October 28, 1994 and amended December 29, 1995
between Corixa Corporation and Fred Hutchinson Cancer Research Center. (A)
10.7 Amendment No. 2 , dated September 25, 1998, to the Lease Agreement
dated May 31, 1996 between Corixa Corporation and Alexandria Real
Estate Equities. (F)
10.8+ Multi-Field Vaccine Discovery Collaboration and License Agreement
between Corixa Corporation and SmithKline Beecham, dated
September 1, 1998. (H)
10.9+ Licensing Agreement between Corixa Corporation and Dana-Farber
Cancer Institute, Inc., dated January 1, 1995. (A)
10.11+ Amendment No. 1, dated September 29, 1997, to the Licensing
Agreement, dated January 1, 1995, by and between Corixa Corporation
and Dana-Farber Cancer Institute, Inc. (D)
</TABLE>
24
<PAGE> 27
<TABLE>
<S> <C> <C>
10.12 Amendment No. 2, dated July 31, 1998, to the Licensing Agreement,
dated January 1, 1995, by and between Corixa Corporation and
Dana-Farber Cancer Institute, Inc. (B)
10.13+ Amended and Restated Research Services and Intellectual Property
Agreement effective as of January 1, 1997 by and between Corixa
Corporation and the Infectious Disease Research Institute. (A)
10.14+ Amendment No. 1 to License Agreement dated April 30, 1997
by and among Corixa Corporation, Southern Research Institute and
University of Alabama at Birmingham Research Foundation. (A)
10.15 Confirmation Letter, Purchase of $7,000,000 Loan Facility, dated
August 21, 1998 to Corixa Corporation from Banque Nationale de Paris. (F)
10.16 Assignment and Assumption Agreement, dated August 21, 1998, by and
Among Sumitomo Bank, Limited, Sumitomo Bank of New York Trust
Corporation, Corixa Corporation, Well Fargo Bank, N.A., Banque
Nationale de Paris, and Bank of The West Trust and Investment
Services Division. (F)
10.17++ Research agreement between Corixa Corporation and the Infectious
Disease Research Institute, dated March 26, 1999
10.18 Certificate of Designation of Corixa Corporation (I)
10.19++ Equity Line of Credit and Securities Purchase Agreement between
Corixa Corporation and Castle Gate, L.L.C. dated April 8, 1999 (I)
10.20++ Registration Rights Agreement between Corixa Corporation and Castle
Gate, L.L.C. dated April 8, 1999 (I)
10.21++ Standstill Agreement between Corixa Corporation and Castle Gate,
L.L.C. dated April 8, 1999 (I)
10.22++ Warrant Number CG-1 issued by Corixa Corporation to Castle Gate,
L.L.C. on April 8, 1999 (I)
10.23++ Warrant Number CG-2 issued by Corixa Corporation to Castle Gate,
L.L.C. on April 8, 1999 (I)
10.24++ Form of Warrant Number CG-3 to be issued by Corixa Corporation
to Castle Gate, L.L.C. upon the occurrence of certain events in
accordance with the terms of the Equity Line of Credit and
Securities Purchase Agreement (I)
10.25++ Form of Warrant Number CG-4 to be issued by the Registrant to
Castle Gate, L.L.C. upon the occurrence of certain events in
accordance with the terms of the Equity Line of Credit and
Securities Purchase Agreement (I)
27.1 Financial Data Schedule
</TABLE>
- ------------------------------
(A) Incorporated herein by reference the Company's Form S-1, as amended,
(File No. 333-32147), filed with the Commission on September 30, 1997.
(B) Incorporated by herein reference to the Company's Form 10-K (File No.
333-32147), filed with the Commission on March 10, 1998.
(C) Incorporated herein by reference to the Company's Form 10-Q (File No.
333-32147), filed with the Commission on May 15, 1998.
(D) Incorporated herein by reference to the Company's Form 10-Q (File No.
333-32147), filed with the Commission on August 11, 1998.
(E) Incorporated herein by reference to Appendix A of The Proxy
Statement/Prospectus included in the Registration Statement on Form
S-4, as amended, (File No. 333-32147), filed with the Commission on
August 5, 1998.
(F) Incorporated herein by reference to the Company's Form 10-Q (File No.
333-32147), filed with the Commission on November 12, 1998.
(G) Incorporated herein by reference to the Company's Form S-4 (File No.
333-69679), filed with the Commission on January 12, 1999.
25
<PAGE> 28
(H) Incorporated herein by reference to the Company's Form 8-K (File No.
0-22891), filed with the Commission on October 28, 1998.
(I) Incorporated herein by reference to the Company's Form 8-K (File No.
0-22891), filed with the Commission on April 23, 1999.
+ Confidential treatment granted by order of the SEC.
++ Confidential treatment requested
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
May 05, 1999 By: /s/ MICHELLE BURRIS
- -------------------------- -----------------------------------
DATE Michelle Burris
Vice President and
Chief Financial Officer
26
<PAGE> 1
EXHIBIT 10.17
RESEARCH AGREEMENT
This Research Agreement, dated as of March 26, 1999, is entered into by and
between the Infectious Disease Research Institute, a Washington not-for-profit
corporation ("IDRI"), and Corixa Corporation, a Delaware corporation ("Corixa").
R E C I T A L S
A. WHEREAS, IDRI is a not-for-profit corporation organized exclusively for
charitable, scientific, literary or educational purposes, within the meaning of
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code").
B. WHEREAS, IDRI may solely make expenditures directly for the purpose of
carrying out its exempt purposes or transfer funds to other organizations that
are exempt from tax under Section 501(c)(3) of the Code.
C. WHEREAS, IDRI's specific purpose (the "Specific Purpose") is research in the
field of infectious diseases and cancers and the development of vaccines,
therapeutics and diagnostics for such diseases and cancers and to take such
other actions, either directly or through other organizations, as are consistent
with these purposes and with its tax exempt status under Section 501(c)(3).
D. WHEREAS, IDRI believes that adoptive immunotherapy represents a promising
approach to the treatment of cancer.
E. WHEREAS, Corixa has notable expertise in the area of therapeutic cancer
vaccine research that involves the use of specialized cells within the immune
system in combination with specific cancer antigens.
F. WHEREAS, IDRI desires that Corixa perform and Corixa is willing to perform
such research in accordance with the research program authorized by IDRI and
attached to this Agreement as Exhibit A (the "Research Program") on the terms
and conditions set forth herein , in order to increase IDRI's expertise related
to such developments and the likelihood that such therapies shall become
available to treat cancer patients, on the terms and conditions set forth
herein.
A G R E E M E N T
NOW, THEREFORE, for and in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
[***] = Confidential Treatment Requested
1
<PAGE> 2
1. DEFINITIONS.
(a) "Adoptive Immunotherapy" shall mean [***]
(b) "Affiliate" shall mean any business entity that controls, is
controlled by, or is under common control with another corporation or business
entity. The direct or indirect ownership of at least fifty percent (50%) or, if
smaller, the maximum allowed by applicable law, of the voting securities or an
interest in the assets, profits or earnings of a business entity shall be deemed
to constitute control of the business entity.
(c) "Calendar Quarter" shall mean, respectively, the three (3)
consecutive months periods of each calendar year as follows: January, February,
March; April, May, June; July, August, September; and October, November and
December.
(d) "Corixa Antigens" shall mean the antigens listed in Exhibit A
hereto.
(e) "Developed Product(s)" shall mean any product for the treatment,
prevention and/or diagnosis of cancer in humans the research or development of
which was initiated during the Research Program Term and pursuant to the
Research Program.
(f) "Effective Date" shall mean the date upon which IDRI receives a
check or wire transfer in the amount of [***] to support the Research Program.
(g) "Net Proceeds" shall mean all amounts actually received by Corixa
or its Affiliates directly in connection with (i) a license or sublicense of
rights relating to Developed Product(s) granted by Corixa to a Third Party,
including, but not limited to license or sublicense fees, technology access fees
and milestone payments; and (ii) sales of Developed Product(s) to Third Parties
by Corixa's sublicensees and/or further sublicensees. For the sake of clarity,
Net Proceeds shall not include any bona fide research and development funding or
any payments received by Corixa from a Third Party in exchange for issuance of
shares of Corixa's capital stock or options to purchase shares of Corixa's
capital stock or other securities convertible into or exercisable for shares of
Corixa's capital stock.
(h) "Research Funds" shall have the meaning ascribed thereto in
Section 4.
(i) "Research Program" shall have the meaning ascribed thereto in
Recital F.
(j) "Research Program Term" shall have the meaning ascribed thereto
in Section 2.
(k) "Third Party" shall mean a party other than Corixa, IDRI, or an
Affiliate of either of them.
[***] = Confidential Treatment Requested
2
<PAGE> 3
2. RESEARCH PROGRAM.
Corixa shall use its best efforts during the Research Program Term to
perform the Research Program. The "Research Program Term" shall commence March
31,1999 and continue until March 31, 2002.
3. RESEARCH OVERSIGHT COMMITTEE.
The parties hereby create a Research Oversight Committee (the
"Research Oversight Committee") which shall consist of four (4) members, two (2)
appointed by Corixa and two (2) appointed by IDRI. Corixa's initial members of
the Research Oversight Committee shall be Martin Cheever and Kenneth Grabstein.
IDRI's initial members of the Research Oversight Committee shall be David
Webster and Patricia Wahl. Each party may at any time upon written notice
replace one or both of its appointees with members reasonably acceptable to the
other party. The Research Oversight Committee shall meet twice each year during
the Research Program Term to review the progress of the Research Program and the
use of the Research Funds. Within thirty (30) days following each meeting, the
members of the Research Oversight Committee shall distribute to each party
minutes detailing the matters reviewed at such meeting.
4. RESEARCH FUNDING.
IDRI shall make the following nonrefundable research support payments
(the "Research Funds"), to Corixa under this Agreement by wire transfer of
immediately available funds, which Research Funds shall be applied by Corixa in
accordance with the budget attached as Exhibit B hereto, provided, that IDRI's
obligation to make the payment pursuant to subsection (b) shall be contingent
upon IDRI's receipt of funds on or before March 31, 2000 to support the Research
Program in an amount equal to or greater than the amount set forth in subsection
(b) and provided, further, that IDRI's obligation to make the payment pursuant
to subsection (c) shall be contingent upon IDRI's receipt of funds on or before
March 31, 2001 to support the Research Program in an amount equal to or greater
than the amount set forth in subsection (c):
(a) [***] within five (5) days following the Effective
Date.
(b) [***] on March 31, 2000.
(c) [***] on March 31, 2001.
5. COMMERCIALIZATION.
(a) Diligence.Following completion of the Research Program, Corixa
shall use its best reasonable commercial efforts to further develop and
commercialize adoptive immunotherapy products for the treatment of cancer in
humans based on the results of the Research Program. With the exception of the
Research Funds or as may otherwise be mutually agreed in writing by IDRI and
Corixa, Corixa shall be responsible for all expenses related to such development
and commercialization. IDRI acknowledges that factors such as cost of clinical
trials and feasibility of successful treatment of cancer based on the results of
the
[***] = Confidential Treatment Requested
3
<PAGE> 4
Research Program are reasonable commercial factors that Corixa may rely upon in
determining whether or to what extent to continue to develop and commercialize
such products.
(b) Net Proceeds. Corixa shall pay to IDRI [***] of all Net Proceeds.
Payments due under this Agreement for Net Proceeds shall be deemed to accrue and
be payable pursuant to Section 6(a) when payments directly connected with
Developed Product(s) are actually received by Corixa or an Affiliate.
(c) Credit Against Payments. Corixa shall receive a credit against
amounts payable to IDRI in the amount of [***] Any excess amount of credit that
is not applied during any applicable Calendar Quarter, including amounts carried
over from past Calendar Quarters, shall be carried over and applied against
payments earned in the next Calendar Quarter, subject to the [***] limitation
set forth in the preceding sentence. Such carry-overs shall be continued until
Corixa has received the full amount of credit set forth herein.
6. PAYMENTS AND REPORTS.
(a) Payments and Reports. The payments required pursuant to Section
5(b) shall be paid within forty-five (45) days after the last day of each
Calendar Quarter with respect to Net Proceeds received by Corixa during such
Calendar Quarter. Each such payment shall be accompanied by a statement, in
sufficient detail describing payments directly connected to Developed Product(s)
received by Corixa or its Affiliates during such Calendar Quarter. All
information provided by Corixa pursuant to this Section 6(a) shall be deemed
Confidential Information. The calculation of the payments required hereunder
shall be based on Net Proceeds in U.S. Dollars. All amounts past due shall bear
interest from the date they are due until the date they are paid at the rate of
twelve percent (12%) per annum, or the maximum rate permitted by law, whichever
is less.
(b) Payment of Applicable Taxes. All taxes that are imposed on any
payments accruing to IDRI under this Agreement shall be borne by IDRI and where
required by law or governmental regulation shall be withheld by Corixa from
payments made to IDRI hereunder. The parties shall take steps consistent with
current commercial practices to avoid or minimize any such withholding.
All taxes levied on IDRI's income arising from this Agreement shall be borne by
IDRI.
(c) Records. Corixa shall keep full, complete and proper records and
accounts of Net Proceeds. Upon reasonable notice to Corixa, IDRI shall have the
right to have an independent certified public accountant, selected by IDRI and
acceptable to Corixa, audit Corixa's records pertaining to the Developed
Product(s) during normal business hours to verify the amounts payable pursuant
to this Agreement; provided, however, that: (i) such audit shall not take place
more frequently than once a year, and (ii) shall not cover such records for more
than the preceding three (3) years. Such audit shall be at IDRI's expense unless
Corixa has paid IDRI less than ninety-five percent (95%) of the amount
determined to be due for a given time period,
[***] = Confidential Treatment Requested
4
<PAGE> 5
in which case such audit shall be at Corixa's expense. Corixa shall preserve and
maintain all such records and accounts required for audit for a period of three
(3) years after the quarter to which such records and accounts apply.
7. OWNERSHIP AND LICENSE OF INTELLECTUAL PROPERTY
(a) Acknowledgement. The parties hereby acknowledge that except as
expressly set forth herein, neither party shall receive any right, title or
interest to any proprietary rights or intellectual property rights of the other
party.
(b) Ownership of Inventions. All inventions made, conceived or
reduced to practice in the course of performing the Research Program shall be
owned in accordance with the U.S. laws governing inventorship.
(c) Non-exclusive Research License. Subject to the rights of Corixa's
corporate partners and any restrictions related thereto, Corixa hereby grants to
IDRI a worldwide, fully paid-up, non-exclusive license to use solely in IDRI's
internal, noncommercial research, all data generated and intellectual property
developed by Corixa, alone or together with others, in the course of performing
the Research Program.
8. CONFIDENTIALITY; PUBLICITY; PUBLICATION.
(a) IDRI acknowledges that it has and shall continue to receive
confidential information of Corixa ("Confidential Information"), in connection
with the negotiation, execution and performance of this Agreement, including,
but not limited to, the performance of the Research Program. Confidential
Information shall include all information, whether oral or written, which by its
nature or content, or the context of disclosure, might reasonably be expected to
be confidential. IDRI agrees to not use or disclose to any third party any of
such confidential information without first obtaining Corixa's written consent.
This confidentiality obligation shall not apply to information which is or
becomes a matter of public knowledge or is disclosed to IDRI by a third party
having no obligation of nondisclosure to Corixa. The obligations of nonuse and
nondisclosure hereunder shall survive any expiration or termination of the
Agreement.
(b) The parties to this Agreement may disclose the nature of this
Agreement in a press release following signature; provided, however, that the
terms of the Agreement shall not be disclosed by either party in such release or
otherwise without the prior consent of the other party, which consent shall not
be unreasonably withheld, except that the disease targets under the Research
Program may be disclosed. In the event of any clinical trial(s) performed
pursuant to the Research Program, the parties may disclose the nature of such
trial(s) in a press release, including IDRI's role in funding such trial(s). The
wording of any press release to be issued in connection with this Agreement by
IDRI must be approved by Corixa in advance of its release, provided that such
approval is not unreasonably withheld by Corixa. IDRI acknowledges that Corixa's
corporate partner(s) may have the right to review and comment on such press
releases and that Corixa's approval may be subject to such comments.
(c) Subject to the terms and conditions of this Section 8(c) and any
restrictions required by clinical study sites or governmental law or regulation,
IDRI shall have the right to
5
<PAGE> 6
publish any data generated by Corixa in the course of performing the Research
Program. If IDRI shall desire to publish or present orally or in writing,
including without limitation at symposia, national or regional professional
meetings, or to publish in journals or other publications, any such data derived
from or in anyway related to its activities under this Agreement IDRI shall
first provide Corixa with copies of the proposed presentation or publication
materials at least sixty (60) days in advance of the presentation or publication
date. The parties agree that publication can be delayed for an appropriate
period of time in the event that either party reasonably determines that it
needs time to seek or maximize patent or other intellectual property or
commercial protection.
9. REPRESENTATIONS AND WARRANTIES.
(a) Representations and Warranties of IDRI.
(i) IDRI hereby represents and warrants to Corixa that it
has the full right and authority to enter into this Agreement.
(ii) IDRI hereby represents and warrants to Corixa that
this Agreement, including all terms and conditions hereof, are
consistent with IDRI's status as a 501(c)(3) corporation, including,
but not limited to, IDRI's Specific Purpose.
(b) Representations and Warranties of Corixa.
(i) Corixa hereby represents and warrants to IDRI that it
has the full right and authority to enter into this Agreement.
(ii) Corixa hereby represents and warrants to IDRI that the
execution, delivery and performance of this Agreement does not
conflict with, violate or breach any agreement to which Corixa is a
party.
10. INDEMNIFICATION.
(a) Indemnification by IDRI. IDRI shall defend, indemnify and hold
Corixa harmless against any liability, damage, loss, cost or expense, including
legal fees ("Liability"), arising out of or resulting from (i) IDRI's breach of
any representation or warranty set forth in Section 9(a), (ii) gross negligence
or willful misconduct committed by IDRI or its officers, directors, employees,
consultants or agents or (iii) IDRI's material default in the performance of its
obligations under this Agreement and failure or inability to cure such default
in accordance with Section 13(b).
(b) Indemnification by Corixa. Corixa shall defend, indemnify and
hold IDRI harmless against any Liability arising out of or resulting from (i)
Corixa's breach of its representations set forth in Section 9(b), (ii) gross
negligence or willful misconduct committed by Corixa or its officers, directors,
employees, consultants or agents, (iii) Corixa's material default in the
performance of its obligations under this Agreement and failure or inability to
cure such default in accordance with Section 13(b), (iv) Corixa's performance of
the Research Program, (v) any clinical trial directly related to the Research
Program or Developed Product(s) or (vi) the manufacture, sale or other
distribution of Developed Product(s).
6
<PAGE> 7
(c) Conditions of Indemnification. The agreements of indemnity set
forth in Sections 9(a) and 9(b) above is conditioned upon the indemnified
party's obligation to: (i) advise the indemnifying party of any claim or suit,
in writing, within sixty (60) days after the indemnified party has received
notice of such claim or suit, and (ii) assist the indemnifying party and its
representatives in the investigation and defense of any claim and/or suit for
which indemnification is provided. This agreement of indemnity shall not be
valid as to any settlement of a claim or suit or offer of settlement or
compromise without the prior written approval of the indemnifying party.
(d) Insurance. During the term of this Agreement, Corixa shall, at
its sole cost and expense, obtain and keep in force a policy of comprehensive
general liability insurance with bodily injury, death and property damage limits
of One Million US Dollars (US$1,000,000) per occurrence and Three Million US
Dollars (US$3,000,000) in the aggregate. In addition Corixa shall put into place
insurance with a reputable insurer in an amount sufficient for the purposes of
conducting or having conducted any clinical trial directly related to the
Research Program, including, without limitation, no-fault products liability
insurance.
(e) No Consequential Damages. NOTWITHSTANDING ANY OTHER PROVISION OF
THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER WITH RESPECT TO THE
SUBJECT MATTER OF THE AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY
OR OTHER LEGAL OR EQUITABLE THEORY FOR (A) ANY CONSEQUENTIAL, INCIDENTAL,
SPECIAL OR INDIRECT DAMAGES WHATSOEVER, (B) COST OF PROCUREMENT OF SUBSTITUTE
GOODS, TECHNOLOGY OR SERVICES, OR (C) LOSS OF PROFIT OR ANTICIPATED BUSINESS.
11. GOVERNING LAW; ARBITRATION.
This Agreement shall be governed by the laws of the state of
Washington, without regard to its or any other jurisdiction's conflicts-of laws
provisions. Any dispute, controversy or claim arising out of or in relation to
this Agreement that cannot be settled amicably by agreement of the parties
hereto shall be finally settled by arbitration in accordance with the
arbitration rules of the American Arbitration Association ("AAA"), then in
force, by one or more arbitrators appointed in accordance with said rules,
provided that the appointed arbitrators shall have appropriate experience in the
biopharmaceutical industry. The award rendered shall be final and binding upon
both parties. The judgment rendered by the arbitrator(s) shall include costs of
arbitration, reasonable attorneys' fees and reasonable costs for any expert and
other witnesses. Judgment upon the award may be entered in any court having
jurisdiction.
12. NOTICES.
(a) Any notice required or permitted under this Agreement shall be
deemed given if delivered (i) personally, (ii) by facsimile transmission
(receipt verified), (iii) by registered or certified mail (return receipt
requested), postage prepaid, or (iv) sent by express courier service (receipt
verified), to the following addresses of the parties:
7
<PAGE> 8
If to Corixa:
Corixa Corporation
1124 Columbia Street, Suite 200
Seattle, WA 98104
Attention: Chief Operating Officer
Facsimile: (206) 754-5762
WITH A COPY TO:
Venture Law Group
4750 Carillon Point
Kirkland, WA 98033
Attention: William W. Ericson
Facsimile: (425) 739-8750
If to IDRI:
Infectious Disease Research Institute
1124 Columbia Street
Seattle, WA 98104
Attention: Executive Director
Facsimile: (206) 754-5715
WITH A COPY TO:
David G. Webster
[***]
(b) Any notice required or permitted to be given concerning this
Agreement shall be effective upon receipt by the party to whom it is addressed.
13. TERM AND TERMINATION
(a) The term of the Research Program shall be the Research Program
Term, unless earlier terminated as set forth below. The term of this Agreement
shall be until the expiration, on a country-by-county and product-by-product
basis, of the last to expire of any patent(s) covering the Developed Product(s),
unless earlier terminated as set forth below.
(b) If either party materially breaches the provisions of the Agreement and such
breach is not cured within sixty (60) days (or in the case of non-payment
pursuant to Section 4 above, then fourteen (14) days) after receiving written
notice from the other party with respect to such breach, the non-breaching party
shall have the right to terminate this Agreement by giving written notice to the
party in breach.
[***] = Confidential Treatment Requested
8
<PAGE> 9
(c) Either party may terminate this Agreement if, at any time, the
other party shall file a petition in bankruptcy or insolvency or for
reorganization or for an arrangement or for the appointment of a receiver or
trustee of the party or of its assets, or if the other party shall be served
with an involuntary petition against it, filed in any insolvency proceeding, and
such petition shall not be dismissed within sixty (60) days after the filing
thereof, or if the other party shall propose or be a party to any dissolution or
liquidation, or if the other party shall make an assignment for the benefit of
creditors.
(d) Upon any termination of this Agreement, each party shall have the
right to retain any sums already paid to it by the other party hereunder.
14. MISCELLANEOUS
(a) Independent Contractors. IDRI and Corixa shall be independent
contractors and shall not be deemed to be partners, joint venturers or each
other's agents, and neither party shall have the right to act on behalf of the
other except as is expressly set forth in this Agreement.
(b) Entire Agreement; Amendment. This Agreement sets forth the entire
agreement and understanding between the parties and supersedes all previous
agreements, promises, representations, understandings, and negotiations, whether
written or oral, between the parties with respect to the subject matter hereof.
There shall be no amendments or modifications to this Agreement, except by a
written document signed by both parties.
(c) Assignment. This Agreement shall not be assigned by Corixa
without the prior written consent of IDRI, such consent not to be unreasonably
withheld, provided, however, that such consent shall not be required in the
event of an assignment by Corixa to any of its Affiliates or in connection with
the merger, acquisition or sale of all or a majority of Corixa's business assets
related to the subject matter of the Research Program.
(d) Successors. This Agreement shall be binding upon the successors
and assigns of the parties hereto.
(e) Governing Law; Injunctive Relief. This Agreement shall be
construed and enforced in accordance with the laws of the state of Washington,
without giving effect to its or any other jurisdiction's principles of conflicts
of law. Corixa shall have the right to such injunctive relief or other legal or
equitable relief as is reasonable in connection with any breach or any
reasonable likelihood of breach by IDRI of its obligations under Section 8.
(f) Severability. If any provision of this Agreement is finally held
to be invalid, illegal or unenforceable by a court of competent jurisdiction,
the validity, legality and enforceability of the remaining provisions shall not
be affected or impaired in any way.
(g) Waiver. Any delay in enforcing a party's rights under this
Agreement or any waiver as to a particular default or other matter shall not
constitute a waiver of a party's right to the future enforcement of its rights
under this Agreement.
(h) Force Majeure. If the performance of this Agreement or any
obligations hereunder is prevented, restricted or interfered with by reason of
fire or other casualty or
9
<PAGE> 10
accident, strikes or labor disputes, war or other violence, any law, order,
proclamation, ordinance, demand or requirement of any government agency, or any
other act or condition beyond the control of the parties hereto, the party so
affected, upon giving prompt notice to the other party shall be excused from
such performance (other than the obligation to pay money) during such
prevention, restriction or interference.
(i) Headings. The section headings appearing in this Agreement are
inserted only as a matter of convenience and in no way define, limit, construe
or describe the scope or extent of such section or in any way affect such
section.
(j) Counterparts. This Agreement may be signed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer as of the date first
written above.
AGREED TO AND ACCEPTED BY: AGREED TO AND ACCEPTED BY:
CORIXA CORPORATION INFECTIOUS DISEASE RESEARCH
INSTITUTE
/s/ STEVEN GILLIS /s/ DAVID G. WEBSTER
- ----------------------------------- -----------------------------------
Steven Gillis, Chairman and David G. Webster
Chief Executive Officer Interim Executive Director
10
<PAGE> 11
EXHIBIT A
RESEARCH PROGRAM
PROPOSED FOR ADOPTIVE DENDRITIC OR T-CELL IMMUNOTHERAPY PRODUCT DEVELOPMENT
[***]
[***] = Confidential Treatment Requested
11
<PAGE> 12
The Corixa Antigens for the Research Program as follows:
[***]
[***] = Confidential Treatment Requested
12
<PAGE> 13
STAFFING REQUIRED
[***]
[***] = Confidential Treatment Requested
13
<PAGE> 14
EXHIBIT B
RESEARCH PROGRAM BUDGET
[***]
[***] = Confidential Treatment Requested
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 7,160
<SECURITIES> 39,321
<RECEIVABLES> 1,712
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 49,671
<PP&E> 14,155
<DEPRECIATION> 4,193
<TOTAL-ASSETS> 62,811
<CURRENT-LIABILITIES> 16,182
<BONDS> 11,292
0
0
<COMMON> 15
<OTHER-SE> 35,337
<TOTAL-LIABILITY-AND-EQUITY> 62,811
<SALES> 0
<TOTAL-REVENUES> 3,134
<CGS> 0
<TOTAL-COSTS> 20,826
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 202
<INCOME-PRETAX> (17,386)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,386)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,386)
<EPS-PRIMARY> (1.23)
<EPS-DILUTED> (1.23)
</TABLE>
