<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): FEBRUARY 12, 1999
(FEBRUARY 10, 1999)
CORIXA CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE [COMMISSION FILE NUMBER] 91-1654387
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
OF incorporation or organization) Identification No.)
1124 COLUMBIA STREET, SUITE 200
SEATTLE, WASHINGTON 98104
(Address of principal executive offices) (Zip code)
(206) 754-5711
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On February 10, 1999, Corixa Corporation a Delaware corporation (the
"Company") acquired Anergen, Inc. a Delaware corporation ("Target"), by the
statutory merger (the "Merger") of Yakima Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of the Company ("Company Sub") with and
into Target. The Merger was accomplished pursuant to the Agreement and Plan of
Reorganization, dated as of December 11, 1998, among the Company, Target and
Company Sub (the "Merger Agreement"), and a related Certificate of Merger,
pursuant to which the Company Sub merged with and into Target with Target
surviving as a wholly-owned subsidiary of the Company. The Merger occurred
following the approval of the Merger Agreement by the stockholders of Target
pursuant to a stockholders meeting held on February 10, 1999 and satisfaction of
certain other closing conditions. As a result of the Merger, the Company became
the owner of 100% of the issued and outstanding shares of Target Common Stock
and each outstanding share of Target Common Stock was converted into .055919 of
a share of the Company's Common Stock.
A total of approximately 1.1 million shares of the Company's Common
Stock will be issued to former Target stockholders and option holders in
exchange for the acquisition by the Company of all outstanding Target capital
stock and all unexpired and unexercised options and warrants to acquire Target
capital stock. The ratio at which Target's stock was exchanged for shares of
the Company's Common Stock was determined pursuant to a formula set forth in
the Merger Agreement. The formula was agreed upon in arms' length negotiations
and took account of several factors concerning the relative valuations of
Target and the Company. Certain adjustments to the purchase price were made in
accordance with the Merger Agreement. Target received an opinion from its
financial advisor that the Merger was fair to the Target's stockholders from a
financial point of view.
The shares issued to Target stockholders were issued pursuant to the
Registration Statement No. 333-69679 on Form S-4, pursuant to the Securities
Act of 1933, as amended, which became effective as of January 12, 1999 (the
"Form S-4"). Options and warrants to purchase Target Common Stock were assumed
by the Company and remain outstanding as options to purchase shares of the
Company's Common Stock.
The Merger will be accounted for as a purchase transaction.
The above description of the Merger is a summary and as such is not
intended to be complete and is subject to and qualified by reference to the
Merger Agreement, and is attached as Appendix A to the Form S-4 and a press
release issued by the Registrant on February 11, 1999 concerning the
Registrant's acquisition of the Target which is incorporated by reference,
and attached hereto as an exhibit. For a more detailed description of
the Merger and the Merger Agreement, reference is made to the Form S-4.
<PAGE> 3
(b) Target is a biotechnology company focused on advancing the
treatment of autoimmune diseases. Target is developing proprietary
biopharmaceutical compounds designed to interrupt selectively antigen
presentation or inactivate those T cells that mediate the disease process.
The Company intends to continue such business.
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
Index to Financial Statements
Report of Ernst & Young LLP, Independent Auditors ..................1
Financial Statements
Balance Sheets .....................................................2
Statements of Operations ...........................................3
Statements of Stockholders Equity' .................................4
Statements of Cash Flows ...........................................5
Notes to Financial Statements ......................................6
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Anergen, Inc.
We have audited the accompanying balance sheets of Anergen, Inc. as of
December 31, 1997 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Since the date of completion of our audit of the accompanying financial
statements and initial issuance of our report thereon dated February 6, 1998,
the Company, as discussed in the second paragraph of Note 1, has experienced a
reduction in revenues and has been unable to secure additional financing, which
has adversely affected the Company's liquidity. The second paragraph of Note 1
describes management's plans to address these issues.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Anergen, Inc. at December
31, 1997 and 1996, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Palo Alto, California
February 6, 1998,
except for the second paragraph of Note 1,
as to which the date is December 21, 1998
<PAGE> 5
ANERGEN, INC.
BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------
1998 1997 1996
------------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 1,868 $ 1,412 $ 3,963
Short-term investments................... 502 6,991 12,437
Accounts receivable...................... -- 836 820
Prepaid expenses......................... 50 78 208
-------- -------- --------
Total current assets............. 2,420 9,317 17,428
Property and equipment, net................ 1,173 1,703 1,459
Deferred charges and deposits.............. 36 36 36
-------- -------- --------
Total assets..................... $ 3,629 $ 11,056 $ 18,923
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities........................... $ 730 $ 1,281 $ 1,326
Deferred revenue......................... -- 502 500
Current portion of obligations and
commitments........................... 1,003 616 728
-------- -------- --------
Total current liabilities.................. 1,733 2,399 2,554
Long-term obligations and commitments, less
current portion.......................... -- 870 366
Stockholders' equity:
Preferred stock, no par value; 10,000,000
shares authorized; none outstanding... -- -- --
Common stock, no par value; 60,000,000
shares authorized; 18,892,000 shares
issued and outstanding (18,846,264 and
18,780,697 at December 31, 1997 and
1996, respectively)................... 57,705 57,670 57,484
Additional paid-in capital............... 659 659 659
Accumulated other comprehensive income... -- (6) (34)
Accumulated deficit...................... (56,468) (50,536) (42,106)
-------- -------- --------
Total stockholders' equity....... 1,896 7,787 16,003
-------- -------- --------
Total liabilities and
stockholders' equity.......... $ 3,629 $ 11,056 $ 18,923
======== ======== ========
</TABLE>
See accompanying notes.
2
<PAGE> 6
ANERGEN, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ -----------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Contract revenue-related
party.................. $ 923 $ 1,797 $ 2,631 $ 3,107 $ 3,001
Contract revenue.......... 2,198 2,667 3,132 412 --
License fee............... -- -- -- 2,000 --
Interest income........... 300 460 565 653 533
------- ------- ------- ------- -------
Total revenue..... 3,421 4,924 6,328 6,172 3,534
Operating expenses:
Research and
development............ 6,374 8,611 11,559 9,278 8,322
General and
administrative......... 2,873 2,180 2,997 2,521 1,976
Interest expense.......... 106 174 202 170 322
------- ------- ------- ------- -------
9,353 10,965 14,758 11,969 10,620
------- ------- ------- ------- -------
Net loss.................... $(5,932) $(6,041) $(8,430) $(5,797) $(7,086)
======= ======= ======= ======= =======
Basic and diluted net loss
per share................. $ (0.31) $ (0.32) $ (0.45) $ (0.35) $ (0.55)
======= ======= ======= ======= =======
Shares used in computation
of basic and diluted net
loss per share............ 18,878 18,807 18,815 16,482 12,859
======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
3
<PAGE> 7
ANERGEN, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER
COMMON STOCK ADDITIONAL ACCUMULATED
---------------- PAID-IN DEFERRED COMPREHENSIVE ACCUMULATED
SHARES AMOUNT CAPITAL COMPENSATION INCOME DEFICIT TOTAL
------ ------- ---------- ------------ -------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994........... 7,439 $32,572 $648 $(36) $(91) $(29,223) $ 3,870
Proceeds from follow-on offering,
net................................ 7,317 14,651 -- -- -- -- 14,651
Issuance of common stock to employees
under option and purchase plans.... 212 136 -- -- -- -- 136
Amortization of deferred
compensation....................... -- -- -- 36 -- -- 36
Unrealized gain on investments....... -- -- -- -- 107 -- 107
Net loss............................. -- -- -- -- -- (7,086) (7,086)
------ ------- ---- ---- ---- -------- -------
Balance at December 31, 1995........... 14,968 47,359 648 -- 16 (36,309) 11,714
Proceeds from follow-on offering,
net................................ 3,668 9,880 -- -- -- -- 9,880
Issuance of common stock to employees
under option and purchase plans.... 145 245 -- -- -- -- 245
Deferred compensation................ -- -- 11 -- -- -- 11
Unrealized loss on investments....... -- -- -- -- (50) -- (50)
Net loss............................. -- -- -- -- -- (5,797) (5,797)
------ ------- ---- ---- ---- -------- -------
Balance at December 31, 1996........... 18,781 57,484 659 -- (34) (42,106) 16,003
Issuance of common stock to employees
under option and purchase plans.... 65 186 -- -- -- -- 186
Unrealized gain on investments....... -- -- -- -- 28 28
Net loss............................. -- -- -- -- -- (8,430) (8,430)
------ ------- ---- ---- ---- -------- -------
Balance at December 31, 1997........... 18,846 57,670 659 -- (6) (50,536) 7,787
Issuance of common stock to employees
under option and purchase plans
(unaudited)........................ 46 35 -- -- -- -- 35
Unrealized gain on investments
(unaudited)........................ -- -- -- -- 6 6
Net loss (unaudited)................. -- -- -- -- -- (5,932) (5,932)
------ ------- ---- ---- ---- -------- -------
Balance at September 30, 1998
(unaudited).......................... 18,892 $57,705 $659 $ -- $ -- $(56,468) $ 1,896
====== ======= ==== ==== ==== ======== =======
</TABLE>
See accompanying notes.
4
<PAGE> 8
ANERGEN, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ ------------------------------
1998 1997 1997 1996 1995
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................................... $(5,932) $ (6,041) $ (8,430) $ (5,797) $ (7,086)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................ 625 633 874 1,096 1,031
Deferred compensation................................ -- -- -- 11 36
Changes in certain assets and liabilities:
Contract receivables -- related party.............. 836 (889) (516) (5) (223)
Prepaid expenses................................... 28 118 130 (106) 76
Other assets....................................... -- -- -- -- (16)
Accounts payable accrued liabilities and deferred
revenue.......................................... (1,053) (18) 457 786 63
------- -------- -------- -------- --------
Net cash used in operating activities.................. (5,496) (6,197) (7,485) (4,015) (6,119)
INVESTING ACTIVITIES
Purchases of securities available-for-sale............. (7,285) (20,946) (27,979) (21,783) (30,172)
Sale of investments available-for-sale................. 13,779 29,201 33,453 20,320 21,763
Purchases of equipment................................. (94) (1,021) (1,118) (545) (790)
------- -------- -------- -------- --------
Net cash provided by (used in) investing activities.... 6,400 7,234 4,356 (2,008) (9,199)
FINANCING ACTIVITIES
Repayments of capital lease obligations and debt....... (483) (452) (817) (883) (1,038)
Proceeds from facility and equipment debt financing.... -- 659 1,209 276 789
Issuance of common stock, net.......................... 35 102 186 10,125 14,787
------- -------- -------- -------- --------
Net cash provided by (used in) financing activities.... (448) 309 578 9,518 14,538
Net increase (decrease) in cash and cash equivalents... 456 1,346 (2,551) 3,495 (780)
Cash and cash equivalents at beginning of period....... 1,412 3,963 3,963 468 1,248
------- -------- -------- -------- --------
Cash and cash equivalents at end of period............. 1,868 5,309 1,412 3,963 468
Short-term investments at end of period................ 502 4,219 6,991 12,437 11,024
------- -------- -------- -------- --------
Cash, cash equivalents and short-term investments at
end of period........................................ $ 2,370 $ 9,528 $ 8,403 $ 16,400 $ 11,492
======= ======== ======== ======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 9
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS
INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Anergen, Inc. (the "Company") was incorporated on April 26, 1988 for the
purpose of developing therapies using biopharmaceutical compounds for the
treatment of autoimmune diseases. The Company devotes its efforts to research
and development on its own behalf and also on behalf of its corporate partners.
At September 30, 1998 the Company had cash, cash equivalents and short-term
investments of approximately $2,370,000 which at historical cash consumption
rates is not sufficient to fund operations through the end of the year.
Therefore, during October of 1998, Anergen announced a restructuring pursuant to
which it took a number of steps to reduce expenses including the termination of
33 employees. Anergen has also ceased its research efforts and is focusing on
clinical development on AnergiX for rheumatoid arthritis in collaboration with
N.V. Organon. Anergen restructured its operations due to an inability to date to
secure financing. On December 11, 1998, Anergen entered into a Note Purchase
Agreement (the "Note Purchase Agreement") with Warburg, Pincus Ventures, L.P.
("WPV") and International Biotechnology Trust, PLC ("IBT"), Anergen's two
largest stockholders, pursuant to which Anergen may obtain a bridge loan (the
"Bridge Loan") of up to $1,500,000 subject to certain conditions. On December
19, 1998 Anergen issued promissory notes in the aggregate amount of $500,000
under this Bridge Loan facility. The Note Purchase Agreement was executed
concurrently with an Agreement and Plan of Reorganization by and among Corixa
Corporation ("Corixa"), Yakima Acquisition Corporation ("Merger Sub") and
Anergen dated December 11, 1998 (the "Merger Agreement") pursuant to which
Merger Sub will merge with and into Anergen and Anergen will become a
wholly-owned subsidiary of Corixa (the "Merger") in consideration for shares of
Corixa Common Stock with an aggregate value of approximately $8.5 million as of
the date of the Merger Agreement. The Merger is subject to certain conditions
including (i) approval of Anergen stockholders, (ii) securing the consent of
Silicon Valley Bank; and (iii) Silicon Valley Bank has not taken certain actions
to foreclose on the Silicon Valley Bank Loan (see Note 5). Anergen is currently
in discussions with Silicon Valley Bank to restructure the Silicon Valley Loan
and to obtain its consent to the Merger. There can be no assurance that Anergen
will obtain Silicon Valley Bank's consent to the Merger or that Silicon Valley
Bank will not require immediate repayment of its loan and will not foreclose on
its loan. If the proposed Merger with Corixa is not consummated, Anergen will
require substantial additional funds to continue its operations and there can be
no assurance that such financing can be obtained.
Interim Financial Information
The interim financial statements included herein have been prepared by the
Company and have not been audited, pursuant to the rules and regulations
promulgated by the Securities and Exchange Commission (the "Commission").
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting principles,
have been omitted pursuant to Commission rules
6
<PAGE> 10
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
and regulations; nevertheless, the Company believes that the disclosures are
adequate to make the information presented not misleading. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company (subject to
year-end adjustments) with respect to the interim financial statements, and of
the results of its operations and cash flows for the interim periods then ended,
have been included. The results of operations for the interim periods are not
necessarily indicative of the results for the full year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost which approximates fair value
(based on quoted market prices) and include primarily interest bearing demand
deposits and U.S. Government notes with original maturities of three months or
less upon purchase.
Securities Available-for-Sale
The Company accounts for its short-term investments in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("Statement 115"). Under Statement
115 management determines the appropriate classification of debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity when the Company has
the positive intent and ability to hold the securities to maturity. Marketable
securities and debt securities not classified as held-to-maturity are classified
as available-for-sale. To date, all marketable securities have been classified
as available-for-sale. Available-for-sale securities are carried at fair value,
with unrealized gains and losses reported in a separate component of
shareholders' equity. The amortized cost of debt securities in this category is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in interest income. The cost of securities sold is
based on the specific identification method. Interest and dividends on
securities classified as available-for-sale are included in interest income.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation and
amortization. Depreciation of property and equipment is provided over the
estimated useful lives (3 to 4 years) of the respective assets using the
straight-line method. Leasehold improvements are amortized over the shorter of
the life of the lease or their estimated useful lives using the straight-line
method.
7
<PAGE> 11
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Contract and License Fee Revenues
Contract and license fee revenues consist of revenues from the Company's
corporate partner, N.V. Organon and former corporate partner Novo Nordisk A/S.
Contract revenues derived from the corporate partner agreements are recorded as
earned based on the level of research effort performed by the Company. The
Company recognizes revenue based upon actual effort performed related to
contract projects. The Company tracks its expenditures related to projects and
these expenditures are recorded as research and development expenses as
incurred. The revenue associated with specific stages of development is recorded
as contract revenue when the related expense is incurred. Any revenues received
related to the projects are not refundable. Currently, the Company only has one
collaborative relationship on-going (please note statements under
"Collaborations" related to the termination of the Company's relationship with
Novo Nordisk) with N.V. Organon ("Organon"). Under the contract between the
Company and Organon, the Company receives quarterly payments related to research
and development activities from Organon based upon a budget agreed to between
the parties. The amounts are recorded as revenue as the actual expenditures
related to the project are incurred. When the actual effort is less than
budgeted amounts received, the variance is recorded as deferred revenue. The
Company is also eligible for certain milestones based upon completion of
activities. These payment amounts are not refundable and are recorded as revenue
when received. License fees that are non-refundable and not tied to future
performance are recorded when received. The Company is also entitled to receive
from its partners (i) development milestone payments upon the occurrence of
certain events and (ii) royalties on product sales, if any.
Research and Development
Research and development costs are expensed as incurred and include
personnel costs, materials consumed in research and development activities,
depreciation on equipment used and the cost of facilities used for research and
development as well as outside services.
Accounting and Disclosure of Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its stock options because the alternative fair
market value accounting provided for under FASB Statement No. 123, "Accounting
for Stock-Based Compensation" ("Statement 123"), requires the use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.
8
<PAGE> 12
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Income Taxes
The Company accounts for income taxes using the liability method as
prescribed by Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes."
Net Loss Per Share
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128
requires the presentation of basic earnings (loss) per share and diluted
earnings (loss) per share, if more diluted. Basic net loss per share is computed
using the weighted average number of shares of common stock outstanding during
the period. Diluted net loss per share has not been presented as stock options
and other common stock equivalents are antidilutive.
Comprehensive Income (Loss)
As of January 1, 1998, the Company adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes new rules
for the reporting and presentation of comprehensive income and its components;
however, the adoption of SFAS 130 had no impact on the Company's net loss or
stockholders' equity. SFAS 130 requires unrealized gains or losses on the
Company's available-for-sale securities, which prior to adoption were reported
separately in stockholders' equity, to be included in other comprehensive income
(loss).
The table below shows comprehensive loss for the periods presented:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
<S> <C> <C>
Net loss........................................... $(5,932,000) $(6,041,000)
Net unrealized gain (loss) on securities available
for sale......................................... 6,000 37,000
----------- -----------
Comprehensive loss................................. $(5,926,000) $(6,004,000)
=========== ===========
</TABLE>
Reclassification
Certain prior year amounts have been reclassified to conform to the current
periods presentation.
2. COLLABORATIONS
Collaboration with N.V. Organon
In June 1996, the Company entered into a development and license agreement
("Organon Agreement") with N.V. Organon for the purpose of developing and
commercializing a product for the treatment of rheumatoid arthritis ("RA") using
the Company's AnergiX technology combined with a peptide discovered by Organon.
Under the Organon Agreement, the Company is entitled to receive (i) a license
fee, (ii) research and development cost reimbursement, (iii) development
milestone payments and
9
<PAGE> 13
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(iv) royalties on product sales, if any. The Company has granted to N.V. Organon
exclusive worldwide rights to products developed under the Organon Agreement,
including rights to commercialize these products although the Company retains
certain co-promotion rights in North America. The Company received and recorded
a $2 million license fee in September 1996 and recorded contract revenues of
$2,198,000, $3,132,000 and $412,000 for the nine months ended September 30, 1998
and for the years ended December 31, 1997 and 1996, respectively under this
agreement.
Collaboration with Novo Nordisk A/S -- related party
In August 1993, the Company entered into a development and license
agreement ("Novo Nordisk Agreement") with Novo Nordisk A/S for the purpose of
developing and commercializing the Company's AnergiX(TM) products for multiple
sclerosis ("MS"), myasthenia gravis ("MG"), and insulin-dependent diabetes
mellitus ("IDDM"). Under the Novo Nordisk Agreement, the Company is entitled to
receive (i) research and development cost reimbursement, (ii) development
milestone payments and (iii) royalties on product sales, if any. For the nine
months ended September 30, 1998 and for the years ended December 31, 1997, 1996
and 1995, the Company recorded contract revenues of $923,000, $2,631,000,
$3,107,000 and $3,001,000 respectively, under this agreement. The Company
granted to Novo Nordisk A/S exclusive worldwide rights to products developed
under the Novo Nordisk Agreement, including rights to commercialize these
products. In April 1996, the Novo Nordisk Agreement was expanded to include
increased milestones and was extended through August of 1998. In August of 1993,
Novo Nordisk A/S purchased 1,219,745 shares of common stock for $8 million, and
an officer of Novo Nordisk A/S became a member of the Company's Board of
Directors. In February 1998, the Company and Novo Nordisk agreed to terminate
the agreement between the two parties effective February 9, 1998. All rights
returned to the Company and it does not have any future obligation to Novo
Nordisk. Novo Nordisk reimbursed the Company for the cost of the ongoing Phase I
clinical trial in Multiple Sclerosis.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------
1998 1997 1996
------------- ------ ------
<S> <C> <C> <C>
Research and office leasehold improvements..... $1,513 $1,513 $1,028
Research and office equipment.................. 3,836 3,741 3,202
Pilot manufacturing facility leasehold
improvements................................. 600 600 600
Pilot manufacturing facility equipment......... 1,237 1,237 1,143
------ ------ ------
7,186 7,091 5,973
Less accumulated depreciation and
amortization................................. (6,013) (5,388) (4,514)
------ ------ ------
$1,173 $1,703 $1,459
====== ====== ======
</TABLE>
10
<PAGE> 14
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENTS
At September 30, 1998, the Company's investments available-for-sale were
recorded at a fair market value of $502,000 consisting of U.S. Corporate
Securities. As of December 31, 1997, the Company's investments
available-for-sale were recorded at a fair market value of $6,991,000,
consisting of U.S. Corporate Securities, Mutual Funds and U.S. Government
obligations of $2,466,000, $853,000 and $3,672,000, respectively. As of December
31, 1996, the estimated fair market value of U.S. Corporate Securities and U.S.
Government obligations was $6,127,000 and $6,310,000, respectively. Gross
unrealized gains and losses for the nine months ended September 30, 1998, and
the years ended December 31, 1997 and 1996 were immaterial.
The net adjustment to unrealized holding gains (losses) on
available-for-sale securities included as a separate component of shareholders'
equity was $6,000, $28,000, ($50,000) and $107,000 for the nine months ended
September 30, 1998 and the years ended December 31, 1997, 1996 and 1995,
respectively. Realized gains and losses for the nine months ended September 30,
1998 and for the years ended December 31, 1997, 1996 and 1995 were immaterial.
The amortized cost and estimated fair value of debt securities at September
30, 1998, December 31, 1997 and 1996, by contractual maturity, are shown below
(in thousands). Expected maturities will differ from contractual maturities
because the issuers of the securities may have the right to prepay obligations
without prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATE
FAIR
COST VALUE
------- --------
<S> <C> <C>
SEPTEMBER 30, 1998
AVAILABLE-FOR-SALE
Due in one year or less.................................... $ 503 $ 502
Due after one year through three years..................... -- --
Due after three years...................................... -- --
------- -------
$ 503 $ 502
======= =======
DECEMBER 31, 1997
AVAILABLE-FOR-SALE
Due in one year or less.................................... $ 6,997 $ 6,991
Due after one year through three years..................... -- --
Due after three years...................................... -- --
------- -------
$ 6,997 $ 6,991
======= =======
DECEMBER 31, 1996
AVAILABLE-FOR-SALE
Due in one year or less.................................... $11,971 $11,936
Due after one year through three years..................... 500 501
Due after three years...................................... -- --
------- -------
$12,471 $12,437
======= =======
</TABLE>
11
<PAGE> 15
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. LEASE AND DEBT OBLIGATIONS
The Company leases its facilities under noncancelable operating leases.
Facilities rent expense for the nine months ended September 30, 1998 and for the
years ended December 31, 1997, 1996, and 1995, was $431,000, $508,000, $589,000,
and $551,000, respectively.
On June 23, 1995 the Company entered into a loan agreement with Silicon
Valley Bank of California ("SVB") which provided $800,000 in financing available
through December 31, 1995, all of which is secured by equipment purchased by the
Company. At September 30, 1998, the Company had no borrowings under the original
loan agreement.
On December 27, 1996 the Company entered into an agreement with SVB which
provided up to $1,500,000 in financing available through December 31, 1997, all
of which is secured by equipment and leasehold improvements purchased by the
Company. At September 30, 1998, the Company had net borrowings of $1,003,000
under the original loan agreements. As of the end of the third quarter ended
September 30, 1998, the Company was no longer in compliance with certain
covenants related to its outstanding loan with SVB. As a result, the Company has
reclassified the long term portion of the debt obligation into the current
portion of the debt obligation. SVB has the right to demand full repayment of
the loan while the Company is out of compliance with the covenants. Immediate
repayment of the loan would have material adverse effect on the Company's
operating cash flow.
Future minimum payments, by year and in the aggregate, under the debt and
noncancelable operating leases consisted of the following at December 31, 1997
(in thousands):
<TABLE>
<CAPTION>
OPERATING
DEBT LEASES
------ ---------
<S> <C> <C>
1998................................................ $ 616 $530
1999................................................ 435 41
2000................................................ 435
------ ----
Total minimum debt and lease payments............... 1,486 $571
====
Less current portion of debt obligations............ 616
------
Long-term debt obligation........................... $ 870
======
</TABLE>
6. STOCKHOLDERS' EQUITY
Change of Control Arrangements
In the event of a change of control of the Company, the Board of Directors
has authority to issue shares of Preferred Stock with rights, preferences and
privileges designated by the Board of Directors. Further, pursuant to the
Company's option plans, under change of control of the Company, the Board of
Directors has the right, under certain circumstances, to cause all outstanding
options to become fully vested.
12
<PAGE> 16
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1988 Stock Option Plan, 1992 Consultant Stock Plan, 1995 Director Option Plan
and 1996 Stock Option Plan
The Company has granted certain officers, employees and consultants options
to purchase shares of the Company's common stock at prices ranging from $.16 to
$11.00 per share under its 1988 Stock Option Plan, 1992 Consultant Stock Plan,
1995 Director Option Plan and 1996 Stock Option Plan ("option plans"). The
Company has reserved 4,050,000 shares of common stock for issuance under the
option plans, of which 2,046,000 are available for grant at September 30, 1998.
These options vest over periods of up to four years and, once vested, can be
exercised at any time for a period of 9 or 10 years from the date of grant.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its stock options because, as discussed below,
the alternative fair market value accounting provided for under FASB Statement
No. 123, "Accounting for Stock-Based Compensation" ("Statement 123"), requires
the use of option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.
The Company's option plans have authorized the grant of options to Company
personnel, consultants and directors for up to 4,050,000 shares of the Company's
common stock. Options granted have 9 or 10 year terms and vest and typically
become fully exercisable at the end of 4 years of continued employment.
Pro forma information regarding net loss and loss per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options and its employee stock purchase plan subsequent to
December 31, 1994 under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions for 1995,
1996 and 1997, respectively; risk-free interest rates of 6.72%, 6.83% and 6.41%;
no dividend yields; volatility factor of the expected market price of the
Company's common stock of .73 for 1995 and 1996, and 1.05 for 1997; and a
weighted-average expected life of the options of 6.87 years for 1995 and 1996,
and 5.25 years for 1997.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
13
<PAGE> 17
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options and Employee Stock Purchase Plan (ESPP) are amortized to expense over
the options' vesting period. The Company's pro forma information follows (in
thousands except for loss per share information):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Pro forma net loss....................... $(9,843) $(6,659) $(7,302)
Pro forma loss per share................. $ (0.52) $ (0.40) $ (0.57)
</TABLE>
Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1998.
A summary of the Company's stock option activity, and related information
follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF SHARES PRICE PER SHARE
---------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Balance at January 1, 1995.............. 805 $4.83
Granted............................... 283 2.93
Exercised............................. (168) 0.24
Forfeited............................. (41) 7.61
-----
Balance at December 31, 1995............ 879 4.94
Granted............................... 535 3.72
Exercised............................. (76) 0.97
Forfeited............................. (11) 3.86
-----
Balance at December 31, 1996............ 1,327 4.69
Granted............................... 787 3.02
Exercised............................. (4) 3.07
Forfeited............................. (428) 5.16
-----
Balance at December 31, 1997............ 1,682 3.79
Granted............................... 436 1.02
Exercised............................. -- 0.00
Forfeited............................. (581) 2.95
-----
Balance at September 30, 1998........... 1,537 3.08
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------------------------
1998 1997 1996 1995
------------------- ------------------- ------------------- -------------------
SHARES WEIGHTED- SHARES WEIGHTED- SHARES WEIGHTED- SHARES WEIGHTED-
UNDER AVERAGE UNDER AVERAGE UNDER AVERAGE UNDER AVERAGE
OPTIONS EXERCISE OPTIONS EXERCISE OPTIONS EXERCISE OPTIONS EXERCISE
(000) PRICE (000) PRICE (000) PRICE (000) PRICE
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding-end of
year............... 1,537 $3.08 1,682 $3.79 1,327 $4.69 879 $4.94
Exercisable.......... 676 $4.03 823 $4.54 609 $5.92 430 $5.72
Weighted-average fair
value of options
granted during the
year............... $ 0.94 $ 2.01 $ 2.74 $2.19
</TABLE>
14
<PAGE> 18
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Exercise prices for options outstanding as of December 31, 1997 ranged from
$2.00 to $11.00. The weighted-average remaining contractual life of those
options is 6.13 years.
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan under which a total of
750,000 shares of common stock have been reserved and made available for
purchase by eligible employees.
Eligible employees may have up to 10% of their wages withheld for purchases
of common stock of the Company. On September 30 and March 31 of each year, the
funds then in each employee's account are applied to the purchase of shares of
common stock at 85% of the fair market value at such date or at six month
retroactive intervals up to 24 months, whichever is less. As of September 30,
1998, 275,497 shares had been purchased with such funds.
Under Statement 123, the fair value for these purchase options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions for 1995, 1996 and 1997,
respectively; risk-free interest rates of 5.96% and 5.52% and 5.86%; no dividend
yields; volatility factor of the expected market price of the Company's common
stock of .73 for 1995 and 1996 and 1.05 for 1997; and a weighted-average
expected life of the options of 1.25 for 1995 and 1996 and .5 years for 1997.
The weighted average fair value of those purchase rights granted in 1995, 1996
and 1997 was $0.93, $1.22 and $1.41 respectively.
Warrants
In 1997 warrants to purchase 50,000 shares of the Company's common stock at
an exercise price of $3.25 per share were issued under a collaboration agreement
and expire on December 31, 2001. No value was assigned to these warrants due to
immateriality; these warrants remain unexercised as of December 31, 1997.
Effective December 31, 1997 the collaboration agreement was terminated and
22,220 unvested warrants were returned to the Company. In connection with
facilities and equipment financings, the Company issued warrants to purchase
16,919 and 8,577 shares of Common Stock at $9.93 per share and $5.83 per share,
respectively. The warrant to purchase 16,919 shares of Common Stock, issued on
December 29, 1992, is exercisable at any time until December 29, 1999, and the
warrant to purchase 8,577 shares of Common Stock, issued on December 30, 1993,
is exercisable at any time until December 30, 2000.
15
<PAGE> 19
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities include the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------
1998 1997 1996
------------- ------ ------
<S> <C> <C> <C>
Accounts payable................................ $184 $ 597 $ 231
Accrued collaborative expenses.................. 253 237 569
Accrued vacation pay............................ 160 186 114
Accrued professional fees....................... 31 221 189
Other........................................... 102 40 223
---- ------ ------
Total accounts payable and accrued
liabilities................................... $730 $1,281 $1,326
==== ====== ======
</TABLE>
8. INCOME TAXES
At December 31, 1997, the Company had federal and state net operating loss
carryforwards of approximately $46.8 million and $9.5 million, respectively.
Additionally, the Company has research and development tax credit carryforwards
for federal tax purposes of approximately $2.0 million. The net operating loss
and credit carryforwards will expire at various dates beginning 1998 through
2012, if not utilized.
The Company's stock offering in April 1995 resulted in a change in
ownership and it is expected that the entire net operating loss and credit carry
forwards as of April 1995 may be subject to an annual limitation based on the
Company's pre-change value. The annual limitation will result in the expiration
of the net operating losses and credits before utilization.
Net operating losses incurred subsequent to April 1995 may be subject to
annual limitation such that the net operating losses may expire before
utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Deferred income tax assets:
Net operating loss carryforwards.................... $16,500,000 $13,900,000
Research credits.................................... 2,900,000 2,000,000
Capitalized research and development................ 1,000,000 --
Other deferred tax assets........................... 300,000 700,000
----------- -----------
Net deferred tax assets............................. $20,700,000 $16,600,000
Valuation allowance for deferred tax assets......... (20,700,000) (16,600,000)
----------- -----------
Total deferred tax assets................. $ -- $ --
=========== ===========
</TABLE>
The net valuation allowance increased by $2,200,000 during the year ended
December 31, 1996 ($3,200,000 in 1995).
16
<PAGE> 20
(b) Pro Forma Financial Information.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements give
effect to the Merger and the GenQuest acquisition using the purchase method of
accounting. The unaudited pro forma consolidated balance sheet gives effect to
the Merger as if it had occurred on September 30, 1998 (the GenQuest Acquisition
occurred on September 15, 1998. Accordingly, the unaudited balance sheet of
Corixa reflects the acquisition of GenQuest). The unaudited pro forma
consolidated statements of operations for the year ended December 31, 1997 and
for the nine months ended September 30, 1998 give effect to the Merger and
GenQuest Acquisition as if they had occurred on January 1, 1997. The Unaudited
Pro Forma Consolidated Financial Statements do not purport to represent what
Corixa's financial position or results of operations would actually have been if
the Merger had in fact occurred on such dates or to project Corixa's financial
position or results of operations as of any future date or for any future
period.
For pro forma purposes, (i) the Corixa unaudited consolidated balance sheet
as of September 30, 1998 has been combined with the Anergen unaudited balance
sheet as of September 30, 1998 as if the Merger had occurred on September 30,
1998, (ii) Corixa's unaudited statement of operations for the nine months ended
September 30, 1998 and audited statement of operations for the year ended
December 31, 1997 have been combined with GenQuest's unaudited statement of
operations for the period from January 1, 1998 to September 15, 1998 and audited
statement of operations for the year ended December 31, 1997, respectively,
(iii) the Corixa/GenQuest unaudited pro forma combined statements of operations
for the nine months ended September 30, 1998 and year ended December 31, 1997
have been combined with the Anergen unaudited statement of operations for the
nine months ended September 30, 1998 and the audited statement of operations for
the year ended December 31, 1997 as if the Merger had occurred on January 1,
1997. The unaudited pro forma adjustments have been applied to the financial
information derived from the financial statements of Corixa, GenQuest, and
Anergen to account for the Merger and the GenQuest Acquisition as a purchase;
accordingly, assets acquired and liabilities assumed are reflected at their
estimated fair values which are subject to further refinement, including
appraisals and other analysis.
The unaudited pro forma consolidated financial information has been
prepared based on the assumptions described in the notes thereto and includes
assumptions relating to the allocation of the consideration paid for the assets
and liabilities of Anergen based on preliminary estimates of their fair value.
The actual allocation of such consideration may differ from that reflected in
the unaudited pro forma consolidated financial information after valuations and
other procedures to be performed after the closing of the Merger. In the opinion
of Corixa, all adjustments necessary to present fairly such unaudited pro forma
consolidated financial information have been made based on the proposed terms
and structure of the Merger.
As a result of the Merger, Corixa expects to record a nonrecurring charge
to operations for acquired in-process technology. The pro forma consolidated
financial statements reflect an allocation to acquired in-process technology
estimated to be $8.8 million. This amount represents only an estimate, as the
valuation of the acquired tangible and intangible assets has not been performed.
The actual amount allocated to in process research and development may differ
significantly from the estimated amount. Should the amount allocated to in
process research and development be less than $8.8 million, the unaudited pro
forma balance sheet would reflect additional assets and the unaudited pro forma
statement of operations would reflect amortization of such assets. The charge
for
17
<PAGE> 21
acquired in-process technology has been reflected in the unaudited pro forma
consolidated balance sheet, but excluded from the unaudited pro forma
consolidated statement of operations, because the charge is nonrecurring.
The unaudited pro forma information is presented for illustrative purposes
only and is not necessarily indicative of the operating results or financial
position that would have occurred if the Merger had been consummated on
September 30, 1998, January 1, 1997, respectively, nor is it necessarily
indicative of future operating results or financial position.
These unaudited pro forma consolidated financial statements and
accompanying notes should be read in conjunction with the historical
consolidated financial statements and the related notes thereto of Corixa,
GenQuest and Anergen, and other financial information pertaining to Corixa,
GenQuest and Anergen, including "Corixa Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Anergen Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Proxy Statement/Prospectus.
18
<PAGE> 22
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
CORIXA/ANERGEN
PRO FORMA PRO FORMA
CORIXA ANERGEN ADJUSTMENTS NOTE 2 COMBINED
------ ------- -------------- ------ ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 4,912 $ 1,868 $ (200) (v) $ 6,580
Securities available-for-sale... 40,565 502 41,067
Accounts receivable............. 724 -- 724
Other current assets............ 1,319 50 -- 1,369
-------- -------- ------- --------
Total current assets.............. 47,520 2,420 (200) 49,740
Property and equipment, net....... 7,025 1,173 8,198
Deferred charges and deposits..... 155 36 191
-------- -------- ------- --------
Total assets...................... $ 54,700 $ 3,629 $ (200) $ 58,129
======== ======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities................... $ 2,380 $ 730 $ 1,400 (ii) $ 4,510
Deferred revenue................ 600 -- 600
Current portion of obligations
and commitments............... 2,134 1,003 3,137
-------- -------- ------- --------
Total current liabilities......... 5,114 1,733 1,400 8,247
Long-term obligations and
commitments, less current
portion......................... 11,707 -- 11,707
Stockholders' equity:
Preferred stock................. -- -- --
Common stock.................... 13 57,705 (57,704) (iii)(iv) 14
Additional paid-in capital...... 74,001 659 8,443 (iii)(iv) 83,103
Receivable for warrants......... -- -- --
Deferred compensation........... (1,444) -- (1,444)
Accumulated comprehensive
loss.......................... 198 -- 198
Deficit accumulated during
development stage............. (34,889) (56,468) 47,661 (43,696)
-------- -------- ------- --------
Total stockholders' equity........ 37,879 1,896 (1,600) 38,175
-------- -------- ------- --------
Total liabilities and
stockholders' equity............ $ 54,700 $ 3,629 $ (200) $ 58,129
======== ======== ======= ========
</TABLE>
19
<PAGE> 23
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CORIXA/GENQUEST CORIXA/GENQUEST
PRO FORMA PRO FORMA
CORIXA GENQUEST ADJUSTMENTS NOTE 4 COMBINED
-------- -------- --------------- ------ ---------------
<S> <C> <C> <C> <C> <C>
Revenue:
Collaborative
agreements........... $ 7,279 $ 150 $(1,048) (c) $ 6,381
Government grants...... 1,068 58 -- 1,126
-------- ------- ------- --------
Total revenue.... 8,347 208 (1,048) 7,507
Operating expenses:
Research and
development.......... (19,661) (2,196) 1,700 (c) (20,157)
General and
administrative....... (1,766) (237) 204 (c) (1,799)
In-process research and
development.......... (12,019) -- 12,019 (d) --
-------- ------- ------- --------
Total operating
expenses....... (33,446) (2,433) 13,923 (21,956)
-------- ------- ------- --------
Loss from operations..... (25,099) (2,225) 12,875 (14,449)
Interest income.......... 2,414 60 -- 2,474
Interest expense......... (513) (47) -- (560)
Other income............. 271 -- (204) (c) 67
-------- ------- ------- --------
Net loss................. $(22,927) $(2,212) $12,671 $(12,468)
======== ======= ======= ========
Basic and diluted net
loss per share......... $ (1.93) $ (.96)
======== ========
Shares used in
computation of basic
and diluted net loss
per share.............. 11,862 12,926(Note 5)
======== ========
</TABLE>
<TABLE>
<CAPTION>
CORIXA/ANERGEN PRO
PRO FORMA FORMA
ANERGEN ADJUSTMENTS COMBINED
------- -------------- --------
<S> <C> <C> <C>
Revenue:
Collaborative
agreements........... $ 3,121 $ 9,502
Government grants...... -- -- 1,126
------- ------- --------
Total revenue.... 3,121 -- 10,628
Operating expenses:
Research and
development.......... (6,374) -- (26,531)
General and
administrative....... (2,873) -- (4,672)
In-process research and
development.......... -- -- --
------- ------- --------
Total operating
expenses....... (9,247) -- (31,203)
------- ------- --------
Loss from operations..... (6,126) -- (20,575)
Interest income.......... 300 -- 2,774
Interest expense......... (106) -- (666)
Other income............. -- 67
------- ------- --------
Net loss................. $(5,932) $ -- $(18,400)
======= ======= ========
Basic and diluted net
loss per share......... $ (.31) $ (1.31)
======= ========
Shares used in
computation of basic
and diluted net loss
per share.............. 18,878 14,038(Note 3)
======= ========
</TABLE>
20
<PAGE> 24
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CORIXA/GENQUEST CORIXA/GENQUEST CORIXA/ANERGEN
PRO FORMA PRO FORMA PRO FORMA
CORIXA GENQUEST ADJUSTMENTS NOTE 4 COMBINED ANERGEN ADJUSTMENTS
-------- -------- --------------- ------ --------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Collaborative agreements....... $ 13,390 $ 25 $(1,948) (c) $ 11,467 $ 5,763
Government grants.............. 977 33 -- 1,010 -- --
-------- ------- ------- -------- -------- --------
Total revenue................ 14,367 58 (1,948) 12,477 5,763 --
Operating expenses:
Research and
development.................. (16,398) (3,654) 2,436 (c) (17,616) (11,559)
General and
administrative............... (2,033) (962) 325 (c) (2,670) (2,997) --
-------- ------- ------- -------- -------- --------
Total operating
expenses................... (18,431) (4,616) 2,761 (20,286) (14,556) --
-------- ------- ------- -------- -------- --------
Loss from operations............. (4,064) (4,558) 813 (7,809) (8,793) --
Interest income.................. 1,300 236 -- 1,536 565 --
Interest expense................. (327) (24) -- (351) (202) --
Other income..................... 415 -- (325) (c) 90 --
-------- ------- ------- -------- -------- --------
Net loss......................... $ (2,676) $(4,346) $ 488 $ (6,534) $ (8,430) $ --
======== ======= ======= ======== ======== ========
Basic and diluted net loss per
share.......................... $ (0.55) $ (1.10) $ (0.45)
======== ======== ========
Shares used in computation of
basic and diluted net loss per
share.......................... 4,891 5,955 18,815
======== ======== ========
Pro forma basic and diluted net
loss per share................. $ (0.31) $ (0.67)
======== ========
Shares used in computation of pro
forma basic and diluted net 9,819 (Note 5)
loss per share................. 8,755 ========
========
<CAPTION>
PRO
FORMA
COMBINED
--------
<S> <C>
Revenue:
Collaborative agreements....... $ 17,230
Government grants.............. 1,010
--------
Total revenue................ 18,240
Operating expenses:
Research and
development.................. (29,175)
General and
administrative............... (5,667)
--------
Total operating
expenses................... (34,842)
--------
Loss from operations............. (16,602)
Interest income.................. 2,101
Interest expense................. (553)
Other income..................... 90
--------
Net loss......................... $(14,964)
========
Basic and diluted net loss per
share.......................... $ (2.12)
========
Shares used in computation of
basic and diluted net loss per
share.......................... 7,067
========
Pro forma basic and diluted net
loss per share................. $ (1.37)
========
Shares used in computation of pro
forma basic and diluted net
loss per share................. 10,931(Note 3)
========
</TABLE>
21
<PAGE> 25
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma information presented is not necessarily indicative
of future consolidated results of operations of Corixa or the consolidated
results of operations which would have resulted had the Merger taken place
during the periods presented. The Unaudited Pro Forma Statements reflect the
effects of the Merger and GenQuest Acquisition, assuming the Merger occurred as
of September 30, 1998 for the purposes of the unaudited pro forma consolidated
balance sheet and the Merger and GenQuest Acquisition as of January 1, 1997 for
the purposes of the unaudited pro forma consolidated statement of operations for
the nine months ended September 30, 1998 and the year ended December 31, 1997,
respectively.
2. ANERGEN -- UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL ADJUSTMENTS
(a) The unaudited pro forma consolidated financial statements reflect the
conversion of all the outstanding shares of Anergen capital stock into
approximately 1,111,588 shares of Corixa Common Stock pursuant to the Merger
(assuming no options or warrants to purchase Anergen Common Stock are exercised
after January 8, 1999). This calculation is based on Anergen's capitalization at
January 8, 1999 and is based on the average last reported closing price per
share on Nasdaq of Corixa Common Stock for the 15-day trading period beginning
November 23, 1998 and ending December 14, 1998 which equals $7.3042. All
outstanding options and warrants to purchase Anergen Common Stock will be
assumed by Corixa pursuant to the Merger and converted into options to purchase
shares of Corixa Common Stock. This calculation assumes that no options and
warrants to purchase Anergen Common Stock will be exercised after January 8,
1999.
(b) The total consideration of $10.7 million consists of Corixa Common
Stock and Options valued at $9.1 million, cash of $.2 million and approximately
$1.4 million of transaction costs. The purchase price will be allocated based on
the fair value of assets acquired and liabilities assumed, netting to $1.9
million and acquired in-process research and development of $8.8 million. These
amounts represent only an estimate, as the valuation has not been performed. The
actual allocation may differ significantly from the estimated amounts.
In-process research and development charges have not been reflected in the pro
forma consolidated statement of operations, as they are considered non-recurring
charges.
(c) The unaudited pro forma consolidated balance sheet includes the
adjustments necessary to give effect to the Merger as if it had occurred on
September 30, 1998, and to reflect the allocation of the proposed acquisition to
the fair value of tangible and intangible assets acquired, including the charge
to operations for in-process technology acquired and the elimination of
Anergen's equity accounts. Also included are the transaction costs, inclusive of
payments to financial advisors, independent accountants, attorneys and other
related costs, including severance costs, and costs associated with the
elimination of redundant facilities and assets. Approximate adjustments included
in the unaudited pro forma consolidated balance sheet are summarized as follows:
(i) Write-off of in-process technology acquired by Corixa, $8,807,000;
(ii) Transaction and other costs associated with the Merger of $1,400,000;
(iii) Elimination of Anergen equity accounts, $1,896,000;
(iv) Issuance of Corixa Common Stock, $0.001 par value, as discussed
above. The value of Corixa Common Stock is equal to the product of
approximately 1,111,588 shares multiplied by approximately $8.1875
per share.
(v) Cash payment of $200,000
22
<PAGE> 26
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
3. ANERGEN -- UNAUDITED CONSOLIDATED NET LOSS PER SHARE
The net loss per share and shares used in computing the net loss per share
for the year ended December 31, 1997 and the nine months ended September 30,
1998 are based upon the historical weighted average common shares outstanding
adjusted to reflect the issuance, as of January 1, 1997 of approximately
1,111,588 shares of Corixa Common Stock as described in Note 2 to these Notes to
Unaudited Pro Forma Consolidated Financial Statements. Options to purchase
Anergen Common Stock will be assumed by Corixa pursuant to the Merger and
converted into options to purchase shares of Corixa Common Stock. The Corixa
Common Stock issuable upon exercise of the stock options to be assumed in the
Merger have been excluded as the effect would be anti-dilutive.
4. GENQUEST -- UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL ADJUSTMENTS
(a) The unaudited pro forma consolidated financial statements reflect the
conversion of all the outstanding shares of GenQuest capital stock into
1,063,695 shares of Corixa Common Stock as a result of the acquisition by Corixa
on September 15, 1998 which was accounted for as a purchase transaction. Options
to purchase shares of GenQuest Common Stock were assumed by Corixa pursuant to
the Merger and converted into options to purchase shares of Corixa Common Stock
which have an estimated value of approximately $77,000.
(b) The total consideration of $12.4 million consisted of Corixa Common
Stock and Options valued at $7.3 million, cash of $4.5 million and approximately
$.6 million of transaction costs. The purchase price was allocated to assets
acquired and liabilities assumed, netting to $.4 million and acquired in-process
research and development of $12.0 million. In process research and development
charges have not been reflected in the pro forma consolidated statement of
operations for the nine months ended September 30, 1998 and the year ended
December 31, 1997, as they are considered a non-recurring charge.
(c) Elimination of inter-company revenue and expenses including
amortization of the warrant previously issued to GenQuest.
(d) Elimination of in process technology acquired by Corixa, which is
considered nonrecurring.
5. GENQUEST -- UNAUDITED CONSOLIDATED NET LOSS PER SHARE
The net loss per share and shares used in computing the net loss per share
for the year ended December 31, 1997 and the nine months ended September 30,
1998 are based upon the historical weighted average common shares outstanding
adjusted to reflect the issuance, as of January 1, 1997 and January 1, 1998 of
1,063,695 shares of Corixa Common Stock as described in Note 2 to these Notes to
Unaudited Pro Forma Consolidated Financial Statements. Options to purchase
shares of GenQuest Common Stock will be assumed by Corixa pursuant to the Merger
and converted into options to purchase shares of Corixa Common Stock. The Corixa
Common Stock issuable upon exercise of the stock options to be assumed in the
Merger has been excluded as the effect would be anti-dilutive.
23
<PAGE> 27
] (c) Exhibits.
2.1 Agreement and Plan of Reorganization dated December 11, 1998,
among the Company, Yakima Acquisition Corporation and Anergen,
Inc. (incorporated by reference to Appendix A of the
Registration Statement No. 333-69679 on Form S-4 filed by the
Company with the Securities and Exchange Commission
on January 12, 1999).
20.1 Press Release dated February 12, 1999 announcing the closing
of the Agreement and Plan of Reorganization. [See Exhibit
Index.]
23.1 Consent of Ernst & Young LLP, Independent Auditors.
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CORIXA CORPORATION
(Registrant)
Date: February 12, 1999 By: /s/ Steven Gillis
----------------------- --------------------------------------
Steven Gillis
President and Chief Executive Officer
<PAGE> 29
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C> <C>
2.1 Agreement and Plan of Reorganization dated December 11, 1998, among
the Company, Yakima Acquisition Corporation and Anergen, Inc.
(incorporated by reference to Appendix A of the Registration
Statement on Form S-4 No. 333-69679 filed by the Company with the
Securities and Exchange Commission on January 12, 1999).
20.1 Press Release dated February 12, 1999 announcing the closing of the
Agreement and Plan of Reorganization.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
</TABLE>
<PAGE> 1
For more information:
Michelle Burris Jesse Ciccone
Corixa Corporation FitzGerald Communications Inc.
(206) 754-5720 (415) 986-9500
[email protected] [email protected]
FOR IMMEDIATE RELEASE
CORIXA CORPORATION COMPLETES ACQUISITION OF aNERGEN iNC.
COMPANY ADDS ADDITIONAL THERAPIES FOR PREVENTION AND TREATMENT OF
AUTOIMMUNE DISEASES
SEATTLE, WASH. -- FEBRUARY 12, 1999 -- Corixa Corporation (Nasdaq: CRXA), a
research-based biotechnology company, today announced that it has completed the
acquisition of Anergen, Inc. (Nasdaq: ANRG), a biotechnology company focused on
advancing the treatment of autoimmune diseases. Anergen develops proprietary
biopharmaceutical compounds designed to selectively interrupt antigen
presentation or inactivate those T cells that mediate the disease process. This
acquisition adds to Corixa's product portfolio research and clinical programs in
rheumatoid arthritis, diabetes and multiple sclerosis.
"We believe the acquisition of Anergen will extend the application of Corixa's
immunotherapeutic expertise into multiple autoimmune disease fields," said
Steven Gillis, Ph.D., president and chief executive officer of Corixa. "With the
addition of Anergen's programs and technologies to our science platforms, we
will be able to expand the breadth and depth of our product offerings to current
and potential corporate partners."
On December 14, 1998, Corixa announced that it had signed a definitive agreement
to acquire all outstanding shares of Anergen, Inc., in a stock-for-stock merger.
Corixa purchased the company for approximately $8.1 million that was paid in
approximately 1.1 million shares of Corixa common stock at a price of
approximately $7.30 per share. The share price was calculated using the average
closing price of shares of Corixa common stock on the Nasdaq National Market
during the 15-day period beginning November 23, 1998 and ending December 14,
1998. Certain adjustments to the purchase price were made in accordance with the
merger agreement. Corixa's purchase of Anergen qualifies as a tax-free
reorganization and will be accounted for as a purchase. In association with this
transaction, two major shareholders of Anergen, Warburg, Pincus Ventures, L.P.
and International Biotechnology Trust, managed by Rothschild Asset Management,
provided Anergen with a $1.5 million financing that will be convertible into
approximately 170,225 additional common shares of Corixa.
-- MORE --
<PAGE> 2
CORIXA CORPORATION
ADD ONE
Corixa intends to maintain Anergen's research facilities in Redwood City,
California, while consolidating all administrative functions in Seattle,
Washington. As of the closing of the merger, the combined entity has
approximately 160 employees, of which approximately 130 are dedicated to the
discovery and early development of vaccines and other immunotherapeutic
products.
ABOUT CORIXA
Corixa Corporation (Nasdaq: CRXA) is a research-based biotechnology company
committed to saving lives and preventing diseases by understanding and directing
the immune system. Corixa applies its advanced immunological expertise and
proprietary technology platforms to rapidly discover and optimize vaccines and
other antigen-based products. The company partners with innovative developers
and marketers of pharmaceuticals and diagnostic products to make its solutions
available to patients around the world. Corixa was founded in 1994 and is
headquartered in Seattle, Washington. For more information about the company,
please visit its Website at www.corixa.com.
FORWARD-LOOKING STATEMENTS
Except for the historical information presented, the matters discussed in this
press release are forward-looking statements, including but not limited to
statements regarding the ability of Anergen's programs and technologies to
provide Corixa with an ability to extend its immunotherapeutic expertise into
multiple autoimmune disease fields, expanding product offerings to potential
corporate partners and enabling Anergen's research and clinical programs to
continue in Redwood City, and the ability of the acquisition to enhance the
value and diversity of the products offered by Corixa to corporate partners.
Such forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from any future results,
performance or achievements expressed or implied by such statements. Additional
risks and uncertainties include the enhanced risks to Corixa as a result of the
acquisition, including uncertainties which may result in the failure to obtain
desired synergies between Corixa and Anergen following the acquisition and
adversely affect Corixa's relations with corporate partners and employees;
difficulties in implementing Corixa's operating plan as a result of the
acquisition; the impact of alternative technological advances and competition,
inherent risks in early stage development of Corixa's and Anergen's
technologies; and other risks detailed from time to time in Corixa's public
disclosure filings with the U.S. Securities and Exchange Commission (SEC),
including the Annual Report on Form 10-K for the fiscal year ended December 31,
1997, and in the Company's Registration Statement on Form S-4, as amended and
filed on January 12, 1999. Copies of Corixa's public disclosure filings with the
SEC are available from its investor relations department.
###
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the use of our report dated February 6, 1998 (except
for the second paragraph of Note 1, as to which date is December 21, 1998) with
respect to the financial statements of Anergen, Inc. included in the Form 8-K
of Corixa Corporation dated February 12, 1999.
ERNST & YOUNG LLP
Palo Alto, California
February 12, 1999
