<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
December 22, 2000
------------------------------------------------
Date of Report (Date of earliest event reported)
CORIXA CORPORATION
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-22891 91-1654387
---------------------------- --------------------- ---------------------
(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) 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)
NONE
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 22, 2000, pursuant to an Agreement and Plan of
Reorganization dated as of October 15, 2000, by and among Corixa Corporation, a
Delaware corporation ("Corixa"), Clearwater Acquisitions Corporation, a Delaware
corporation and wholly owned subsidiary of Corixa ("Merger Sub"), and Coulter
Pharmaceutical, Inc., a Delaware corporation ("Coulter"), Merger Sub merged with
and into Coulter, and Coulter became a wholly owned subsidiary of Corixa (the
"Merger"). As a result of the Merger, Corixa became the owner of all of the
issued and outstanding shares of Coulter capital stock, and each outstanding
share of Coulter common stock was exchanged for 1.003 shares of Corixa common
stock.
A total of approximately 19,116,013 shares of Corixa common stock were
issued to former Coulter stockholders in exchange for the acquisition by Corixa
of all outstanding Coulter capital stock. The exchange ratio was agreed upon in
arms' length negotiations and took account of several factors concerning the
relative valuations of Coulter and Corixa. Corixa and Coulter received opinions
from their financial advisors that the Merger was fair to Corixa's stockholders
and Coulter's stockholders from a financial point of view.
The shares issued to Coulter stockholders were issued pursuant to the
Registration Statement on Form S-4/A (File No. 333-49490), pursuant to the
Securities Act of 1933, as declared effective on November 17, 2000 (the "Form
S-4"). Options to purchase Coulter common stock were assumed by Corixa and
remain outstanding as options to purchase shares of Corixa common stock. As a
result, Corixa will be obligated to issue up to approximately 4,297,146 shares
of Corixa common stock upon exercise, if and when exercised, of all the Coulter
options that Corixa assumed in the Merger.
Corixa's acquisition of Coulter is intended by the parties to be a
tax-free reorganization under Section 368(a) of the Internal Revenue Code. The
parties intend to account for the acquisition 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, which is attached as Appendix A to the Form S-4, and a press
release issued by Corixa on December 22, 2000 covering Corixa's acquisition of
Coulter, which is attached as an exhibit to this report. For a more detailed
description of the Merger and the Merger Agreement, reference is made to the
Form S-4.
Coulter is a biotechnology company that focuses on developing novel
drugs and therapies for treating people with cancer or autoimmune diseases.
Coulter is developing a family of potential therapeutics based on two drug
discovery programs: therapeutic antibodies and targeted oncologics. Corixa
intends to continue Coulter's business.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Business Acquired.
Coulter Pharmaceutical, Inc.
Annual Consolidated Financial Statements
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors ........................ 2
Consolidated Balance Sheets as of December 31, 1999 and 1998 ............. 3
Consolidated Statements of Operations for the years ended
December 31, 1997, 1998 and 1999 and the period from
inception (February 16, 1995) to December 31, 1999 .................. 4
Consolidated Statements of Stockholders' Equity for the period from
inception (February 16, 1995) to December 31, 1996 and the years
ended December 31, 1997, 1998 and 1999 .............................. 5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999 and the period from
inception (February 16, 1995) to December 31, 1999 .................. 7
Notes to Consolidated Financial Statements ............................... 8
</TABLE>
<TABLE>
Quarterly Consolidated Financial Statements
<S> <C>
Consolidated Balance Sheets -- September 30, 2000 and
December 31, 1999.................................................... 20
Consolidated Statements of Operations -- for the three months and
nine months ended September 30, 2000 and 1999 and for the period
from inception (February 16, 1995) to September 30, 2000............. 21
Consolidated Statements of Cash Flows - for the nine months ended
September 30, 2000 and 1999 and for the period from inception
(February 16, 1995) to September 30, 2000............................ 22
Notes to Consolidated Financial Statements........................... 23
</TABLE>
1
<PAGE> 3
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Coulter Pharmaceutical, Inc.
We have audited the accompanying consolidated balance sheets of Coulter
Pharmaceutical, Inc. (a development stage company) (the "Company") as of
December 31, 1999 and 1998, and the related consolidated statements of
operations and cash flows for each of the three years in the period ended
December 31, 1999 and for the period from inception (February 16, 1995) to
December 31, 1999 and the related statement of stockholders' equity for the
period from inception (February 16, 1995) to December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Coulter
Pharmaceutical, Inc. at December 31, 1999 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1999 and for the period from inception (February 16, 1995) to
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ ERNST & YOUNG LLP
Palo Alto, California
January 27, 2000
2
<PAGE> 4
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 22,168 $ 89,808
Short-term investments.................................... 60,257 49,970
Prepaid expenses and other current assets................. 5,279 3,063
-------- --------
Total current assets.............................. 87,704 142,841
Property and equipment, net................................. 21,029 9,449
Employee loans receivable................................... 1,274 907
Other assets................................................ 198 233
-------- --------
$110,205 $153,430
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 6,504 $ 4,068
Accrued liabilities....................................... 5,208 6,353
Current portion of equipment financing obligations and
debt facility.......................................... 2,258 1,157
-------- --------
Total current liabilities......................... 13,970 11,578
Non current portion of equipment financing obligations and
debt facility............................................. 9,428 6,659
Commitments
Stockholders' equity:
Preferred stock, issuable in series, $.001 par value:
3,000,000 shares authorized; none outstanding at
December 31, 1999 and 1998............................ -- --
Common stock, $.001 par value:
30,000,000 shares authorized; 16,896,438 and 16,704,103
shares issued and outstanding at December 31, 1999 and
1998, respectively.................................... 17 17
Additional paid-in capital.................................. 184,524 182,390
Accumulated other comprehensive loss........................ (215) (32)
Deferred compensation....................................... (296) (565)
Deficit accumulated during the development stage............ (97,223) (46,617)
-------- --------
Total stockholders' equity........................ 86,807 135,193
-------- --------
$110,205 $153,430
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 5
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
YEAR ENDED DECEMBER 31, INCEPTION
------------------------------- (FEBRUARY 16, 1995)
1997 1998 1999 TO DECEMBER 31, 1999
-------- ------- -------- --------------------
<S> <C> <C> <C> <C>
Corporate partner revenues............... $ -- $34,250 $ -- $ 34,250
Revenues from unconsolidated joint
business............................... -- 1,750 5,449 7,199
-------- ------- -------- --------
Total revenues $ -- $36,000 $ 5,449 $ 41,449
Operating expenses:
Research and development............... $ 21,045 $30,848 $ 44,804 112,917
Selling, general and administrative.... 7,610 11,358 15,947 37,905
-------- ------- -------- --------
Total operating expenses................. 28,655 42,206 60,751 150,822
Interest income and other, net........... 2,327 4,248 4,696 12,150
-------- ------- -------- --------
Net loss................................. $(26,328) $(1,958) $(50,606) $(97,223)
======== ======= ======== ========
Basic and diluted net loss per share..... $ (2.58) $ (0.13) $ (3.03)
======== ======= ========
Shares used in computing basic and
diluted net loss per share............. 10,197 14,562 16,695
======== ======= ========
</TABLE>
See accompanying notes.
4
<PAGE> 6
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL OTHER
---------------------- ------------------- PAID-IN COMPREHENSIVE DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL LOSS COMPENSATION
----------- -------- ---------- ------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A
convertible preferred stock
to founders at $1.00 per
share for cash and
technology in February
1995....................... 7,500,000 $ 2,500 -- $-- $ -- $ -- $ --
Issuance of Series B
convertible preferred stock
to a founder at $1.50 per
share for cash in August
and October 1995, less
issuance costs of $11...... 2,333,333 3,489 -- -- -- -- --
Exercise of common stock
options by a consultant at
$0.30 per share for cash in
November 1995.............. -- -- 2,059 -- 1 -- --
Net loss.................... -- -- -- -- -- -- --
----------- -------- ---------- --- -------- ----- -------
Balance at December 31,
1995....................... 9,833,333 $ 5,989 2,059 $-- $ 1 $ -- $ --
Issuance of Series C
convertible preferred stock
and warrants for 498,705
shares of common stock to
investors at $2.25 per
share for cash in April
1996, less issuance costs
of $55..................... 9,964,607 22,366 -- -- -- -- --
Issuance of common stock to
a prospective officer at
$0.45 per share for cash in
March 1996................. -- -- 400,000 1 179 -- --
Issuance of common stock
pursuant to stock option
exercises.................. -- -- 35,553 -- 14 -- --
Deferred compensation
related to grants of
certain stock options...... -- -- -- -- 2,294 -- (2,294)
Amortization of deferred
compensation............... -- -- -- -- -- -- 330
Net loss.................... -- -- -- -- -- -- --
Unrealized loss on
securities
available-for-sale, net.... -- -- -- -- -- (3) --
Comprehensive loss......... -- -- -- -- -- -- --
----------- -------- ---------- --- -------- ----- -------
Balance at December 31,
1996....................... 19,797,940 $ 28,355 437,612 $ 1 $ 2,488 $ (3) $(1,964)
Conversion of convertible
preferred stock into common
stock...................... (19,797,940) (28,355) 6,599,287 6 28,349 -- --
Issuance of 2,875,000 shares
of common stock at $12.00
per share less issuance
costs of $3,226............ -- -- 2,875,000 3 31,274 -- --
Issuance of common stock
pursuant to stock options
exercises.................. -- -- 77,358 -- 45 -- --
Issuance of common stock
pursuant to warrant
exercises.................. -- -- 385,315 1 3,127 -- --
Deferred compensation
related to grant of certain
stock options.............. -- -- -- -- 206 -- (206)
Amortization of deferred
compensation............... -- -- -- -- -- -- 1,085
Issuance of common stock
pursuant to the employee
stock purchase plan........ -- -- 33,152 -- 280 -- --
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE TOTAL
DEVELOPMENT STOCKHOLDERS'
STAGE EQUITY
----------- -------------
<S> <C> <C>
Issuance of Series A
convertible preferred stock
to founders at $1.00 per
share for cash and
technology in February
1995....................... $ -- $ 2,500
Issuance of Series B
convertible preferred stock
to a founder at $1.50 per
share for cash in August
and October 1995, less
issuance costs of $11...... -- 3,489
Exercise of common stock
options by a consultant at
$0.30 per share for cash in
November 1995.............. -- 1
Net loss.................... (2,993) (2,993)
-------- --------
Balance at December 31,
1995....................... $ (2,993) $ 2,997
Issuance of Series C
convertible preferred stock
and warrants for 498,705
shares of common stock to
investors at $2.25 per
share for cash in April
1996, less issuance costs
of $55..................... -- 22,366
Issuance of common stock to
a prospective officer at
$0.45 per share for cash in
March 1996................. -- 180
Issuance of common stock
pursuant to stock option
exercises.................. -- 14
Deferred compensation
related to grants of
certain stock options...... -- --
Amortization of deferred
compensation............... -- 330
Net loss.................... (15,338) (15,338)
Unrealized loss on
securities
available-for-sale, net.... -- (3)
--------
Comprehensive loss......... -- (15,341)
-------- --------
Balance at December 31,
1996....................... $(18,331) $ 10,546
Conversion of convertible
preferred stock into common
stock...................... -- --
Issuance of 2,875,000 shares
of common stock at $12.00
per share less issuance
costs of $3,226............ -- 31,277
Issuance of common stock
pursuant to stock options
exercises.................. -- 45
Issuance of common stock
pursuant to warrant
exercises.................. -- 3,128
Deferred compensation
related to grant of certain
stock options.............. -- --
Amortization of deferred
compensation............... -- 1,085
Issuance of common stock
pursuant to the employee
stock purchase plan........ -- 280
</TABLE>
5
<PAGE> 7
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL OTHER
---------------------- ------------------- PAID-IN COMPREHENSIVE DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL LOSS COMPENSATION
----------- -------- ---------- ------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of 3,162,500 shares
of common stock at $15.50
per share less issuance
costs of $3,190............ -- $ -- 3,162,500 $ 3 $ 45,829 $ -- $ --
Net loss.................... -- -- -- -- -- -- --
Unrealized loss on
securities
available-for-sale, net.... -- -- -- -- -- (4) --
Comprehensive loss......... -- -- -- -- -- -- --
----------- -------- ---------- --- -------- ----- -------
Balance at December 31,
1997....................... -- $ -- 13,570,224 $14 $111,598 $ (7) $(1,085)
Issuance of 239,607 shares
of common stock pursuant to
contract with corporate
partner.................... -- -- 239,607 -- 7,250 -- --
Issuance of common stock
pursuant to stock options
exercises.................. -- -- 164,785 -- 538 -- --
Issuance of common stock
pursuant to warrant
exercise................... -- -- 16,787 -- -- -- --
Deferred compensation
related to grant of certain
stock options.............. -- -- -- -- 156 -- (156)
Amortization of deferred
compensation............... -- -- -- -- -- -- 676
Issuance of common stock
pursuant to the employee
stock purchase plan........ -- -- 67,700 -- 712 -- --
Issuance of 2,645,000 shares
of common stock at $25.00
per share less issuance
costs of $3,986............ -- -- 2,645,000 3 62,136 -- --
Net loss.................... -- -- -- -- -- -- --
Unrealized loss on
securities
available-for-sale, net.... -- -- -- -- -- (25) --
Comprehensive loss......... -- -- -- -- -- -- --
----------- -------- ---------- --- -------- ----- -------
Balance at December 31,
1998....................... -- $ -- 16,704,103 $17 $182,390 $ (32) $ (565)
Issuance of common stock
pursuant stock option
exercises.................. -- -- 124,561 -- 1,103 -- --
Deferred compensation
related to grants to
certain stock options...... -- -- -- -- 107 -- (107)
Amortization of deferred
compensation............... -- -- -- -- -- -- 376
Issuance of common stock
pursuant to stock purchase
plan....................... -- -- 67,774 -- 924 -- --
Net loss.................... -- -- -- -- -- -- --
Unrealized loss on
securities
available-for-sale, net.... -- -- -- -- -- (183) --
Comprehensive loss......... -- -- -- -- -- -- --
Balance at December 31,
1999....................... -- $ -- 16,896,438 $17 $184,524 $(215) $ (296)
=========== ======== ========== === ======== ===== =======
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE TOTAL
DEVELOPMENT STOCKHOLDERS'
STAGE EQUITY
----------- -------------
<S> <C> <C>
Issuance of 3,162,500 shares
of common stock at $15.50
per share less issuance
costs of $3,190............ $ -- $ 45,832
Net loss.................... (26,328) (26,328)
Unrealized loss on
securities
available-for-sale, net.... -- (4)
--------
Comprehensive loss......... -- (26,332)
-------- --------
Balance at December 31,
1997....................... $(44,659) $ 65,861
Issuance of 239,607 shares
of common stock pursuant to
contract with corporate
partner.................... -- 7,250
Issuance of common stock
pursuant to stock options
exercises.................. -- 538
Issuance of common stock
pursuant to warrant
exercise................... -- --
Deferred compensation
related to grant of certain
stock options.............. -- --
Amortization of deferred
compensation............... -- 676
Issuance of common stock
pursuant to the employee
stock purchase plan........ -- 712
Issuance of 2,645,000 shares
of common stock at $25.00
per share less issuance
costs of $3,986............ -- 62,139
Net loss.................... (1,958) (1,958)
Unrealized loss on
securities
available-for-sale, net.... -- (25)
--------
Comprehensive loss......... -- (1,983)
-------- --------
Balance at December 31,
1998....................... $(46,617) $135,193
Issuance of common stock
pursuant stock option
exercises.................. -- 1,103
Deferred compensation
related to grants to
certain stock options...... -- --
Amortization of deferred
compensation............... -- 376
Issuance of common stock
pursuant to stock purchase
plan....................... -- 924
Net loss.................... (50,606) (50,606)
Unrealized loss on
securities
available-for-sale, net.... -- (183)
--------
Comprehensive loss......... -- (50,789)
--------
Balance at December 31,
1999....................... $(97,223) $ 86,807
======== ========
</TABLE>
See accompanying notes.
6
<PAGE> 8
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
INCEPTION
(FEBRUARY 16,
YEAR ENDED DECEMBER 31, 1995) TO
--------------------------------- DECEMBER 31,
1997 1998 1999 1999
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................... $(26,328) $ (1,958) $ (50,606) $ (97,223)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization............. 250 712 2,500 3,523
Amortization of deferred compensation..... 1,085 676 376 2,467
Loss on sale of equipment................. -- -- 40 40
Changes in operating assets and liabilities:
Prepaid expenses and other current
assets................................. 230 (2,794) (2,216) (5,279)
Employee loans receivable................. (17) (171) (367) (1,274)
Other assets.............................. (222) (275) 35 (198)
Accounts payable.......................... 237 2,230 2,436 6,504
Accrued liabilities....................... 3,629 (1,604) (1,145) 5,208
-------- -------- --------- ---------
Net cash used in operating
activities...................... (21,136) (3,184) (48,947) (86,232)
-------- -------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments......... (61,525) (82,336) (116,619) (271,359)
Maturities of short-term investments........ 14,144 82,261 96,775 194,166
Sale of short-term investments.............. -- 5,073 9,374 16,717
Purchases of property and equipment......... (1,589) (7,899) (14,125) (24,594)
Proceeds from sale of equipment............. -- -- 5 5
-------- -------- --------- ---------
Net cash used in investing
activities...................... (48,970) (2,901) (24,590) (85,065)
-------- -------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of equipment financing obligations
and debt facility......................... (531) (817) (1,130) (2,433)
Borrowings under equipment financing
obligations and debt facility............. 1,700 5,620 5,000 14,120
Proceeds from issuances of convertible
preferred stock, net...................... -- -- -- 28,355
Proceeds from issuance of common stock,
net....................................... 80,562 70,639 2,027 153,423
-------- -------- --------- ---------
Net cash provided by financing
activities...................... 81,731 75,442 5,897 193,465
-------- -------- --------- ---------
Net increase (decrease) in cash
and cash equivalents............ 11,625 69,357 (67,640) 22,168
Cash and cash equivalents at beginning of
period.................................... 8,826 20,451 89,808 --
-------- -------- --------- ---------
Cash and cash equivalents at end of
period.................................... $ 20,451 $ 89,808 $ 22,168 $ 22,168
======== ======== ========= =========
SUPPLEMENTAL SCHEDULE OF CASH FLOW
INFORMATION:
Interest paid............................... $ 283 $ 385 $ 821 $ 1,489
SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Net exercises of warrant to purchase common
stock..................................... $ 453 $ 512 $ -- $ 965
Acquisition of equipment pursuant to
supplemental lease obligation............. $ -- $ -- $ -- $ 78
Deferred compensation related to grant of
certain stock options..................... $ 206 $ 156 $ 107 $ 2,762
</TABLE>
See accompanying notes.
7
<PAGE> 9
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Principles of Consolidation
Coulter Pharmaceutical, Inc. (the "Company" or "Coulter") was incorporated
in the State of Delaware on February 16, 1995 to engage in the research and
development of products for the treatment of cancer. The Company's principal
activities to date have involved conducting research and development, recruiting
management and technical personnel, obtaining financing and securing operating
facilities. Therefore, the Company is classified as a development stage company.
In the course of its development activities, the Company has sustained
continuing operating losses and expects such losses to continue over the next
several years. The Company plans to continue to finance its operations with a
combination of stock sales, collaborative agreements with corporate partners,
revenues from product sales and technology licenses.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Coulter Pharma Belgium, SA which was formed
under the laws of Belgium in June 1996. Intercompany balances and transactions
have been eliminated.
In connection with its formation, the Company issued 5,000,000 shares of
its Series A preferred stock (since converted to 1,666,666 shares of common
stock) to Coulter Corporation in exchange for rights to certain intellectual
property, contractual rights and other assets pertaining to Bexxar(TM). In 1997
Beckman Instruments acquired Coulter Corporation (now known as "Beckman
Coulter"). Prior to the acquisition, all shares of the Company's stock were
distributed to the members of the Coulter family. Beckman Coulter retains the
rights to the assignment agreement and under the terms of the agreement,
royalties are payable to Beckman Coulter upon commercial sale of product, if
any, derived from these licenses. Beckman Coulter also has the right, in lieu of
receiving cash, to purchase shares of the Company's equity securities at the
then current fair market value of such securities with respect to the first $4.5
million payable to Beckman Coulter under this assignment agreement. This
transaction was accounted for as an acquisition of assets from an affiliate with
the amounts brought over at their historical basis of $0.
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.
Net Loss Per Share
Basic and diluted net loss per common shares are presented in conformity
with Statement of Financial Accounting Standard 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 dilutive, for all periods
presented. Basic earnings per share is computed by dividing income or loss
applicable to common stockholders by the weighted-average number of common
shares outstanding for the period net of certain common shares outstanding which
are subject to continued vesting and the Company's right to repurchase. Basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted net loss per share has not been presented
separately as, given the Company's net loss position, the result would be
antidilutive.
The following have been excluded from the calculation of loss per share
because the effect of inclusion would be antidilutive: approximately 58,300
common shares which are outstanding but are subject to the Company's right of
repurchase which expires July 1, 2000 and options to purchase approximately
3,608,700 shares of common stock at a weighted average price of $17.87 per
share. The repurchasable shares and options
8
<PAGE> 10
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
will be included in the calculation at such time as the effect is no longer
antidilutive, as calculated using the treasury stock method.
A reconciliation of shares used in the calculation of basic and diluted net
loss per share follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1997 1998 1999
------------ ----------- ------------
<S> <C> <C> <C>
Net loss.......................................... $(26,328,000) $(1,958,000) $(50,606,000)
============ =========== ============
Basic and diluted weighted-average shares of
common stock outstanding used in computing basic
and diluted net loss per share.................. 10,197,225 14,561,950 16,694,699
============ =========== ============
Basic and diluted net loss per share.............. $ (2.58) $ (0.13) $ (3.03)
============ =========== ============
</TABLE>
Current Vulnerability to Certain Concentrations
The Company has contracted with two third-party manufacturers, Boehringer
Ingelheim Pharma KG ("BI Pharma KG") and LONZA Biologics plc ("Lonza"), to
produce a monoclonal antibody (the "Anti-B1 Antibody"). The Company has also
contracted with a third-party manufacturer, MDS Nordion, Inc. ("Nordion") for
the radiolabeling of the Anti-B1 Antibody in a centralized facility. However,
should the Company not be able to obtain sufficient quantities of the Anti-B1
Antibody from BI Pharma KG or Lonza or radiolabeled Anti-B1 Antibody from
Nordion, or additional suppliers, certain research and development activities
may be delayed.
Cash, Cash Equivalents and Short-Term Investments
The Company considers all highly liquid investments with maturities of
three months or less from the date of purchase to be cash equivalents.
Short-term investments consist of investments with original maturities greater
than three months, but less than two years.
The Company accounts for its cash equivalents and short-term investments
under Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("SFAS 115"). Under the
provisions of SFAS 115, the Company has classified its cash equivalents and
short-term investments as "available-for-sale." Such investments are recorded at
fair value and unrealized gains and losses, which are considered to be
temporary, are recorded as a separate component of stockholders' equity until
realized. Realized gains and losses and declines in value judged to be other
than temporary on available-for-sale securities are included in interest income.
The cost of securities sold is based on the specific identification method. The
Company classifies all investments in its available-for-sale portfolio as
current assets.
Revenues
Corporate partner revenues for which no further performance obligations
exist are recognized when the payments are received or when collection is
assured. All corporate partner revenues to date have been earned under the
Company's collaboration agreement with SmithKline Beecham Corporation ("SB")
(see Note 5).
Revenues from unconsolidated joint business consists of the Company's share
of the pretax operating results generated from its joint business arrangement
with SB and reimbursement from SB of their share of the Company's Bexxar-related
manufacturing development expenses. Under the joint business arrangement, all
sales of Bexxar and associated expenses will be recorded in the books and
accounts of SB with the Company recording its share of the pretax operating
results on a quarterly basis, as defined in the Company's collaborative
agreement with SB (see Note 5).
9
<PAGE> 11
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Foreign Currency Translation
The functional currency of Coulter Pharma Belgium, SA is the United States
Dollar. Assets and liabilities of Coulter Pharma Belgium, SA are translated at
current exchange rates, and the related revenues and expenses are translated at
average exchange rates in effect during the period. The resulting translation
adjustment is recorded in selling, general and administrative expense in the
accompanying consolidated statements of operations and has been immaterial since
the formation of the subsidiary in June 1996.
Property and Equipment
Purchased property and equipment are stated at cost less accumulated
depreciation which is calculated using the straight-line method over the
estimated useful lives of the respective assets of three to five years.
Sponsored Research and License Fees
Research and development expenses paid to third parties under sponsored
research arrangements are recognized as the related services are performed,
generally ratably over the period of service. License fees are expensed when the
related obligation is incurred.
Stock-Based Compensation
The Company generally grants stock options to employees for a fixed number
of shares with an exercise price equal to the fair value at the date of grant.
In accordance with the provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), 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
to employees under its stock option plans and to adopt the pro forma disclosure
alternative as described in SFAS 123 (see Note 10). Options granted to all
others are accounted for using the fair value method prescribed by SFAS 123.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, which
establishes accounting and reporting standards for derivative instruments,
including forward foreign exchange contracts, and hedging activities. In June
1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and
Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133.
SFAS No. 133 is now effective for fiscal years beginning after June 15, 2000
and, therefore, the Company will adopt this accounting standard effective
January 1, 2001. Management has not yet determined the impact of SFAS No. 133 on
its financial position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." Among other things, SAB No. 101 requires that license and other
upfront fees from research collaborators be recognized over the term of the
agreement unless the fee is in exchange for products delivered or services
performed that represent the culmination of a separate earnings process. The
Company is currently reviewing the impact of SAB No. 101 on its previously
reported results of operations.
Reclassifications
Certain reclassifications have been made to prior year data to conform with
the current year presentation.
10
<PAGE> 12
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The following is a summary of available-for-sale securities (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1999
Money market funds.............................. $ 4,205 $ -- $ -- $ 4,205
Commercial paper................................ 22,910 -- (4) 22,906
Government bonds................................ 25,904 -- (203) 25,701
Corporate bonds................................. 9,767 -- (8) 9,759
Certificates of deposits........................ 19,821 -- -- 19,821
-------- ---- ----- --------
Total................................. 82,607 -- (215) 82,392
Less amounts classified as cash equivalents..... (22,135) -- -- (22,135)
-------- ---- ----- --------
Total short-term investments.......... $ 60,472 $ -- $(215) $ 60,257
======== ==== ===== ========
DECEMBER 31, 1998
Money market funds.............................. $ 1,719 $ -- $ -- $ 1,719
Commercial paper................................ 100,897 -- (8) 100,889
Corporate bonds................................. 17,624 4 (29) 17,599
Certificates of deposits........................ 13,924 1 -- 13,925
-------- ---- ----- --------
Total................................. 134,164 5 (37) 134,132
Less amounts classified as cash equivalents..... (84,170) -- 8 (84,162)
-------- ---- ----- --------
Total short-term investments.......... $ 49,994 $ 5 $ (29) $ 49,970
======== ==== ===== ========
</TABLE>
Realized gain or losses on available-for-sale securities for the years ended
December 31, 1999, 1998 and 1997 were not significant.
At December 31, 1999, the contractual maturities of short-term investments
were as follows (in thousands):
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less..................................... $32,821 $32,782
Due after one year through two years........................ 27,651 27,475
------- -------
$60,472 $60,257
======= =======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Machinery and equipment..................................... $ 4,737 $19,687
Furniture and fixtures...................................... 480 3,033
Construction in process..................................... 5,252 1,777
------- -------
10,469 24,497
Less accumulated depreciation and amortization.............. (1,020) (3,468)
------- -------
Property and equipment, net................................. $ 9,449 $21,029
======= =======
</TABLE>
11
<PAGE> 13
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. SPONSORED RESEARCH AND LICENSE AGREEMENTS
The Company has entered into numerous agreements with research
institutions, universities, and other entities for the performance of research
and development activities and for the acquisition of licenses related to those
activities. Included in research and development expenses for the years ended
December 31, 1999, 1998 and 1997 and for the period from inception (February 16,
1995) to December 31, 1999 is $1.3 million, $0.8 million, $0.8 million and $2.9
million, respectively, to fund activities under these agreements. As of December
31, 1999, noncancelable commitments under these arrangements were approximately
$0.7 million. In order to maintain certain of these licenses, the Company must
pay specified annual license fees. Certain of the licenses provide for the
payment of royalties by the Company on future product sales, if any.
5. COLLABORATIVE DEVELOPMENT AND COMMERCIALIZATION AGREEMENT
In December 1998, the Company and SB entered into a collaborative agreement
for the development and commercialization of Bexxar, which is in late-stage
development for the treatment of non-Hodgkin's lymphoma ("NHL"). Under the terms
of the agreement, the Company and SB will jointly market and sell Bexxar in the
United States following regulatory approval and the two companies will share
profits and losses equally. Outside the United States, excluding Japan, the
Company has granted SB exclusive marketing and distributing rights in return for
milestone payments and product royalties. The agreement also provides for the
sharing of certain costs related to clinical and manufacturing development
activities as well as a $15.0 million credit line, all of which is available at
December 31, 1999.
Upon signing of the agreement, the Company received a $34.25 million,
non-refundable license fee, all of which was recognized as corporate partner
revenues in fiscal 1998, as well as $7.25 million from the sale of the Company's
common stock. The Company may receive additional payments upon the achievement
of certain clinical development and regulatory milestones. As of December 31,
1999, no milestone payments have been earned or received. Commencing with the
year ended December 31, 1999, the Company and SB prepared a joint profit and
loss statement to account for the sharing of sales, costs of goods sold and
costs relating to selling, marketing, distribution and certain other Bexxar
related activities. The Company's share of the pretax operating results is
included as a component of revenues from unconsolidated joint business.
Development expenses for Bexxar will generally be shared by both companies, with
the Company retaining responsibility for funding certain predetermined
development costs. All such development expenses and the reimbursement is
included as a component of revenues from unconsolidated joint business.
The following is a summary of revenues from unconsolidated joint business
(in thousands):
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
YEAR ENDED DECEMBER 31, INCEPTION
--------------------------- (FEBRUARY 16, 1995)
1997 1998 1999 TO DECEMBER 31, 1999
------ ------ ------- --------------------
<S> <C> <C> <C> <C>
Co-promotion operating loss.................. $ -- $ -- $(2,944) $(2,944)
Reimbursement of development expenses........ -- 1,750 8,393 10,143
------ ------ ------- -------
Revenues from unconsolidated joint
business................................... $ -- $1,750 $ 5,449 $ 7,199
====== ====== ======= =======
</TABLE>
Revenue from unconsolidated joint business earned in excess of payments
received are classified as other current assets. Reimbursements owed to SB are
classified as accounts payable. Amounts receivable from SB were approximately
$2.6 million and $4.5 million at December 31, 1998 and 1999, respectively.
Amounts payable to SB were $0 and approximately $1.5 million at December 31,
1998 and 1999, respectively.
12
<PAGE> 14
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. ACCRUED LIABILITIES
Accrued liabilities consists of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
Accrued research and development expenses................... $4,028 $1,375
Accrued clinical trial costs................................ 543 1,759
Accrued employee compensation & benefits.................... 1,296 1,357
Other....................................................... 486 717
------ ------
Total............................................. $6,353 $5,208
====== ======
</TABLE>
7. LONG TERM DEBT
Equipment Financing
In December 1996, the Company entered into a $3,827,000 equipment lease
financing and debt facility with a financing company, none of which remain
available at December 31, 1999. The Company makes monthly payments plus interest
on amounts borrowed over the 48-month term of the facility followed by a balloon
payment. Interest rates under the facility range from 11.75% to 11.93%. Amounts
outstanding under the equipment facility are secured by the underlying assets.
Included in property and equipment at December 31, 1999 and 1998 are assets with
a cost of $1,486,000 acquired pursuant to a fixed interest rate equipment loan.
Accumulated amortization of assets acquired pursuant to these obligations was
approximately $752,950 and $456,000 at December 31, 1999 and 1998, respectively.
Operating Lines of Credit
In November 1998, the Company entered into a $10.0 million revolving loan
facility with a commercial bank, none of which remain available at December 31,
1999. The loan is secured by the assets of the Company. Interest is paid each
month on the outstanding balance at prime rate plus 0.5% (8.75% at December 31,
1998). In accordance with the agreement, principal payments are due in 48
monthly installments beginning November 1999, followed by a balloon payment of
approximately $2.1 million due in November 2003. The agreement also requires the
maintenance of a $5 million compensating balance with the bank until the entire
amount of the facility has been drawn down. In September 1999, the Company
borrowed the remaining $5 million and converted the entire $10 million facility
from variable interest rate to fixed interest rate of 9.36% over the 48-month
term, followed by a balloon payment of $5.3 million due in October 2003.
At December 31, 1999, the Company's aggregate commitment under its
long-term debt agreements are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31:
-------------------------
<S> <C>
2000............................................... $ 2,258
2001............................................... 1,767
2002............................................... 1,380
2003............................................... 6,281
-------
$11,686
=======
</TABLE>
8. COMMITMENTS
The Company leases its facilities under operating leases which expire at
various dates beginning in 2001 through 2010. Rent expense under these leases
totaled approximately $2,468,000, $1,051,000, $451,000 and
13
<PAGE> 15
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
$4,224,000 for the years ended December 31, 1999, 1998 and 1997, and for the
period from inception (February 16, 1995) to December 31, 1999, respectively.
At December 31, 1999, the aggregate noncancelable future minimum payments
under the operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING
YEARS ENDING DECEMBER 31: LEASES
------------------------- ---------
<S> <C>
2000............................................... $ 2,609
2001............................................... 2,359
2002............................................... 2,127
2003............................................... 2,212
2004............................................... 2,301
Thereafter......................................... 15,228
-------
Total.................................... $26,836
=======
</TABLE>
On November 7, 1997, the Company entered into an agreement to build and
lease new facilities. The lease was amended on November 10, 1998 to include a
second building. The monthly rent payments range from $78,000 to $241,000
throughout the term of the lease. In connection with this lease agreement, the
Company obtained a $2 million letter of credit agreement from a bank which
secures the aggregate future payments under the lease.
At December 31, 1999, the Company had approximately $15.6 million in
noncancelable purchase commitments with BI Pharma KG, its third party
manufacturer. In the event of cancellation by Coulter prior to fulfillment of
its obligation, the agreements contain certain economic penalty provisions which
would be applied and determined at the point in time when cancellation occurs.
9. RELATED PARTY TRANSACTIONS
The Company issued loans to employees totaling $485,000 prior to December
31, 1996. These loans were either repaid in full or converted to new loan
agreements in 1997. The Company entered into loan agreements with certain key
employees, totaling $438,000 for the period ended December 31, 1998 and $490,000
for the period ended December 31, 1999. The loans are non-interest bearing with
various terms ranging from four to ten years. The forgiven amount and the repaid
amount is calculated on a pro-rata basis over years one through ten of continued
employment. In the event an employee ceases to be employed by the Company, the
loan becomes interest-bearing and due within a reasonable period not to exceed
three months. Each loan is secured by a Second Deed of Trust on employee's
residence.
10. STOCKHOLDERS' EQUITY
Preferred Stock
Upon the completion of the Company's initial public offering of common
stock in January 1997, all of the Series A, B and C preferred stock outstanding
converted into 6,599,287 shares of common stock. Also upon the completion of the
initial public offering, the Company's Certificate of Incorporation was amended
to authorize 3,000,000 shares of preferred stock, none of which are issued or
outstanding. The Company's board of directors is authorized to determine the
designation, powers, preferences and rights of any such series. The Company has
reserved 200,000 shares of preferred stock for potential issuance under the
Share Purchase Rights Plan.
14
<PAGE> 16
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Common Stock
In July 1998, the Company completed a follow-on public offering of
2,400,000 shares of common stock at a price to the public of $25.00 per share,
resulting in net proceeds to the Company of approximately $56.3 million. Also,
in August 1998, the underwriters of that offering purchased 245,000 additional
shares of common stock upon a partial exercise of their over-allotment option,
raising additional net proceeds of $5.8 million. The total net proceeds from
this offering were $62.1 million.
Equity Incentive Plans
The 1995 Equity Incentive Plan (the "1995 Plan") was adopted in 1995 by the
Board of Directors and allowed for the granting of options for up to 866,666
shares of common stock to employees, consultants and directors.
In December 1996, the Board of Directors adopted the 1996 Equity Incentive
Plan (the "1996 Plan") under which a total of 1,400,000 shares of the Company's
authorized but unissued common stock has been reserved for issuance thereunder.
In February 1998, the Board of Directors approved an amendment to increase the
number of shares of common stock authorized from 1,400,000 to 2,800,000 shares.
The amendment was approved by the Company's stockholders in May 1998. In
February 1999, the Board of Directors authorized an additional 2,000,000 shares
of common stock as available for grant of future option. This amendment was
approved by the Company's stockholders in May 1999.
Stock options granted under the 1995 and 1996 Plans (collectively, the
"Plans") may be either incentive stock options or non-qualified stock options.
Incentive stock options may be granted to employees with exercise prices not
less than the fair market value at the date of grant and nonqualified stock
options may be granted at exercise prices of no less than 85% of the fair market
value of the common stock on the date of grant. The options vest over four years
pursuant to a formula determined by the Company's Board of Directors and expire
after ten years. The 1995 Plan terminated upon the closing of the Company's
initial public offering in January 1997.
15
<PAGE> 17
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Activity under the Plans was as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------
OPTIONS NUMBER EXERCISE WEIGHTED-
AVAILABLE OF PRICE AVERAGE
FOR GRANT SHARES PER SHARE EXERCISE PRICE
---------- --------- --------------- --------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996.......... 6,751 822,305 $ 0.30 - $12.00 $ 1.64
Shares authorized..................... 1,400,000 -- $ -- $ --
Options granted....................... (1,010,100) 1,010,100 $ 8.50 - $19.13 $10.83
Options exercised..................... -- (77,358) $ 0.30 - $ 2.25 $ 0.59
Options canceled...................... 106,063 (106,063) $ 0.30 - $10.75 $ 2.04
Options terminated.................... (100,314) -- $ -- $ --
---------- --------- --------------- ------
Balance at December 31, 1997.......... 402,400 1,648,984 $ 0.30 - $19.13 $ 7.29
Shares authorized..................... 1,400,000 -- $ -- $ --
Options granted....................... (1,117,800) 1,117,800 $19.38 - $32.38 $24.77
Options exercised..................... -- (164,785) $ 0.30 - $24.13 $ 3.26
Options canceled...................... 95,505 (95,505) $ 0.30 - $24.50 $ 4.34
Options terminated.................... (63,042) -- $ -- $ --
---------- --------- --------------- ------
Balance at December 31, 1998.......... 717,063 2,506,494 $ 0.30 - $32.38 $15.46
---------- --------- --------------- ------
Shares authorized..................... 2,000,000 -- $ -- $ --
Options granted....................... (1,454,600) 1,454,600 $14.50 - $31.00 $22.08
Options exercised..................... -- (124,561) $16.88 - $34.00 $23.57
Options canceled...................... 227,893 (227,893) $ 0.30 - $29.19 $23.18
Options terminated.................... (3,412) -- $ -- $ --
---------- --------- --------------- ------
Balance at December 31, 1999.......... 1,486,944 3,608,640 $ 0.30 - $32.38 $17.87
========== ========= =============== ======
</TABLE>
Options were exercisable to purchase 222,201 shares (at a weighted-average
exercise price of $6.52 per share), 557,676 shares (at a weighted-average
exercise price of $13.30 per share) and 1,071,482 shares (at a weighted-average
exercise price of $16.16 per share) for the years ended at December 31, 1997,
1998 and 1999, respectively.
Exercise prices for options outstanding under the Plans as of December 31,
1999 ranged from $0.30 to $32.38 per share. The weighted-average remaining
contractual life of those options is 8.5 years.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING WEIGHTED- EXERCISABLE OPTIONS
-------------------------- AVERAGE --------------------------
WEIGHTED- REMAINING WEIGHTED-
EXERCISE PRICE AVERAGE CONTRACTUAL AVERAGE
RANGE NUMBER EXERCISE PRICE LIFE (IN YEARS) NUMBER EXERCISE PRICE
---------------- --------- -------------- --------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.30 - $ 8.625 980,163 $ 5.8478 7.2 604,724 $ 5.4589
$ 8.875 - $21.063 601,719 $16.4770 8.8 144,194 $15.4871
$21.375 - $22.625 675,215 $22.5215 9.4 49,592 $22.5887
$22.750 - $24.125 710,060 $23.7998 8.7 163,057 $23.8092
$24.375 - $29.875 615,983 $25.8594 9.1 106,759 $26.5647
$31.000 - $32.375 25,500 $31.3652 9.3 3,156 $31.9542
--------- -------- --- --------- --------
3,608,640 $17.8686 8.5 1,071,482 $12.5747
</TABLE>
The Company has reserved 5,095,584 shares of its common stock for options
to purchase common shares which may be issued under the Plans.
16
<PAGE> 18
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In March 1996, 400,000 shares of common stock were purchased at $0.45 per
share by an officer of the Company. The Company has the right to repurchase
these shares under certain conditions. At December 31, 1999, 58,000 common
shares were available for repurchase.
The Company recorded deferred compensation expense of $2.3 million for the
difference between the exercise price and the deemed fair value for financial
statement presentation purposes of the Company's common stock, as determined by
the board of directors, for common stock issued and stock options granted prior
to the Company's initial public offering in January 1997. Additionally, deferred
compensation of approximately $468,000 was recorded based on the deemed fair
values of common stock options granted subsequent to the Company's initial
public offering. The deferred compensation is being amortized over the
corresponding vesting period of each respective share purchase or option,
generally four years. Amortization of approximately $1.1 million, $676,000,
$376,000, and $2.5 million was recorded in fiscal years 1997, 1998, and 1999,
and for the period from inception (February 16, 1995) to December 31, 1999,
respectively.
In calculating pro forma compensation, the fair value of each option grant
is estimated on the date of grant using the Black-Scholes option pricing model.
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, the Black-Scholes model requires the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock-based awards to employees 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 its stock-based awards to its employees. The fair value of each
option grant is estimated assuming no expected dividends and the following
weighted-average assumptions:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate -- options.......................... 5.81% 5.32% 5.60%
Risk-free interest rate -- ESPP............................. 5.69% 5.50% 5.48%
Volatility.................................................. 68% 68% 68%
Expected life in years (from granting date) -- options...... 4.1 4.0 4.0
Expected life in years -- ESPP.............................. 1.2 1.2 1.4
Dividend yield.............................................. 0% 0% 0%
</TABLE>
The pro forma information required by SFAS 123 includes compensation
expenses related to the Company's employee stock purchase plan and has also been
calculated based on the fair value method using a Black-Scholes option pricing
model using the weighted-average assumptions discussed above.
The weighted average fair market value of options granted for the years
ended December 31, 1997, 1998 and 1999 was $10.83, $24.77 and $22.08,
respectively.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options. The
Company's pro forma information follows (in thousands, except for earnings per
share information):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
-------- ------- --------
<S> <C> <C> <C>
Net loss as reported................................ $(26,328) $(1,958) $(50,606)
Basic and diluted net loss per share as reported.... $ (2.58) $ (0.13) $ (3.03)
Pro forma net loss.................................. $(27,296) $(5,482) $(57,544)
Pro forma basic and diluted net loss per share...... $ (2.68) $ (0.38) $ (3.45)
</TABLE>
17
<PAGE> 19
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1996 Employee Stock Purchase Plan
In December 1996, the Board of Directors adopted the 1996 Employee Stock
Purchase Plan (the "Purchase Plan") under which employees can purchase shares of
the Company's common stock based on a percentage of their compensation. The
purchase price per share must be equal to at least 85% of the market value on
the date offered or the date purchased. A total of 350,000 shares of common
stock are reserved for issuance thereunder. As of December 31, 1999, 168,626
shares had been issued under the Purchase Plan (100,852 shares as of December,
1998).
The Company has reserved sufficient shares of its common stock, which may
be issued under the Purchase Plan.
Share Purchase Rights Plan
In July 1997, the Company adopted a Share Purchase Rights Plan (the "Rights
Plan"), commonly known as a "poison pill." The Rights Plan provides for the
distribution of certain rights to acquire shares of the Company's Series A
Junior Participating Preferred Stock (the "Rights") as a dividend for each share
of common stock held of record as of August 20, 1997. Under certain conditions
involving an acquisition or proposed acquisition by any person or group holding
20% or more of the common stock, the Rights permit the holders (other than the
20% holder) to purchase the Company's common stock at a 50% discount from the
market price at that time, upon payment of an exercise price of $70 per Right.
In addition, in the event of certain business combinations, the Rights permit
the purchase of shares of common stock of an acquirer at a 50% discount from the
market price at that time. The Rights have no voting privileges and are attached
to and automatically trade with the Company's common stock. The Rights expire on
July 30, 2007.
Warrants
In January 1997, the Company received approximately $3.1 million from the
cash exercise of warrants to purchase 347,530 shares of its common stock and
issued an additional 37,785 shares of its common stock upon the net exercise of
warrants to purchase 151,173 shares of its common stock.
In May 1998, the Company issued 16,787 shares of its common stock upon the
net exercise of a warrant to purchase 24,666 shares of its common stock. As of
December 31, 1999, no warrants were outstanding.
11. INCOME TAXES
As of December 31, 1999, the Company had federal and state net operating
loss carryforwards of approximately $92.7 million and $25.3 million,
respectively. The Company also had federal and California research and
development tax credit carryforwards of approximately $1.9 million and $1.1
million. The federal and California net operating loss and credit carryforwards
will expire at various dates beginning in the year 2003 through 2019, if not
utilized.
Utilization of the federal and state net operating loss and credit
carryforwards may be subject to a substantial annual limitation due to the
"change in ownership" provisions of the Internal Revenue Code of 1986. The
annual limitation may result in the expiration of net operating losses and
credits before utilization.
18
<PAGE> 20
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Significant components of the Company's deferred tax assets are as follows
at December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Deferred Tax Assets:
Net operating loss carryforwards.......................... $ 14,700 $ 33,000
Capitalized research and development...................... 2,200 4,000
Research credit carryforwards............................. 1,500 3,000
Other -- net........................................... 200 300
-------- --------
Total deferred tax assets......................... 18,600 40,300
Valuation allowance......................................... (18,600) (40,300)
-------- --------
Net deferred tax assets..................................... $ -- $ --
======== ========
</TABLE>
Because of the Company's lack of earnings history, the deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by $21,700,000 during the year ended December 31, 1999.
19
<PAGE> 21
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED) (NOTE 1)
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................ $ 44,726 $ 22,168
Short-term investments ........................... 37,953 60,257
Prepaid expenses and other current assets ........ 12,136 5,279
-------- --------
Total current assets ..................... 94,815 87,704
Property and equipment, net ........................ 19,505 21,029
Employee loans receivable .......................... 1,145 1,274
Other assets ....................................... 245 198
-------- --------
$115,710 $110,205
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................. $ 13,583 $ 6,504
Accrued liabilities .............................. 6,788 5,208
Current portion of equipment financing
obligations and debt facility ................. 1,969 2,258
-------- --------
Total current liabilities ................ 22,340 13,970
Non-current portion of equipment financing
obligations and debt facility ...................... 8,086 9,428
Commitments
Stockholders' equity:
Preferred stock, issuable in series, $.001 par
value: 3,000,000 shares authorized; none
outstanding at September 30, 2000 and
December 31, 1999 ............................... -- --
Common stock, $.001 par value: 30,000,000 shares
authorized; 18,856,456 shares and
16,896,438 shares issued and outstanding at
September 30, 2000 and December 31, 1999,
respectively ..................................... 19 17
Additional paid-in capital ........................ 224,047 184,524
Accumulated other comprehensive income (loss) ..... (97) (215)
Deferred compensation ............................. (1,463) (296)
Deficit accumulated during the development stage .. (137,222) (97,223)
-------- --------
Total stockholders' equity ................ 85,284 86,807
-------- --------
$115,710 $110,205
======== ========
</TABLE>
See accompanying notes.
20
<PAGE> 22
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE PERIOD
THREE MONTHS ENDED NINE MONTHS ENDED FROM INCEPTION
SEPTEMBER 30, SEPTEMBER 30, (FEBRUARY 16, 1995)
---------------------- ---------------------- TO SEPTEMBER 30,
2000 1999 2000 1999 2000
--------- --------- --------- --------- -------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Corporate partner revenues .......... $ -- $ -- $ 2,000 $ -- $ 36,250
Revenues from unconsolidated joint
business........................... 1,152 4,127 6,917 4,975 14,116
--------- --------- --------- --------- ----------
Total revenues.................... 1,152 4,127 8,917 4,975 50,366
Operating expenses:
Research and development.............. $ 13,708 $ 12,423 $ 38,731 $ 33,414 $ 151,648
Selling, general and administrative... 4,612 4,097 12,519 11,459 50,423
--------- --------- --------- --------- ----------
Total operating expenses.............. 18,320 16,520 51,250 44,873 202,071
Interest income and other, net........ 821 1,056 2,334 3,760 14,483
--------- --------- --------- --------- ----------
Net loss.............................. $ (16,347) $ (11,337) $ (39,999) $ (36,138) $ (137,222)
========= ========= ========= ========= ==========
Basic and diluted net loss per share.. $ (0.92) $ (0.68) $ (2.32) $ (2.17)
========= ========= ========= =========
Shares used in computing basic and
diluted net loss per share.......... 17,726 16,749 17,236 16,663
========== ========= ========= =========
</TABLE>
See accompanying notes.
21
<PAGE> 23
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED FOR THE PERIOD
SEPTEMBER 30, FROM INCEPTION
------------------------- (FEBRUARY 16, 1995)
2000 1999 TO SEPTEMBER 30, 2000
--------- --------- ---------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss .................................................... $ (39,999) $ (36,138) $(137,222)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ............................ 2,852 1,610 6,375
Amortization of deferred compensation .................... 292 314 2,759
Loss on sale of equipment ................................ 23 38 63
Changes in operating assets and liabilities:
Prepaid expenses and other current assets ................ (6,857) (4,787) (12,136)
Employee loans receivable ................................ 129 (249) (1,145)
Other assets ............................................. (47) 23 (245)
Accounts payable ......................................... 7,079 (1,027) 13,583
Accrued liabilities ...................................... 1,580 (748) 6,788
--------- --------- ---------
Net cash used in operating activities ............... (34,948) (40,964) (121,180)
--------- --------- ---------
Cash flows from investing activities:
Purchases of short-term investments ......................... (15,146) (109,958) (286,505)
Maturities of short-term investments ........................ 37,568 84,551 231,734
Sales of short-term investments ............................. -- 9,374 16,717
Purchases of property and equipment ......................... (1,504) (11,288) (26,098)
Proceeds from sale of equipment ............................. 153 5 159
--------- --------- ---------
Net cash provided by (used in) investing activities.. 21,071 (27,316) (63,993)
--------- --------- ---------
Cash flows from financing activities:
Payments of equipment financing obligations and debt
facility .................................................... (1,631) (739) (4,065)
Borrowings under equipment financing obligations and debt
facility .................................................... -- 5,000 14,120
Proceeds from issuance of convertible preferred stock, net... -- -- 28,355
Proceeds from issuance of common stock, net ................. 38,066 1,361 191,489
--------- --------- ---------
Net cash provided by financing activities ........... 36,435 5,622 229,899
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents .......... 22,558 (62,658) 44,726
Cash and cash equivalents at beginning of period .............. 22,168 89,808 --
--------- --------- ---------
Cash and cash equivalents at end of period .................... $ 44,726 $ 27,150 $ 44,726
========= ========= =========
Supplemental schedule of cash flow information:
Interest paid ................................................. $ 815 $ 538 $ 2,304
Schedule of non-cash investing and financing activities:
Net exercise of warrants to purchase common stock ........... $ -- $ -- $ 965
Acquisition of equipment pursuant to supplemental
lease obligation............................................. $ -- $ -- $ 78
Deferred compensation related to grant of certain
stock options................................................ $ 1,459 $ 7 $ 4,221
</TABLE>
See accompanying notes.
22
<PAGE> 24
COULTER PHARMACEUTICAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The information at September 30, 2000, for the three and nine month periods
ended September 30, 2000 and 1999 and for the period from inception (February
16, 1995) to September 30, 2000 is unaudited but includes all adjustments
(consisting only of normal recurring adjustments) which, in the opinion of
management, are necessary to state fairly the financial information set forth
therein in accordance with generally accepted accounting principles. The
September 30, 2000 interim results are not necessarily indicative of results to
be expected for the full fiscal year. These financial statements should be read
in conjunction with the audited financial statements for the fiscal year ended
December 31, 1999 included in the Company's annual report to security holders
furnished to the Securities and Exchange Commission pursuant to Rule 14a-3(b) in
connection with the Company's 2000 Annual Meeting of Stockholders.
The consolidated balance sheet at December 31, 1999 has been derived from
audited consolidated financial statements at that date but does not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements.
2. INVESTMENTS
Management determines the appropriate classification of debt securities at
the time of purchase and re-evaluates such designation as of each balance sheet
date. The Company's debt securities are classified as available-for-sale and are
carried at estimated fair value in cash equivalents and short-term investments.
Unrealized gains and losses are reported as accumulated other comprehensive
income (loss) in stockholders' 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.
Realized gains and losses on available-for-sale securities are included in
interest income and expense. 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. The Company's cash
equivalents and short-term investments as of September 30, 2000 are as follows
(in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Money market funds.................... $ 180 $-- $ -- $ 180
Commercial paper...................... 46,500 -- (5) 46,495
Government bonds...................... 28,377 1 (92) 28,286
Certificate of deposits............... 7,710 -- (1) 7,709
--------- --- ------- --------
Total....................... 82,767 1 (98) 82,670
Less amounts classified as
cash equivalents...................... (44,722) -- 5 (44,717)
--------- --- ------ --------
Total short-term investments.......... $ 38,045 $ 1 $ (93) $ 37,953
========= === ====== ========
</TABLE>
Realized gains or losses on the sale of available-for-sale securities for
the three- and nine-month periods ended September 30, 2000 and 1999 were
insignificant.
At September 30, 2000 the contractual maturities of short term investments
were as follows (in thousands):
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less..... $17,864 $ 17,863
Due after one year.......... 20,181 20,090
------- --------
$38,045 $ 37,953
======= ========
</TABLE>
23
<PAGE> 25
3. COLLABORATIVE DEVELOPMENT AND COMMERCIALIZATION AGREEMENT
In December 1998, the Company and SmithKline Beecham Corporation ("SB")
entered into a collaborative agreement for the development and commercialization
of Bexxar(TM), which is in late-stage development for the treatment of
non-Hodgkin's lymphoma ("NHL"). Under the terms of the agreement, the Company
and SB will jointly market and sell Bexxar in the United States following
regulatory approval and the two companies will share profits and losses equally.
Outside the United States, excluding Japan, the Company granted SB exclusive
marketing and distributing rights in return for milestone payments and product
royalties. The agreement provides for the sharing of certain costs related to
clinical and manufacturing development activities as well as a $15.0 million
credit line, all of which was available to the Company at September 30, 2000
(see Note 7). In April 2000, the Company and SB announced an amendment to their
collaboration for Bexxar. Under the amended agreement, effective June 30, 2000,
the Company reacquired from SB rights outside of the U.S. for the development
and commercialization of Bexxar. The Company continues to retain all rights in
Japan. In addition, the Company and SB announced an expansion of the
collaboration between the two companies to include a co-promotion agreement that
will temporarily use the Company's sales force for the U.S. promotion of SB's
oncology products, Hycamtin(R) and Kytril(R). SB will compensate the Company for
such time and efforts of its sales force.
Upon signing of the agreement, the Company received a $34.25 million,
non-refundable license fee, all of which was recognized as corporate partner
revenues in fiscal 1998, as well as $7.25 million from the sale of the Company's
common stock. The Company may receive additional payments upon the achievement
of certain clinical development and regulatory milestones. As of September 30,
2000, $2.0 million in milestone payments have been earned by the Company
pursuant to the terms of the agreement. Commencing with the year ended December
31, 1999, the Company and SB prepared a joint profit and loss statement to
account for the sharing of sales, costs of goods sold and costs relating to
selling, marketing, distribution and certain other Bexxar related activities. To
date, such activities have principally consisted of pre-commercialization
activities in anticipation of the potential launch of Bexxar. The Company's
share of the pretax operating results is included as a component of revenues
from unconsolidated joint business. Development expenses for Bexxar will
generally be shared by both companies, with the Company retaining responsibility
for funding certain predetermined development costs. All such development
expenses are included in the Company's operating expenses, and the reimbursement
is included as a component of revenues from unconsolidated joint business.
The following is a summary of revenues from unconsolidated joint business
(in thousands):
<TABLE>
<CAPTION>
NINE MONTHS FOR THE PERIOD
THREE MONTHS ENDED ENDED FROM INCEPTION
SEPTEMBER 30, SEPTEMBER 30, (FEBRUARY 16, 1995)
-------------------- --------------------- TO SEPTEMBER 30,
2000 1999 2000 1999 2000
------- -------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C>
Co-promotion operating loss.................. $ (81) $ (994) $ (765) $ (1,822) $ (4,109)
Reimbursement of development expenses........ 1,233 5,121 7,682 6,797 18,225
------- -------- -------- -------- --------
Revenue from unconsolidated joint business... $ 1,152 $ 4,127 $ 6,917 $ 4,975 $ 14,116
</TABLE>
Revenue from unconsolidated joint business earned in excess of payments
received are classified as other current assets. Reimbursements owed to SB are
classified as accounts payable. Amounts receivable from SB were approximately
$5.8 million and $4.5 million at September 30, 2000 and December 31, 1999,
respectively. Amounts payable to SB were $2.0 million and $1.5 million at
September 30, 2000 and December 31, 1999, respectively.
4. COMPREHENSIVE INCOME
For the three months ended September 30, 2000 and 1999 total comprehensive
loss amounted to $16.3 million and $11.3 million, respectively. For the nine
months ended September 30, 2000 and 1999 total comprehensive loss amounted to
$39.9 million and $36.3 million, respectively.
5. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, which
establishes accounting and reporting standards for derivative instruments,
including forward exchange contracts, and hedging activities. In June 1999, the
FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities --- Deferral of the Effective Date of FASB Statement No. 133. SFAS
No. 133 is now effective for fiscal years beginning after
24
<PAGE> 26
June 15, 2000 and, therefore, the Company will adopt this accounting standard
effective January 1, 2001. Management believes the impact of SFAS No. 133 will
be immaterial, as Coulter has no hedging activities or derivatives.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
Statements. Among other things, SAB 101 requires that license and other upfront
fees from research collaborators be recognized over the term of the agreement
unless the fee is in exchange for products delivered or services performed that
represent the culmination of a separate earnings process. The Company is
currently reviewing the impact of SAB No. 101 on its previously reported results
of operations and it will adopt SAB 101 during the fourth quarter of fiscal
2000.
6. STOCKHOLDERS' EQUITY
In August 2000, the Company completed a private placement of 1,655,000
shares of newly issued common stock at $21.625 per share, resulting in net
proceeds to the Company of $33.6 million.
7. SUBSEQUENT EVENTS
In October 2000, the Company borrowed $15 million from SB pursuant to the
credit line provided for under the Bexxar collaboration agreement with SB. No
amounts remain available under the credit line. Borrowings under the credit line
are due in December 2003, however, a portion of the then outstanding balance may
come due and payable at each of December 2001 and December 2002 if certain
financial earnings targets, as defined in the loan agreement, are achieved by
the Company. Quarterly interest payments, due in arrears are at a fixed interest
rate of 9.5%. The Company may repay the principal in either cash or common
stock, at its sole discretion.
Also, in October 2000, the Company announced its intention to merge with
Corixa Corporation, a research and development-based biotechnology company
committed to treating and preventing autoimmune diseases, cancer and infectious
diseases by understanding and directing the immune system.
25
<PAGE> 27
(b) Unaudited Pro Forma Financial Information.
The following unaudited pro forma consolidated financial statements give
effect to the Merger 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, 2000. The unaudited pro forma consolidated statements
of operations for the nine months ended September 30, 2000 and the year ended
December 31, 1999 give effect to the Merger and Corixa's acquisition of Ribi
ImmunoChem Research, Inc., or Ribi, as if they had occurred on January 1, 1999.
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 and the Ribi acquisition had in fact occurred
on those 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:
- Corixa's unaudited consolidated balance sheet as of September 30, 2000
has been consolidated with Coulter's unaudited consolidated balance sheet
as of September 30, 2000 as if the Merger had occurred on September 30,
2000.
- Corixa's consolidated statement of operations for the year ended December
31, 1999 has been combined with Ribi's unaudited statement of operations
for the period from January 1, 1999 to October 6, 1999 to arrive at
Corixa's pro forma combined results.
- Corixa's unaudited consolidated statement of operations for the nine
months ended September 30, 2000 and pro forma combined results for the
year ended December 31, 1999 have been combined with Coulter's unaudited
consolidated statement of operations for the nine months ended September
30, 2000 and for the year ended December 31, 1999 to arrive at the pro
forma combined results.
The unaudited pro forma consolidated financial information has been
prepared based on the assumptions described in the notes to the unaudited pro
forma consolidated financial information and includes assumptions relating to
the allocation of the consideration paid for the assets and liabilities of
Coulter based on their estimated fair value. In Corixa's opinion, all
adjustments necessary to present fairly the unaudited pro forma consolidated
financial information have been made based on the proposed terms and structure
of the Merger. The unaudited pro forma adjustments have been applied to the
financial information derived from the financial statements of Corixa and of
Coulter to account for the Merger as a purchase; accordingly, assets acquired
and liabilities assumed are reflected at their estimated fair values.
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 and of
Coulter and other financial information pertaining to Corixa and Coulter,
including Corixa's "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Coulter's "Management's Discussion and Analysis
of Financial Condition and Results of Operations," included in each company's
Annual Report on Form 10-K for the year ended December 31, 1999 and Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2000, June 30, 2000 and
September 30, 2000.
26
<PAGE> 28
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOOTNOTE
PRO FORMA REFERENCE PRO FORMA
CORIXA COULTER ADJUSTMENTS (SEE NOTE 2) COMBINED
--------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents... $ 22,070 $ 44,726 $ -- $ 66,796
Securities
available-for-sale....... 72,392 37,953 -- 110,345
Accounts receivable......... 4,309 -- -- 4,309
Interest receivable......... 1,325 -- -- 1,325
Prepaid expenses and other
assets................... 5,140 12,136 17,276
Deposits.................... 1,704 -- -- 1,704
--------- --------- --------- ----------
Total current assets..... 106,940 94,815 201,755
Property and equipment, net... 20,691 19,505 -- 40,196
Securities available-for-sale,
noncurrent.................. 14,195 -- -- 14,195
Investments................... 2,245 -- -- 2,245
Acquisition-related intangible
assets, net................. 12,422 -- 178,429 (C) 194,751
3,900 (B)
Deferred charges, deposits and
other assets................ 1,121 1,390 -- 2,511
--------- --------- --------- ----------
Total assets............. $ 157,614 $ 115,710 $ 182,329 $ 455,653
========= ========= ========= ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable and accrued
liabilities.............. $ 17,393 $ 20,371 $ 1,800 (D) $ 54,864
15,300 (D)
Dividend payable............ 312 -- -- 312
Deferred revenue............ 18,888 -- -- 18,888
Current portion of
obligations and
commitments.............. 3,924 1,969 -- 5,893
--------- --------- --------- ----------
Total current
liabilities............ 40,517 22,340 17,100 79,957
Long-term obligations and
commitments, less current
portion..................... 11,906 8,086 19,992
Deferred revenue, less current
portion..................... 1,750 -- 1,750
Redeemable common stock....... 2,000 -- 2,000
Stockholders' equity:
Preferred stock............. -- -- --
Common stock................ 21 19 (19) (E) 40
19 (F)
Additional paid-in
capital.................. 210,488 224,047 (224,047) (E) 1,142,093
800,259 (F)
131,346 (F)
Deferred compensation....... (146) (1,463) 1,463 (E) (54,857)
(54,711) (F)
Accumulated comprehensive
loss..................... (109) (97) 97 (E) (109)
Accumulated deficit......... (108,813) (137,222) 137,222 (E) (735,213)
(626,400) (A)
--------- --------- --------- ----------
Total stockholders'
equity................. 101,441 85,284 165,229 351,954
--------- --------- --------- ----------
Total liabilities and
stockholders' equity... $ 157,614 $ 115,710 $ 182,329 $ 455,653
========= ========= ========= ==========
</TABLE>
27
<PAGE> 29
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CORIXA/COULTER FOOTNOTE
PRO FORMA REFERENCE PRO FORMA
CORIXA COULTER ADJUSTMENTS (SEE NOTE 2) COMBINED
-------- -------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Revenue:
Collaborative agreements............. $ 31,906 $ 2,000 $ -- $ 33,906
Government grants.................... 1,675 -- -- 1,675
Revenue from unconsolidated joint
business.......................... -- 6,917 -- 6,917
-------- -------- -------- ---------
Total revenue..................... 33,581 8,917 -- 42,498
Operating expenses:
Research and development............. 50,656 38,731 7,591 (H) 96,978
Sales, general and administrative.... 4,498 12,519 2,667 (H) 19,684
Amortization of acquisition-related
intangibles....................... 2,333 -- 34,187 (G) 36,520
-------- -------- -------- ---------
Total operating expenses.......... 57,487 51,250 44,445 153,182
-------- -------- -------- ---------
Loss from operations................... (23,906) (42,333) (44,445) (110,684)
Other income, net...................... 3,129 2,334 -- 5,463
-------- -------- -------- ---------
Net loss............................... (20,777) (39,999) (44,445) (105,221)
Preferred stock dividend............... (468) -- -- (468)
-------- -------- -------- ---------
Net loss applicable to common
stockholders......................... $(21,245) $(39,999) $(44,445) $(105,689)
======== ======== ======== =========
Basic and diluted net loss per common
share................................ $ (1.05) $ (2.32) $ (2.70)
======== ======== =========
Shares used in computing basic and
diluted net loss per share applicable
to common............................
stockholders......................... 20,159 17,236 (I) 39,117
======== ======== =========
</TABLE>
28
<PAGE> 30
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CORIXA
PRO FORMA CORIXA/COULTER FOOTNOTE
COMBINED PRO FORMA REFERENCE PRO FORMA
(SEE NOTE 3) COULTER ADJUSTMENTS (SEE NOTE 2) COMBINED
------------ -------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Revenue:
Collaborative agreements........... $ 29,150 $ -- $ -- $ 29,150
Government grants.................. 1,463 -- -- 1,463
Revenue from unconsolidated joint
business........................ -- 5,449 -- 5,449
-------- -------- -------- ---------
Total revenue................... 30,613 5,449 -- 36,062
Operating expenses:
Research and development........... 48,702 44,804 30,364 (H) 123,870
General and administrative......... 7,389 15,947 10,669 (H) 34,005
Acquired in-process research and
development..................... 37,637 -- -- 37,637
Amortization of acquisition-related
intangibles..................... 2,950 -- 45,582 (G) 48,532
-------- -------- -------- ---------
Total operating expenses........ 96,678 60,751 86,615 244,044
-------- -------- -------- ---------
Loss from operations................. (66,065) (55,302) (86,615) (207,982)
Other income (net)................... 3,117 4,696 -- 7,813
-------- -------- -------- ---------
Net loss............................. (62,948) (50,606) (86,615) (200,169)
Preferred stock dividend............. (6,008) -- -- (6,008)
-------- -------- -------- ---------
Net loss applicable to common
stockholders....................... $(68,956) $(50,606) $(86,615) $(206,177)
======== ======== ======== =========
Basic and diluted net loss per common
share.............................. $ (3.47) $ (3.03) $ (5.31)
======== ======== =========
Shares used in computing basic and
diluted net loss per share
applicable to common
stockholders....................... 19,859 16,695 (I) 38,817
======== ======== =========
</TABLE>
29
<PAGE> 31
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF MERGER AND PURCHASE PRICE
The unaudited pro forma consolidated financial statements reflect the
conversion of all the outstanding shares of Coulter capital stock into
approximately 18,958,313 shares of Corixa common stock pursuant to the Merger.
The calculation of the number of shares is based on outstanding shares of
Coulter common stock of approximately 18,901,609 (which excludes approximately
134,790 common shares that will be issued to SmithKline Beecham plc for $5
million as a result of U.S. Food and Drug Administration, or FDA, acceptance of
the Biologics License Application, or BLA, for Bexxar) multiplied by the
exchange ratio of 1.003. The unaudited pro forma consolidated financial
statements reflect the assumption by Corixa of options to purchase approximately
4,233,730 shares of Coulter common stock pursuant to the Merger Agreement, which
would be converted into options to purchase approximately 4,246,228 shares of
Corixa common stock. On December 22, 2000, the date of the Merger, 19,116,013
shares of Corixa common stock were actually issued to former Coulter
stockholders and Corixa assumed options to purchase 4,284,293 shares of Coulter
common stock, which were converted into options to purchase 4,297,146 shares of
Corixa common stock. The total cost of the Merger is estimated to be
approximately $892.2 million, based on a fair value of Corixa common stock of
$42.21. The total purchase price was as follows (in thousands):
<TABLE>
<S> <C>
Fair value of Corixa shares................................. $800,278
Fair value of Coulter options assumed....................... 131,346
Less intrinsic value of unvested options.................... (54,711)
Corixa transaction costs, consisting primarily of financial
advisory, legal and accounting fees....................... 15,300
--------
$892,213
========
</TABLE>
Based upon preliminary valuation, performed by an independent third party, of
tangible and intangible assets acquired and liabilities assumed as of September
30, 2000, Corixa has allocated the total cost of the Merger as follows (in
thousands):
<TABLE>
<S> <C>
Tangible assets acquired.................................... $115,710
In-process research and development......................... 626,400
Assembled workforce......................................... 3,900
Goodwill.................................................... 178,429
Liabilities assumed......................................... (32,226)
--------
$892,213
========
</TABLE>
Acquired in-process research and development, or IPR&D, for the Merger was
evaluated utilizing the present value of the estimated after-tax cash flows
expected to be generated by the purchased technology, which, at the effective
time of the Merger, had not reached technological feasibility. The cash flow
projections for revenues are based on estimates of growth rates and the
aggregate size of the respective market for each product, probability of
technical success given the stage of development at the time of acquisition,
royalty rates based on prior licensing agreements, product sales cycles, and the
estimated life of a product's underlying technology. Estimated operating
expenses and income taxes are deducted from estimated revenue projections to
arrive at estimated after-tax cash flows. Projected operating expenses include
general and administrative expenses, and research and development costs. The
rates utilized to discount projected cash flows range from 30% to 50% depending
on the relative risk of each in-process technology and were based primarily on
risk adjusted rates of return for research and development and the weighted
average cost of capital for Corixa at the time of the Merger.
30
<PAGE> 32
The unaudited pro forma consolidated financial statements reflect acquired
IPR&D of approximately $626.4 million, representing the values determined by
Corixa's management to be attributable to the IPR&D assets associated with the
technology acquired in the Merger as follows (in thousands):
<TABLE>
<S> <C>
Bexxar...................................................... $585,800
64G12....................................................... 28,300
CPI-0004.................................................... 12,300
--------
$626,400
========
</TABLE>
- Bexxar consists of a radioisotope, (131)Iodine, or(131)I, combined with a
monoclonal antibody that recognizes and binds to the CD20 antigen, an
antigen commonly expressed on the surface of B-cells primarily during
that stage of their life cycle when non-Hodgkin's lymphoma, or NHL,
arises. Bexxar is administered to patients in a proprietary therapeutic
protocol consisting of a single, two-dose regimen. Coulter has estimated
that research and development costs to complete individual Bexxar
development projects will be approximately $12.0 million, net of
reimbursements from a corporate joint business. The most advanced Bexxar
project is for relapsed and refractory low-grade and transformed
low-grade NHL for which Phase III clinical studies have been completed
and a BLA was submitted to the FDA in September 2000. Additional
indications include first line low-grade treatment and intermediate-grade
NHL, which are estimated to be completed in 2002. Significant risk
remains in relation to FDA approval of Bexxar.
- 64G12 is a monoclonal antibody that binds to sub-unit one of the type I
interferon receptor and neutralizes the activity of all type I
interferons. This antibody, or a derivative, may provide therapeutic
benefit in a number of autoimmune diseases, including: rheumatoid
arthritis, systemic lupus erythematosus, Crohn's disease, graft versus
host disease and solid organ transplantation rejection. It has been
estimated that an individual 64G12 project may be completed by 2006 with
an additional $40 million in research and development costs. To date,
Coulter had made progress in preclinical studies in rheumatoid arthritis
and transplantation.
- CPI-0004 is a pro-drug version of doxorubicin. Doxorubicin is an
off-patent chemotherapeutic drug that currently is used in treating a
number of solid tumor cancers, including breast, prostate, ovarian and
soft-tissue sarcoma cancers. CPI-0004 is a proprietary molecule based on
a peptide of four amino acids that is linked to doxorubicin. CPI-0004 is
designed to deliver significantly higher levels of doxorubicin to a tumor
site relative to normal tissues. The pro-drug approach is also designed
to achieve a higher dose of active drug to the tumor site than can be
achieved using unconjugated drug. It has been estimated that CPI 0004 may
be completed by 2005 with an additional $33.0 million in research and
development costs. This project is scheduled to complete preclinical
development of CPI-0004 and to commence Phase I clinical trials in the
second half of 2001.
The values associated with these programs represent values ascribed by
Corixa's management, based on the discounted cash flows currently expected from
the technologies acquired. If these projects are not successfully developed, the
business, results of operations and financial condition of Corixa may be
adversely affected. As of the date the Merger Agreement was signed, Corixa
concluded that once completed, the technologies under development can only be
economically used for their specific and intended purposes and that the
in-process technology has no alternative future use after taking into
consideration the overall objectives of the project, progress toward the
objectives, and uniqueness of developments to these objectives.
2. PRO FORMA ADJUSTMENTS
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,
2000, and to reflect the allocation of the proposed acquisition of Coulter to
the fair value of tangible and intangible assets acquired, including the charge
to operations for IPR&D acquired, liabilities assumed, and the elimination of
Coulter's equity accounts. Also
31
<PAGE> 33
included are the transaction costs, inclusive of payments to financial advisors,
independent auditors, attorneys and other related costs. Approximate adjustments
included in the unaudited pro forma consolidated balance sheet are summarized as
follows (in thousands):
(A) the charge to operations for IPR&D acquired by Corixa, $626,400;
(B) the valuation of workforce acquired by Corixa, $3,900, estimated 4-year
life;
(C) the valuation of goodwill acquired by Corixa, $178,429, estimated
4-year life;
(D) transaction and other costs associated with the Merger, $15,300, and
employee severance costs, $1,800;
(E) elimination of Coulter equity accounts; and
(F) issuance of Corixa common stock, $0.001 par value, as discussed above,
which value is equal to the product of up to approximately 18,958,313
shares multiplied by $42.21 per share and the fair value of stock
options issued by Corixa in exchange for Coulter stock options,
$131,346, less the intrinsic value of unvested outstanding Coulter
stock options assumed by Corixa, $54,711.
The pro forma combined statements of operations include the adjustments
necessary to give effect to the Merger as if it had occurred on January 1, 1999
(G) To record amortization related to acquired goodwill and work force.
(H) To record amortization of deferred compensation related to Coulter
options assumed by Corixa.
(I) The pro forma combined share and net loss per share data was prepared
using an exchange ratio of 1.003 shares of Corixa common stock for each
share of Coulter common stock and the assumed issuance of up to
approximately 18,958,313 shares of Corixa common stock on January 1,
1999 as described in Note 1 to these Notes to Unaudited Pro Forma
Consolidated Financial Statements. The impact of outstanding options
has been excluded from the calculation of diluted net loss per share as
the effect would be antidilutive.
3. RIBI -- UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Corixa's unaudited consolidated statement of operations for the year ended
December 31, 1999 has been combined with Ribi's unaudited statement of
operations for the period from January 1, 1999 to October 6, 1999 as follows:
32
<PAGE> 34
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
RIBI CORIXA/RIBI CORIXA
(PRIOR TO PRO FORMA PRO FORMA
CORIXA ACQUISITION) ADJUSTMENTS COMBINED
-------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Revenue:
Collaborative agreements.................... $ 25,035 $ 4,115 $ -- $ 29,150
Government grants........................... 1,463 -- -- 1,463
-------- ------- ------- --------
Total revenue............................ 26,498 4,115 -- 30,613
Operating expenses:
Research and development.................... 41,962 6,740 -- 48,702
General and administrative.................. 3,743 3,646 -- 7,389
Acquired in-process research and
development(1)........................... 37,637 -- -- 37,637
Amortization of acquisition-related
intangibles.............................. 587 -- 2,363 2,950
-------- ------- ------- --------
Total operating expenses................. 83,929 10,386 2,363 96,678
-------- ------- ------- --------
Loss from operations.......................... (57,431) (6,271) (2,363) (66,065)
Other income (net)............................ 2,673 444 -- 3,117
-------- ------- ------- --------
Net loss...................................... (54,758) (5,827) (2,363) (62,948)
Preferred stock dividend...................... (6,008) -- -- (6,008)
-------- ------- ------- --------
Net loss applicable to common stockholders.... $(60,766) $(5,827) $(2,363) $(68,956)
======== ======= ======= ========
Basic and diluted net loss per common share... $ (3.91) $ (0.28) $ (3.47)
======== ======= ========
Shares used in computing basic and diluted net
loss per share applicable to common
stockholders................................ 15,528 20,796 19,859
======== ======= ========
</TABLE>
---------------
(1) This amount represents the IPR&D charge related to the Ribi acquisition
($26.0 million) and the Anergen acquisition ($11.6 million), which was
completed in February 1999.
The unaudited pro forma consolidated financial statements reflect the
conversion of all the outstanding shares of Ribi capital stock into 3,610,766
shares of Corixa common stock as a result of the acquisition by Corixa on
October 6, 1999, which was accounted for as a purchase transaction. Options and
warrants to purchase shares of Ribi common stock were assumed by Corixa pursuant
to the merger and converted into options and warrants to purchase shares of
Corixa common stock.
The total consideration of $57.5 million consisted of Corixa common stock
and options valued at $47.9 million, cash of $7.9 million paid by Corixa to Ribi
for the redemption of Ribi Series A preferred stock and approximately $1.7
million of transaction costs. The purchase price was allocated to tangible
assets acquired of $23.9 million and liabilities assumed of $7.5 million,
acquired intangible assets, including goodwill of approximately $15.1 million
and acquired IPR&D of $26.0 million.
The net loss per share and shares used in computing net loss per share for
the year ended December 31, 1999 are based on the historical weighted average
common shares outstanding adjusted to reflect the issuance, as of January 1,
1999, of 3,610,766 shares of Corixa common stock. Options and warrants to
purchase Ribi common stock were assumed by Corixa pursuant to the merger and
converted into options and warrants to purchase shares of Corixa common stock.
The Corixa common stock issuance upon exercise of the stock options and warrants
assumed have been excluded as the effect would be anti-dilutive. Refer to Note 3
to the Notes to Consolidated Financial Statements in Corixa's 1999 Annual Report
on Form 10-K/A.
33
<PAGE> 35
(c) Exhibits.
<TABLE>
<S> <C> <C>
2.1 Agreement and Plan of Merger By and Among Corixa (A)
Corporation, Clearwater Acquisitions Corporation, and
Coulter Pharmaceutical, Inc., dated October 15, 2000
23.1 Consent of Ernst & Young LLP, Independent Auditors
99.1 Press Release of Corixa, dated December 22, 2000
</TABLE>
----------------
(A) Incorporated by reference to Appendix A to Corixa's Form S-4/A, as amended
(File No. 333-49490), declared effective by the Commission on November 17, 2000.
34
<PAGE> 36
SIGNATURE
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 hereunto duly authorized.
CORIXA CORPORATION
Dated: December 29, 2000 By /s/ Michelle Burris
---------------------------------
Name: Michelle Burris
Its: Vice President and
Chief Financial Officer
35
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C> <C>
(A)
2.1 Agreement and Plan of Merger By and Among Corixa
Corporation, Clearwater Acquisitions Corporation, and
Coulter Pharmaceutical, Inc., dated October 15, 2000
23.1 Consent of Ernst & Young LLP, Independent Auditors
99.1 Press Release of Corixa, dated December 22, 2000
</TABLE>
------------------------
(A) Incorporated by reference to Appendix A to Corixa's Form S-4/A, as amended
(File No. 333-49490), declared effective by the Commission on November 17, 2000
