<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
----------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE PERIOD ENDED SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
COMMISSION FILE NO. 0-21905
COULTER PHARMACEUTICAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 94-3219075
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
600 GATEWAY BOULEVARD
SOUTH SAN FRANCISCO, CALIFORNIA 94080
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
650-553-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares outstanding of the issuer's Common Stock, par value $.001
per share, as of October 19, 2000: 18,875,569.
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<PAGE> 2
COULTER PHARMACEUTICAL, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Item 1. Consolidated Financial Statements and Notes........................... 3
Consolidated Balance Sheets -- September 30, 2000 and
December 31, 1999..................................................... 3
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.............. 4
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............................. 5
Notes to Consolidated Financial Statements............................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk............ 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................................... 13
SIGNATURES.................................................................... 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
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.
3
<PAGE> 4
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.
4
<PAGE> 5
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.
5
<PAGE> 6
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>
6
<PAGE> 7
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
7
<PAGE> 8
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.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. Actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed below and in our Registration Statement
on Form S-3 filed on August 30, 2000 as well as in our Annual Report on Form
10-K for the year ended December 31, 1999, filed on March 27, 2000.
OVERVIEW
We are engaged in the development of novel drugs and therapies for the
treatment of cancer and autoimmune diseases. We are currently developing a
family of potential therapeutics based upon two drug discovery programs;
therapeutic antibodies and targeted oncologies. Within these broad drug
discovery programs, we are currently concentrating on several distinct platform
technologies; therapeutic antibodies consisting of both conjugated and
unconjugated antibody technology, and targeted oncologics based on tumor
activated pro-drug ("TAP") technology and tumor specific targeting ("TST")
technology. We are also developing a portfolio of proprietary ultra potent
compounds which we believe will be suitable payloads for both our TAP and TST
platforms. Ultra potent compounds generally are at least 1,000 times more potent
than standard chemotherapeutic agents and are active against resistant tumor
cells. In October 2000, we announced our 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.
Our most advanced product candidate, Bexxar(TM) (tositumomab, iodine I 131
tositumomab) consists of a monoclonal antibody conjugated with a radioisotope.
We intend to seek initial approval of Bexxar for the treatment of low-grade and
transformed low-grade non-Hodgkin's lymphoma ("NHL") in patients who have
relapsed after, or are refractory to, chemotherapy. We intend to seek expedited
Biologics License Application ("BLA") review and marketing approval for Bexxar,
while simultaneously pursuing clinical trials to expand the potential use of
Bexxar to other indications. Bexxar is based upon the antibody therapeutics
program which originated at Coulter Corporation. In September 2000, we announced
the submission of a BLA for Bexxar to the Food and Drug Administration ("FDA")
and in October 2000, we announced that Bexxar had been granted Priority Review
Status by the FDA. In 1995, Coulter Pharmaceutical was incorporated and acquired
worldwide rights to Bexxar and related intellectual property, know-how and other
assets from Coulter Corporation. In 1997, Beckman Instruments, Inc. acquired
Coulter Corporation, and is now known as Beckman Coulter. In December 1998, we
announced a joint collaboration agreement with SmithKline Beecham Corporation
("SB") granting SB joint marketing rights to Bexxar in the United States and
exclusive commercial rights internationally, except Japan. In April 2000, we
announced that we reacquired rights outside the U.S. for the development and
commercialization of Bexxar effective June 30, 2000.
To date, we have devoted substantially all of our resources to research and
development programs, as well as selling, general and administrative activities
needed to support product development and potential product sales. No revenues
have been generated from product sales, and product revenues resulting from our
research and development efforts, if any, will not occur until commercial
availability of such product. We have a limited history of operations and have
experienced significant operating losses to date. We may continue to incur
significant additional operating losses in future periods and expect cumulative
losses to increase substantially due to expanded research and development
efforts, preclinical studies and clinical trials and development of
manufacturing, marketing and sales capabilities, if anticipated product sales
revenues do not offset these costs. We expect that losses will fluctuate from
quarter to quarter and that such fluctuations may be substantial. There can be
no assurance that we will successfully develop, manufacture and commercialize
our products or ever achieve or sustain product revenues or profitability. As of
September 30, 2000, our accumulated deficit was approximately $137.2 million.
RESULTS OF OPERATIONS
Revenues
Corporate partner revenues of $2.0 million for the nine-month period ended
September 30, 2000 resulted from the recognition of a $2.0 million clinical
milestone from SB related to expanded development of Bexxar. Revenues from
unconsolidated joint business represents our share of the pre-tax Bexxar
operating losses generated from our joint business arrangement with SB to
co-promote Bexxar and the reimbursement from SB of its share of our
Bexxar-related manufacturing development expenses. Revenues from unconsolidated
joint business in the three months ended September 30, 2000 was $1.2 million
compared to $4.1 million for the same
9
<PAGE> 10
period in 1999. For the nine months ended September 30, 2000, revenues from
unconsolidated joint business were $6.9 million compared to $5.0 million for the
same period in 1999. Such revenues were partially offset by co-promote pre-tax
operating losses. The decrease for the quarter ended September 30, 2000 was due
to a decrease in manufacturing development activities as we approach the
anticipated launch of Bexxar. The increase for the nine months ended September
30, 2000 was due to the recognition in the first quarter of fiscal 2000 of a
final payment of approximately $3.0 million related to 1999 manufacturing
development activities. Revenue in future periods will depend on the achievement
of contract milestones, the timing and scope of reimbursable development
activities and commercial sales of Bexxar.
Operating Costs and Expenses
Research and development expenses were $13.7 million for the three-month
period ended September 30, 2000 compared to $12.4 million for the same period in
1999. For the nine months ended September 30, 2000, research and development
expenses were $38.7 million compared to $33.4 million for the same period in
1999. The increase in research and development expenses for both periods in 2000
was primarily due to ongoing Bexxar-related clinical development activities,
manufacturing activities in anticipation of potential product launch, and
activities related to the acquisition of rights to certain technologies in
support of our ongoing research. We expect our research and development expenses
to grow during the remainder of 2000, reflecting anticipated increased costs
related to additions to staffing, preclinical studies, clinical trials and
manufacturing.
Selling, general and administrative expenses were $4.6 million for the
quarter ended September 30, 2000, compared to $4.1 million for the same period
in 1999. For the nine months ended September 30, 2000, selling, general and
administrative expenses were $12.5 million compared to $11.5 million for the
same period in 1999. The increase for the three- and nine-month periods was
primarily due to expenses incurred to support our facilities and staffing
expansion, sales and marketing efforts, increased pre-commercialization
activities, increased corporate development activities and related legal and
patent activities. We expect our selling, general and administrative expenses to
continue to increase during the remainder of 2000 in continued support of these
activities.
Interest Income and Other, Net
Interest income and other, net was $821,000 for the quarter ended September
30, 2000, compared to $1.1 million for the same period in 1999. For the nine
months ended September 30, 2000, interest income and other, net was $2.3 million
compared to $3.8 million for the same period in 1999. These decreases were due
to lower average cash, cash equivalents and short-term investment balances.
Interest expense is not material for any period presented.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception through September 30, 2000, we have financed our
operations primarily through private placements and public offerings of equity
securities totaling $215.6 million, including $33.6 million received in August
2000 pursuant to the sale of 1,655,000 shares of newly issued, unregistered
common stock at a price of $21.625 per share. Cash, cash equivalents and
short-term investments totaled $82.7 million at September 30, 2000. Our
agreement with SB 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 at September 30, 2000. In October 2000, we borrowed
all $15 million available under the credit line. In 1999, we obtained a credit
line with GE Capital Leasing for $1.4 million relating to capital equipment
leasing. Total available under this leasing credit line at the end of September
30, 2000 is $313,000.
The negative cash flow from operations results primarily from our net
operating losses and is expected to continue and to accelerate in future
periods. We expect to incur substantial and increasing research and development
expenses, including expenses related to additions to personnel, preclinical
studies, clinical trials, and manufacturing. In addition, we expect to incur
increasing selling, general and administrative expenses in support of our
commercialization efforts. We may need to raise substantial additional capital
to fund our operations. We may seek such additional funding through public or
private equity or debt financing from time to time, as market conditions permit.
There can be no assurance that additional financing will be available on
acceptable terms, if at all. If adequate funds are not available, we may be
required to delay, reduce the scope of, or eliminate one or more of our research
and development programs or obtain funds through arrangements with collaborative
partners or others that may require us to relinquish rights to certain of our
technologies, product candidates or products that we would otherwise seek to
develop or commercialize.
Net cash used in operations was $34.9 million for the nine months ended
September 30, 2000, compared to $41.0 million for the same period in 1999. This
$6.1 million decrease was primarily the result of increases in accounts payable
and accrued liabilities,
10
<PAGE> 11
partially offset by an increase in our net loss and prepaid and other current
assets. Included in prepaid expenses and other current assets is approximately
$5.5 million of monoclonal antibody purchased from one of our third-party
manufacturers in the second quarter. The antibody will be used in our continued
clinical research and development of Bexxar(TM) as well as potential future
commercial use, pending Bexxar(TM) approval. Net cash provided by investing
activities was $21.1 million for the nine months ended September 30, 2000
compared to net cash used in investing activities of $27.3 million for the same
period in 1999. In the 2000 period, maturities of short-term investments
exceeded purchases of such investments by $22.4 million. In the 1999 period,
purchases of short-term investments exceeded maturities and sales by $16.0
million. Also in the 1999 period, we expended $10.8 million more in purchases of
property and equipment than we did in 2000. The 1999 expenditures related
primarily to our facilities expansion. Net cash provided by financing activities
was $36.4 million for the nine months ended September 30, 2000 compared to $5.6
million for the same period in 1999. The increase was primarily due to the net
proceeds from our August 2000 private placement of $33.6 million of common
stock, partially offset by payments in equipment financing obligations.
We expect that our existing capital resources, including the net proceeds
of our public offerings and interest thereon, will be adequate to satisfy the
requirements of our current and planned operations through 2001. Our future
capital requirements will depend on a number of factors, including: the scope
and results of preclinical studies and clinical trials; continued progress of
our research and development of potential products; the cost, timing and outcome
of regulatory approvals; the expenses of establishing a sales and marketing
force; the timing and cost of establishment or procurement of requisite
production, radiolabeling and other capacities; the cost involved in preparing,
filing, prosecuting, maintaining, defending and enforcing patent claims; the
need to acquire licenses to new technology; the status of competitive products;
the availability of other financing and the ability to achieve profitability.
BUSINESS RISKS
Except for the historical information contained herein, the matters
discussed in this filing are forward-looking statements that involve risks and
uncertainties, including uncertainties related to product development,
uncertainties related to the need for regulatory and other government approvals,
dependence on proprietary technology, uncertainty of market acceptance of Bexxar
or our other product candidates and other risks, including those detailed in our
other filings with the Securities and Exchange Commission. In particular, see
"Risk Factors," referenced in our Registration Statement on Form S-3 filed on
August 30, 2000 and our Annual Report on Form 10-K for the year ended December
31, 1999, filed on March 27, 2000.
11
<PAGE> 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, our financial position is routinely
subjected to a variety of risks, including market risk associated with interest
rate movements and currency rate movements on non-United States dollar
denominated assets and liabilities. We regularly assesses these risks and have
established policies and business practices to protect against the adverse
effects of these and other potential exposures. As a result, we do not
anticipate material losses in these areas.
Interest Rates -- Our interest income is sensitive to changes in the
general level of interest rates, primarily United States interest rates. In this
regard, changes in United States interest rates affect the interest earned on
our cash equivalents and short-term investments. Based on our overall interest
rate exposure at September 30, 2000, a near-term change in interest rates, based
on historical movements, would not materially affect the fair value of interest
rate sensitive instruments.
Foreign Currency Exchange Rates - We have certain liabilities which are
denominated in several European currencies. As a result, our financial results
could be significantly affected by factors such as changes in foreign currency
exchange rates or economic conditions in the foreign markets in which our
suppliers are located. To mitigate this risk, we may enter into foreign currency
forward contracts as we deemed necessary. Based on our overall currency rate
exposure at September 30, 2000, a near-term change in currency rates, based on
historical currency rate movements, would not materially affect the value of
foreign currency sensitive liabilities.
We invest cash which is not currently being used for operational purposes
in accordance with our investment policy. This policy allows for the purchase of
low risk securities issued by the government agencies and very highly rated
banks and corporations subject to certain concentration limits. The maturities
of these securities are maintained at less than two years. The following table
presents the amounts and related weighted average interest rates by year of
maturity for our investment portfolio and long term debt obligations at
September 30, 2000.
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 THEREAFTER TOTAL 1999
-------- ------ ----- ----- ---- ---------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Equivalent Investments:
Fixed Rate .................. $ 44,717 -- -- -- -- -- $ 44,717 $ 22,135
Average Interest Rate ....... 6.6% -- -- -- -- -- -- --
Short Term Investments:
Fixed Rate .................. 4,599 33,354 -- -- -- -- 37,953 60,257
Average Interest Rate ....... 6.2% 6.1% -- -- -- -- -- --
Long-term debt,
including current portion:
Variable Rate ............... 710 1,684 1,380 6,281 -- -- 10,055 11,686
Average Interest Rate ....... 10.8% 10.2% 9.5% 9.4% -- -- -- --
</TABLE>
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
27.1 Financial data Schedule
</TABLE>
(b) Reports on Form 8-K
There were no reports on Form 8-K during the quarter ended September 30,
2000.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COULTER PHARMACEUTICAL, INC.
Date: November 2, 2000 /s/ MICHAEL F. BIGHAM
----------------------------------------
Michael F. Bigham
President and Chief Executive Officer
Date: November 2 , 2000 /s/ WILLIAM G. HARRIS
----------------------------------------
William G. Harris
Sr. Vice President and
Chief Financial Officer
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
27.1 Financial data Schedule
</TABLE>
