-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A/TJxDgi5YW2BpzA4IVHNkwIm5yhN8dhNC/JoVa16EIQoO4BCDqY1GPP18E/oZwo gR300t6GuLZPVdkZdRCQ+g== 0000891618-98-002370.txt : 19980515 0000891618-98-002370.hdr.sgml : 19980515 ACCESSION NUMBER: 0000891618-98-002370 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COULTER PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000942416 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 943219075 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21905 FILM NUMBER: 98619240 BUSINESS ADDRESS: STREET 1: 550 CALIFORNIA AVE STE 200 CITY: PALO ALTO STATE: CA ZIP: 94306 BUSINESS PHONE: 4158427300 MAIL ADDRESS: STREET 1: 550 CALIFORNIA AVE STE 200 CITY: PALO ALTO STATE: CA ZIP: 94306 10-Q 1 FORM 10-Q FOR THE PERIOD ENDING 3/31/98 1 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 MARCH 31, 1998 --------------------------------- 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) Delaware 94-3219075 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 550 California Ave, Palo Alto, California 94306 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 650-849-7500 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 May 7, 1998: 13,643,154. 1 2 COULTER PHARMACEUTICAL, INC. INDEX
PART I. FINANCIAL INFORMATION PAGE NO. -------- Item 1. Consolidated Financial Statements and Notes 3 Consolidated Balance Sheets - March 31, 1998 and December 31, 1997 3 Consolidated Statements of Operations - Three months ended March 31, 1998 and 1997 and for the period from inception (February 16, 1995) to March 31, 1998 4 Consolidated Statements of Cash Flows - Three months ended March 31, 1998 and 1997 and for the period from inception (February 16, 1995) to March 31, 1998 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11
2 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) ASSETS
MARCH 31, DECEMBER 31, 1998 1997 --------- ------------ Current assets: (Unaudited) (Note 1) Cash and cash equivalents $ 11,031 $ 20,451 Short-term investments 56,340 54,994 Prepaid expenses and other current assets 491 269 --------- --------- Total current assets 67,862 75,714 Property and equipment, net 2,573 2,263 Employee loans receivable 299 323 Other assets 371 371 --------- --------- $ 71,105 $ 78,671 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,470 $ 1,838 Accrued liabilities 10,967 7,959 Current portion of equipment financing obligations and debt facility 765 715 --------- --------- Total current liabilities 13,202 10,512 Non current portion of equipment financing obligations and debt facility 2,106 2,298 Commitments Stockholders' equity: Preferred stock, issuable in series, $.001 par value: 20,000,000 shares authorized; no shares issued and outstanding at March 31, 1998 or December 31, 1997 -- -- Common stock, $.001 par value: 30,000,000 shares authorized; 13,629,528 shares and 13,570,224 shares issued and outstanding at March 31, 1998 and December 31, l997, respectively 14 14 Additional paid-in capital 111,746 111,598 Accumulated other comprehensive income (35) (7) Deferred compensation (1,004) (1,085) Deficit accumulated during the development stage (54,924) (44,659) --------- --------- Total stockholders' equity 55,797 65,861 --------- --------- $ 71,105 $ 78,671 ========= =========
See accompanying notes. 3 4 COULTER PHARMACEUTICAL, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per share data)
THREE MONTHS ENDED FOR THE PERIOD MARCH 31, FROM INCEPTION ------------------------ (FEBRUARY 16, 1995) 1998 1997 TO MARCH 31, 1998 -------- -------- -------------------- Operating expenses: Research and development $ 9,017 $ 3,036 $ 46,282 Selling, general and administrative 2,160 1,208 12,760 -------- -------- -------- Total operating expenses 11,177 4,244 59,042 Interest income and other, net 912 438 4,118 -------- -------- -------- Net loss $(10,265) $ (3,806) $(54,924 ) ======== ======== ======== Basic and diluted net loss per share $( 0.77 ) $( 0.56 ) -------- -------- Shares used in computing basic and diluted net loss per share 13,377 6,792 ======== ========
See accompanying notes. 4 5 COULTER PHARMACEUTICAL, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (decrease) in cash and cash equivalents (unaudited) (in thousands)
FOR THE PERIOD THREE MONTHS FROM INCEPTION ENDED MARCH 31, (FEB. 16, 1995) 1998 1997 TO MARCH 31, 1998 --------- --------- ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (10,265) $ (3,806) $ (54,924) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 98 22 409 Amortization of deferred compensation 81 298 1,496 Changes in operating assets and liabilities: Prepaid expenses and other current assets (222) (66) (491) Employee loans receivable 24 37 (299) Other assets -- 9 (371) Accounts payable (368) 285 1,470 Accrued liabilities 3,008 (3,202) 10,967 --------- --------- --------- Net cash used in operating activities (7,644) (6,423) (41,743) --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short-term investments (32,432) (21,781) (104,749) Maturities of short-term investments 25,984 7,645 41,114 Sales of short-term investments 5,074 -- 7,344 Purchases of property and equipment (408) (185) (2,978) --------- --------- --------- Net cash used in investing activities (1,782) (14,321) (59,269) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments of equipment financing obligations and debt facility (175) (86) (750) Borrowings under equipment financing obligations and debt facility 33 1,159 3,533 Proceeds from issuances of convertible preferred stock, net -- -- 28,355 Proceeds from issuance of common stock, net 148 34,445 80,905 --------- --------- --------- Net cash provided by financing activities 6 35,518 112,043 --------- --------- --------- Net increase in cash and cash equivalents (9,420) 14,774 11,031 Cash and cash equivalents at beginning of period 20,451 8,826 -- --------- --------- --------- Cash and cash equivalents at end of period $ 11,031 $ 23,600 $ 11,031 ========= ========= =========
See accompanying notes 5 6 COULTER PHARMACEUTICAL, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1998 (unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The information at March 31, 1998, for the three month periods ended March 31, 1998 and 1997 and for the period from inception (February 16, 1995) to March 31, 1998 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 March 31, 1998 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, 1997 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 1998 Annual Meeting of Stockholders. The consolidated balance sheet at December 31, 1997 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. Net Loss Per Share Effective December 31, 1997 the Company adopted Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share", which modifies the way in which earnings per share are calculated and disclosed. "Basic" net loss per share (as defined by SFAS 128) is computed using the weighted average number of common shares outstanding less those shares outstanding subject to continued vesting. As the Company reported a loss for all periods presented, there is no difference between basic and diluted net loss per share amounts as prescribed by SFAS 128. Loss per share for the three months ended March 31, 1997 has been restated to conform to the requirements of SFAS 128. New Accounting Standard As of January 1, 1998, the Company adopted Statement 130, Reporting Comprehensive Income. Statement 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this Statement had no impact on the Company's net income or shareholders' equity. Statement 130 requires unrealized gains or losses on the Company's available-for-sale securities which, prior to adoption, were reported separately in shareholders' equity to be included in other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of Statement 130. During the first quarter of 1998 and 1997, total comprehensive loss amounted to $10.3 million and $3.9 million, respectively. 6 7 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 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 March 31, 1998 are as follows (in thousands):
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED COST GAINS LOSSES FAIR VALUE ------------------------------------------------------------------- Money market funds $ 1,943 $ -- $ -- $ 1,943 Commercial paper 20,571 -- (16) 20,555 Corporate bond 24,117 -- (10) 24,107 Certificate of Deposits 20,636 -- (9) 20,627 ----------- ----------- ----------- ----------- Total 67,267 -- (35) 67,232 Less amounts classified as cash equivalents (10,898) -- 6 (10,892) ----------- ----------- ----------- ----------- Total short-term investments $ 56,369 $ -- $ (29) $ 56,340 =========== =========== =========== ===========
Realized gain or losses of available-for-sale securities for the quarter ended March 31, 1998 were not significant. There were no realized gains or losses on the sale of available-for-sale securities for the quarter ended March 31, 1997. At March 31, 1998 the contractual maturities of short term investments were as follows (in thousands):
ESTIMATED FAIR AMORTIZED COST VALUE -------------- -------------- Due in one year or less $30,944 $30,925 Due after one year through two years 25,425 25,415 ------- ------- $56,369 $56,340 ======= =======
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 the Company's Annual Report on Form 10-K for the year ended December 31, 1997. 7 8 OVERVIEW Coulter Pharmaceutical is engaged in the development of novel drugs and therapies for the treatment of people with cancer. The Company currently is developing a family of cancer therapeutics based upon two drug discovery programs, therapeutic antibodies and targeted oncologics. Within these broad discovery programs, the Company is currently concentrating on two distinct platform technologies: therapeutic antibodies based on conjugated antibody technology and targeted oncologics based on tumor activated peptide pro-drugs. The Company's most advanced product candidate, Bexxar (formerly known as the "B-1 Therapy"), consists of a monoclonal antibody conjugated with a radioisotope. The Company intends to seek initial approval of Bexxar for the treatment of low-grade and transformed low-grade non-Hodgkin's lymphoma ("NHL") in patients refractory to chemotherapy, 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 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 upon which occurrence Coulter Corporation became known as Beckman Coulter ("Beckman Coulter"). To date, the Company has devoted substantially all of its resources to its 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 products resulting from the Company's research and development efforts, if any, are not expected to be available commercially for at least the next one to two years. The Company has a limited history of operations and has experienced significant operating losses to date. The Company expects to incur significant additional operating losses over the next several years and expects 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. The Company expects that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial. There can be no assurance that the Company will successfully develop, manufacture and commercialize its products or ever achieve or sustain product revenues or profitability. As of March 31, 1998, the Company's accumulated deficit during the development stage was approximately $54.9 million. RESULTS OF OPERATIONS Operating Costs and Expenses Research and development expenses were $9.0 million for the quarter ended March 31, 1998, compared to $3.0 million for the same period in 1997. This $6.0 million increase was due primarily to increases in staffing and expenditures associated with the development of Bexxar, including costs of clinical trials and manufacturing expenses. These manufacturing expenses included certain expenses associated with scaled-up production of monoclonal antibodies and the establishment of a centralized radiolabeling capability. The Company expects its research and development expenses to continue to grow during the remainder of 1998, reflecting anticipated increased costs related to additions to staffing, preclinical studies, clinical trials and manufacturing. Selling, general and administrative expenses were $2.2 million for the quarter ended March 31, 1998, compared to $1.2 million for the same period in 1997. This $1.0 million increase was incurred to support the Company's facilities and staffing expansion, increased research and development efforts, increased pre-commercialization activities, increased corporate development activities and related legal and patent activities. The Company expects its selling, general and administrative expenses to continue to increase during the remainder of 1998, in support of its increased research and development, patent and corporate development 8 9 activities, as well as increasing commercialization efforts in anticipation of potential product sales. Interest Income and Other, net Interest income was $912,000 for the quarter ended March 31, 1998, compared to $438,000 for the same period in 1997. This increase was due to higher average cash, cash equivalent and short-term investment balances as a result of the completion of the Company's initial public offering in January 1997 and follow-on offering in October 1997. LIQUIDITY AND CAPITAL RESOURCES Since its inception through March 31, 1998, the Company has financed its operations primarily through private placements and public offerings of equity securities totaling $109.3 million. In addition, the Company entered into a $3.8 million equipment lease financing and debt facility in December 1996, $0.3 million of which is available at March 31, 1998. Cash, cash equivalents and short-term investments totaled $67.4 million at March 31, 1998. The negative cash flow from operations results primarily from the Company's net operating losses and is expected to continue and to accelerate in the foreseeable future. The Company expects to incur substantial and increasing research and development expenses, including expenses related to additions to personnel, preclinical studies, clinical trials, manufacturing and commercialization efforts. The Company will need to raise substantial additional capital to fund its operations. The Company intends to seek such additional funding through public or private equity or debt financings 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, the Company may be required to delay, reduce the scope of, or eliminate one or more of its research and development programs or obtain funds through arrangements with collaborative partners or others that may require the Company to relinquish rights to certain of its technologies, product candidates or products that the Company would otherwise seek to develop or commercialize. Net cash used in operations was $7.6 million for the quarter ended March 31, 1998, compared to $6.4 million for the same period in 1997. This $1.2 million increase is primarily the result of the increased net loss for the quarter ended March 31, 1998, partially offset by an increase in accrued liabilities. Net cash used in investing activities decreased to $1.8 million for the quarter ended March 31, 1998 from $14.3 million for the same period in 1997 primarily resulting from the purchase of $32.4 million short-term investments, partially offset by an increase in maturities of short-term investments. The Company expects that its existing capital resources, including the net proceeds of its public offerings and interest thereon, will be adequate to satisfy the requirements of its current and planned operations into 1999. At March 31, 1998, the Company had entered into a long-term lease obligation for office and laboratory space that will require material commitments for capital expenditures. The Company's future capital requirements will depend on a number of factors, including: the scope and results of preclinical studies and clinical trials; continued progress of the Company's 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 manufacturing 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; and the availability of other financing. 9 10 IMPACT OF THE YEAR 2000 At this time, the Company believes that with upgrades of existing software and conversions to new software, both of which are readily available in the market, the Year 2000 issue will not pose significant operational problems for its internal computer systems. Modifications and conversions to the Company's internal computer systems are expected to be completed not later than September 30, 1999. Some risks associated with the Year 2000 issue are beyond the ability of the Company to control, for example, the extent to which the Company's suppliers and service providers, including providers of telephone services, address the Year 2000 issue. A failure by a third party to adequately address the Year 2000 issue would have a material adverse impact on such third party, and could result in a material adverse impact on the Company. The Company, however, has initiated formal communications with its significant suppliers and service providers to determine the extent to which the Company may be vulnerable to those third parties' failure to remediate their own Year 2000 issues. The Company does not expect the estimated cost of implementing its Year 2000 plan to be significant. 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 (TM) or the Company's other product candidates and other risks, including those detailed in the Company's other filings with the Securities and Exchange Commission. In particular, see "Item 1, Business-Risk Factors," of the Company's Annual Report on Form 10-K for the year ended December 31, 1997. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits
Exhibit Number Description of Document -------------- ----------------------- 27.0 Financial Data Schedule
(b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended March 31, 1998. 10 11 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: May 12, 1998 /s/ MICHAEL F. BIGHAM ------------------------------------- Michael F. Bigham President and Chief Executive Officer Date: May 12, 1998 /s/ WILLIAM G. HARRIS ------------------------------------- William G. Harris Vice President and Chief Financial Officer 11 12
Exhibit Number Description of Document ------ ----------------------- 27.0 Financial Data Schedule
12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 11,031 56,340 0 0 0 67,862 2,978 405 71,105 13,202 0 0 0 14 55,783 71,105 0 0 0 0 11,177 0 85 (10,265) 0 0 0 0 0 (10,265) (0.77) 0
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