-----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, MmVhGMDkC+alVBNYFdW90BQC6Huf+FjrXWn+6mp5R9s7NzrZz0gBgVTQC6qCSS9R wPKjbEtEIuq6G9RbO3ylAw== 0000891618-99-005159.txt : 19991115 0000891618-99-005159.hdr.sgml : 19991115 ACCESSION NUMBER: 0000891618-99-005159 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: 99750985 BUSINESS ADDRESS: STREET 1: 600 GATEWAY BOULEVARD CITY: SOUTH SAN FRANCISCO STATE: CA ZIP: 94080 BUSINESS PHONE: 650-553-2000 MAIL ADDRESS: STREET 1: 600 GATEWAY BOULEVARD CITY: SOUTH SAN FRANCISCO STATE: CA ZIP: 94080 10-Q 1 FORM 10-Q 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________ . COMMISSION FILE 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.) 600 GATEWAY BOULEVARD SOUTH SAN FRANCISCO, CALIFORNIA 94080 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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 31, 1999: 16,853,667. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 COULTER PHARMACEUTICAL, INC. INDEX
PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements and Notes................. 3 Consolidated Balance Sheets -- September 30, 1999 and December 31, 1998........................................... 3 Consolidated Statements of Operations -- for the three months and nine months ended September 30, 1999 and 1998 and for the period from inception (February 16, 1995) to September 30, 1999.......................................... 4 Consolidated Statements of Cash Flows -- for the nine months ended September 30, 1999 and 1998 and for the period from inception (February 16, 1995) to September 30, 1999......... 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
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
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ (UNAUDITED) (NOTE 1) Current assets: Cash and cash equivalents................................... $ 27,150 $ 89,808 Short-term investments.................................... 65,884 49,970 Prepaid expenses and other current assets................. 7,850 3,063 -------- -------- Total current assets.............................. 100,884 142,841 Property and equipment, net................................. 19,084 9,449 Employee loans receivable................................... 1,156 907 Other assets................................................ 210 233 -------- -------- $121,334 $153,430 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 3,041 $ 4,068 Accrued liabilities....................................... 5,605 6,353 Current portion of equipment financing obligations and debt facility.......................................... 2,363 1,157 -------- -------- Total current liabilities......................... 11,009 11,578 Non-current portion of equipment financing obligations and debt facility............................................. 9,714 6,659 Commitments Stockholders' equity: Preferred stock, issuable in series, $.001 par value: 20,000,000 shares authorized; none outstanding at September 30, 1999 and December 31, 1998.............. -- -- Common stock, $.001 par value: 30,000,000 shares authorized; 16,853,667 shares and 16,704,103 shares issued and outstanding at September 30, 1999 and December 31, 1998, respectively....................... 17 17 Additional paid-in capital............................. 183,758 182,390 Accumulated other comprehensive loss................... (151) (32) Deferred compensation.................................. (258) (565) Deficit accumulated during the development stage....... (82,755) (46,617) -------- -------- Total stockholders' equity........................ 100,611 135,193 -------- -------- $121,334 $153,430 ======== ========
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 NINE MONTHS ENDED FOR THE PERIOD SEPTEMBER 30, SEPTEMBER 30, FROM INCEPTION ------------------- -------------------- (FEBRUARY 16, 1995) 1999 1998 1999 1998 TO SEPTEMBER 30, 1999 -------- ------- -------- -------- --------------------- Corporate partner revenues..... $ -- $ -- $ -- $ -- $ 34,250 Operating expenses: Research and development..... 7,301 7,347 26,617 22,581 92,580 Selling, general and administrative............ 4,096 2,643 11,474 7,721 33,832 -------- ------- -------- -------- -------- Total operating expenses..... 11,397 9,990 38,091 30,302 126,412 Interest income and other, net.......................... 60 1,168 1,953 2,867 9,407 -------- ------- -------- -------- -------- Net loss....................... $(11,337) $(8,822) $(36,138) $(27,435) $(82,755) ======== ======= ======== ======== ======== Basic and diluted net loss per share................. $ (0.68) $ (0.58) $ (2.17) $ (1.96) ======== ======= ======== ======== Shares used in computing basic and diluted net loss per share........................ 16,749 15,123 16,663 13,982 ======== ======= ======== ========
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 NINE MONTHS ENDED FROM INCEPTION SEPTEMBER 30, (FEBRUARY 16, --------------------- 1995) TO 1999 1998 SEPTEMBER 30, 1999 --------- -------- ------------------ Cash flows from operating activities: Net loss............................................ $ (36,138) $(27,435) $ (82,755) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization.................. 1,610 454 2,633 Amortization of deferred compensation.......... 314 390 2,405 Loss on sale of equipment...................... 38 -- 38 Changes in operating assets and liabilities: Prepaid expenses and other current assets...... (4,787) (195) (7,850) Employee loans receivable...................... (249) (71) (1,156) Other assets................................... 23 (122) (210) Accounts payable............................... (1,027) 1,895 3,041 Accrued liabilities............................ (748) (1) 5,605 --------- -------- --------- Net cash used in operating activities..... (40,964) (25,085) (78,249) --------- -------- --------- Cash flows from investing activities: Purchases of short-term investments............... (109,958) (68,231) (264,698) Maturities of short-term investments.............. 84,551 59,180 181,942 Sales of short-term investments................... 9,374 5,073 16,717 Purchases of property and equipment............... (11,288) (4,828) (21,757) Proceeds from sale of equipment................... 5 -- 5 --------- -------- --------- Net cash used in investing activities..... (27,316) (8,806) (87,791) --------- -------- --------- Cash flows from financing activities: Payments of equipment financing obligations and debt facility.................................. (739) (564) (2,042) Borrowings under equipment financing obligations and debt facility.............................. 5,000 420 14,120 Proceeds from issuance of convertible preferred stock, net..................................... -- -- 28,355 Proceeds from issuance of common stock, net....... 1,361 62,916 152,757 --------- -------- --------- Net cash provided by financing activities.............................. 5,622 62,772 193,190 --------- -------- --------- Net increase (decrease) in cash and cash equivalents....................................... (62,658) 28,881 27,150 Cash and cash equivalents at beginning of period.... 89,808 20,451 -- --------- -------- --------- Cash and cash equivalents at end of period.......... $ 27,150 $ 49,332 $ 27,150 ========= ======== ========= Supplemental Schedule of Cash Flow Information: Interest Paid..................................... $ 538 $ 242 $ 1,206 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.................................. $ 7 $ 156 $ 2,663
See accompanying notes. 5 6 COULTER PHARMACEUTICAL, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999 (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The information at September 30, 1999, for the three- and nine-month periods ended September 30, 1999 and 1998 and for the period from inception (February 16, 1995) to September 30, 1999 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, 1999 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, 1998 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 1999 Annual Meeting of Stockholders. The consolidated balance sheet at December 31, 1998 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), net 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 December 31, 1998 and September 30, 1999 are as follows (in thousands):
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED COST GAINS LOSSES FAIR VALUE --------- ---------- ---------- ---------- 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 Certificate 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 ========= === ==== =========
6 7 COULTER PHARMACEUTICAL, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1999 (UNAUDITED)
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED COST GAINS LOSSES FAIR VALUE --------- ---------- ---------- ---------- September 30, 1999 Money market funds............................ $ 7,464 $-- $ -- $ 7,464 Commercial paper.............................. 24,387 -- (4) 24,383 Corporate bonds............................... 23,578 -- (123) 23,455 Government bonds.............................. 17,918 -- (26) 17,892 Certificate of deposits....................... 19,591 -- -- 19,591 -------- --- ----- -------- Total............................... 92,938 -- (153) 92,785 Less amounts classified as cash equivalents... (26,903) -- 2 (26,901) -------- --- ----- -------- Total short-term investments.................. $ 66,035 $-- $(151) $ 65,884 ======== === ===== ========
Realized gains or losses on the sale of available-for-sale securities were not material for the three- and nine-month periods ended September 30, 1999 and 1998 and for the period from inception (February 16, 1995) to September 30, 1999. At September 30, 1999 the contractual maturities of short term investments were as follows (in thousands):
ESTIMATED FAIR AMORTIZED COST VALUE -------------- -------------- Due in one year or less.................................. $18,462 $18,411 Due after one year....................................... 47,573 47,473 ------- ------- $66,035 $65,884 ======= =======
3. NET LOSS PER SHARE 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 of repurchase. Basic earnings per share excludes any dilutive effects of options. Diluted net loss per share has not been presented separately for any period as, given the Company's net loss position, the result would be anti-dilutive. Options to purchase approximately 3,444,000 shares of common stock at a weighted average price of $18.08 per share have been excluded from the calculation of net loss per share because the effect of inclusion would be anti-dilutive. 4. 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. Under the terms of the agreement, Coulter may receive milestone payments, shared profits, if any, and royalties. The agreement also provides for the sharing of certain costs related to clinical development, manufacturing development, and sales and marketing costs. For the three- and nine-month periods ended September 30, 1999, the Company has recorded approximately $5.1 million and $6.8 million, respectively of shared manufacture development costs from SB as reductions to 7 8 COULTER PHARMACEUTICAL, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1999 (UNAUDITED) research and development expense. The Company and SB will prepare a joint profit and loss statement to account for the sharing of sales, cost of goods sold, and costs related to selling, marketing, distribution and certain other Bexxar-related activities. At September 30, 1999, the Company has a net receivable from SB of approximately $7.1 million classified as other current assets. In November 1999, the Company received payment from SB of approximately $4.3 million. The agreement provided for an upfront, non-refundable license fee of $34.25 million and the purchase of $7.25 million of the Company's common stock. The license fee was recognized as corporate partner revenues in fiscal year 1998. In addition, the agreement provides for a $15.0 million credit line. The Company may receive additional payments based upon completion of certain milestones. Future development expenses for Bexxar will generally be shared by both companies, with the Company retaining responsibility for funding certain predetermined development costs. In addition, the companies will jointly explore the potential of other indications for the product. If approved, the Company and SB will jointly market Bexxar in the United States and share profits and losses equally. Outside the United States, excluding Japan, the Company has granted SB exclusive marketing and distribution rights in return for product royalties. SB also may have access to second generation anti-CD20 compounds. 5. COMPREHENSIVE INCOME As of January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income". For the nine months ended September 30, 1999 and 1998 total comprehensive loss amounted to $36.3 million and $27.4 million, respectively. For the three months ended September 30, 1999 and 1998 total comprehensive loss amounted to $11.3 million and $8.8 million, respectively. 8 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 the Annual Report on Form 10-K for the year ended December 31, 1998, filed on March 29, 1999. OVERVIEW Coulter Pharmaceutical is engaged in the development of novel drugs and therapies for the treatment of cancer and autoimmune diseases. The Company currently is developing therapeutics based upon two drug discovery programs: therapeutic antibodies and targeted oncologics. Within these broad drug discovery programs, the Company currently is concentrating on two distinct platform technologies: therapeutic antibodies including conjugated antibody technology and targeted oncologics based on tumor activated peptide pro-drug technology. The Company's most advanced product candidate, Bexxar(TM)(tositumomab, iodine I 131 tositumomab) consists of a monoclonal antibody conjugated with a radioisotope. In December 1998, the Company announced a joint collaboration agreement with SmithKline Beecham ("SB") granting SB joint marketing rights in the United States and exclusive commercial rights internationally, except Japan, in return for a non-refundable license fee of $34.3 million, potential product royalties, development milestone payments and other shared development payments. Results of the joint marketing of Bexxar are accounted for on a joint profit and loss statement. In June 1999, the Company announced that it had submitted a Biologics License Application ("BLA") to the United States Food and Drug Administration ("FDA") to seek initial approval of Bexxar for the treatment of low-grade and transformed low-grade non-Hodgkin's lymphoma in patients who have relapsed after, or are refractory to, chemotherapy. The Company announced in July 1999 that Bexxar has been assigned priority review status by the FDA. Priority review status indicates that the license application for Bexxar will be reviewed and action taken by the agency within six months from the BLA filing date provided that the BLA is subsequently accepted. In August 1999, the Company announced that the FDA had requested modifications to the BLA. The Company is currently working with the FDA to address its requests prior to re-submitting the BLA. While seeking expedited review and marketing approval for Bexxar, the Company and SB intend to simultaneously pursue clinical trials to expand the potential use of Bexxar to other indications. To date, the Company has devoted substantially all of its 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 the Company's research and development efforts, if any, will not occur until commercial availability of such product. The Company has a limited history of operations and has experienced significant operating losses to date. The Company may continue to incur significant additional operating losses in future periods and expects cumulative losses to increase substantially if anticipated product sales do not offset the projected costs associated with 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 September 30, 1999, the Company's accumulated deficit was approximately $82.8 million. RESULTS OF OPERATIONS Operating Costs and Expenses Research and development expenses, net of Bexxar shared manufacture development cost from SB, were $7.3 million for the three-month period ended September 30, 1999 and $26.6 million for the nine-month period ended September 30, 1999. Research and development expenses were $7.3 million and $22.6 million for the same periods in 1998. The Company's research and development expenses increased for the three- and 9 10 nine-month periods ended September 30, 1999 primarily due to higher personnel and facilities costs. These increases were totally offset for the three month period and partially offset for the nine month period ended September 30, 1999 by obligations of SB for reimbursement to the Company of approximately $5.1 million and $6.8 million, respectively of certain costs related to manufacture development of Bexxar. The Company expects its research and development expenses to grow during the remainder of 1999, reflecting anticipated increased costs related to additions to staffing, preclinical studies, clinical trials and manufacturing. Selling, general and administrative expenses were $4.1 million for the quarter ended September 30, 1999, compared to $2.6 million for the same period in 1998. For the nine months ended September 30, 1999, selling, general and administrative expenses were $11.5 million compared to $7.7 million for the same period in 1998. The increases in both 1999 periods were incurred to support the Company's facilities and staffing expansion, sales and marketing 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 1999 in continued support of these activities. Interest Income and Other, Net Interest income and other, net was $60,000 for the quarter ended September 30, 1999, compared to $1.2 million for the same period in 1998. For the nine months ended September 30, 1999, interest income and other, net was $2.0 million compared to $2.9 million for the same period in 1998. The decreases in both 1999 periods were due to the recognition of approximately $1.8 million of other expenses representing the Company's share of the joint loss related to the marketing of Bexxar with SB, partially offset by the higher average cash, cash equivalents and short-term investment balances. Interest expense is not material for any period presented. LIQUIDITY AND CAPITAL RESOURCES Since its inception through September 30, 1999, the Company has financed its operations primarily through private placements and public offerings of equity securities totaling $180.8 million. Cash, cash equivalents and short-term investments totaled $93.0 million at September 30, 1999. The negative cash flow from operations results primarily from the Company's net operating losses and is expected to continue and to accelerate in future periods. The Company expects to incur substantial and increasing research and development expenses, including expenses related to additions to personnel, preclinical studies, clinical trials, and manufacturing. In addition, the Company expects to incur increasing selling, general and administrative expenses in support of its commercialization efforts. The Company may need to raise substantial additional capital to fund its operations. The Company may 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 $41.0 million for the nine months ended September 30, 1999, compared to $25.1 million for the same period in 1998. This $15.9 million increase is primarily the result of the increased net loss for the 1999 period and an increase in other current assets which relates to receivables from activities under the SB collaboration agreement partially offset by a decrease in accounts payable. Net cash used in investing activities was $27.3 million for the nine months ended September 30, 1999 compared to $8.8 million for the same period in 1998. This use of cash in the 1999 period primarily resulted from an increased purchases of short-term investments, partially offset by an increase in maturities. Property and equipment purchases of $11.3 million for the nine months ended September 30, 1999 were in support of the Company's facilities expansion and staffing growth. Net cash provided by financing activities decreased to $5.6 million for the nine months ended September 30, 1999 from $62.8 million for the same period in 1998 primarily resulting 10 11 from lower proceeds from issuance of common stock. In the 1998 period, the Company received approximately $62.1 million through the issuance of 2,645,000 shares of common stock to the public. 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 through the first quarter of 2001. The Company has 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 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. YEAR 2000 READINESS The Company uses and relies on a wide variety of information technologies, computer systems and scientific equipment containing computer related components. Some of the Company's older computer software programs and equipment use two digit fields rather than four digit fields to define the applicable year (i.e., "98" in the computer code refers to the year "1998"). As a result, time-sensitive functions of those software programs and equipment may misinterpret dates after January 1, 2000, to refer to the twentieth century rather than the twenty-first century (i.e., "02" could be interpreted as "1902" rather than "2002"). This could cause system or equipment shutdowns, failures or miscalculations resulting in inaccuracies in computer output or disruptions of operations, including, among other things, inaccurate processing of financial information and/or temporary inability to process transactions or engage in other normal business activities. The Company has developed a strategy to address the potential exposures related to the impact on its computer systems for the Year 2000 and beyond. An inventory of key financial, informational and operational systems has been completed. Detailed plans for testing key computer systems and equipment to ensure they are Year 2000 compliant have been developed by a cross functional team and will address problems identified, as required, by December 31, 1999. The Company believes that with these plans and completed tests, the Year 2000 issue will not pose significant operational problems for its computer systems and equipment. However, if modifications and conversions are not made, or are not completed in a timely fashion, the Year 2000 issue could have a material impact on the operations of the Company, the precise degree of which cannot be known at this time. The Company has completed external verification of its key computer systems and has not identified any need for specific contingency plans to deal with major Year 2000 failures. The Company does not expect the resources required to be devoted to Year 2000 compliance to cause significant delay in other projects. In addition to risks associated with the Company's own computer systems and equipment, the Company has relationships with, and is to varying degrees dependent upon, a large number of third parties that provide information, goods and services to the Company. These include financial institutions, suppliers, vendors, research partners and governmental entities. The Company has obtained information from, and conducted interviews with, key suppliers to determine their Year 2000 readiness. If a significant number of these third parties experience failures in their computer systems or equipment due to Year 2000 non-compliance, it could affect the Company's ability to process transactions, develop, manufacture and distribute products, or engage in similar normal business activities. While some of these risks are outside the control of the Company, the Company has instituted programs, including internal records review and use of external questionnaires, to identify key third parties, assess their level of Year 2000 compliance, update contracts and address any non-compliance issues. The total cost of the Year 2000 systems assessments and conversions is funded through operating cash flows, and the Company is expensing these costs. The financial impact of making the required systems changes and ensuring that key third-parties are Year 2000 compliant is not known precisely at this time, but it is 11 12 currently expected to be less than $200,000. The cost incurred to date is less than $100,000. The actual financial impact could, however, exceed this estimate. These costs are not expected to be material to the Company's financial position, results of operations or cash flows. 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 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 "Risk Factors," referenced in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, filed on March 29, 1999. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business, the financial position of the Company 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. The Company regularly assesses these risks and has established policies and business practices to protect against the adverse effects of these and other potential exposures. As a result, the Company does not anticipate material losses in these areas. Interest Rates -- The Company's 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 the Company's cash equivalents and short-term investments. Based on the Company's overall interest rate exposure at September 30, 1999, 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 -- The Company has certain liabilities which are denominated in several European currencies. As a result, the Company's 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 the Company's suppliers are located. To mitigate this risk, the Company may enter into foreign currency forward contracts as is deemed necessary by management. Based on the Company's overall currency rate exposure at September 30, 1999, a near-term change in currency rates, based on historical currency rate movements, would not materially affect the value of foreign currency sensitive liabilities. The Company invests cash which is not currently being used for operational purposes in accordance with its 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 the Company's investment portfolio and long term debt obligations at September 30, 1999.
1999 2000 2001 2002 2003 THEREAFTER TOTAL ------- ------ ------ ----- ----- ---------- ------- (DOLLARS IN THOUSANDS) Cash Equivalent Investments: Fixed Rate.......................... $26,901 -- -- -- -- -- $26,901 Average Interest Rate............. 4.6% -- -- -- -- -- -- Short Term Investments: Fixed Rate........................ 14,232 37,106 14,546 -- -- -- 65,884 Average Interest Rate............. 4.9% 5.2% 5.8% -- -- -- -- Long-term debt, including current portion: Variable Rate..................... 238 1,429 1,429 1,429 5,475 -- 10,000 Average Interest Rate............. 9.0% 9.0% 9.0% 9.0% 9.0% -- --
12 13 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- 27.1 Financial Data Schedule
(b) Reports on Form 8-K There were no reports on Form 8-K during the quarter ended September 30, 1999. 13 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 12, 1999 /s/ MICHAEL F. BIGHAM -------------------------------------- Michael F. Bigham President and Chief Executive Officer Date: November 12, 1999 /s/ WILLIAM G. HARRIS -------------------------------------- William G. Harris Vice President and Chief Financial Officer 14 15 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------- ----------------------- 27.1 Financial Data Schedule
EX-27.1 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 27,150 65,884 0 0 0 100,884 21,661 2,577 121,334 11,009 9,714 0 0 17 100,594 121,334 0 0 0 0 38,091 0 538 (36,138) 0 (36,138) 0 0 0 (36,138) (2.17) (2.17)
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