10-Q 1 e10-q.txt FORM 10-Q QUARTER ENDED JUNE 30, 2000 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 JUNE 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) 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 July 31, 2000: 17,112,537. ================================================================================ 2 COULTER PHARMACEUTICAL, INC. INDEX PART I. FINANCIAL INFORMATION
PAGE NO. Item 1. Consolidated Financial Statements and Notes............................ 3 Consolidated Balance Sheets -- June 30, 2000 and December 31, 1999..... 3 Consolidated Statements of Operations -- for the three months and six months ended June 30, 2000 and 1999 and for the period from inception (February 16, 1995) to June 30, 2000................................... 4 Consolidated Statements of Cash Flows - for the six months ended June 30, 2000 and 1999 and for the period from inception (February 16, 1995) to June 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 4. Submission of Matters to a Vote of Security Holders..................13 Item 5. Other Information.....................................................13 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
JUNE 30, DECEMBER 31, 2000 1999 ----------- ----------- (UNAUDITED) (NOTE 1) Current assets: Cash and cash equivalents ...................................... $ 36,589 $ 22,168 Short-term investments ......................................... 25,196 60,257 Prepaid expenses and other current assets....................... 13,229 5,279 -------- -------- Total current assets ................................... 75,014 87,704 Property and equipment, net ...................................... 20,037 21,029 Employee loans receivable ........................................ 1,283 1,274 Other assets ..................................................... 245 198 -------- -------- $ 96,579 $110,205 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ................................................ $ 13,670 $ 6,504 Accrued liabilities ............................................. 6,405 5,208 Current portion of equipment financing obligations and debt facility ...................................................... 2,154 2,258 --------- --------- Total current liabilities ............................... 22,229 13,970 Non-current portion of equipment financing obligations and debt facility ...................................................... 8,482 9,428 Commitments Stockholders' equity: Preferred stock, issuable in series, $.001 par value: 3,000,000 shares authorized; none outstanding at June 30, 2000 and December 31, 1999........................................... -- -- Common stock, $.001 par value: 30,000,000 shares authorized; 17,095,058 shares and 16,896,438 shares issued and outstanding at June 30, 2000 and December 31, 1999, respectively.................................................... 17 17 Additional paid-in capital ...................................... 187,564 184,524 Accumulated other comprehensive income (loss) ................... (186) (215) Deferred compensation ........................................... (652) (296) Deficit accumulated during the development stage ................ (120,875) (97,223) --------- --------- Total stockholders' equity .............................. 65,868 86,807 --------- --------- $ 96,579 $ 110,205 ========= =========
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 SIX MONTHS ENDED FOR THE PERIOD JUNE 30 JUNE 30 FROM INCEPTION ---------------------- -------------------- (FEBRUARY 16, 1995) 2000 1999 2000 1999 TO JUNE 30, 2000 --------- --------- --------- --------- ----------------- Revenues: Corporate partner revenues ........... $ 2,000 $ -- $ 2,000 $ -- 36,250 Revenues from unconsolidated joint business ............................. 1,610 1,356 5,765 848 12,964 --------- --------- --------- --------- --------- Total revenues .................... 3,610 1,356 7,765 848 49,214 Operating expenses: Research and development ............. $ 13,270 $ 11,928 $ 25,023 $ 20,992 $ 137,940 Selling, general and administrative .. 3,781 4,098 7,906 7,362 45,811 --------- --------- --------- --------- --------- Total operating expenses ............. 17,051 16,026 32,929 28,354 183,751 Interest income and other, net ....... 726 1,274 1,512 2,705 13,662 --------- --------- --------- --------- --------- Net loss ............................. $ (12,715) $ (13,396) $ (23,652) $(24,801) $(120,875) ========= ========= ========= ========= ========= Basic and diluted net loss per share ............................... (0.75) (0.80) (1.39) (1.49) ========= ========= ========= ========= Shares used in computing basic and diluted net loss per share ......... 17,042 16,652 16,991 16,621 ========= ========= ========= =========
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)
SIX MONTHS FOR THE PERIOD ENDED JUNE 30, FROM INCEPTION ----------------------- (FEB. 16, 1995) 2000 1999 TO JUNE 30, 2000 ---------- ---------- ---------------- Cash flows from operating activities: Net loss ............................................................... $ (23,652) $ (24,801) $(120,875) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization ....................................... 1,897 963 5,420 Amortization of deferred compensation ............................... 150 219 2,617 Loss on sale of equipment ........................................... 23 38 63 Changes in operating assets and liabilities: Prepaid expenses and other current assets ........................... (7,950) (3,010) (13,229) Employee loans receivable ........................................... (9) (142) (1,283) Other assets ........................................................ (47) (269) (245) Accounts payable .................................................... 7,166 347 13,670 Accrued liabilities ................................................. 1,197 (1,255) 6,405 --------- --------- --------- Net cash used in operating activities .......................... (21,225) (27,910) (107,457) --------- --------- --------- Cash flows from investing activities: Purchases of short-term investments .................................... (2,477) (101,573) (273,836) Maturities of short-term investments ................................... 37,567 53,250 231,733 Sales of short-term investments ........................................ -- 7,911 16,717 Purchases of property and equipment .................................... (1,082) (6,870) (25,676) Proceeds from sale of equipment ........................................ 154 5 159 --------- --------- --------- Net cash provided by (used in) investing activities ............ 34,162 (47,277) (50,903) --------- --------- --------- Cash flows from financing activities: Payments of equipment financing obligations and debt facility .......... (1,050) (379) (3,483) Borrowings under equipment financing obligations and debt facility...... -- -- 14,120 Proceeds from issuance of convertible preferred stock, net.............. -- -- 28,355 Proceeds from issuance of common stock, net ............................ 2,534 1,040 155,957 --------- --------- --------- Net cash provided by financing activities ...................... 1,484 661 194,949 --------- --------- --------- Net increase (decrease) in cash and cash equivalents ..................... 14,421 (74,526) 36,589 Cash and cash equivalents at beginning of period ......................... 22,168 89,808 -- --------- --------- --------- Cash and cash equivalents at end of period ............................... $ 36,589 $ 15,282 $ 36,589 ========= ========= ========= Supplemental schedule of cash flow information: Interest paid ............................................................ $ 555 $ 353 $ 2,044 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 ........ $ 506 $ -- $ 3,268
See accompanying notes. 5 6 COULTER PHARMACEUTICAL, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The information at June 30, 2000, for the three and six month periods ended June 30, 2000 and 1999 and for the period from inception (February 16, 1995) to June 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 June 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 June 30, 2000 are as follows (in thousands):
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED COST GAINS LOSSES FAIR VALUE --------- ---------- ---------- ---------- Money market funds....................... $ 3,072 $ -- $ -- $ 3,072 Commercial paper......................... 36,474 -- (4) 36,470 Government bonds......................... 19,895 -- (182) 19,713 Certificate of deposits.................. 2,512 -- -- 2,512 -------- -------- -------- -------- Total.......................... 61,953 -- (186) 61,767 Less amounts classified as cash equivalents ........................... (36,574) -- 3 (36,571) -------- -------- -------- -------- Total short-term investments............. $ 25,379 $ -- $ (183) $ 25,196 ======== ======== ======== ========
Realized gains or losses on the sale of available-for-sale securities for the quarters ended June 30, 2000 and 1999 were insignificant. At June 30, 2000 the contractual maturities of short term investments were as follows (in thousands):
ESTIMATED FAIR AMORTIZED COST VALUE -------------- -------------- Due in one year or less..... $ 4,981 $ 4,980 Due after one year.......... 20,398 20,216 ------- -------- $25,379 $ 25,196 ======= ========
6 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 is available at June 30, 2000. 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 June 30, 2000, $2 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):
FOR THE PERIOD FROM THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, INCEPTION --------------------------- ------------------------- (FEBRUARY 16, 1995) 2000 1999 2000 1999 TO JUNE 30, 2000 ----------- ---------- --------- --------- ----------------- Co-promotion operating loss.................. $ (231) $ (269) $ (683) $ (827) $ (4,027) Reimbursement of development expenses........ 1,841 1,625 6,448 1,675 16,991 ----------- ---------- --------- --------- ---------- Revenue from unconsolidated joint business... $ 1,610 $ 1,356 $ 5,765 $ 848 $ 12,964
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 $6.9 million and $4.5 million at June 30, 2000 and December 31, 1999, respectively. Amounts payable to SB were $1.9 million and $1.5 million at June 30, 2000 and December 31, 1999, respectively. 4. COMPREHENSIVE INCOME As of January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income". For the six months ended June 30, 2000 and 1999 total comprehensive loss amounted to $23.8 million and $25.0 million, respectively. For the three months ended June 30, 2000 and 1999 total comprehensive loss amounted to $12.7 million and $13.5 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 7 8 Activities --- Deferral of the Effective Date of FASB Statement No. 133. SFAS No. 133 is now effective for fiscal years beginning after June 15, 2000 and, therefore, the Company will adopt this accounting standard effective January 1, 2001. Management has not yet determined the impact of SFAS No. 133 on its financial position or results of operations. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." Among other things, SAB No. 101 requires that license and other upfront fees from research collaborators be recognized over the term of the agreement unless the fee is in exchange for products delivered or services performed that represent the culmination of a separate earnings process. The Company is currently reviewing the impact of SAB No. 101 on its previously reported results of operations and anticipates that it will adopt SAB No. 101 during the fourth quarter of fiscal 2000. 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, 1999, filed on March 27, 2000. 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 a family of potential therapeutics based upon two drug discovery programs: therapeutic antibodies and targeted oncologies. Within these broad drug discovery programs, the Company is 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. The Company also is developing a portfolio of proprietary ultra potent compounds which it believes will be suitable payloads for both its 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. The Company's most advanced product candidate, Bexxar(TM) (tositumomab, iodine I 131 tositumomab) 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 who have relapsed after, or are refractory to, chemotherapy. The Company intends 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 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, the Company 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, the Company and SB announced that the Company will reacquire rights outside the U.S. for the development and commercialization of Bexxar effective June 30, 2000. 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 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. 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 June 30, 2000, the Company's accumulated deficit was approximately $120.9 million. RESULTS OF OPERATIONS Revenues Corporate partner revenues were $2.0 million for the three- and six- month periods ended June 30, 2000 compared to none for the same periods in 1999. The increase in both periods was due to the recognition of a $2.0 million clinical milestone from SB related to expanded development of Bexxar. Revenues from unconsolidated joint business represents the Company's share of the pre-tax Bexxar operating losses generated from its joint business arrangement with SB to co-promote Bexxar and the reimbursement from SB of its share of the Company's Bexxar-related manufacturing development expenses. Revenues from unconsolidated joint business in the three months ended June 30, 2000 was $1.6 million compared to $1.4 million for the same period in 1999. For the six months ended June 30, 2000, revenues from unconsolidated joint business were $5.8 million compared to $800,000 for the same period in 1999. Such revenues were partially offset by co-promote pre-tax operating losses. The SB reimbursement in the six months ended June 30, 2000 includes a final payment of approximately $3.0 million related to 1999 manufacturing development activities. Revenue in future 9 10 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 $13.3 million for the three-month period ended June 30, 2000 compared to $11.9 million for the same period in 1999. For the six months ended June 30, 2000, research and development expenses were $25.0 million compared to $21.0 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 as well as manufacturing activities in anticipation of potential product launch. The Company expects its 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 $3.8 million for the quarter ended June 30, 2000, compared to $4.1 million for the same period in 1999. For the six months ended June 30, 2000, selling, general and administrative expenses were $7.9 million compared to $7.4 million for the same period in 1999. The decrease for the three-month period primarily represents reimbursement from SB of the Company's sales effort to co-promote SB's oncology products. The increase for the six-month period is primarily due to expenses 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 2000 in continued support of these activities. Interest Income and Other, Net Interest income and other, net was $726,000 for the quarter ended June 30, 2000, compared to $1.3 million for the same period in 1999. For the six months ended June 30, 2000, interest income and other, net was $1.5 million compared to $2.7 million for the same period in 1999. This decrease was 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 its inception through June 30, 2000, the Company has financed its operations primarily through private placements and public offerings of equity securities totaling $179.8 million. Cash, cash equivalents and short-term investments totaled $61.8 million at June 30, 2000. The agreement between the Company and 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 is available at June 30, 2000. In 1999, the Company 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 June 30, 2000 is $561,400. 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 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, 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 $21.2 million for the six months ended June 30, 2000, compared to $27.9 million for the same period in 1999. This $6.7 million decrease was primarily the result of increases in accounts payable and accrued liabilities, partially offset by an increase in prepaid and other current assets. Included in prepaid expenses and other current assets is approximately $5.6 million of monoclonal antibody purchased from one of the Company's third-party manufacturers in the second quarter. The antibody will be used in the Company's 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 $34.2 million for the six months ended June 30, 2000 compared to $47.3 million net cash used in investing activities for the same period in 1999. The cash provided in the 2000 period 10 11 primarily resulted from maturities of short-term investments. Net cash provided by financing activities increased to $1.5 million for the six months ended June 30, 2000 compared to $661,000 for the same period in 1999. The increase is primarily due to the proceeds from the issuance of $2.5 million of common stock, partially offset by payments in equipment financing obligations. 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 2001. 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. 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, 1999, filed on March 27, 2000. 11 12 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 June 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 -- 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 June 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. 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 June 30, 2000.
2000 2001 2002 2003 2004 THEREAFTER TOTAL 1999 -------- -------- -------- -------- -------- ---------- -------- -------- (dollars in thousands) Cash Equivalent Investments: Fixed Rate ........................... $36,571 -- -- -- -- -- $36,571 $22,135 Average Interest Rate ................ 6.6% -- -- -- -- -- -- -- Short Term Investments: Fixed Rate ........................... 4,980 20,216 -- -- -- -- 25,196 60,257 Average Interest Rate ................ 6.3% 5.8% -- -- -- -- -- -- Long-term debt, including current portion: Variable Rate ........................ 1,284 1,691 1,380 6,281 -- -- 10,636 11,686 Average Interest Rate ................ 10.7% 8.9% 9.5% 9.4% -- -- -- --
12 13 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Annual Meeting of Stockholders of the Company held on June 13, 2000, the stockholders elected eight directors, approved the Company's 1996 Equity Incentive Plan, as amended, to increase the aggregate number of shares of Common Stock authorized for issuance under such plan by 850,000 shares (the "Plan Amendment") and ratified the selection of Ernst & Young LLP as independent auditors of the Company for its fiscal year ending December 31, 2000 (the "Selection of Auditors"). Of the 17,041,757 shares of Common Stock of the Company outstanding as of April 17, 2000, the record date for the Annual Meeting (the "Outstanding Shares"), the votes regarding the election of directors were as follows:
VOTES FOR VOTES WITHHELD ---------- -------------- Brian G. Atwood 11,708,952 78,677 Michael F. Bigham 11,746,174 41,455 Joseph R. Coulter III 11,758,849 28,780 Donald L. Lucas 11,753,049 34,580 Robert Momsen 11,754,249 33,380 Arnold L. Oronsky 11,704,977 82,652 Samuel R. Saks, M.D. 11,756,849 30,780 George J. Sella, Jr. 11,759,299 28,330
Of the Outstanding Shares, 10,254,678 shares were voted for the approval of the Plan Amendment; 1,513,509 shares were voted against with respect to the approval of the Plan Amendment; 17,566 shares abstained and 5,256,004 shares were broker non-votes. Of the Outstanding Shares, 11,763,313 shares were voted for the ratification of the Selection of Auditors; 8,856 shares were voted against with respect to the ratification of the Selection of Auditors; 15,460 shares abstained and 5,254,128 shares were broker non-votes. ITEM 5. OTHER INFORMATION Pursuant to the Company's bylaws, stockholders who wish to bring matters or propose nominees for director at the Company's 2000 annual meeting of stockholders must provide specified information to the Company's not less than one hundred twenty (120) calendar days in advance of the anniversary date of the Company's 1999 proxy statement (unless such matters are included in the Company's proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended). 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 June 30, 2000. 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: August 11, 2000 /s/ MICHAEL F. BIGHAM ---------------------------------------------- Michael F. Bigham President and Chief Executive Officer Date: August 11, 2000 /s/ WILLIAM G. HARRIS ---------------------------------------------- William G. Harris Sr. Vice President and Chief Financial Officer 14 15 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- 27.1 Financial Data Schedule