COR THERAPEUTICS INC - Quarterly Report (SEC form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In addition to the historical information contained herein, this document includes forward-looking statements which involve risks and uncertainties. Actual results of the Company's activities may differ
significantly from the potential results discussed in such forward-looking statements. These forward-looking statements are based on current expectations, and the Company assumes no obligation to
update this information. Risk factors that might cause such differences include, but are not limited to, those factors identified below and in the sections titled "Business" and "Business-Additional Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
The Company's business is subject to significant risks including, but not limited to, the successful sales, distribution and manufacture of INTEGRILIN, the success of its research and development activities,
the length and expense of obtaining regulatory approval and the results of clinical trials. Other significant risks include uncertainty related to the availability of future funding, uncertainty related to third-party reimbursement for the Company's product and/or potential products, and uncertainty related to its collaborative relationships. In addition, the Company's product candidates may be
difficult to manufacture on a large scale, uneconomical to market or precluded from commercialization by proprietary rights of other parties. Additional expenses, delays and lost opportunities that may arise out of these and other risks could have a material adverse effect on the Company's business, financial condition and results of operations.
COR THERAPEUTICS, INC.
OVERVIEW
Since its inception, the Company has been dedicated to the discovery, development and commercialization of novel pharmaceutical products to establish new standards of care for the treatment and prevention of
severe cardiovascular diseases. The Company has incurred a cumulative net loss of $201,000,000 during the period from inception to March 31, 1999. The Company has funded its operations primarily through public equity financings and proceeds from collaboration research and development agreements.
INTEGRILIN is the first product that COR has taken from discovery to commercialization. INTEGRILIN was approved for marketing in the United States by the U.S. Food and Drug Administration in May 1998. INTEGRILIN is indicated for the treatment of patients with acute
coronary syndrome (encompassing unstable angina and non-Q-wave myocardial infarction) including patients who are to be managed medically and those undergoing percutaneous coronary intervention
("PCI.") INTEGRILIN is also indicated for the treatment of patients undergoing PCI.
COR and Schering are worldwide partners for INTEGRILIN. COR and Schering co-promote the drug in the United States and share any profits or losses. COR and Schering launched INTEGRILIN in June
1998 in the United States.
Total sales of INTEGRILIN, as reported to COR by Schering, were $11,300,000 for the three months ended March 31, 1999, as compared to $8,400,000 for the three months ended December 31, 1998, a 35% increase. Product sales as reported by Schering for either the three months ended March 31, 1999 or December 31, 1998 are not necessarily indicative of product sales for any future period.
Schering has the right to launch INTEGRILIN in the European Union as an exclusive licensee on a royalty-bearing basis for a period of time. In February 1999, Schering announced that the Committee for Proprietary Medicinal Products ("CPMP") of the European Agency for the Evaluation of Medicinal Products issued a positive opinion recommending approval of INTEGRILIN for the prevention of myocardial infarction in patients presenting with unstable angina and non-Q-wave myocardial infarction. The CPMP opinion serves as the basis for a European Commission approval, which is typically issued in
approximately four months. The Company believes that the Commission approval of the centralized Marketing Authorization application for INTEGRILIN would result in a single Marketing Authorization with unified labeling that would be valid in all 15 European Union member states. Schering submitted the centralized Marketing Application in February 1998. INTEGRILIN has received regulatory approval in a number of countries outside the European Union and the United States.
COR and Schering are conducting or have conducted Phase II clinical trials of INTEGRILIN with different thrombolytics in the setting of acute myocardial infarction. COR and Schering also sponsor additional clinical trials of INTEGRILIN in a variety of clinical settings.
In addition to its commercial activities, COR continues to pursue a wide array of research and development programs. The Company's next potential product is an oral glycoprotein IIb-IIIa ("GP IIb-IIIa") inhibitor to prevent platelet aggregation. Results to date of Phase I and initial Phase II studies for the Company's lead compound, cromafiban, show that it has high affinity and specificity for
GP IIb-IIIa. Inhibition of platelet aggregation by cromafiban has been shown to be dose- and concentration-dependent. Plasma concentrations have indicated a sufficiently long elimination half-life to allow for once-daily dosing with a low peak-to-trough ratio and low inter-patient variability. No food interactions have been observed. Bleeding was the most prevalent complication encountered during
cromafiban therapy in clinical trials conducted to date. COR is also conducting preclinical research and development in several other cardiovascular programs.
RESULTS OF OPERATIONS
Three months ended March 31, 1999 and 1998
Total contract revenues were $7,521,000 for the three months ended March 31, 1999 compared to $8,412,000 for the three months ended March 31, 1998. Copromotion revenue related to the sales of INTEGRILIN by Schering, which commenced in June 1998, was $5,668,000 for the three months ended March 31, 1999 and $0 for the three months ended March 31, 1998.
Milestones were $0 during the three months ended March 31, 1999 compared to $8,000,000 received from Schering in connection with the acceptance for review of the centralized Marketing Authorization
application seeking European marketing approval of INTEGRILIN during the three months ended March 31, 1998. Development and other contract revenue was $1,853,000 for the three months ended March 31, 1999 compared to $412,000 for the three months ended March 31, 1998. The Company expects contract revenues to continue to fluctuate in the future.
Cost of copromotion revenue was $3,917,000 for the three months ended March 31, 1999 and $0 for the three months ended March 31, 1998. Cost of copromotion revenue includes certain manufacturing-related and marketing expenses incurred in connection with the collaboration with Schering.
Research and development expenses were $9,984,000 for the three months ended March 31, 1999 compared to $9,999,000 for the three months ended March 31, 1998. The Company expects research and development expenses to increase over the next several years, although the timing of certain of these expenses may depend on the timing and phase of, and indications pursued in, additional clinical trials of INTEGRILIN and other product candidates in development.
Marketing, general and administrative expenses were $6,196,000 for the three months ended March 31, 1999 compared to $4,696,000 for the three months ended March 31, 1998. The increase was primarily due to the addition of marketing and sales personnel for the commercialization of INTEGRILIN, as well as increased staffing and administrative expenses associated with general corporate activities. The Company expects marketing, general and administrative costs to continue to increase significantly over the next several years.
Interest income was $857,000 for the three months ended March 31, 1999 compared to $1,147,000 for the three months ended March 31, 1998. Interest expense was $117,000 for the three months ended March 31, 1999 compared to $140,000 for the three months ended March 31, 1998. The decreases in both interest income and interest expense were primarily due to changes in cash, investment and debt obligation balances.
LIQUIDITY AND CAPITAL RESOURCES
The Company had available cash, cash equivalents and short-term investments of $60,291,000 at March 31, 1999. Cash in excess of immediate requirements is invested according to the Company's investment policy. The primary objective of the Company's investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. From inception, the Company has funded its operations primarily through public equity financings and proceeds from collaboration research and development agreements. Additional funding has come from private equity financings, grant revenues, interest income and property and equipment financings. At March 31, 1999, the Company had approximately $3,521,000 available under an equipment financing facility.
Net cash used for operating activities and additions to capital equipment increased to $15,057,000 for the three months ended March 31, 1999 from $5,002,000 for the three months ended March 31, 1998,
primarily due to expenses related to the copromotion of INTEGRILIN. The Company anticipates that its expenditures for operating activities and additions to capital equipment will increase in future periods.
The timing of these expenditures may vary from period to period depending on the timing and phase of, and indications pursued in, additional clinical trials of INTEGRILIN and clinical trials of product candidates in development.
The Company expects its cash requirements will increase in future periods due to costs related to continuation and expansion of research and development, including clinical trials and increased marketing, sales, general and administrative activities. The Company anticipates that its existing capital resources and interest earned thereon will enable it to maintain its operations at least through the end of 2000. However, the Company's capital requirements may change depending on numerous factors, including the progress of the Company's research and development programs, the scope and results of preclinical and clinical studies and the number and nature of the indications the Company pursues in clinical studies. The Company's capital requirements may also change due to the timing of regulatory
approvals, technological advances, determinations as to the commercial potential of the Company's future products and the status of competitive products. The Company's capital requirements may also change because of other unanticipated circumstances.
In addition, expenditures may depend on the establishment and maintenance of collaboration relationships with other companies, the availability of financing and other factors. The Company may need to raise substantial additional funds in the future. Such funds may not be available on favorable terms, if at all. If such funds are unavailable, the Company may need to delay or curtail its research and
development activities to a significant extent.
YEAR 2000 ISSUE
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 may 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 to the twenty-first century (i.e., "02" could be interpreted
as "1902" rather than "2002.") This condition is commonly referred to as the Year 2000 Issue. The Year 2000 Issue could have a material adverse effect on the Company's business, financial condition or
results of operations.
The Company has developed a strategy to address the potential exposures related to the Year 2000 Issue on its operations for the year 2000 and beyond. A review of key financial, informational and
operational systems has been completed. Plans for implementation and testing of any necessary modifications to these key computer systems and equipment to ensure that they are Year 2000 compliant have been developed or are in the final stages of development to address computer system and equipment problems as required by December 31, 1999. The Company believes that with these plans and completed
modifications, the Year 2000 Issue will not have a material adverse effect on its business, financial condition or results of operations. However, even if these modifications are made in a timely fashion,
they still may not prevent a material adverse effect on the Company's business, financial condition or results of operations. If such a material adverse effect were to occur, the magnitude of it cannot be
known at this time. The Company currently has no contingency plans to deal with major Year 2000 failures, although such plans will be developed over the coming quarters if they are deemed necessary.
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 corporate partners, suppliers, vendors, financial institutions and governmental entities. These other organizations may not adequately
address the Year 2000 Issue and their failure to address the Year 2000 Issue may have a material adverse effect on the Company's business, financial condition or results of operations. The Company has
instituted a review of key third parties to assess their readiness to address the Year 2000 Issue.
The total cost of systems assessments and modifications related to the Year 2000 Issue has been and is being funded through operating cash flows and has not been material to date. The Company has been and
is expensing these costs as incurred. The Company has identified resources to address the Year 2000 Issue. The aggregate financial impact to the Company of addressing the Year 2000 Issue cannot be
known precisely at this time, but it is currently expected to be less than $2,000,000. The actual financial impact may exceed this estimate. The financial impact is not expected to have a material adverse effect on the Company's business, financial condition or results of operations.
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