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PROSPECTUS SUMMARY Corgentech is a biopharmaceutical company focused on the discovery, development and commercialization of a new class of therapeutics called transcription factor decoys, or TF decoys. Our TF decoys are short strands of DNA that specifically bind to and block the activity of their target transcription factors. Transcription factors are specialized DNA-binding proteins that specifically bind to the regulatory regions of a target gene or, more often, a set of functionally related target genes and regulate the expression of those genes and their biological processes. Because abnormal gene expression is a fundamental cause of many diseases, blockade of the transcription factors that regulate gene expression offers an attractive therapeutic approach to treat many unmet medical needs. We are focused on TF decoys initially for the treatment of cardiovascular disease, inflammatory disease, such as arthritis, and cancer. We are creating a pipeline of novel therapeutics based on our proprietary TF decoy technology. Our lead product candidate, E2F Decoy, a combination drug and delivery device, is currently in two Phase 3 clinical trials for the prevention of vein graft failure. In September 2003, we completed patient enrollment for both of our Phase 3 clinical trials. We are also developing E2F Decoy for the prevention of arterio-venous, or AV, graft failure and intend to begin Phase 1/2 clinical trials for this indication in the first half of 2004. E2F Decoy has received Fast Track designation from the FDA for both the prevention of vein graft failure and AV graft failure. We have entered into a world-wide collaborative agreement with Bristol-Myers Squibb Company, or BMS, for the development and commercialization of E2F Decoy for all indications. We also have additional TF decoys in preclinical development for the treatment of inflammatory diseases and cancer. The Market Opportunity for Our Lead Product Candidate. Bypass graft surgery is one of the most common surgical procedures in the United States. This procedure involves using sections of a patient's vein to bypass clogged arteries that transport blood to the heart or leg by rerouting blood around the clogged artery. There are two types of bypass graft procedures, both of which are performed to improve the flow of blood and oxygen to the affected organ or limb. Coronary Artery Bypass Graft, or CABG, surgery involves rerouting the flow of blood to the heart, while Peripheral Artery Bypass Graft, or PBG, surgery involves rerouting the flow of blood to the legs. In 2000, approximately 375,000 and 120,000 patients underwent CABG and PBG surgery, respectively, in the United States. While CABG and PBG surgeries are very effective procedures, these grafts often fail due to abnormal cell growth that results in a narrowing of the vein. In the case of CABG surgery, approximately 19% of these grafts fail within the first year with the failure rate increasing to about 50% between years ten and fifteen. The consequences of failure for CABG patients include heart attack, chest pain, congestive heart failure, irregular heartbeat and death. In the case of PBG surgery, about 20% to 30% of the grafts fail within the first year and up to 50% fail within five years. The consequences of failure for PBG patients include grave disability and discomfort, poor wound healing, gangrene, amputation of some or all of the limb and death. The surgery to repair a failed or failing graft is a technically more difficult procedure with an increased risk of complications. In 2001, there were more than 300,000 patients in the United States with severe kidney disease, known as end stage renal disease, who required dialysis treatment. Approximately 100,000 patients per year receive new or revised AV grafts. An AV graft composed of a plastic material is used to connect an artery and vein in the arm of the dialysis patient. More than half of these grafts fail within six months and over 95% fail within 24 months following the surgery. Vascular access graft failure accounts for 25% of the hospitalizations of these patients and results in an estimated $1 billion in annual costs in the United States alone. Our Lead Product Candidate. E2F Decoy works by binding to and inactivating the E2F transcription factor. This transcription factor turns on a dozen or more genes responsible for the proliferation of smooth muscle cells that can lead to arterial blockage and failure of bypass vein grafts. Bypass vein grafts often fail because the thin walled veins do not adapt well to the high-pressured arterial environment. These veins seek to adapt to the high pressure environment by causing the proliferation of smooth muscle cells. These smooth muscle cells line the inner surface of a bypass vein graft, making the vein wall thicker which leads to a build up of plaque and eventually blockage of the graft. By inactivating E2F, we believe that E2F Decoy may not only prevent the formation of the inner layer of smooth muscle cells on a bypass vein graft that leads to blockage and failure, but also force the vein to strengthen its wall in a more favorable manner. Following E2F Decoy treatment, the vein adapts by causing the cells in the middle of its wall to lengthen and thicken, strengthening the vein and making it look more like the artery it is bypassing. E2F Decoy is introduced into veins using a pressure delivery device. We are conducting two randomized, double-blind, placebo controlled Phase 3 clinical trials to evaluate the safety and effectiveness of E2F Decoy in the prevention of bypass graft failure, one trial in 2,400 patients undergoing CABG surgery and the other trial in 1,400 patients undergoing PBG surgery. In the CABG trial, we are using angiography to measure the reduction in the occurrence of blockages of 75% or greater in the bypass graft at 12 months in E2F Decoy treated patients versus a placebo group. In the PBG trial, we are measuring the difference in time from the PBG surgery to the first procedure needed to repair a failed or failing graft or amputation between E2F Decoy treated patients and a placebo group. Our data safety and monitoring boards for both Phase 3 clinical trials have each met twice and recommended that the trials proceed. Data from both trials will be required to support FDA approval for prevention of bypass graft failure, which includes CABG and PBG surgery. We expect results from our CABG trial in the first quarter of 2005 and results from our PBG trial in the fourth quarter of 2004. We have completed two randomized, blinded, placebo controlled earlier stage trials studying E2F Decoy's ability to prevent bypass graft failure. In a Phase 2 clinical trial in CABG patients, we observed a statistically significant reduction of blockage (of 75% or greater) in E2F Decoy treated patients in a per graft analysis of angiograms obtained 12 months after treatment. In a Phase 1/2 clinical trial in PBG patients, we showed that treatment of bypass vein grafts with E2F Decoy during the surgery was safe and resulted in significant inhibition of the E2F-controlled genes and the smooth muscle proliferation that leads to bypass graft failure. We observed no adverse events related to E2F Decoy treatment in these trials. The results of these clinical studies do not necessarily predict future clinical trial results and our Phase 3 clinical trials may fail to produce results satisfactory to the FDA or foreign regulatory authorities. Collaboration with Bristol-Myers Squibb Company. In October 2003, we entered into our collaboration with BMS for the development and commercialization of E2F Decoy. BMS paid us $45 million, consisting of $25 million in cash and a $20 million equity investment. Future BMS financial obligations include (a) funding of a majority of ongoing development costs for E2F Decoy, (b) payments of up to $205 million based on achievement of regulatory milestones and (c) payments of up to $320 million based on attainment of sales milestones. We have retained the right to co-promote E2F Decoy in the United States and intend to build our own sales force to market E2F Decoy to cardiothoracic and vascular surgeons. We will share equally in profits and losses on sales of E2F Decoy in the United States. We have granted BMS the exclusive right to commercialize E2F Decoy outside the United States pursuant to a royalty-bearing license. Advantages of Our Transcription Factor Decoy Platform. We believe our TF decoys may offer several advantages over existing therapeutic approaches: • Broadly Applicable to a Variety of Diseases. Because inappropriate expression of genes plays an important role in most diseases, our TF decoy technology allows us to address a wide range of diseases. • Potentially More Effective Treatment. Many diseases are caused by the inappropriate expression of multiple functionally related genes. By intervening at the transcription factor level, TF decoys prevent the expression of multiple, related genes that are turned on when they should not be, thereby potentially providing more effective treatment than therapeutics that target a single gene. • Short Development Cycle. In contrast to the year or more required to discover and optimize small molecule therapeutics, TF decoys can be designed based on known transcription factor binding site information and be ready for preclinical testing in a matter of one or two months. • Ease of Manufacturing. In contrast to the typical biotechnology therapeutic product, TF decoys can be easily synthesized and purified at a reasonable cost. Our synthesis technology renders TF decoys resistant to degradation which simplifies the storage and distribution of these products. As of December 31, 2003, we had 37 issued patents, 37 pending patent applications, exclusive licenses and trade secrets covering our TF decoy and delivery technology. Our Management Team. We have assembled a management team with over 100 years of experience in the discovery, development, registration, manufacture and commercialization of new therapies at 19 pharmaceutical, medical device and biotechnology companies. We are also advised by renowned thought leaders and highly respected cardiothoracic and vascular surgeons, the two primary user groups of our lead product candidate, E2F Decoy. We believe that our expertise will enable us to maximize the commercial opportunity for E2F Decoy as well as our future transcription factor decoy products. Risks Related to Our Business. We are at an early stage in the development of our company with a limited operating history and have had no revenues derived from operations. We have experienced significant operating losses since our inception, and we expect to continue to incur substantial additional operating losses. If we are unable to develop, receive approval for, or successfully commercialize our lead product candidate, E2F Decoy, we may never be profitable and may have to cease operations. Corporate Information We were incorporated in Delaware in January 1999. The address of our principal executive office is 650 Gateway Boulevard, South San Francisco, California 94080, and our telephone number is (650) 624-9600. Our website address is www.corgentech.com. We do not incorporate the information on our website into this prospectus, and you should not consider it part of this prospectus. The Offering Common stock offered by Corgentech: 5,000,000 shares Common stock to be outstanding after the offering: 25,113,294 shares Proposed Nasdaq National Market symbol: CGTK Use of proceeds: We expect to use the net proceeds from this offering to continue the development of E2F Decoy and our other product candidates, to prepare for the commercial launch of E2F Decoy and for other general corporate purposes. See "Use of Proceeds." The number of shares to be outstanding immediately after this offering is based on 20,113,294 shares of common stock outstanding as of December 31, 2003, and excludes: • 1,820,654 shares of common stock issuable upon the exercise of stock options outstanding as of December 31, 2003, with a weighted average exercise price of $1.78 per share; • 979,780 shares of common stock issuable upon the exercise of warrants outstanding as of December 31, 2003, with a weighted average exercise price of $7.36 per share, of which 16,955 shares of common stock issuable upon the exercise of warrants will remain outstanding after this offering; and • 1,566,671 shares of common stock reserved for future grants under our stock option plans and employee stock purchase plan as of December 31, 2003. Unless specifically stated, all information contained in this prospectus: • gives effect to a 1-for-4 reverse split of our common stock and preferred stock completed on January 23, 2004; • gives effect to the conversion of all of our shares of preferred stock into 17,327,139 shares of common stock immediately prior to the closing of this offering; and • assumes no exercise of the underwriters' over-allotment option. | ||||||||||||||
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