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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 NUMBER: 0-19311
IDEC PHARMACEUTICALS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0112644
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3030 CALLAN ROAD, SAN DIEGO, CALIFORNIA 92121
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(858) 431-8500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.0005 PAR VALUE
(TITLE OF CLASS)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of January 31, 2000, the aggregate market value of the voting stock held
by non-affiliates of the Registrant was approximately $5,112,936,000. (Based
upon the "closing" price as reported by The Nasdaq Stock Market on January 31,
2000). This number is provided only for the purposes of this report and does not
represent an admission by either the Registrant or any such person as to the
status of such person.
As of January 31, 2000, the Registrant had 42,851,387 shares of its common
stock, $.0005 par value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held on May 17, 2000 are incorporated by reference into Part
III.
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IDEC PHARMACEUTICALS CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
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PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 29
Item 3. Legal Proceedings........................................... 29
Item 4. Submission of Matters to a Vote of Stockholders............. 29
PART II
Market for Registrant's Common Equity and Related
Item 5. Stockholder Matters......................................... 30
Item 6. Selected Financial Data..................................... 31
Management's Discussion and Analysis of Financial Condition
Item 7. and Results of Operations................................... 32
Quantitative and Qualitative Disclosures About Market
Item 7A. Risk........................................................ 37
Item 8. Consolidated Financial Statements and Supplementary Data.... 39
Changes in and Disagreements with Accountants on Accounting
Item 9. and Financial Disclosure.................................... 57
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 57
Item 11. Executive Compensation...................................... 59
Security Ownership of Certain Beneficial Owners and
Item 12. Management.................................................. 59
Item 13. Certain Relationships and Related Transactions.............. 59
PART IV
Exhibits, Financial Statement Schedules, and Reports on Form
Item 14. 8-K......................................................... 60
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PART I
ITEM 1. BUSINESS.
OVERVIEW
IDEC Pharmaceuticals Corporation ("we", "our", or "us") is a
biopharmaceutical company engaged primarily in the research, development and
commercialization of targeted therapies for the treatment of cancer and
autoimmune and inflammatory diseases. Our first commercial product, Rituxan(R),
and our most advanced product candidate, ZEVALIN(TM) (ibritumomab tiuxetan,
formerly IDEC-Y2B8), are for use in the treatment of certain B-cell
non-Hodgkin's lymphomas ("NHL"). B-cell NHLs currently afflict approximately
275,000 patients in the United States. We are also developing products for the
treatment of various autoimmune diseases (such as psoriasis, rheumatoid
arthritis and lupus).
In November 1997, Rituxan became the first monoclonal antibody approved by
the U.S. Food and Drug Administration ("FDA") for a cancer therapy indication.
Rituxan, marketed in the U.S. pursuant to a copromotion arrangement between
Genentech, Inc. ("Genentech") and us, achieved U.S. net sales of $262.7 million
in 1999, a 73% increase over U.S. net sales of $152.1 million in 1998. F.
Hoffmann-La Roche Ltd. ("Roche") sells Rituxan (under the trade name MabThera)
outside the United States, except in Japan where Zenyaku Kogyo Co. Ltd.
("Zenyaku") has the rights for product development, marketing and sales.
Under our copromotion arrangement with Genentech we share responsibility
with Genentech for selling and continued development of Rituxan in the United
States. Continued development of Rituxan includes conducting supportive research
on Rituxan and post approval clinical studies and obtaining potential approval
of Rituxan for additional indications. Genentech provides support functions for
the commercialization of Rituxan including marketing, customer service, order
entry, distribution, shipping and billing and, as of September 1999, Genentech
is responsible for all manufacturing responsibilities for Rituxan.
Delivered intravenously as a treatment for relapsed or refractory low-grade
or follicular, CD20-positive B-cell NHL, Rituxan possesses a favorable side
effect profile. Treatment with Rituxan is given as four weekly intravenous
infusions over a twenty-two day period as compared to chemotherapy, which is
typically given in repeated cycles for up to four to eight months. Thus, Rituxan
offers the possibility of increased quality of life during the treatment of
cancer, while maintaining a response rate that compares favorably with
conventional treatments. In its pivotal Phase III clinical trial involving 166
evaluable patients, Rituxan, administered as a single agent achieved a partial
(at least 50% tumor shrinkage) or complete response to therapy in forty-eight
percent (48%) of patients on an intent-to-treat basis (80 of 166 patients).
Eighty-seven percent of evaluable patients demonstrated at least a quantifiable
shrinkage in tumor size. For the 80 patients achieving a partial or complete
response, the median time of regrowth of the tumor was 11.6 months from the
onset of response, and we believe 16 of the 80 patients are experiencing ongoing
remissions. Because of its favorable safety profile, we believe that Rituxan is
a strong candidate for combination therapy, and we are currently researching its
possible uses in this role.
BACKGROUND INFORMATION
In order to better analyze our business and prospects, it is helpful to
understand the field in which we operate, including the general manner in which
our products and product candidates interact with people's bodies and, in
particular, with the diseases that our products and product candidates are
designed to target. Each of the following subsections provides background
information which is important to gaining an understanding of our products and
product candidates:
Antibodies and the Immune System. The immune system is composed of
specialized cells, including B cells and T cells, that function in the
recognition, destruction and elimination of disease-causing foreign substances
and of virally infected or malignant cells. The role of these specialized cells
is determined by receptors on the cell surface which govern the interaction of
the cell with foreign substances and with the rest of the immune system.
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For example, each differentiated B cell of the immune system has a
different antibody anchored to its surface that serves as a receptor to
recognize foreign substances. This antibody then triggers the production of
additional antibodies which, as free-floating molecules, bind to and eliminate
these foreign substances. Each foreign substance is individually identifiable by
structures on its surface known as antigens, which serve as binding sites for
the specific antibodies. T cells play more diverse roles, including the
identification and destruction of virally infected or malignant cells.
A variety of technologies have been developed to produce antibodies as
therapeutic agents. These include hybridoma technology and molecular biology
techniques such as gene cloning and expression, which can now be applied to the
generation, selection and production of hybrid monoclonal antibody varieties
known as chimeric and humanized antibodies, as well as strictly human
antibodies. Chimeric antibodies are constructed from portions of non-human
species (typically mouse) antibodies and human antibodies. In these
applications, the portion of the antibody responsible for antigen binding (the
"variable region") is taken from a non-human antibody and the remainder of the
antibody (the "constant region") is taken from a human antibody. Compared to
mouse-derived ("murine") monoclonal antibodies, chimeric antibodies generally
exhibit lower immunogenicity (the tendency to trigger an often adverse immune
response such as a human anti-mouse antibody, or "HAMA" response), are cleared
more slowly from the body, and function more naturally in the human immune
system. Humanized antibodies can be constructed by grafting several small pieces
of a murine antibody's variable region onto a constant region framework provided
by a human antibody. This process, known as "CDR grafting," reduces the amount
of foreign materials in the antibody, rendering it closer to a human antibody.
However, the construction of humanized antibodies by CDR grafting requires
complex computer modeling, and the properties of the resulting antibody are not
completely predictable and may, in fact, still trigger a HAMA response.
B-cell Non-Hodgkin's Lymphomas. As with other cell types in the body, B
cells and T cells may become malignant and grow as immune system tumors, such as
B-cell NHLs. B-cell NHLs are cancers of the immune system which currently
afflict approximately 275,000 patients in the United States. Treatment
alternatives for B-cell NHL patients include chemotherapy, radiation therapy,
and more recently, Rituxan. Rituxan is approved for use in relapsed or
refractory, low grade or follicular, CD20 positive, B-cell NHL. B-cell NHLs are
diverse with respect to prognosis and treatment, and are generally classified
into one of three groups (low, intermediate or high grade) based on histology
and clinical features. These three groups are further subdivided by the
International Working Formulation ("IWF") into subclasses A through J: low grade
(A, B and C); intermediate grade (D, E, F and G); and high grade (H, I and J).
Low grade or follicular B-cell NHL is comprised of IWF subclasses A through D.
We estimate that approximately half of the 275,000 patients afflicted with
B-cell NHL in the United States have low grade or follicular disease. Of such
patients afflicted with low grade or follicular B-cell NHL in the United States,
approximately 20,000 will have been diagnosed during the past 12 months.
Patients with low grade lymphomas have a fairly long life expectancy from the
time of diagnosis (median survival 6.6 years), despite the fact that low grade
NHLs are almost always incurable. Intermediate grade and high grade lymphomas
are more rapidly growing forms of these cancers, which in some cases can be
cured with early, aggressive chemotherapy. New diagnoses of NHLs in the United
States are estimated to be 55,000 in 2000. In approximately 90% of the cases in
the United States, non-Hodgkin's lymphomas are of B-cell origin, the remainder
are of T-cell origin.
Owing to the fluid nature of the immune system, B-cell lymphomas are
usually widely disseminated and characterized by multiple tumors at various
sites throughout the body at first presentation. Treatment courses with
chemotherapy or radiation therapy often result in a limited number of remissions
for patients with B-cell lymphomas. The majority of patients in remission will
relapse and ultimately die either from their cancer or from complications of
standard therapy. Fewer patients achieve additional remissions following relapse
and those remissions are generally of shorter duration as the tumors become
increasingly resistant to subsequent courses of chemotherapy. Therapeutic
product development efforts for these cancers have focused on both improving
treatment results and minimizing the toxicities associated with standard
treatment regimens. Immunotherapies with low toxicity and demonstrated efficacy,
such as Rituxan, might be expected to reduce treatment and hospitalization costs
associated with side effects or opportunistic infections, which can result from
the use of chemotherapy and radiation therapy.
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Autoimmune and Inflammatory Diseases. Psoriasis, inflammatory bowel disease
("IBD"), asthma, allergic rhinitis, rheumatoid arthritis ("RA"), systemic lupus
erythematosus ("SLE") and multiple sclerosis ("MS") are autoimmune and
inflammatory diseases that require ongoing therapy and afflict many millions of
patients in the United States. Autoimmune disease occurs when the patient's
immune system goes awry, initiating a cascade of events which results in an
attack by the patient's immune system against otherwise healthy tissue and often
includes inflammation of the involved tissue. Autoimmune diseases are typically
treated with products such as steroids and nonsteroidal anti-inflammatory agents
and with other therapies, all of which are limited for several reasons,
including their lack of specificity and ineffectiveness when used chronically.
Furthermore, steroids suppress the immune system and make the patient
susceptible to infections while nonsteroidal, anti-inflammatory agents have
limited efficacy and have been implicated in the formation of gastro-intestinal
ulcerations.
Regulation of Immune System Cells. Monoclonal antibodies may be used to
bind to specific subsets of human immune system cells and may act to deplete, to
suppress or to up-regulate the activity of the targeted cells. Indeed, the high
specificity of monoclonal antibodies enables them to selectively act against
different types of B cells or T cells. Depletion of diseased immune cells or
suppression of disease-causing immune activities may be possible by using
antibodies that attach to specific antigens on the surface of target immune
system cells. In particular, the individual B and T cells of the immune system
express a broad variety of surface antigens (cell surface markers). Such
antigens not only differentiate one cell type from another, but also
differentiate individual cells from other cells with specificity for different
antigens. Monoclonal antibodies may also be used to bind to molecules, such as
cytokines, in the plasma which serve as soluble mediators of immune system cell
activity. By neutralizing these molecules, monoclonal antibodies may be used to
alter immune cell activity and/or migration, for example, in inflammatory
conditions.
TECHNOLOGY
We are developing products for the management of immune system cancers and
autoimmune and inflammatory diseases. Our antibody products bind to specific
subsets of human immune system cells, or to soluble mediators of immune cell
activity, and act to deplete or to alter the activity of these cells. The
products are administered intravenously and target cells or soluble mediators
located in easily accessible compartments of the body, specifically the blood,
the lymphatic fluid and the synovial fluid. For treatment of B-cell NHLs, our
products target a cell surface marker known as CD20 which is present only on B
cells but not on B-cell precursors. These products act to reduce total B-cell
levels, including both malignant and normal B cells. The depletion of normal B
cells observed in clinical experience to date has been only temporary, with
regeneration occurring within months from the unaffected B-cell precursors. We
believe that our lead product, Rituxan provides therapeutic alternatives to
complement the treatment of certain B-cell NHLs. We also believe that our
radioimmunotherapeutic agent, ZEVALIN, if successfully developed and approved
for marketing, may provide an additional alternative for the treatment of
certain B-cell NHLs.
Due to their specificity and affinity for cell surface receptors,
monoclonal antibodies are an attractive means by which to treat autoimmune
diseases. Attachment of monoclonal antibodies to specific cell surface receptors
can be used to suppress aberrant and unwanted immune activity. Historically,
however, the use of monoclonal antibodies as an ongoing therapy has been limited
by the body's rejection of the murine components of the antibodies. Murine
monoclonal antibodies, which are structurally different from human antibodies,
tend to trigger adverse immune reactions when used as therapies. These reactions
include a HAMA response in which the patient's immune system produces antibodies
against the therapeutic antibody, thus limiting its effectiveness.
We have developed the following proprietary technology for use with and in
the development of our products:
PRIMATIZED(R) Antibody Technology. We have developed a proprietary
PRIMATIZED antibody technology designed to avoid HAMA responses and other
immunogenicity problems by developing monoclonal antibodies from primate rather
than mouse B cells. These antibodies are characterized by their strong
similarity to human antibodies and by the absence of mouse components. In 1998,
we received an
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issued U.S. patent covering our PRIMATIZED antibodies. Underlying this
proprietary technology is our discovery that macaque monkeys produce antibodies
that are structurally indistinguishable from human antibodies in their variable
(antigen-binding) regions. Further, we found that the macaque monkey can be
immunized to make antibodies that react with human, but not with macaque,
antigens. Genetic engineering techniques are then used to isolate the portions
of the macaque antibody gene that encode the variable region from a macaque B
cell. This genetic material is combined with constant region genetic material
from a human B cell and inserted into a host cell line which then expresses the
desired antibody specific to the given antigen. The result is a part-human,
part-macaque PRIMATIZED antibody which appears structurally to be so similar to
human antibodies that it may be accepted by the patient's immune system as
"self." This development allows the possibility of therapeutic intervention in
chronic diseases or other conditions that are not amenable to treatment with
antibodies containing mouse components. We are currently using our PRIMATIZED
technology for the development of our IDEC-151, IDEC-152 and IDEC-114 product
candidates described below.
PROVAX(TM) Antigen Formulation. We have also discovered a proprietary
antigen formulation, PROVAX, which has shown the ability to induce cellular
immunity, manifested by cytotoxic T lymphocytes, in animals immunized with
protein antigens. Cellular immunity is a counterpart to antibody-based immunity
and is responsible for the direct destruction of virally infected and malignant
cells. PROVAX is a combination of defined chemical entities and may provide a
practical means for the development of effective immunotherapies that act
through the induction of both antibody and cell-mediated immunity. We believe
such immunotherapies may be useful for the treatment of certain cancers and
viral diseases. Preliminary studies also indicate that PROVAX can be safely
administered by injection to human subjects. We intend to make PROVAX available
through licenses and collaborations to interested partners for development of
immunotherapeutic vaccines.
Proprietary Vector Technologies. We have developed methods of engineering
mammalian cell cultures using proprietary gene expression technologies ("vector
technologies") that rapidly and reproducibly select for stable cells, producing
high levels of desired proteins. These technologies allow the efficient
production of proteins at yields that may be significantly higher, and costs
that may be significantly lower, than current, competing cell culture
manufacturing methods. We have successfully applied one of these technologies to
the commercial scale production of Rituxan.
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OUR PRODUCT AND PRODUCT CANDIDATES
Rituxan, our first product approved for marketing in the United States, and
our primary products under development address immune system disorders, such as
lymphomas and autoimmune and inflammatory diseases, such as SLE and psoriasis.
In addition, we have discovered certain other product candidates through the
application of our technology platform. The products either commercialized or in
preclinical and clinical development by our partners and us include the
following.
INDICATION STATUS(1) DEVELOPMENT/MARKETING(2)
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Immune System Cancer Products:
Rituxan............................ Certain B-cell NHL U.S.: Approved Genentech (U.S.
European Union: copromotion)
Approved Roche (worldwide except
Japan: Approval U.S. and Japan) Zenyaku
pending (Japan)
ZEVALIN............................ Certain B-cell NHL Phase III Schering AG (worldwide
(radioimmunotherapy) except U.S.)
Autoimmune and Inflammatory
Products:
PRIMATIZED Anti-CD4 (IDEC-151)
(Clenoliximab)................... Rheumatoid Arthritis Phase II No current partner
Humanized Anti-gp39 (IDEC-131)..... Various autoimmune Phase II Eisai (Europe and Asia)
diseases, initially
SLE
PRIMATIZED Anti-B7 (IDEC-114)...... Various autoimmune Phase I/II Mitsubishi (Asia)
diseases, initially
psoriasis
PRIMATIZED Anti-CD23
(IDEC-152)....................... Various allergic Phase I Seikagaku (Europe and
conditions, Asia)
initially allergic
asthma
Humanized and PRIMATIZED
Anti-MIF......................... Various inflammatory Discovery No current partner
conditions
Other Products:
PROVAX (antigen formulation)....... Cancer therapeutic Preclinical No current partner
vaccines development
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(1) As used in this Form 10-K, "Discovery" means that the research phase is
ongoing and a lead compound has not yet been selected. "Lead compound
selected" means agents have been identified that meet preselected criteria
in assays for activity and potency. "Preclinical development" means lead
compound undergoing testing required prior to submission of an
Investigational New Drug Application. "Phase I" means initial human studies
designed to establish the safety, dose tolerance and pharmacokinetics of a
compound. "Pilot" means a Phase I/II study is currently being designed for
this indication, however, prior clinical activities have been conducted in
other indications" "Phase I/II" means initial human studies designed to
establish the safety, dose tolerance and pharmacokinetics of a compound and
which may be designed to show preliminary activity of a compound in patients
with the targeted disease. "Phase II" means human studies designed to
establish safety, optimal dosage and preliminary activity of a compound.
"Phase III" means human studies designed to lead to accumulation of data
sufficient to support a marketing license application such as a Biologics
Licensing Application, including data relating to efficacy.
(2) We have retained exclusive marketing rights in the United States for all of
our products except Rituxan.
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IMMUNE SYSTEM CANCER PRODUCTS
Our objective with respect to treating B-cell NHLs is to use our anti-CD20
antibodies to target, bind to and selectively eliminate both the patient's
normal and malignant B cells. The following is a brief description of each of
our products in this area:
Rituxan. Rituxan is a genetically engineered, chimeric murine/human
monoclonal antibody designed to harness the patient's own immune mechanisms to
destroy tumor cells. In November, 1997, Rituxan was approved in the United
States for treatment of certain B-cell NHLs and we market Rituxan in the United
States with Genentech pursuant to a copromotion arrangement. Roche sells Rituxan
outside the United States under the trade name MabThera, except in Japan where
Zenyaku has the rights for product development, marketing and sales.
Laboratory studies performed by us have shown that the antibody attaches to
the CD20 antigen on B cells and activates a group of proteins known as
"complement," leading to normal and malignant B-cell destruction. Additionally,
the antibody, when bound to the CD20 antigen, recruits macrophages and natural
killer cells to attack the B cells. Through these and other mechanisms, the
antibody utilizes the body's immune defenses to lyse (rupture) and deplete B
cells. B cells have the capacity to regenerate from early precursor cells that
do not express the CD20 antigen. The depletion of normal B cells observed in
clinical experience to date has been only temporary, with normal B-cell
regeneration typically occurring within six to nine months. The capacity of a
tumor to regrow after treatment with Rituxan will depend on the number of
malignant B cells, or malignant B-cell precursors (if the malignancy first
appeared within a precursor cell), remaining after treatment.
Rituxan was the first monoclonal antibody approved in the United States for
a cancer therapy indication. Rituxan is unique in the treatment of B-cell NHLs
due to its specificity for the antigen CD20, which is expressed only on normal
and malignant B cells, but not on other tissues of the body, and its mechanism
of action as compared to conventional lymphoma therapies, including experimental
radioimmunotherapies. These properties of Rituxan allow its use in patients
where chemotherapy is either poorly tolerated or ineffective in inducing disease
remissions. Rituxan is easily administered as outpatient therapy by personnel
trained in the use of chemotherapies. A standard course of Rituxan therapy
consists of four intravenous infusions given on days 1, 8, 15 and 22, whereas
chemotherapy is given typically in repeating cycles for up to four to eight
months. In October 1999, we filed a supplemental Biologics Licensing Application
("BLA") relating to the use of Rituxan in expanded dosing, including
retreatment, times eight dosing and bulky disease for the treatment of B-cell
NHL.
Rituxan is indicated for single agent use in relapsed or refractory, low
grade or follicular, CD20-positive, B-cell NHLs, which comprise approximately
half of the prevalence of B-cell NHLs in the United States. Ongoing or completed
Phase II studies suggest that Rituxan may also be useful in combination with
chemotherapy in low grade or follicular B-cell NHLs, and as a single agent, or
in combination with various chemotherapies, in the treatment of other forms of
B-cell NHLs. In relapsed or chemotherapy refractory B-cell NHLs, which to date
have proven to be incurable, Rituxan provides a means to induce remissions of
disease in some patients without subjecting the patient to the toxicity and
duration of therapy that are typical of chemotherapy regimens. In certain newly
diagnosed B-cell NHLs that are curable with early aggressive chemotherapy, we
believe that the addition of Rituxan to combination regimens may improve the
overall cure rate. Demonstration of improved cure rate (i.e. long-term disease
remissions) is being sought through ongoing, randomized controlled trials. In
Phase III clinical trials, Rituxan, given as a single agent to patients with
relapsed or refractory, low grade or follicular, CD20-positive, B-cell NHL,
achieved partial or complete responses to therapy in 48% of patients on an
intent-to-treat basis (80 of 166 patients). Of the 80 responding patients (tumor
shrinkage greater than 50% verified over at least two independent observations
28 days apart), 10 were complete responses (6%), and 70 were partial responses
(42%). The median duration of response (time from first determination of
response to tumor regrowth) in the 80 responders was 11.6 months, despite the
short duration (22 days) of the full course of therapy. We believe that 16 of
the 80 responders (approximately 24%) are experiencing ongoing remissions
lasting from one-and-a-half to three years. Retrospective analysis of patient
subgroups in the Phase III Rituxan trial showed responses in patients with poor
prognostic features, who generally respond poorly to chemotherapy regimes, such
as age greater than 60,
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extranodal disease, prior relapse from autologous bone marrow transplant, or
relapse or failure of anthracycline containing regimens.
There are standard response criteria for solid tumor cancers, chronic
lymphocytic leukemia, Hodgkin's disease and acute myelogenous leukemia, but
currently none for B-cell NHL. As a result, clinical response rates in B-cell
NHL may vary depending on which criteria is being applied. For example, one of
the requirements for scoring a complete response in the Rituxan pivotal trial
was that all measurable lesions must have shrunk to less than 1x1cm. Using this
conservative criterion, a 6% complete response rate ("CR") was reported.
However, as presented at the American Society of Hematology meeting in December
1998, complete response rates for the Rituxan pivotal trial increased
significantly when analyzed according to alternative minimums for lesion
shrinkage, i.e.: 18% CR and 28% CR when analyzed using 1.5x1.5cm and 2.0x2.0cm,
respectively. Until uniform criteria is adopted for all B-cell NHL trials,
complete response rates will vary widely depending on the measures being
utilized.
The following figure shows the percentage change in tumor size in all 166
patients entered into the Phase III trial of Rituxan in relapsed or refractory,
low grade or follicular CD20-positive, B-cell NHL.
MAXIMUM PERCENTAGE CHANGE IN TUMOR SIZE AMONG ALL TREATED PATIENTS(1)
[GRAPH]
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(1) Tumor shrinkage measured radiographically for the 166 patients by sum of
products of lesion perpendicular diameters. Data represents the greatest
shrinkage achieved by each patient during the observation period. Subsequent
tumor growth may have occurred and data for three patients are unavailable.
(2) Includes two patients with increase in lesion size greater than 100%.
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In December 1999, we announced updated information on the results of a
Phase II Rituxan re-treatment study presented at the American Society of
Hematology Conference ("ASH"). This Phase II study in patients with low-grade or
follicular, CD20-positive, B-cell NHL was conducted to determine the safety and
efficacy of Rituxan in patients who had relapsed or were refractory to prior
chemotherapy, but had responded previously to Rituxan. From the analyses of the
study, patients who responded to one regimen of Rituxan may be re-treated with
additional courses of Rituxan without impairment of bone marrow function
(myelosuppression) or development of an immune response (antibodies) to CD20
antibody therapy -- a response called human anti-chimeric antibody (HACA). Of 60
patients treated, 57 were considered evaluable for efficacy. The overall
response rate was 40%, with 7 out of 57 (13%) being complete responders and 16
out of 57 (29%) being partial responders. Median time to progression and
duration of response have not been reached after more than 15 months of
follow-up. While the overall safety profile seen with re-treatment was similar
to what was reported for the initial treatment with Rituxan (primarily
infusion-related events that usually occurred within a few hours of the first
infusion) other events that occurred less frequently included: leukopenia,
nausea, transient bronchospasm, and mild hypotension. These results supported
the supplemental BLA filed in October 1999, which requested a label expansion to
include re-treatment with Rituxan for B-cell NHL patients.
Also in December 1999, we announced updated information on the results of a
Phase II study assessing the safety and effectiveness of Rituxan used in
combination with cyclophosphamide, doxorubicin, vincristine and prednisone
(collectively known as "CHOP") chemotherapy in low-grade or follicular B-cell
NHL. The overall response rate in the Phase II study was 100 percent in 35
evaluable patients with 22 patients (63%) achieving complete responses and 13
patients (37%) achieving partial responses. The median duration of response was
45.9+ months with progression free survival not reached after a median
observation time of 47.4+ months. Twenty-four patients (63%) are still in
remission beyond 36+ months and up to 65.3+ months. Attending physicians
attributed 75% of toxicity associated with this combined treatment to the CHOP
chemotherapy. The most frequently experienced adverse events were neutropenia,
dehydration, alopecia, nausea and fever. Rituxan was associated with fever and
chills.
Results of a Phase II clinical trial evaluating the combination of Rituxan
plus CHOP in intermediate and high-grade B-cell NHL were also announced in
December 1999. The overall response rate in the 33 evaluable patients was 97%
with 20 patients (61%) achieving complete responses and 12 patients (36%)
achieving partial responses. At a median follow-up of 24 months, the median
duration of response has not been reached at 18+ months with 27 evaluable
patients with no evidence of progressive disease.
While these Phase II trials were conducted in a relatively small number of
patients, it appears that adding Rituxan to CHOP chemotherapy may have the
potential to provide durable remissions for patients with NHL. As a result, a
Phase III randomized, open-label clinical trial, sponsored by us and Genentech,
began in January 2000 to evaluate the safety and efficacy of Rituxan plus CHOP
versus CHOP alone in previously untreated CD20-positive intermediate- or
high-grade NHL patients. The clinical trial will include approximately 420
patients at various sites in the United States and Canada.
These CHOP/Rituxan Phase II clinical trials also served as the basis for
the commencement of a large, randomized controlled cooperative Phase III trial
by the National Cancer Institute ("NCI"), the Eastern Cooperative Oncology
Group, the Cancer and Leukemia Group B, and the Southwest Oncology Group. This
trial will examine whether the addition of Rituxan to the CHOP regime will
improve cure rates (long-term remission) in elderly (age greater than 60 years)
intermediate- and high-grade B-cell NHL patients.
The most common adverse events associated with Rituxan, based on our
clinical trial experience, are infusion-related, consisting mainly of mild to
moderate flu-like symptoms (e.g., fever, chills, rigors) that occur in the
majority of patients during the first infusion. Other events which occur with
less frequency include nausea, rashes, fatigue and headaches. More serious
events include hypotension, wheezing, sensation of tongue or throat swelling and
recurrence of cardiac events in patients with a history of angina or arrhythmia.
These symptoms were usually limited in duration to the period of infusion and
decrease with subsequent infusions. These adverse events are generally more mild
and of a shorter duration than the adverse events associated with chemotherapy.
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In the fourth quarter of 1998 we, along with Genentech and Roche, notified
doctors of the occurrence in certain patients of severe infusion-related adverse
events that were associated with eight fatalities out of approximately 14,000
patients treated worldwide since Rituxan was launched. In 1999, in consultation
with the FDA, the warning section of the package insert for Rituxan was updated
to include information on infusion-related reactions and cardiovascular events.
In an effort to identify expanded applications for Rituxan, we, in
conjunction with Genentech and Roche, have authorized over 120 Rituxan
post-marketing study concepts to date, at least two of which will be large Phase
III clinical trials. Several of these trials will explore the use of Rituxan in
a variety of investigational B-cell NHL clinical settings including: (i)
combination therapy with widely used chemotherapy regimens for both low-grade
and intermediate/high-grade disease; (ii) single agent therapy in newly
diagnosed, previously untreated low-grade disease; (iii) integration into
autologous bone marrow transplant regimens both as an in vivo purging agent
prior to bone marrow harvest and post-transplant as consolidation therapy; and
(iv) treatment of AIDS-related B-cell NHLs. Additionally, clinical trials have
been initiated in other B-cell malignancies and pre-malignant conditions such as
CLL, multiple myeloma and lymphoproliferative disorders associated with solid
organ transplant therapies.
ZEVALIN. Due to the sensitivity of B-cell tumors to radiation, radiation
therapy has historically played, and continues to play, an important role in the
management of B-cell lymphomas. Radiation therapy currently consists of external
beam radiation focused on certain areas of the body with tumor burden. We are
developing an antibody product that is intended to deliver targeted
immunotherapy by means of injectable radiation to target sites expressing the
CD20 antigen, such as lymphatic B-cell tumors. In clinical testing, the isotope
indium-111 was used to image the patient's tumor and to ensure that normal
organs are not exposed to undue radiation from the subsequently administered
therapeutic product, which uses the isotope yttrium-90. The low-energy gamma
particle emitted by indium is detectable outside the body, thereby allowing the
physician to determine the localization of the antibody in the tumor. The
companion yttrium-90 isotope provides targeted radiation therapy by emitting a
high-energy beta particle that is absorbed by surrounding tissue, leading to
tumor destruction. Our objective with ZEVALIN is to provide safer, more
effective radiation therapy than is possible with external beam radiation or
with other isotopes and to provide this radiation therapy in an outpatient
setting.
Other radioisotopes, such as iodine-131, emit both beta and gamma radiation
and at certain therapeutic doses require that the patient be hospitalized and
isolated in a lead-shielded room for several days. In contrast, the beta
particle emitted by yttrium-90 is absorbed by tissue immediately adjacent to the
antibody and is concentrated at the antibody target. We believe that this short
penetrating radiation will permit the use of the product in outpatient therapy,
and have conducted our clinical trials in the outpatient setting.
We have completed patient accrual for two multi-center, pivotal Phase III
studies of ZEVALIN in the treatment of low-grade and/or follicular NHL, which
will be the basis for a BLA that we anticipate submitting during the fourth
quarter of 2000. Also, within this time frame, we are preparing to submit with
our isotope supplier a New Drug Application ("NDA") for yttrium-90 from a new
and larger site that has the capacity to support global commercialization of
ZEVALIN.
Phase III interim results for these two studies were presented at ASH in
December 1999. The first trial compares ZEVALIN, plus Rituxan, to Rituxan alone
in patients with relapsed or refractory, low-grade, follicular or transformed
CD20-positive, B-cell NHL. The prospectively defined 90-patient interim analysis
showed an overall response rate of 80% for the ZEVALIN group compared to an
overall response rate of 44% for the Rituxan group. A treatment course for
ZEVALIN includes a Rituxan infusion (250 mg/m2) on day one, followed by
infusions of Rituxan (250 mg/m2) and ZEVALIN (at a standard radiation dose of
0.4 mCi/kg of patient body weight) on day eight. Patients in the Rituxan arm
received four infusions of Rituxan (at the indicated dose of 375 mg/m2) once a
week over 22 days. Of the evaluable patients 21% in the ZEVALIN group achieved a
complete response to therapy and 59% achieved a partial response. ZEVALIN
associated toxicity was primarily hematologic, transient and reversible. Six
percent of patients in the ZEVALIN arm of the study experienced Grade 4
thrombocytopenia (platelet count below 10,000/mm3) and 25 percent experienced
Grade 4 neutropenia (neutrophil count below 500/mm3). However, patients
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recovered in a median of 12 and 14 days, respectively. The overall safety
profile for treatment with Rituxan in the study was consistent with the Rituxan
pivotal trial safety results.
The second pivotal study is evaluating the safety and efficacy of ZEVALIN
in follicular NHL patients who are refractory to Rituxan, i.e., who did not
achieve a response or had a time to progression of less than six months with the
most recent course of Rituxan. The interim overall response rate was 46% with
all responders achieving a partial response. Eighty percent of these patients
had sizable tumors (greater than 5cm in single diameter) and 76% were
chemotherapy-resistant. The dosimetry results obtained in the second Phase III
trial concluded that the ZEVALIN biodistribution and estimated radiation
absorbed dose to normal body organs were not affected by prior treatment with
Rituxan.
We expect that Rituxan and ZEVALIN, if approved, will become complementary
products for the management of B-cell NHLs. Because most B-cell NHLs are treated
today in community-based group practices, Rituxan fits nicely into the community
practice, as no special equipment or extensive training is required for its
administration or for management of treatment-related side effects. Rituxan has
shown activity even in patients refractory to chemotherapy and is indicated for
this use, so that it may provide a viable option for the community-based
oncologist prior to referral of the patient to the major medical center for
treatment with more aggressive therapies, potentially including ZEVALIN. By
contrast, all radioimmunotherapies will be administered by the nuclear medicine
specialists or radiation oncologists at the major medical or cancer centers that
are equipped for the handling, administration and disposal of radioisotopes.
Also, the nuclear medicine department, but not the community-based practice, has
the specialized equipment and governmental licenses that are required for use of
radioisotopes. We believe that referral patterns will develop for treatment of
B-cell NHL patients with radioimmunotherapies at major medical centers after the
community-based oncologist has exhausted all other options, such as Rituxan or
chemotherapy, for the management of his or her patients. This trend will be
further reinforced by the observation made by us, and by others working in the
field, of the substantial clinical activity of radioimmunotherapies in patients
with late-stage disease that has become refractory to chemotherapies. We are
committed to the development and commercialization of ZEVALIN as a complementary
product to Rituxan that might be used throughout the course of a patient's
disease, providing an alternative for both the patient and the healthcare
professional to conventional chemotherapies.
9-Aminocamptothecin. In July 1999, we announced that we terminated our
development of 9-aminocamptothecin ("9-AC"), following a Phase II clinical
trial. We concluded that 9-AC would not yield the desired benefits to
solid-tumor cancer patients. We originally acquired 9-AC from Pharmacia & Upjohn
S.p.A. ("Pharmacia & Upjohn") in 1997 who developed it under collaboration with
the NCI. We have returned all product rights for 9-AC to the NCI.
AUTOIMMUNE AND INFLAMMATORY PRODUCTS
We are developing new antibodies using humanized antibody technology and
our own proprietary class of antibodies, termed PRIMATIZED antibodies, that are
of part-human, part-macaque monkey, origin. These antibodies are structurally
similar to, and potentially indistinguishable by a patient's immune system from,
human antibodies. PRIMATIZED antibodies may provide therapeutic intervention for
diseases or conditions not amenable to chronic treatment with mouse-derived
antibodies. Our objective with our PRIMATIZED antibodies is to provide therapies
that can be used to control autoimmune diseases characterized by overactive
immune functions. We have entered into research and development collaborations
with Eisai Co. Ltd. ("Eisai"), Mitsubishi-Tokyo Pharmaceuticals, Inc., formerly
Mitsubishi Chemical Corporation ("Mitsubishi") and Seikagaku Corporation
("Seikagaku"), all of which target distinct, cell surface antigens. See
"-- Strategic Alliances."
PRIMATIZED Anti-CD4 (IDEC-151). In March 1998, we, along with SmithKline
Beecham, p.l.c. ('SmithKline Beecham') announced the selection of IDEC-151 as
our lead PRIMATIZED anti-CD4 antibody for the treatment of RA. In a Phase I
portion of a Phase I/II study of 32 patients with moderate to severe RA, the
results of which were announced in late November 1997, IDEC-151 displayed no CD4
depletion and no infusion-related adverse events. Based upon the clinical
profile of IDEC-151 shown in the
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Phase II portion of this study, as well as the current competitive landscape for
new products in RA, SmithKline Beecham decided to discontinue the development of
IDEC-151 for RA. In February 2000, we amended and restated our agreement with
SmithKline Beecham which resulted in all anti-CD4 program rights, including
IDEC-151, being returned to us. We will receive no further funding from
SmithKline Beecham under the restated agreement. As part of the restated
agreement, SmithKline Beecham has the option to negotiate commercialization and
copromotion rights with us for the first compound based on our PRIMATIZED
anti-CD4 antibodies to complete a Phase II study. If we do not commercialize and
copromote the compound with SmithKline Beecham, we will pay SmithKline Beecham
royalties on sales by us, our affiliates and licensees on any products emerging
from the rights returned to us under the restated agreement.
Humanized Anti-gp39 (IDEC-131). In December 1995, we entered into a
research and development collaborative agreement with Eisai. The collaboration
focuses on developing humanized and PRIMATIZED antibodies against the gp39
antigen. This antigen, also referred to as the CD40 ligand, is an essential
immune system trigger for B-cell activation and antibody production. Potential
target indications include transplantation and antibody-mediated autoimmune
diseases such as idiopathic thrombocytopenic purpura ("ITP") and SLE. The
development of our humanized anti-gp39 monoclonal antibody, IDEC-131, is based
on technology that we licensed from Dartmouth College, where researchers have
shown that the binding of gp39 to its CD40 receptor on B cells is essential for
proper immune system function. These researchers generated anti-gp39 antibodies
that blocked this T-cell and B-cell interaction and halted disease progression
in a variety of animal models of disease characterized by abnormal or unwanted
immune response. Moreover, when researchers ended the animals' anti-gp39
treatments, the animals' antibody-producing capacity returned to normal levels,
but their disease remained suppressed. Treatment with the anti-gp39 antibodies
appeared to have reset the animals' immune systems and restored a normal immune
response. Under the collaborative agreement, we have agreed to develop with
Eisai a humanized anti-gp39 antibody and launch additional efforts to develop a
second generation, PRIMATIZED anti-gp39 antibody. This effort has resulted in
the identification of the humanized anti-gp39 antibody lead candidate, IDEC-131,
which underwent preclinical testing, process development and manufacturing of
clinical trial material in early 1997. We successfully completed a Phase I
clinical trial in SLE with IDEC-131 in early 1999, which demonstrated an overall
favorable safety profile. Based upon the favorable Phase I clinical results of
our IDEC-131 humanized anti-gp39 antibody, we discontinued in 1999, the
development of our PRIMATIZED anti-gp39 antibody. In the first quarter of 2000,
we completed a Phase II clinical trial with IDEC-131 to access the antibody's
safety and clinical efficacy in patients with SLE. Results of the study will be
presented in a scientific meeting later in the year and will determine if we
continue to investigate SLE or pursue alternative autoimmune indications.
PRIMATIZED Anti-B7 (IDEC-114). In November 1993, we entered into a research
and development collaboration with Mitsubishi that focuses on the development of
PRIMATIZED antibodies directed at a B7.1 antigen. This B7.1 antigen appears on
the surface of antigen-presenting cells and is involved in the interaction of
these cells with T cells in triggering a cascade of immune system responses.
Antibodies directed at the B7.1 antigens may block this cascade and, therefore,
may be useful in preventing unwanted immune responses in certain inflammatory
and chronic autoimmune conditions such as psoriasis, arthritis and MS.
Mitsubishi has actively shared in the development process, generating animal
models and participating in research with us. In July 1999, we announced
completion of patient enrollment for a Phase I clinical trial with IDEC-114 to
evaluate the safety, tolerability and pharmacokinetics of a single dose of the
investigational agent in 24 patients with psoriasis. Analysis of the Phase I
data showed a favorable safety profile with preliminary findings of clinical
activity in patients with moderate to severe psoriasis. IDEC-114 as a single
dose demonstrated an overall favorable safety profile and there were no serious
adverse events. The majority of adverse events were mild, such as short-lived
flu-like symptoms, headache and chills. In October 1999, we initiated a Phase
I/II clinical trial with IDEC-114 to assess the safety, tolerability,
pharmacokinetics and potential clinical activity of multiple doses in patients
with psoriasis.
PRIMATIZED Anti-CD23 (IDEC-152). In December 1994, we entered into a
collaboration with Seikagaku aimed at the development of PRIMATIZED anti-CD23
antibodies for the potential treatment of allergic rhinitis, asthma and other
allergic conditions. Antibodies against the CD23 receptor on certain white
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blood cells inhibit the production of immune system molecules called
immunoglobulin class E, or IgE, which are known to trigger allergic conditions.
At the same time, anti-CD23 antibodies do not affect the production of the
immunoglobulins (the patient's own antibodies) responsible for granting
protective immunity to infectious agents. Thus, PRIMATIZED anti-CD23 antibodies
may provide a unique new approach to treating chronic illnesses such as allergic
rhinitis and asthma. This effort has resulted in the identification of a
PRIMATIZED antibody lead candidate, IDEC-152, which underwent preclinical
testing, process development and manufacturing of clinical material during 1999.
We filed an IND for IDEC-152 in October 1999 and began a Phase I clinical trial
in allergic asthma in February 2000. The Phase I trial with IDEC-152 will
evaluate its safety, tolerability and pharmacokinetics.
Humanized and PRIMATIZED Anti-MIF. Macrophage migration inhibitory factor
("MIF") is the body's natural counter-regulatory cytokine which serves to
override the anti-inflammatory activities of natural and administered steroids.
Inhibition of MIF may represent a novel approach to the management of a variety
of acute and chronic inflammatory diseases, including steroid-resistant
rheumatoid arthritis and asthma. In September 1997, we licensed from Cytokine
Pharmasciences, Inc., formally known as Cytokine Networks, Inc. ("CPI"), a
privately held bio-pharmaceutical company, development rights to CPI's anti-MIF
antibody technology. Under the terms of the licensing and development agreement,
we became the exclusive licensee of CPI's rights to the anti-MIF antibody
technology for therapeutic and diagnostic applications.
STRATEGIC ALLIANCES
We have entered into strategic partnering arrangements for many of our
product development programs. Through these strategic partners, we are funding a
significant portion of our product development costs and are capitalizing on the
production, development, regulatory, marketing and sales capabilities of our
partners. Unless otherwise indicated, the amounts shown below as potential
payments include license fees, research and development fees and product
development milestone payments. In addition, our strategic partners will pay
royalties on product sales, or in the case of Genentech, will in addition share
copromotion profits in the United States once products are commercialized. Our
entitlement to such payments depends on achieving product development objectives
related to development, clinical trials results, regulatory approvals and other
factors. These arrangements include:
Genentech, Inc. In March 1995, we entered into a collaborative agreement
with Genentech for the clinical development and commercialization of our
anti-CD20 monoclonal antibody, Rituxan, for the treatment of B-cell NHLs.
Concurrent with the collaborative agreement, we also entered into an expression
technology license agreement with Genentech for a proprietary gene expression
technology developed by us and a preferred stock purchase agreement providing
for certain equity investments that have been made by Genentech in us. In
November 1995, we entered into a joint development, supply and license agreement
with Zenyaku and Genentech, pursuant to which Zenyaku received exclusive rights
to develop, market and sell Rituxan, and we receive royalties on sales of
Rituxan in Japan. In addition, we are copromoting Rituxan with Genentech in the
United States. Genentech retained commercialization rights throughout the rest
of the world, except in Japan. Genentech has granted Roche exclusive marketing
rights outside of the United States, and Roche has elected to market Rituximab
under the trade name MabThera. We receive royalties on sales outside the United
States. Our collaborative agreement with Genentech provides two independent
mechanisms by which either party may purchase or sell its rights in the
copromotion territory from or to the other party. Upon the occurrence of certain
events that constitute a change of control in us, Genentech may elect to present
an offer to us to purchase our copromotion rights. We must then accept
Genentech's offer or purchase Genentech's copromotion rights for an amount
scaled (using the profit sharing ratio between the parties) to Genentech's
offer. Under a second mechanism, after a specified period of commercial sales
and (i) upon a certain number of years of declining copromotion profits or (ii)
if Genentech files for U.S. regulatory approval on a competitive product during
a limited period of time, either party may offer to purchase the other party's
copromotion rights. The offeree may either accept the offer price or purchase
the offeror's copromotion rights at the offer price scaled to the offeror's
share of copromotion profits.
SmithKline Beecham, p.1.c. In October 1992, we entered into an exclusive,
worldwide collaborative research and license agreement with SmithKline Beecham
related to the development and commercialization
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of compounds based on our PRIMATIZED anti-CD4 antibodies. In February 2000, we
amended and restated our agreement with SmithKline Beecham which resulted in all
anti-CD4 program rights, including IDEC-151, being returned to us. We will
receive no further funding from SmithKline Beecham under the restated agreement.
As part of the restated agreement, SmithKline Beecham has the option to
negotiate commercialization and copromotion rights with us for the first
compound based on our PRIMATIZED anti-CD4 antibodies to complete a Phase II
study. If we do not commercialize and copromote the compound with SmithKline
Beecham, we will pay SmithKline Beecham royalties on sales by us, our affiliates
and licensees on any products emerging from the rights returned to us under the
restated agreement.
Eisai Co., Ltd. In December 1995, we entered into a collaborative
development agreement and a license agreement with Eisai aimed at the
development and commercialization of humanized and PRIMATIZED anti-gp39
antibodies. Under the terms of these agreements, Eisai may provide up to $37.5
million in milestone payments and support for research and development, subject
to the attainment of certain product development objectives and satisfaction of
other criteria to be agreed upon between the parties, of which $28.9 million has
been recognized through December 31, 1999. Eisai will receive exclusive rights
in Asia and Europe to develop and market resulting products emerging from the
collaboration, with us receiving royalties on eventual product sales by Eisai.
At any time, Eisai may terminate the development agreement by giving us 60 days'
written notice based on a reasonable determination that the products do not
justify continued development or marketing.
Mitsubishi-Tokyo Pharmaceuticals, Inc. In November 1993, we entered into a
three-year collaborative agreement and an ongoing license agreement with
Mitsubishi for the development of a PRIMATIZED anti-B7 antibody. Under the terms
of the agreement, we may receive payments totaling $12.2 million to fund
research of the PRIMATIZED anti-B7 antibody, subject to the attainment of
certain product development objectives, of which $9.2 million has been
recognized through December 31, 1999. Under the license agreement, we have
granted Mitsubishi an exclusive license in Asia to make, use and sell PRIMATIZED
anti-B7 antibody products. We will receive royalties on sales by Mitsubishi of
the developed products.
Seikagaku Corporation. In December 1994, we entered into a collaborative
development agreement and a license agreement with Seikagaku aimed at the
development and commercialization of therapeutic products based on our
PRIMATIZED anti-CD23 antibodies. Under the terms of these agreements, Seikagaku
may provide up to $26.0 million in milestone payments and support for research
and development, subject to the attainment of certain product development
objectives, of which $18.0 million has been recognized through December 31,
1999. Under the license agreement, Seikagaku has received exclusive rights in
Europe and Asia to all products emerging from the collaboration. We will receive
royalties on eventual product sales by Seikagaku. At any time, Seikagaku may
terminate the license agreement by giving us 60 days' written notice based on a
reasonable determination that the products do not justify continued development
or marketing.
Schering Aktiengesellschaft. In June 1999, we entered into a collaboration
and license agreement and a supply agreement with Schering Aktiengesellschaft
("Schering AG") aimed at the development and commercialization of our
radioimmunotherapy drug ZEVALIN. Under the terms of the agreement, Schering AG
may provide up to $47.5 million in product development milestone payments and
support for research and development, subject to the attainment of certain
product development objectives, of which $19.0 million has been recognized
through December 31, 1999. Schering AG received exclusive marketing and
distribution rights to ZEVALIN outside the United States, and we will receive
royalties on eventual product sales by Schering AG. Under the terms of a
separate supply agreement we are obligated to meet Schering AG's clinical and
commercial requirements for ZEVALIN. Schering AG may terminate these agreements
for any reason.
MANUFACTURING STRATEGY
From our inception, we have focused on establishing and maintaining a
leadership position in cell culture techniques for antibody manufacturing. Cell
culture provides a method for manufacturing of clinical and commercial grade
protein products by reproducible techniques at various scales, up to many
kilograms of antibody. Our manufacturing facility is based on the suspension
culture of mammalian cells in stainless steel vessels. Suspension culture
fermentation provides greater flexibility and more rapid production of the large
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amounts of antibodies required for pivotal trials than the bench-scale systems
that we previously utilized. Our manufacturing facility has been approved by the
FDA only for the commercial manufacture of Rituxan and currently may not be used
for the commercial manufacture of other products. See "Forward-Looking
Information and Risk Factors That May Affect Future Results -- Failure to Obtain
Product Approvals or Comply with Government Regulations Could Adversely Affect
Our Business."
In September 1999, we transferred all manufacturing activities for bulk
Rituxan to Genentech. Since the transfer of bulk Rituxan manufacturing to
Genentech, we have begun using our available manufacturing capacity for
production of specification-setting lots and potential commercial inventory of
the ZEVALIN antibody. We intend to use our remaining manufacturing capacity for
production of clinical material and potentially some third-party contract
manufacturing. We will manufacture our own commercial requirements of the
antibody for ZEVALIN upon the receipt of approval, if any, from the FDA to
manufacture and market the antibody. ZEVALIN has multiple components that
require successful coordination among several third-party contract manufacturers
and suppliers. We have no fill/finish experience or capacity and we do not have
manufacturing experience in the field of chelates or radioisotopes and,
therefore, we will be dependent on outside contractors and suppliers to meet
these needs. We are currently negotiating with commercial contractors to meet
our long-term manufacturing demands for the fill/finish of ZEVALIN bulk product.
See "Forward-looking Information and Risk Factors That May Affect Future
Results -- We Have Limited Manufacturing Experience and We Rely Heavily on
Contract Manufacturers, -- We Rely Heavily on Certain Suppliers, and -- Failure
to Obtain Product Approvals or Comply with Government Regulations Could
Adversely Affect Our Business."
We are dependent upon Genentech to meet all long-term manufacturing demands
for Rituxan. We are considering the addition of another manufacturing facility
to meet our long-term requirements for additional products under development.
We have made our vector technology platform available for licensing to a
small number of other biopharmaceutical and pharmaceutical companies. This
technology has been licensed to Genentech, Chugai Pharmaceutical Co., Ltd.,
Boehringer Ingelheim GmbH ("Boehringer") and Kirin Brewery Co. Ltd.
Pharmaceuticals Division ("Kirin").
SALES AND MARKETING STRATEGY
During 2000, we will continue to depend on the successful marketing and
sales of Rituxan for much of our anticipated revenue. Rituxan is marketed and
sold in the United States pursuant to a copromotion agreement with Genentech,
which currently has a sales and marketing staff of approximately 100
professionals that is also promoting one other new biologic application in
oncology. To fulfill our duties under the copromotion agreement, we have a
marketing staff and a sales organization of 39 professionals with experience
primarily in the oncology therapeutic category, and who are currently dedicated
exclusively to the commercialization of Rituxan. We rely heavily on Genentech to
supply marketing support services including customer service, order entry,
shipping, billing, customer reimbursement assistance, managed-care sales
support, medical information and sales training.
Outside North America, we have adopted a strategy to pursue collaborative
arrangements with established pharmaceutical companies for marketing,
distribution and sale of our products. See "Forward-looking Information and Risk
Factors That May Affect Future Results -- We Have Limited Sales and Marketing
Experience, and -- We May be Unable to Adequately Protect or Enforce Our
Intellectual Property Rights or Secure Rights to Third-Party Patents."
PATENTS AND PROPRIETARY TECHNOLOGY
The biopharmaceutical field is characterized by a large number of patent
filings. A substantial number of patents have already been issued to other
biotechnology and biopharmaceutical companies. Particularly in the monoclonal
antibody and recombinant deoxyribonucleic acid ("DNA") fields, competitors may
have filed applications for or have been issued patents and may obtain
additional patents and proprietary rights relating to products or processes
competitive with or similar to those of ours. Moreover, United States and
foreign
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country patent laws are distinct and the interpretations thereunder unique to
each country. Thus, patentability, validity and infringement issues for the same
technology or inventions may be resolved differently in different jurisdictions.
There can be no assurance that patents do not exist in the United States or in
foreign countries or that patents will not be issued that would have an adverse
effect on our ability to market our products. Accordingly, we expect that
commercializing our products may require licensing and/or cross-licensing of
patents with other companies or institutions in the field. There can be no
assurance that the licenses, which might be required for our processes or
products, would be available on commercially acceptable terms, if at all. The
ability to license any such patents and the likelihood of successfully
contesting the scope, validity or enforceability of such patents are uncertain
and the costs associated therewith may be significant. If we are required to
acquire rights to valid and enforceable patents but cannot do so at a reasonable
cost, our ability to manufacture or market our products would be materially
adversely affected.
We are the assignee of 26 issued U.S. patents, several patent applications
and numerous corresponding foreign patents and patent applications. Certain
other patents and/or applications owned by third-parties have been exclusively
licensed, as in the case of anti-CD40L core technology licensed from Dartmouth
College, or non-exclusively licensed by us. We have filed trademark applications
in the United States, Canada and in certain international markets for the
trademarks "PRIMATIZED," "PROVAX," "Rituxan," "ZEVALIN" and "IDEC
Pharmaceuticals." "PRIMATIZED," "Rituxan" and "IDEC Pharmaceuticals" are
registered as trademarks in the United States.
We have three issued U.S. patents, a similar number of U.S. patent
applications and numerous corresponding foreign counterparts directed to
anti-CD20 antibody technology, including Rituxan, and the radioimmunoconjugate,
ZEVALIN. Our radioimmunoconjugate products include a chelating agent covered by
a U.S. patent that is non-exclusively sublicensed to us. We have been granted a
patent covering Rituxan by the European Patent Office. Genentech, our
collaborative partner for Rituxan, has secured an exclusive license to three
U.S. patents and counterpart U.S. and foreign patent applications assigned to
Xoma Corporation ("Xoma"), that relate to chimeric antibodies against the CD20
antigen. Genentech has granted to us a non-exclusive sublicense to make, have
made, use and sell certain products, including Rituxan, under such patents and
patent applications. We, along with Genentech, share the cost of any royalties
due to Xoma in the Genentech/IDEC Pharmaceuticals copromotion territory.
We have also filed for worldwide patent protection on our PRIMATIZED
antibody technology. We have received five U.S. patents claiming various aspects
of the PRIMATIZED antibody technology. These patents generically cover our
PRIMATIZED antibody technology as well as PRIMATIZED antibodies to specific
antigen targets.
PROVAX, our antigen formulation, is the subject of five issued U.S.
patents, pending U.S. applications and several pending foreign counterparts. In
addition, U.S. and foreign patent applications have been filed on aspects of our
proprietary high-yield gene expression technology, including our impaired
selectable marker vector technology. At this point, we have been granted three
U.S. patents claiming the high-yield gene expression technology in general and
methods of making antibodies using such technology. We have also received a U.S.
patent directed to homologous recombination vector technology and have foreign
counterparts pending.
Our licensor, Dartmouth University, has received seven patents with claims
that relate to our anti-CD40L antibody (IDEC-131) technology. Numerous
applications relevant to our anti-CD40L antibody program, which are either
licensed from Dartmouth University or assigned to us, are pending in the U.S.
Patent and Trademark Office ("PTO") and foreign patent offices.
We are aware of several third-party patents and patent applications (to the
extent they issue as patents) that, if successfully asserted against us, may
materially affect our ability to make, use, offer to sell, sell and import our
products. See "Forward-looking Information and Risk Factors That May Affect
Future Results -- We May be Unable to Adequately Protect or Enforce Our
Intellectual Property Rights or Secure Rights to Third-Party Patents."
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We also rely upon unpatented trade secrets, and no assurance can be given
that others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade secrets or
disclose such technology, or that we can meaningfully protect such rights. We
require our employees, consultants, outside scientific collaborators and
sponsored researchers and other advisers to execute confidentiality agreements
upon the commencement of employment or consulting relationships with us. These
agreements provide that all confidential information developed or made known to
the individual during the course of the individual's relationship with us is to
be kept confidential and not disclosed to third-parties except in specific
circumstances. In the case of our employees, the agreement provides that all
inventions conceived by such employees shall be our exclusive property. There
can be no assurance, however, that these agreements will provide meaningful
protection or adequate remedies for our trade secrets in the event of
unauthorized use or disclosure of such information.
REGULATION OF PRODUCTS BY THE FDA
The testing, manufacturing, labeling, advertising, promotion, export and
marketing, among other things, of our product and proposed products are subject
to extensive regulation by governmental authorities in the United States and
other countries. In the United States, pharmaceutical products are regulated by
the FDA under the Federal Food, Drug, and Cosmetic Act and other laws,
including, in the case of biologics, the Public Health Service Act. At the
present time we believe that our products will be regulated by the FDA as
biologics. Biologics require the submission of a BLA and approval by the FDA
prior to being marketed in the United States. Yttrium-90, the radioisotope bound
to ZEVALIN will require the submission of an NDA by our isotope supplier. The
regulatory approval process for an NDA is similar to the approval process for a
BLA. Manufacturers of biologics and drugs may also be subject to state
regulation.
The steps required before a product may be approved for marketing in the
United States generally include (i) preclinical laboratory tests and animal
tests, (ii) the submission to the FDA of an IND for human clinical testing,
which must become effective before human clinical trials may commence, (iii)
adequate and well-controlled human clinical trials to establish the safety and
efficacy of the product, (iv) the submission to the FDA of a BLA or NDA, (v) FDA
review of the BLA or NDA, and (vi) satisfactory completion of an FDA inspection
of the manufacturing facility or facilities at which the product is made to
assess compliance with current Good Manufacturing Practices ("cGMP"). The
testing and approval process requires substantial time, effort, and financial
resources and there can be no assurance that any approval will be granted on a
timely basis, if at all.
Preclinical tests include laboratory evaluation of the product, as well as
animal studies to assess the potential safety and efficacy of the product. The
results of the preclinical tests, together with manufacturing information and
analytical data, are submitted to the FDA as part of an IND, which must become
effective before human clinical trials may be commenced. The IND will
automatically become effective 30 days after receipt by the FDA, unless the FDA
before that time raises concerns or questions about the conduct of the trials as
outlined in the IND. In such a case, the IND sponsor and the FDA must resolve
any outstanding concerns before clinical trials can proceed. There can be no
assurance that submission of an IND will result in FDA authorization to commence
clinical trials.
Clinical trials involve the administration of the investigational product
to healthy volunteers or patients under the supervision of qualified principal
investigators. Further, each clinical study must be reviewed and approved by an
independent Institutional Review Board.
Clinical trials typically are conducted in three sequential phases, but the
phases may overlap. In Phase I, the initial introduction of the drug into human
subjects, the drug is usually tested for safety (adverse effects), dosage
tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics.
Phase II usually involves studies in a limited patient population to (i)
evaluate preliminarily the efficacy of the drug for specific, targeted
indications, (ii) determine dosage tolerance and optimal dosage and (iii)
identify possible adverse effects and safety risks. Phase III trials generally
further evaluate clinical efficacy and test further for safety within an
expanded patient population.
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In the case of products for severe or life-threatening diseases, the
initial human testing is sometimes done in patients rather than in healthy
volunteers. Since these patients are already afflicted with the target disease,
it is possible that such studies may provide preliminary evidence of efficacy
traditionally obtained in Phase II trials. These trials are frequently referred
to as "Phase I/II" trials. There can be no assurance that Phase I, Phase II or
Phase III testing will be completed successfully within any specific time
period, if at all, with respect to any of our product candidates. Furthermore,
the FDA may suspend clinical trials at any time on various grounds, including a
finding that the subjects or patients are being exposed to an unacceptable
health risk.
The results of the preclinical studies and clinical studies, together with
other detailed information, including information on the manufacture and
composition of the product, are submitted to the FDA in the form of a BLA or NDA
requesting approval to market the product. Before approving a BLA or NDA, the
FDA will inspect the facilities at which the product is manufactured, and will
not approve the product unless cGMP compliance is satisfactory. The FDA may deny
a BLA or NDA if applicable regulatory criteria are not satisfied, require
additional testing or information, and/or require postmarketing testing and
surveillance to monitor the safety or efficacy of a product. There can be no
assurance that FDA approval of any BLA or NDA submitted by us will be granted on
a timely basis, if at all. Also, if regulatory approval of a product is granted,
such approval may entail limitations on the indicated uses for which it may be
marketed.
Both before and after approval is obtained, violations of regulatory
requirements, including the preclinical and clinical testing process, the BLA or
NDA review process, or thereafter (including after approval) may result in
various adverse consequences, including the FDA's delay in approving or refusal
to approve a product, withdrawal of an approved product from the market, and/or
the imposition of criminal penalties against the manufacturer and/or BLA or NDA
holder. For example, BLA and NDA holders are required to report certain adverse
reactions to the FDA, and to comply with certain requirements concerning
advertising and promotional labeling for their products. Also, quality control
and manufacturing procedures must continue to conform to cGMP regulations after
approval, and the FDA periodically inspects manufacturing facilities to assess
compliance with cGMP. Accordingly, manufacturers must continue to expend time,
monies and effort in the area of production and quality control to maintain cGMP
compliance. In addition, discovery of problems may result in restrictions on a
product, manufacturer or BLA or NDA holder, including withdrawal of the product
from the market. Also, new government requirements may be established that could
delay or prevent regulatory approval of our products under development.
We will also be subject to a variety of foreign regulations governing
clinical trials and sales of our products. Whether or not FDA approval has been
obtained, approval of a product by the comparable regulatory authorities of
foreign countries must be obtained prior to the commencement of marketing the
product in those countries. The approval process varies from country to country
and the time may be longer or shorter than that required for FDA approval. At
least initially, we intend, to the extent possible, to rely on foreign licensees
to obtain regulatory approval for marketing our products in foreign countries.
Orphan Drug Designation. Under the Orphan Drug Act, the FDA may grant
orphan drug designation to drugs intended to treat a "rare disease or
condition," which generally is a disease or condition that affects fewer than
200,000 individuals in the United States. Orphan drug designation must be
requested before submitting a BLA or NDA. After the FDA grants orphan drug
designation, the generic identity of the therapeutic agent and its potential
orphan use are publicly disclosed by the FDA. Orphan drug designation does not
convey any advantage in, or shorten the duration of, the regulatory review and
approval process. If a product which has an orphan drug designation subsequently
receives the first FDA approval for the indication for which it has such
designation, the product is entitled to orphan exclusivity, i.e., the FDA may
not approve any other applications to market the same drug for the same
indication for a period of seven years, except in certain very limited
circumstances.
In 1994, we obtained orphan drug designation for Rituxan and ZEVALIN from
the FDA to treat certain B-cell NHLs. In connection with its approval by the
FDA, Rituxan has received orphan drug exclusivity in the United States. However,
there can be no assurance that ZEVALIN will receive orphan drug exclusivity for
the B-cell NHL indication, and it is possible that our competitors could obtain
approval, and attendant orphan
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drug exclusivity, for products similar to ZEVALIN for the B-cell NHL indication,
thus precluding us from marketing ZEVALIN for that indication in the United
States for some time. In addition, even if we do obtain orphan drug exclusivity
for any of our compounds for B-cell NHL, there can be no assurance that
competitors will not receive approval of other different drugs or biologics for
B-cell NHLs. Although obtaining FDA approval to market a product with orphan
drug exclusivity can be advantageous, there can be no assurance that the scope
of protection or the level of marketing exclusivity that is currently afforded
by orphan drug designation will remain in effect in the future.
FORWARD-LOOKING INFORMATION AND RISK FACTORS
THAT MAY AFFECT FUTURE RESULTS
This Form 10-K contains forward-looking statements based on our current
expectations. You should be aware that such statements are projections or
estimates as to future events, and actual results may differ materially.
In addition to the other information in this Form 10-K, you should
carefully consider the following risk factors which could affect our actual
future results and have a material and adverse effect on our business, financial
condition and results of operations. The risks and uncertainties described below
are not the only ones facing us, and additional risks and uncertainties may also
impair our business operations.
OUR REVENUES RELY SIGNIFICANTLY ON RITUXAN SALES
Our revenues currently depend largely upon continued U.S. sales of a single
commercialized product, Rituxan. We cannot be certain that Rituxan will continue
to be accepted in the United States or in any foreign markets. A number of
factors may affect the rate and level of market acceptance of Rituxan,
including:
- the perception by physicians and other members of the health care
community of its safety and efficacy or that of competing products, if
any;
- the effectiveness of our and Genentech's sales and marketing efforts in
the United States and the effectiveness of Roche's sales and marketing
efforts outside the United States;
- unfavorable publicity concerning Rituxan or comparable drugs;
- its price relative to other drugs or competing treatments;
- the availability of third-party reimbursement; and
- regulatory developments related to the manufacture or continued use of
Rituxan.
We incurred annual operating losses from our inception in 1985 through
fiscal 1997. Given our current reliance upon Rituxan as the principal source of
our revenue, any material adverse developments with respect to the
commercialization of Rituxan may cause us to incur losses in the future.
OUR OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS
Our quarterly revenues, expenses and operating results have fluctuated in
the past and are likely to fluctuate significantly in the future. Fluctuation
may result from a variety of factors, including:
- our achievement of product development objectives and milestones;
- demand and pricing for our commercialized products, such as Rituxan;
- our ability to utilize excess manufacturing capacity by obtaining
contract manufacturing relationships;
- timing and nature of contract manufacturing and contract research and
development payments and receipts;
- hospital and pharmacy buying decisions;
- clinical trial enrollment and expenses;
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- physician acceptance of our products;
- government or private healthcare reimbursement policies;
- our manufacturing performance and capacity and that of our partners;
- the amount and timing of sales orders of Rituxan by Genentech for
customers in the United States and by Roche for customers outside the
United States;
- rate and success of product approvals;
- timing of FDA approval, if any, of competitive products and the rate of
market penetration of competing products;
- collaboration obligations and copromotion payments we make or receive;
- foreign currency exchange rates; and
- overall economic conditions.
Our operating results during any one quarter do not necessarily suggest
those of future quarters. These results fluctuate periodically because our
revenues are driven by certain events such as achievement of product development
milestone events and the applicable profit-sharing allocation between us and
Genentech, based upon our copromotion arrangement.
VOLATILITY OF OUR STOCK PRICE
The market prices for our common stock and for securities of other
companies engaged primarily in biotechnology and pharmaceutical development,
manufacture and distribution are highly volatile. For example, the market price
of our common stock fluctuated between $19 13/16 per share and $151 5/8 per
share during the twelve months ended January 31, 2000. The market price of our
common stock will likely continue to fluctuate due to a variety of factors,
including:
- material public announcements;
- the announcement and timing of new product introductions by us or others;
- technical innovations or product development by us or our competitors;
- regulatory approvals or regulatory issues;
- developments relating to patents, proprietary rights and orphan drug
status;
- actual or potential clinical results with respect to our products under
development or those of our competitors;
- political developments or proposed legislation in the pharmaceutical or
healthcare industry;
- economic and other external factors, disaster or crisis;
- hedge and/or arbitrage activities by holders of our 20-year zero coupon
subordinated convertible notes ("Notes");
- period-to-period fluctuations in our financial results;
- market trends relating to or affecting stock prices throughout our
industry, whether or not related to results or news regarding us or our
competitors.
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WE FACE UNCERTAIN RESULTS OF CLINICAL TRIALS OF OUR POTENTIAL PRODUCTS
Our future success depends in large part upon the results of clinical
trials designed to assess the safety and efficacy of our potential products. The
completion rate of these clinical trials depends significantly upon the rate of
patient enrollment. Factors that affect patient enrollment include:
- size of patient population for the targeted disease;
- eligibility criteria;
- proximity of eligible patients to clinical sites;
- clinical trial protocols; and
- the existence of competing protocols (including competitive financial
incentives for patients and clinicians) and existing approved drugs
(including Rituxan).
Our inability to enroll patients on a timely basis could result in
increased expenses and product development delays, which could have a material
adverse effect on our business, results of operations and financial condition.
Even if a trial is fully enrolled, significant uncertainties remain as to
whether it will prove successful. For example, in July 1999 we announced that we
terminated our development of 9-AC following a Phase II clinical trial. We
concluded that 9-AC would not yield the desired benefit to solid-tumor cancer
patients.
In addition, the length of time necessary to complete clinical trials and
submit an application for marketing and manufacturing approvals varies
significantly and may be difficult to predict. Failure to comply with extensive
FDA regulations may result in delay, suspension or cancellation of a trial
and/or the FDA's refusal to accept test results. The FDA may also suspend our
clinical trials at any time if it concludes that the participants are being
exposed to unacceptable risks. Consequently, we cannot ensure that Phase I,
Phase II, Phase III or Phase IV (post-marketing) testing will be completed
timely or successfully, if at all, with respect to any of our potential or
existing products. Furthermore, success in preclinical and early clinical trials
does not ensure that later phase or large scale trials will be successful. We
cannot be certain that patients enrolled in our clinical trials will respond to
our products, that any product will be safe and effective or that data derived
from the trials will be suitable for submission to the FDA or satisfactorily
support a BLA or NDA.
WE MAY BE UNABLE TO DEVELOP AND COMMERCIALIZE NEW PRODUCTS
Our future results of operations will depend to a large extent upon our
ability to successfully commercialize new products in a timely manner. As a
result, we must continue to develop, test and manufacture new products and then
must meet regulatory standards and obtain regulatory approvals. Our products
currently in development may not receive the regulatory approvals necessary for
marketing in a timely manner, if at all. Additionally, the development and
commercialization process is time-consuming and costly, and we cannot be certain
that any of our products, if and when developed and approved, will be
successfully commercialized. Delays or unanticipated costs in any part of the
process or our inability to obtain regulatory approval for our products or to
maintain manufacturing facilities in compliance with all applicable regulatory
requirements could adversely affect our results of operations.
WE HAVE LIMITED MANUFACTURING EXPERIENCE AND RELY HEAVILY ON CONTRACT
MANUFACTURERS
We rely heavily upon third-party manufacturers to manufacture significant
portions of our products and product candidates. Our manufacturing capacity is
limited. Our manufacturing experience to date has been limited to the production
of preclinical and clinical quantities of product candidates and to
approximately three years of commercial production of bulk Rituxan. We have no
fill/finish experience or capacity and we do not have experience manufacturing
in the field of chelates or radioisotopes and therefore, we rely entirely upon
third parties for the manufacture of these products and components.
Consequently, we cannot ensure that either our manufacturing facilities or our
ability to sustain ongoing production of our products will be able to meet our
expectations. Nor can we be certain that we will be able to enter into
satisfactory agreements with third-party manufacturers. Our failure to enter
into agreements with such manufacturers on reasonable terms, if at all, or poor
manufacturing performance on our part or that of our third-party manufacturers
could have a material and adverse effect on our business, financial condition
and results of operations.
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In September 1999 we transferred all manufacturing of bulk Rituxan to
Genentech. We rely upon Genentech for all Rituxan manufacturing to meet
worldwide requirements. We cannot ensure that Genentech will manufacture and
fill/finish Rituxan in sufficient quantities and on a timely and cost-effective
basis or that Genentech will obtain and maintain all required manufacturing
approvals. Genentech's failure to manufacture and fill/finish Rituxan or obtain
and maintain required manufacturing approvals could materially and adversely
affect our business, results of operations and financial condition.
Since the completion in September 1999 of our obligation to manufacture
bulk Rituxan, we have commenced conversion of our manufacturing facility to a
multi-product facility, where we will initially manufacture ZEVALIN and other
clinical antibodies. We cannot be certain that this conversion will be
successful or that our manufacturing performance will meet our expectations. We
cannot be certain that we will receive all necessary regulatory approvals, or,
even if our conversion is successful and such approvals are received, that the
conversion will be completed within our budgeted time and expense estimations.
Our failure to successfully convert the manufacturing facility in a timely
manner could have an adverse effect on our product development efforts, our
ability to timely file our product license applications and our ability to
timely produce commercial supplies of the ZEVALIN antibody, if approved, and
could cause us to incur significant unabsorbed overhead costs. To the extent we
cannot produce our own biologics, we will need to rely on third-party
manufacturers, of which there are only a limited number capable of manufacturing
biologics as contract suppliers. We cannot be certain that we could reach
agreement on reasonable terms, if at all, with those manufacturers.
ZEVALIN (ibritumomab tiuxetan, formally IDEC-Y2B8) has multiple components
that require successful coordination among several third-party contract
manufacturers and suppliers. We are currently negotiating with commercial
contractors to meet our long-term manufacturing demands for fill/finish of
ZEVALIN bulk product. We cannot be certain that we will reach agreement on
reasonable terms, if at all, with our contract manufacturers or that the
integration of our contract manufacturers and suppliers can be successfully
coordinated.
WE RELY HEAVILY ON CERTAIN SUPPLIERS
Some materials used in our products and potential products, including
Rituxan and ZEVALIN, are currently available only from sole or limited number of
suppliers. In addition, the suppliers of some materials for our products must be
approved by the FDA and/or by other governmental agencies. For example, we
recently identified a new commercial supplier of the radioisotope used with our
ZEVALIN product. Prior to the commercialization of ZEVALIN, the supplier will be
required to obtain NDA approval. Although we have initiated a program for
identifying alternative suppliers for certain materials, any interruption or
delay in our supply of materials, or delays in obtaining applicable governmental
approvals or any loss of a sole source supplier, including any interruption or
loss related to the supply or supplier of our radioisotope for ZEVALIN, could
have a material adverse effect on our business, financial condition and results
of operations.
OUR INDUSTRY IS INTENSELY COMPETITIVE
The biotechnology industry is intensely competitive and we cannot be
certain that we will be able to produce or acquire rights to new products with
commercial potential. We compete with biotechnology and pharmaceutical companies
that have been established longer than we have, have a greater number of
products on the market, have greater financial and other resources and have
other technological or competitive advantages. We also compete in the
development of technologies and processes and in acquiring personnel and
technology from academic institutions, government agencies, and other private
and public research organizations. We cannot be certain that one or more of our
competitors will not receive patent protection that dominates, blocks or
adversely affects our product development or business; will benefit from
significantly greater sales and marketing capabilities; or will not develop
products that are accepted more widely than ours. We are aware that a competitor
is preparing to file a BLA for a radiolabeled murine antibody product for the
treatment of non-Hodgkin's lymphomas, which may compete with Rituxan and
ZEVALIN, if approved. We are also aware of other potentially competitive
biologic therapies for non-Hodgkin's lymphomas in development.
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WE HAVE LIMITED SALES AND MARKETING EXPERIENCE
We have limited experience with commercial sales and marketing, based
entirely upon our launch and subsequent sales of Rituxan. Outside the United
States, our strategy is to pursue and to rely solely upon collaborations with
established pharmaceutical companies for marketing, distribution and sale of our
products. We currently have no plans to directly market outside the United
States. Since we currently rely upon copromotion partners in the United States
and rely exclusively on third parties outside the United States, we cannot be
certain that our products will be marketed and distributed in accordance with
our expectations or that our market research or sales forecasts will be
accurate. We also cannot be certain that we will ever be able to develop our own
sales and marketing capabilities to an extent that we would not need to rely on
third-party efforts, or that we will be able to maintain satisfactory
arrangements with the third parties on whom we rely.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS OR SECURE RIGHTS TO THIRD-PARTY PATENTS
Our ability and the abilities of our partners to obtain and maintain patent
and other protection for our products will affect our success. We are assigned
or have rights to or have exclusive access to a number of U.S. and foreign
patents, patents pending and patent applications. However, we cannot be certain
that such patent applications will be approved, or that any of our patent rights
will be upheld in a court of law if challenged. The patent positions of
pharmaceutical and biotechnology companies can be highly uncertain and involve
complex legal and factual questions. We cannot be certain that our patent rights
will provide competitive advantages for our products or will not be challenged,
infringed upon or circumvented by our competitors.
Because of the large number of patent filings in the biopharmaceutical
field, our competitors may have filed applications or been issued patents and
may obtain additional patents and proprietary rights relating to products or
processes competitive with or similar to ours. We cannot be certain that U.S. or
foreign patents do not exist or will not issue that would materially and
adversely affect our ability to commercialize our products and product
candidates.
In addition to patents, we rely on trade secrets and proprietary know-how
that we seek to protect, in part, through confidentiality agreements with our
partners, employees and consultants. It is possible that such parties will
breach our agreements or that courts may not enforce the agreements, leaving us
without adequate remedies. We also cannot be certain that our trade secrets will
not become known or be independently developed or patented by our competitors.
In September 1999, an interference to determine priority of inventorship
was declared in the United States Patent and Trademark Office between Dartmouth
University's patent application (which patent application has been exclusively
licensed to us) and Columbia University's patent (which patent we believe has
been exclusively licensed to Biogen) relating to anti-CD40L antibodies. We are
aware that oppositions have been filed to a granted Japanese Immunex patent
relating to anti-CD40L antibodies. We are also aware that oppositions have been
filed in the European Patent Office to granted European applications that have
been licensed to us. Each of these applications contain claims relating to the
use of anti-CD40L antibodies as a therapeutic. Also, we are aware of an
opposition that was recently filed to a granted European patent application
which names us as the applicant and which relates to PROVAX and therapeutic use
thereof. If the outcome of the interference or any of the oppositions is
adverse, in whole or in part, it could result in the scope of some or all of the
granted claims being limited, some or all of the granted claims being lost,
and/or the granted patent application(s) not proceeding to a patent.
We are aware of several third-party patents and patent applications (to the
extent they issue as patents) that, if successfully asserted against us, may
materially affect our ability to make, use, offer to sell, sell and import our
products. These third-party patents and, patent applications may include,
without limitation:
- three U.S. patents assigned to Glaxo Wellcome and foreign counterparts
relating to therapeutic uses of CHO-glycosylated antibodies;
- two U.S. patents assigned to Glaxo Wellcome and foreign counterparts
relating to chelator-stabilized antibody preparations;
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- two U.S. patents assigned to Glaxo Wellcome and foreign counterparts
thereof directed to methods of growing CHO cells in media that is free
from components obtained directly from an animal source;
- a U.S. patent assigned to Coulter Pharmaceutical, Inc. and the Regents of
the University of Michigan that relates to compositions comprising
radiolabeled antibodies directed to CD20 antigen which are administered
at nonmyelosuppressive doses;
- U.S. patent and patent applications and foreign counterparts filed by
Bristol-Myers Company that relate to ligands to a B7 antigen;
- a U.S. patent assigned to Columbia University and a Japanese patent
assigned to Immunex, which we believe have been exclusively licensed to
Biogen, related to monoclonal antibodies to the 5C8 antigen found on T
cells. We believe the 5C8 antigen is associated with CD40L, the target
for our anti-CD40L antibodies expressed on the surface of activated T
cells; and
- a number of issued U.S. and foreign patents that relate to various
aspects of radioimmunotherapy of cancer and to methods of treating
patients with anti-CD4 antibodies.
The owners, or licensees of the owners, of these patents and patent
applications (to the extent they issue as patents) may assert that one or more
of our products infringe one or more claims of such patents. Such owners or
licensees of foreign counterparts to these patents and any other foreign patents
may assert that one or more of our products infringe one or more claims of such
patents. Specifically, if legal action is commenced against us or our partners
to enforce any of these patents and patent applications (to the extent they
issue as patents) and the plaintiff in such action prevails, we could be
prevented from practicing the subject matter claimed in such patents or patent
applications.
We are aware that on May 28, 1999, Glaxo Wellcome filed a patent
infringement lawsuit against Genentech in the U.S. District Court in Delaware.
According to Genentech's Form 10-K for the year ended December 31, 1999, that
suit asserts that Genentech infringes four U.S. patents owned by Glaxo Wellcome.
Two of the patents relate to the use of specific kinds of monoclonal antibodies
for the treatment of human disease, including cancer. The other two patents
asserted against Genentech relate to preparations of specific kinds of
monoclonal antibodies which are made more stable and the methods by which such
preparations are made. Genentech believes that the suit relates to the
manufacture, use and sale of Rituxan and their product Herceptin. The judge has
scheduled the trial of this suit to begin January 29, 2001. On or about January
10, 2000 Glaxo Wellcome filed a request with the court to add additional patent
infringement claims to the suit under Glaxo Wellcome's U.S. Patent No.
5,633,162. Genentech has opposed that request. Based upon the nature of the
claims made and the information available to Genentech, Genentech reports that
it believes that the outcome of this action is not likely to have a material
adverse effect on their financial position, results of operations or cash flows,
but that if an unfavorable ruling were to occur in any quarterly period, there
exists the possibility of a material impact on Genentech's net income of that
period. If the suit relates to the manufacture, use and sale of Rituxan, and
depending on the suit's outcome, there exists the possibility of a material
impact on our corresponding period copromotion profit related to Rituxan and a
material adverse effect on our business, financial condition and results of
operations.
If our intellectual property rights are challenged, we may be required or
may desire to obtain licenses to patents and other intellectual property held by
third parties to develop, manufacture and market our products. However, we
cannot be certain that we will be able to obtain these licenses on commercially
reasonable terms, if at all, or that any licensed patents or intellectual
property will be valid or enforceable. In addition, the scope of intellectual
property protection is subject to scrutiny and change by courts and other
governmental bodies. Litigation and other proceedings concerning patents and
proprietary technologies can be protracted, expensive and distracting to
management and companies may sue competitors as a way of delaying the
introduction of competitors' products. Any litigation, including any
interference proceeding to determine priority of inventions, oppositions to
patents in foreign countries or litigation against our partners, may be costly
and time-consuming and could have a material adverse effect on our business,
financial condition and results of operations.
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WE MAY BE UNABLE TO MAINTAIN THIRD-PARTY RESEARCH AND DEVELOPMENT RELATIONSHIPS
Funding of research and development efforts depends largely upon various
arrangements with strategic partners and others who provide us with funding and
who perform research and development with respect to our products. Such
strategic partners may generally terminate their arrangement with us at any
time. These parties may develop products that compete with ours, and we cannot
be certain that they will perform their contractual obligations or that any
revenues will be derived from such arrangements. If one or more of our strategic
partners fail to achieve certain product development objectives, such failure
could have a material adverse effect on our ability to fund related programs and
develop products.
FAILURE TO OBTAIN PRODUCT APPROVALS OR COMPLY WITH GOVERNMENT REGULATIONS COULD
ADVERSELY AFFECT OUR BUSINESS
As pharmaceutical manufacturers, we as well as our partners, contract
manufacturers and suppliers are subject to extensive, complex, costly and
evolving governmental rules, regulations and restrictions administered by the
FDA, by other federal and state agencies, and by governmental authorities in
other countries. In the United States, our products cannot be marketed until
after they are approved by the FDA. Obtaining an FDA approval involves the
submission, among other information, of the results of preclinical and clinical
studies on the product, and requires substantial time, effort and financial
resources. Rituxan is our only product that has received FDA approval, and we
cannot be certain that ZEVALIN or any of our product candidates will be approved
either in the United States or in other countries in a timely fashion, if at
all. Both before and after approval, we, as well as our partners, contract
manufacturers and suppliers, are subject to numerous FDA requirements covering,
among other things, research and development, testing, manufacturing, quality
control, labeling and promotion of drugs, and to government inspection at all
times. Among the conditions for NDA or BLA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
on an ongoing basis with Good Manufacturing Practices, or GMP. Before approval
of a NDA or BLA, the FDA will perform a prelicensing inspection of the facility
to determine its compliance with GMP and other rules and regulations. After the
establishment is licensed for the manufacture of any product, manufacturers are
subject to periodic inspections by the FDA. Failure to meet or comply with any
rules, regulations or restrictions of the FDA or other agencies could result in
fines, unanticipated expenditures, product delays, non-approval or recall,
interruption of production and even criminal prosecution. Although we have
instituted internal compliance programs and continue to address compliance
issues raised from time-to-time by the FDA, we cannot be certain that we will
meet regulatory agency standards or that any lack of compliance will not have a
material adverse effect on our business, financial condition or results of
operations.
OUR BUSINESS EXPOSES US TO PRODUCT LIABILITY CLAIMS
Our design, testing, development, manufacture and marketing of products
involves an inherent risk of exposure to product liability claims and related
adverse publicity. Insurance coverage is expensive and difficult to obtain, and
we may be unable to obtain coverage in the future on acceptable terms, if at
all. Although we currently maintain product liability insurance for our products
in the amounts we believe to be commercially reasonable, we cannot be certain
that the coverage limits of our insurance policies or those of our strategic
partners will be adequate. If we are unable to obtain sufficient insurance at an
acceptable cost or if a claim is brought against us, whether fully covered by
insurance or not, our business, results of operations and financial condition
could be materially adversely affected.
WE MAY BE UNABLE TO RAISE ADDITIONAL CAPITAL OR TO REPURCHASE THE ZERO COUPON
SUBORDINATED CONVERTIBLE NOTES
We expend and will likely continue to expend substantial funds to complete
the research, development, manufacturing and marketing of our potential future
products. Consequently, we may seek to raise capital through collaborative
arrangements, strategic alliances, and/or equity and debt financings or from
other sources. We may be unable to raise additional capital on commercially
acceptable terms, if at all, and if we raise capital through equity financing
then existing stockholders may have their ownership interests diluted. If
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we are unable to generate adequate funds from operations or from additional
sources, then our business, results of operations and financial condition may be
materially and adversely affected.
If we undergo certain events constituting a change of control prior to
February 16, 2004, we will be obligated to repurchase all outstanding Notes at
the option of the holder. However, it is possible that we will not have
sufficient funds at that time, will not be able to raise sufficient funds, or
that restrictions in our indebtedness will not allow such repurchases. In
addition, certain major corporate events that would increase our indebtedness,
such as leveraged recapitalizations, would not constitute a change of control
under the Indenture entered into in connection with the offering of the Notes.
FUTURE TRANSACTIONS MAY ADVERSELY AFFECT OUR BUSINESS OR THE MARKET PRICE OF
SECURITIES
We regularly review potential transactions related to technologies,
products or product rights and businesses complementary to our business. Such
transactions could include mergers, acquisitions, strategic alliances,
off-balance sheet financings, licensing agreements or copromotion agreements. We
may choose to enter into one or more of such transactions at any time, which may
cause substantial fluctuations to the market price of securities that we have
issued. Moreover, depending upon the nature of any transaction, we may
experience a charge to earnings, which could also have a material adverse impact
upon the market price of securities that we have issued.
WE RELY UPON CERTAIN KEY PERSONNEL
Our success will depend, to a great extent, upon the experience, abilities
and continued services of our executive officers and key scientific personnel.
We do not carry key-man life insurance on any of our officers or personnel. If
we lose the services of any of these officers or key scientific personnel, we
could suffer a material adverse effect on our business, financial condition and
results of operations. Our success also will depend upon our ability to attract
and retain other highly qualified scientific, managerial, sales and
manufacturing personnel and our ability to develop and maintain relationships
with qualified clinical researchers. Competition for such personnel and
relationships is intense and we compete with numerous pharmaceutical and
biotechnology companies as well as with universities and non-profit research
organizations. We cannot be certain that we will be able to continue to attract
and retain qualified personnel or develop and maintain relationships with
clinical researchers.
WE ARE SUBJECT TO UNCERTAINTIES REGARDING HEALTH CARE REIMBURSEMENT AND REFORM
Our ability to commercialize products depends in part on the extent to
which patients are reimbursed by governmental agencies, private health insurers
and other organizations, such as health maintenance organizations, for the cost
of such products and related treatments. Our business, results of operations and
financial condition could be materially adversely affected if health care payers
and providers implement cost-containment measures and governmental agencies
implement healthcare reform.
OUR BUSINESS INVOLVES ENVIRONMENTAL RISKS
Our business and the business of several of our strategic partners,
including Genentech, involves the controlled use of hazardous materials,
chemicals, biologics and radioactive compounds. Biologics manufacture is
extremely susceptible to product loss due to microbial or viral contamination,
material equipment failure, or vendor or operator error. Although we believe
that our safety procedures for handling and disposing of such materials complies
with state and federal standards, there will always be the risk of accidental
contamination or injury. In addition, certain microbial or viral contamination
may cause the closure of the respective manufacturing facility for an extended
period of time. By law, radioactive materials may only be disposed of at state
approved facilities. We currently store our radioactive materials on-site
because the approval of a disposal site in California for all California-based
companies has been delayed indefinitely. If and when a disposal site is
approved, we may incur substantial costs related to the disposal of such
material. If liable for an accident, or if we suffer an extended facility
shutdown, we could incur significant costs, damages and penalties that could
have a material adverse effect on our business, financial condition and results
of operations.
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THE ZERO COUPON SUBORDINATED CONVERTIBLE NOTES LEVERAGE US CONSIDERABLY
As a result of issuing the Notes in February 1999, we raised approximately
$112.7 million, net of underwriting commissions and expenses of $3.9 million, by
incurring indebtedness of $345.0 million at maturity in 2019. As a result of
this indebtedness, our principal and interest obligations increased
substantially. The degree to which we are leveraged could materially adversely
affect our ability to obtain future financing and could make us more vulnerable
to industry downturns and competitive pressures. Our ability to meet our debt
obligations will be dependent upon our future performance, which will be subject
to financial, business and other factors affecting our operations, many of which
are beyond our control. The holders of the Notes may require us to purchase the
Notes on February 16, 2004, 2009, 2014 at a price equal to the issue price plus
accrued original issue discount to the date of purchase. We have the option to
repay the Notes plus accrued original issue discount in cash, our common stock
or a combination thereof. We have the right to redeem the Notes on or after
February 16, 2004.
In addition, in the event of our insolvency, bankruptcy, liquidation,
reorganization, dissolution or winding up or upon our default in payment with
respect to any indebtedness or an event of default with respect to such
indebtedness resulting in the acceleration thereof, our assets will be available
to pay the amounts due on the Notes only after all our senior indebtedness has
been paid in full. Moreover, holders of common stock would only receive the
assets remaining after payment of all indebtedness and preferred stock, if any.
WE HAVE ADOPTED SEVERAL ANTITAKEOVER MEASURES AND THE ZERO COUPON SUBORDINATED
CONVERTIBLE NOTES MAY HAVE FURTHER ANTITAKEOVER EFFECT
We have taken a numb