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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
Commission File Number: 0-19131
MEDIMMUNE, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1555759
State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or organization)
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
(Address of principal executive office)
(Zip Code)
Registrant's telephone number, including area code: (301) 417-0770
Securities Registered pursuant to Section 12(b) of the Act: None
Securities Registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 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 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 [ ].
Aggregate market value of the 248,493,923 shares of voting stock held by non-affiliates of the registrant based on the closing price
on March 14, 2002 was $10,449,169,462. Common Stock outstanding as of March 14, 2002: 249,915,151 shares.
Documents Incorporated by Reference:
Document Part of Form 10-K
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Proxy Statement for the Annual Meeting Part III
of Stockholders to be held May 23, 2002.
MEDIMMUNE, INC.
FORM 10-K
TABLE OF CONTENTS
PART I PAGE
Item 1. Business........................................................................................2
Item 2. Properties.....................................................................................42
Item 3. Legal Proceedings..............................................................................42
Item 4. Submission of Matters to a Vote of Security Holders............................................44
PART II
Item 5. Market for MedImmune, Inc.'s Common Stock and Related
Shareholder Matters............................................................................45
Item 6. Selected Financial Data........................................................................46
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................................48
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk...........................................................................................63
Item 8. Financial Statements and Supplementary Data....................................................65
Report of Independent Accountants..............................................................94
Report of Management...........................................................................95
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................................................96
PART III
Item 10. Directors and Executive Officers of MedImmune, Inc.............................................96
Item 11. Executive Compensation.........................................................................96
Item 12. Security Ownership Certain Beneficial Owners and
Management.....................................................................................96
Item 13. Certain Relationships and Related Transactions.................................................96
PART IV
ITEM 14. Exhibits, Financial Statement Schedule, and
Reports on Form 8-K............................................................................97
SIGNATURES.......................................................................................................98
Schedule I .............................................................................................S-1
Exhibit Index ..............................................................................................E-1
Exhibits (Attached to this Report on Form 10-K)
Synagis, CytoGam, Ethyol, RespiGam, and NeuTrexin are registered trademarks of the Company. Numax and Vitaxin are trademarks of the
Company. FluMist is a trademark of Aviron, a wholly owned subsidiary of MedImmune, Inc.
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The statements in this annual report that are not descriptions of historical facts may be forward-looking statements. Those
statements involve substantial risks and uncertainties. You can identify those statements by the fact that they contain words such
as "anticipate," "believe," "estimate," "expect," "intend," "project" or other terms of similar meaning. Those statements reflect
management's current beliefs, but are based on numerous assumptions which MedImmune cannot control and which may not develop as
MedImmune expects. Consequently, actual results may differ materially from those projected in the forward - looking statements.
Among the factors that could cause actual results to differ materially are: seasonal demand for and continued supply of the
Company's principal product, Synagis; whether FluMist receives clearance by the Food and Drug Administration and, if it does,
whether it will be successfully launched; availability of competitive products in the market; availability of third-party
reimbursement for the cost of our products; effectiveness and safety of our products; exposure to product liability, intellectual
property or other types of litigation; foreign currency exchange rate fluctuations; changes in generally accepted accounting
principles; growth in costs and expenses; the impact of acquisitions, divestitures and other unusual items; and the risks,
uncertainties and other matters discussed below under "Risk Factors" and elsewhere in this annual report and in our other periodic
reports filed with the U.S. Securities and Exchange Commission. MedImmune cautions that RSV disease occurs primarily during the
winter months; MedImmune believes its operating results will reflect that seasonality for the foreseeable future. MedImmune is also
developing several products (including FluMist) for potential future marketing. There can be no assurance that such development
efforts will succeed, that such products will receive required regulatory clearance or that, even if such regulatory clearance were
received, such products would ultimately achieve commercial success. Unless otherwise indicated, the information in this annual
report is as of December 31, 2001. This annual report will not be updated as a result of new information or future events.
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EXPLANATORY NOTE
Effective January 10, 2002, MedImmune, Inc. acquired Aviron through a stock-for-stock exchange offer and merger transaction that is
being accounted for as a purchase. Aviron is a biopharmaceutical company focused on prevention of disease through innovative vaccine
technologies. Aviron's lead product candidate is FluMist, a live, attenuated virus vaccine delivered as a nasal mist for the
prevention of influenza. A Biologic License Application relating to FluMist is currently pending before the U. S. Food and Drug
Administration.
The textual portion of this Annual Report on Form 10-K (i.e., Items 1 through 7A) gives effect to the Aviron acquisition and
describes the operations of Aviron as part of MedImmune's business. However, since the acquisition did not occur until January 2002,
MedImmune's Financial Statements and Supplementary Data as of and for the three years ended December 31, 2001 included in Item 8 of
this Annual Report only reflect the Aviron acquisition in Note 21 thereof entitled "Subsequent Event (unaudited)."
------------------------------
PART I Item 1. Business
MedImmune, Inc. (together with its subsidiaries, "MedImmune" or "the Company") was founded in 1988 and is a biotechnology company
headquartered in Gaithersburg, Maryland with five products on the market and a diverse product pipeline. The Company is focused on
using advances in immunology and other biological sciences to develop important new products that address significantly unmet
medical needs in areas of infectious disease and immune regulation. The Company also focuses on oncology through its wholly owned
subsidiary, MedImmune Oncology, Inc.
On December 3, 2001, MedImmune announced it had entered into a definitive agreement to acquire Aviron, a biotech company located in
Mountain View, California. The acquisition was completed in January 2002, at which point Aviron became a wholly owned subsidiary of
the Company ("Aviron").
In 1998, the Company launched Synagis (palivizumab) in the United States for preventing respiratory syncytial virus ("RSV") in
high-risk pediatric patients. Synagis was the first monoclonal antibody approved for an infectious disease and has become an
important new pediatric product for the prevention of RSV, the leading cause of viral pneumonia and bronchiolitis in infants and
children.
The Company also markets CytoGam (cytomegalovirus immune globulin intravenous (human)) and RespiGam (respiratory syncytial virus
immune globulin intravenous (human)). Through MedImmune Oncology's sales and marketing group, the Company markets Ethyol
(amifostine) and NeuTrexin (trimetrexate glucuronate for injection). The Company owns or leases five manufacturing facilities: a
multi-use biologics facility in Frederick, Maryland; a fill and finish facility in Nijmegen, the Netherlands; a pilot manufacturing
facility at its headquarters in Gaithersburg, Maryland; a filling and packaging plant in Philadelphia, Pennsylvania; and a bulk
supply facility in Speke, England.
Products on the Market
Synagis
Synagis is a humanized monoclonal antibody approved for marketing in June 1998 by the U.S. Food and Drug Administration ("FDA") for
the prevention of serious lower respiratory tract disease caused by RSV in pediatric patients at high risk of RSV disease. Synagis
is administered by intramuscular injection at 15 mg/kg and is given once per month during anticipated periods of RSV prevalence in
the community. In the Northern Hemisphere, the RSV season typically commences in October and lasts through April or May.
RSV is the most common cause of lower respiratory infections in infants and children worldwide. Healthy children and individuals
with adequate immune systems often acquire a benign chest cold when infected with RSV. In contrast, certain high-risk infants such
as premature infants and children with chronic lung disease ("CLD," also known as bronchopulmonary dysplasia or "BPD") are at
increased risk for acquiring severe RSV disease (pneumonia and bronchiolitis), often requiring hospitalization. Each year in the
United States, more than 125,000 infants are hospitalized with RSV disease. The mortality rate of hospitalized infants with RSV
infection of the lower respiratory tract is about two percent.
There are approximately 325,000 infants at high risk of acquiring severe RSV disease born annually in the United States. The pivotal
clinical trial for Synagis showed a 55-percent reduction in RSV hospitalizations among high-risk pediatric patients receiving
Synagis versus those patients receiving placebo. Synagis was safe and generally well tolerated, and the proportions of subjects in
the placebo and Synagis groups who experienced any adverse event or any serious adverse event were similar.
In December 1997, the Company formed an exclusive worldwide marketing alliance with Abbott Laboratories ("Abbott") to commercialize
Synagis. Within the United States, the Ross Products Division of Abbott co-promotes Synagis with the Company. The Company records
all United States sales and pays Abbott a commission on sales above defined annual thresholds. Each company is responsible for its
own selling expenses.
In 2001, the Company reported sales of $516 million of Synagis to wholesalers and distributors. In general, the Company expects most
of its Synagis sales to occur in the fourth and first quarters of the year because of the seasonality of RSV in the United States.
Since most of the product is expected to be sold in the Northern Hemisphere, the Company expects this seasonality to continue in the
foreseeable future.
The Company believes that Synagis was broadly reimbursed by third-party payors in the United States during the 2000-2001 RSV season
and the first part of the 2001-2002 RSV season. There can be no assurance that third-party payors will not attempt to restrict
reimbursement guidelines of Synagis in the remainder of the 2001-2002 RSV season or in future RSV seasons.
Outside the United States, the International Division of Abbott Laboratories has the exclusive right to distribute Synagis. The
Company manufactures and sells Synagis to Abbott for sales outside the United States. As of February 1, 2002, the Company and Abbott
had submitted regulatory applications requesting approval to market Synagis in 58 countries outside the United States and had
received approval in the 46 countries listed here: Argentina, Austria, Australia, Bahrain, Belgium, Brazil, Chile, Colombia, Costa
Rica, Czech Republic, Denmark, El Salvador, Finland, France, Germany, Greece, Guatemala, Honduras, Hong Kong, Hungary, Iceland,
Ireland, Israel, Italy, Japan, Jordan, Kuwait, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Nicaragua, Norway, Poland,
Portugal, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, United Kingdom, Uruguay, and Venezuela. On
January 17, 2002, Synagis was approved by the Japanese Ministry of Health, Labor, and Welfare. Net revenue to the Company from
Abbott recorded as product sales in 2001 for sales of Synagis outside of the United States was $37 million.
The Company has established a manufacturing alliance with German-based Boehringer Ingelheim Pharma KG ("BI") to supplement its own
capacity to manufacture Synagis. In September 1998, the FDA approved the Company's supplement to its Biologic License Application
("BLA") allowing the Company to import and sell in the United States product from the BI facility. In December 1999, the FDA
approved the Company's own 91,000 square foot manufacturing facility in Frederick, Maryland ("Frederick Manufacturing Center" or
"FMC"). This approval allowed the Company to begin distributing Synagis manufactured at this facility. In 2001, the Company received
additional approval from the FDA to begin marketing Synagis manufactured using a fermentation improvement, called the "Enhanced
Yield Process" (EYP), which improves Synagis fermentation yields by over 300 percent. Even with these yield improvements, the
Company will continue to rely upon BI for a portion of worldwide Synagis production for at least the next few years. BI produces
Synagis in large lot sizes relative to overall product supply; there can be no assurance that failure of one or more lots of Synagis
will not adversely impact the Company's supply of product and/or market perception. Additionally, because Synagis costs are affected
by changes in foreign exchange rates and production yields, there can be no assurance that Synagis will continue to be economical to
purchase from BI. Further, there can be no assurance that product supply will be properly matched with demand.
The Company is continuing to evaluate Synagis in post-marketing clinical trials. In 2001, the Company announced that patient
enrollment was complete in a multi-year Phase 3 safety and efficacy study in children under two years of age with congenital heart
disease ("CHD") and in a multi-year Phase 4 safety study in children with cystic fibrosis. On October 31, 2001, the Cooperative
Antiviral Studies Group ("CASG") at the National Institutes of Health ("NIH") informed the Company that it had discontinued its
Phase 3 study with Synagis in bone marrow transplant recipients due to a failure to accrue patients in a timely manner. There can be
no assurance that data from these clinical trials will establish the safety or efficacy of Synagis in these populations, or that
results from these trials will not adversely affect perceptions of Synagis in the marketplace.
The Company received a composition of matter patent protecting Synagis through October 20, 2015. Additional patent applications
which could provide even broader and longer protection are pending. Other than the Company's product RespiGam (see below), the
Company is not aware of any competing products being marketed anywhere in the world for the prevention of RSV disease. The Company
believes that any products being developed, if successfully commercialized, would require at least four years of clinical
development and regulatory approval prior to reaching the marketplace. Nevertheless, there can be no assurance that a competitive
product will not be brought to market sooner than expected, or if brought to market, would not be superior to Synagis.
The Company intends to continue to explore opportunities to expand its franchise in the RSV marketplace, including the development
of a third-generation injectable antibody, Numax, which may one day replace Synagis in the marketplace for the treatment of RSV. The
Company has identified the top three Numax candidates, and is currently evaluating them in animal models to determine which molecule
to take into clinical evaluation.
Ethyol
Ethyol is an intravenous organic thiophosphate cytoprotective agent indicated for the reduction of cumulative renal toxicity
associated with repeated administration of cisplatin in patients with advanced ovarian cancer or non-small cell lung cancer
("NSCLC"). It is also indicated for the reduction of the incidence of moderate-to-severe xerostomia in patients undergoing
post-operative radiation treatment for head and neck cancer, where the radiation port includes a substantial portion of the parotid
glands. Xerostomia (chronic dry mouth) is caused by a reduction of salivary function. It is a frequent and debilitating condition
associated with radiation to the head and neck region. Patients with xerostomia are at increased risk of oral infection, dental
cavities and loss of teeth and often have difficulty chewing, swallowing, and speaking. According to the American Cancer Society,
approximately 40,000 cases of head and neck cancer are diagnosed each year in the United States. Radiation therapy, often in
conjunction with surgery and/or chemotherapy, is standard treatment for head and neck cancer.
Ethyol was initially approved by the FDA in 1995 for the ovarian cancer indication. In 1996, the FDA approved MedImmune Oncology's
supplemental new drug application under the Accelerated Approval Regulations to include treatment of patients with NSCLC. Products
approved under the Accelerated Approval Regulations require further adequate and well-controlled studies to verify and describe
clinical benefit. In 2001, the Company completed a clinical trial that it anticipates may fulfill this requirement. In the event the
clinical trial fails to verify the benefit of Ethyol for the NSCLC indication, the FDA may, under certain circumstances, withdraw
approval of this indication. In 1999, the FDA approved Ethyol's use in head and neck cancer patients.
In 2001, the Company reacquired the U.S. marketing rights to Ethyol from ALZA Corporation ("ALZA"). The rights to Ethyol were
originally scheduled to return to the Company on April 1, 2002, pursuant to the 1995 co-promotion agreement between the two
companies whereby ALZA was responsible for sales and marketing of the product in the United States. Due to a shift in ALZA's
priorities following its acquisition by Johnson & Johnson in early 2001, the Company believed it was in the product's best interest
for the Company to regain full commercial control as soon as possible. As part of the accelerated reacquisition, the Company
recognized approximately $20 million of incremental expenses in the third quarter of 2001 and began recording 100 percent of U.S.
sales on October 1, 2001. In accordance with the original agreement, the Company will pay ALZA a gradually diminishing royalty
beginning April 1, 2002 and expiring in 2011. Net U.S. sales of Ethyol recognized by the Company in 2001 were $14 million.
Ethyol has been approved in 60 countries worldwide. Outside the United States, Ethyol is primarily marketed by affiliates of
Schering-Plough Corporation ("Schering" or "Scherico"). Schering purchases Ethyol from the Company at a price based on a percentage
of the net sales price of Ethyol in Germany, the United Kingdom, Spain, Italy and France. Schering's exclusive rights to market the
product in the European Union ("EU") will continue through December 31, 2003. At the end of the exclusive period, the Company can
choose to co-promote Ethyol with Scherico for an additional two years, after which the rights revert back to the Company in exchange
for future royalties. The Company has various other distribution and marketing arrangements for Ethyol outside the U.S. and the EU,
primarily with affiliates of Schering. In 2001, net revenues of Ethyol to the Company (recorded as product sales) from sales outside
the United States were $6 million.
The Company is continuing to evaluate Ethyol in its approved indications through post-marketing clinical trials. In November 2001,
investigators presented data from a Phase 2 study with subcutaneous Ethyol suggesting that subcutaneous administration of Ethyol may
provide comparable protective effects against radiation therapy-induced xerostomia as intravenously administered Ethyol. The Company
plans to expand the applicability and usefulness of Ethyol to potential new indications by conducting trials that evaluate its
ability to reduce mucositis in non-small cell lung cancer patients caused by radiation or chemotherapy. There can be no assurance
that data from these clinical trials will establish the efficacy of Ethyol in these populations, or that results from these trials
will not adversely affect the perception of Ethyol in the marketplace.
CytoGam
CytoGam is an intravenous immune globulin product enriched in antibodies against cytomegalovirus ("CMV") and is marketed for
prophylaxis against CMV disease associated with transplantation of kidney, lung, liver, pancreas, and heart. CMV contributes
significantly to morbidity and mortality in organ transplant recipients. CMV can cause severe pneumonia and other organ
complications related to invasive CMV disease which, if not successfully treated, can lead to organ failure. CMV has also been shown
to cause increased bacterial and fungal infections, and has been associated with an increased risk of rejection of the transplanted
organ. There are approximately 20,000 kidney, lung, liver, pancreas, and heart transplants performed annually in the United States.
Clinical studies have shown a 50-percent reduction in CMV disease in kidney transplant patients given CytoGam and a 56-percent
reduction in serious CMV disease in liver transplant patients given CytoGam. CytoGam prophylaxis has also been associated with
increased survival in liver transplant recipients.
In December 2000, the Company received approval from the FDA for an amendment to the BLA for CytoGam allowing for the manufacture of
a portion of the production process of CytoGam at the FMC. The Company will continue to rely on third-party manufacturers to fulfill
the production steps for which the Company does not have FDA approval. Should any of the suppliers or manufacturers be unable to
supply the Company with product for any reason, there can be no assurances that the Company would be able to arrange alternate
production capabilities in a timely fashion or at all. Further, there can be no assurance that should such alternate production
capabilities be needed, the Company would be able to obtain such capabilities for a comparable cost or without continuing to incur
its existing manufacturing operating costs.
The Company began marketing CytoGam in the U.S. through its own hospital-based sales force in 1993. Net sales of CytoGam in the U.S.
were $28 million in 2001, 13 percent below sales of $32 million in 2000. The variance reflects a reduction in 2001 in the amount of
CytoGam used as a substitute for standard intravenous immune globulin (IVIG), which had been in short supply in 2000. The Company
believes that, currently, there is not a shortage of standard IVIG and has no way to predict future supply shortages. Somewhat
offsetting the drop in substitution usage, CytoGam sales in 2001 reflect a modest increase in its approved, core transplantation
business. The Company believes the United States marketplace for CMV drugs in transplantation is competitive and no assurance can be
given that growth in the product's labeled indications will continue. CytoGam has been designated as an orphan drug for use in lung,
liver, pancreas and heart and therefore has market exclusivity for these indications until 2005. The product's orphan drug status in
the United States for use of CytoGam in kidney transplants expired in 1997. There can be no assurance that additional CMV
intravenous specialty immune globulin products will not be successfully commercialized by other companies.
Internationally, CytoGam is approved for marketing and is currently registered for sale in Argentina, Canada, Turkey and South
Korea. The product is also available on a named patient basis in other countries. Additionally, the Company is evaluating the
potential to expand distribution into countries in Europe and Mexico. Net sales of CytoGam outside the U.S. in 2001 were $4 million.
RespiGam
RespiGam, an intravenous immune globulin enriched in neutralizing antibodies against RSV, was approved by the FDA for marketing in
the United States in January 1996. RespiGam is indicated for the prevention of serious RSV disease in children less than 24 months
of age with BPD or a history of premature birth (i.e., born at 35 weeks or less gestation) and is administered by an approximately
four-hour intravenous infusion. RespiGam was the first product demonstrated to be safe and effective in reducing the incidence and
duration of RSV hospitalization and the severity of RSV illness in these high-risk infants. The Company believes that RespiGam has
largely been replaced by Synagis in the marketplace. In 2001, net sales of RespiGam were $4 million.
NeuTrexin
NeuTrexin is a lipid-soluble, intravenously administered analog of methotrexate, a commonly used anti-cancer agent. In December
1993, NeuTrexin was approved in the United States and Canada for use with concurrent leucovorin administration as an alternative
therapy for the treatment of moderate-to-severe Pneumocystis carinii pneumonia ("PCP") in immunocompromised patients, including
patients with AIDS, who are intolerant of or refractory to, trimethoprim-sulfamethoxazole therapy, or for whom
trimethoprim-sulfamethoxazole is contraindicated. Due to the improvement in drugs to treat AIDS patients, worldwide use of NeuTrexin
has steadily declined in recent years. In 2001, net sales of NeuTrexin were $4 million.
Hexalen
Hexalen is an oral synthetic cytotoxic antineoplastic chemotherapeutic agent cleared for marketing by the FDA in December 1990 for
use as a single agent in the palliative treatment of patients with persistent or recurrent ovarian cancer following first-line
therapy with cisplatin and/or alkylating agent-based combination chemotherapy. In November 2000, MedImmune Oncology signed an
agreement to sell to MGI Pharma ("MGI") worldwide rights to Hexalen and all related assets and technology. MGI assumed product
responsibilities early in 2001. Under the terms of the agreement, MGI will pay the Company $7.2 million in cash plus royalties on
sales of Hexalen for ten years. The $7.2 million is being paid to the Company over 18 months, ending in March 2002.
Development-Stage Products
FluMist (Frozen)
FluMist was acquired by MedImmune as a part of the Company's acquisition of Aviron in January of 2002. FluMist is a live, attenuated
vaccine delivered as a nasal mist for the prevention of influenza. The BLA for FluMist was submitted to the FDA for approval on
October 31, 2000. Aviron received a Complete Response Letter from the FDA on August 31, 2001, and filed its response to this letter
on January 8, 2002. The Company is working to achieve approval of the product. There can be no assurance that such approval will be
received.
FluMist is based on live cold-adapted influenza vaccine technology developed by Dr. H.F. Maassab. It was licensed from the
University of Michigan and is being developed under a Cooperative Research and Development Agreement (CRADA) with the National
Institutes of Health (NIH).
FluMist has undergone, and is currently undergoing, extensive clinical trials to evaluate its usefulness as a vaccine to prevent
influenza in a number of human populations. To date, more than 20,000 children and adults have received FluMist. In studies that
have been published thus far, FluMist has been shown to provide a high protection rate against influenza in healthy children and
adults. In these studies, FluMist was shown to be generally well tolerated. FluMist recipients were more likely than placebo
recipients to report side effects, which were transitory in nature, such as sore throat, runny nose, and low-grade fever.
As a part of its response to the FDA's Complete Response Letter, Aviron provided data from two large Phase 3 clinical trials with
FluMist. The first study was a multi-year trial, involving more than 9,000 children, conducted by Aviron and the NIH. The trial was
initiated in 1998 in Temple, Texas and was funded by a $3.0 million grant from the NIH awarded to the Baylor College of Medicine.
The trial was designed to evaluate the impact of vaccinating preschool and school-age children with FluMist on the spread of
influenza into the community as measured by the number of doctor visits for flu-related illness as well as to examine the safety of
FluMist. The second Phase 3 trial completed in 2001 was one initiated by Kaiser Permanente in October 2000. In this trial, more than
9,700 participants, age one to 17 years, were enrolled during the 2000-2001 influenza season to compare the rates of different
medically attended events in the group receiving FluMist versus the group receiving placebo. There can be no assurance that data
from these clinical trials, or any future clinical trials, will establish the safety or efficacy of FluMist.
The manufacturing of FluMist involves three key processes, which since 1998, have been performed at three facilities owned or leased
by the Company's Aviron subsidiary. Each year, after the FDA's annual selection of the influenza strains to be included in the
subsequent season's vaccine, the master virus seeds are created for each of the selected vaccine strains for large scale production.
This first step is conducted at Aviron's Mountain View, California facility, and generally takes approximately four to 12 weeks.
Next, these master virus seeds are transferred to Aviron's leased facility in Speke, England, where they are used to make bulk
quantities of the vaccine strains. The vaccine's diluent, which is normal allantoic fluid ("NAF"), is also produced in bulk at this
U.K. facility. This process requires the use of specific pathogen-free hens' eggs. After an incubation period, the bulk vaccine
strains are carefully harvested from the eggs, frozen and shipped to Aviron's leased Pennsylvania facility. Once in Pennsylvania,
the frozen bulk vaccine strains and the frozen bulk NAF are thawed and blended into the trivalent vaccine, filled into nasal spray
devices, labeled, and packaged. As of December 31, 2001, none of the existing manufacturing facilities involved in the production of
FluMist had been licensed by any regulatory agency and FluMist had not yet been manufactured at a sustained commercial scale. There
can be no assurance that these facilities can achieve licensure by the FDA or any other regulatory agency. Nor can there be any
assurances that if licensed, commercial scale production can be achieved or sustained.
In January 1999, Aviron signed a worldwide collaborative agreement with Wyeth Lederle Vaccines for the development, manufacturing,
distribution, marketing, promotion, and sale of FluMist. Under this agreement, Wyeth has exclusive worldwide rights to market
FluMist, excluding Korea, Australia, New Zealand and some South Pacific countries. The two companies will co-promote FluMist in the
United States. Under the terms of the agreement, Wyeth will distribute FluMist and record all product sales. The Company will
receive approximately 50 percent of FluMist revenues, paid to the Company in the form of product transfer payments and royalties.
These payments are higher in the U.S. than internationally.
The FDA has estimated that approximately 80 million doses of the current inactivated influenza vaccine were manufactured for use in
the U.S. for the 2000/2001 influenza season. According to the U.S. Centers for Disease Control, 65 percent of the 35 million
Americans over the age of 64 received the influenza vaccine shot during 1997, up from less than 25 percent a few years earlier.
Experts suggest that very few of the 75 million children in the United States under age 19 receive the influenza vaccine, even those
at high risk for complications. Given FluMist's ease of administration, the Company believes this already large market has the
potential to grow substantially larger, primarily through expansion in the pediatric and adolescent markets.
Cold Adapted Influenza Vaccine (Liquid Formulation)
The original formulation of FluMist requires freezer storage throughout distribution. Because many international markets do not have
distribution channels well suited to the sale of frozen vaccines, Wyeth and Aviron are collaborating to develop a second generation,
refrigerator stable, liquid trivalent cold adapted influenza vaccine (CAIV-T).
Currently, there are a number of late-stage clinical trials being conducted to demonstrate the safety and efficacy of CAIV-T. In
2001, Wyeth completed a Phase 2 clinical trial of CAIV-T in more than 1,300 children in the southern hemisphere to demonstrate the
safety and immunogenicity of this formulation.
In addition, Wyeth is conducting several Phase 3 clinical trials with liquid CAIV-T:
o a Pan-Asian efficacy trial enrolled more than 3,000 participants from 12 to 36 months of age. The primary endpoint is
protection against culture-confirmed influenza.
o a Pan-European pediatric day care efficacy trial enrolled more than 1,500 children in day care from 6 to 36 months of age.
The primary endpoint is protection against culture-confirmed influenza.
o an efficacy trial in healthy elderly over 60 years of age in South Africa. The primary endpoint is protection against
culture confirmed influenza.
There can be no assurance that data from these clinical trials, or any future clinical trials, will establish the safety or efficacy
of CAIV-T.
Human Papillomavirus Vaccine
The Company is developing a vaccine against the human papillomavirus ("HPV") to prevent cervical cancer. There are over 75 different
types of HPV associated with a variety of clinical disorders, ranging from benign lesions to potentially lethal cancers. Two types
of HPV, HPV-16 and HPV-18, cause the majority of cervical cancer in the world. There are currently no vaccines to prevent HPV
infection, which is estimated to affect 24 to 40 million men and women in the United States.
In December 1997, the Company entered into a strategic alliance with GlaxoSmithKline ("GSK") to develop and commercialize the
Company's HPV vaccine. Under the terms of the agreement, GSK receives exclusive worldwide rights to the Company's HPV vaccine
technology and both companies will collaborate on research and development activities. To date, the Company has received a total of
$39.5 million in up-front payments, an equity investment, and research funding from GSK. Pursuant to the agreement, the Company will
continue to receive certain research funding, milestone payments (if specified development and sales goals are met), and royalties
on any product sales. Total funding and payments to the Company, exclusive of royalties, could total over $85 million.
Under the terms of the agreement, the Company conducted Phase 1 and Phase 2 clinical trials, manufactured clinical material for
those studies and received funding from GSK for these activities. GSK is responsible for the final development of the product, as
well as regulatory, manufacturing, and marketing activities.
The Company's strategy for this vaccine development relies on a virus-like particle ("VLP") technology for producing a structurally
identical, non-infectious form of the virus. Scientists at the Company, in collaboration with a team at Georgetown University, first
demonstrated the effectiveness of a VLP vaccine candidate using a dog model for papillomavirus infection.
In 2001, GSK and the Company completed enrollment in five clinical trials with this vaccine, including a Phase 1 trial, three Phase
2 trials, and a 3,000-person epidemiology trial. The Company hopes that data from these trials once completed and analyzed, will
help support the initiation of Phase 3 clinical testing.
No assurance can be given that the current clinical trials or any future clinical trials will be successful, or if successful, would
lead to a continuation of the programs in the indications currently studied or at all.
Siplizumab (formerly known as MEDI-507)
Siplizumab is a humanized monoclonal antibody that binds to the CD2 antigen receptor found on T cells and natural killer ("NK")
cells. Laboratory studies suggest that siplizumab primarily inhibits the response of T cells through its binding of the CD2 receptor
while allowing other immune cells to respond normally to foreign antigens. This suggested selectivity of T cell inhibition suggests
that siplizumab may have potential utility in certain autoimmune diseases such as psoriasis and psoriatic arthritis, as well as in
applications in the fields of transplant medicine (e.g., as a treatment or prevention of graft-versus-host disease ("GvHD")) and
cancer (e.g., as a treatment for T cell lymphoma).
The Company's current lead development program for siplizumab is in psoriasis. In 2001, MedImmune completed enrollment in three
large Phase 2 trials: a randomized, double-blind, placebo-controlled, subcutaneous administration trial involving 420 patients at 44
sites in North America; a randomized, double-blind, placebo-controlled, intravenous administration trial involving 124 patients at
approximately 25 sites in North America; and a randomized, double-blind, subcutaneous administration trial involving 121 patients at
approximately 20 sites in Europe.
Data from MedImmune's Phase 1 program were presented in September 2001 at the European Society of Dermatology Research meeting held
in Stockholm, Sweden, which built upon the preliminary data presented in San Francisco in June 2001 at the International Psoriasis
Symposium and European Congress on Psoriasis. The updated data provided longer-term safety analysis for two trials using intravenous
administration, as well as clinical data from a subcutaneously administered trial. Overall in these studies, siplizumab was found to
be generally well tolerated, and was shown to improve psoriatic disease as measured by PASI (Psoriasis Area and Severity Index)
score given either through intravenous or subcutaneous administration. The follow-up of patients in the Phase 1 program was
consistent with the preliminary safety and clinical results, and showed that improvement in patients' psoriasis appears to be
durable after completion of treatment at least through the initial three-month follow-up period in these trials.
Autoimmune diseases are of major medical importance worldwide and include common afflictions such as rheumatoid arthritis, multiple
sclerosis, Crohn's disease, psoriatic arthritis and psoriasis. Psoriasis is a common chronic, recurrent disease characterized by
dry, scaling, red lesions on the skin. Approximately six million Americans have psoriasis with between 150,000 and 260,000 new cases
reported each year. There is no cure for psoriasis and the treatments are often inconvenient, difficult to use, or have unwanted
side effects.
Siplizumab was derived from BTI-322, a rat monoclonal antibody the Company licensed from BioTransplant Incorporated
("BioTransplant") in 1995. Under the terms of the agreement with BioTransplant, the Company is responsible for all activities
related to commercialization. BioTransplant will receive milestone payments at various stages of product development and royalties
if the product is commercialized. BioTransplant has retained the right to use BTI-322 and/or siplizumab in its proprietary
ImmunoCognance systems. BTI-322 is a registered trademark of BioTransplant.
No assurance can be given that the current clinical trials or any future clinical trials will be successful, or if successful, would
lead to a continuation of the programs in the indications currently studied or at all.
Urinary Tract Infection Vaccine
The Company is developing a vaccine candidate to prevent urinary tract infections ("UTIs") caused by Escherichia coli ("E. coli"), a
bacteria that causes 85 percent of all UTIs. UTIs are a significant medical problem and one of the most common disorders prompting
medical attention in otherwise healthy women and children. Retrospective data indicate that 40 percent of adult women in the United
States experience at least one UTI sometime during their lifetime and more than 20 percent experience recurrent infection. UTIs
result in more than 7 million physician and hospital visits per year at an estimated annual healthcare cost of greater than $1
billion. Older adults are also at risk with the incidence as high as 33 out of 100 people. Currently, there are no vaccines to
prevent UTIs. Most infections can be treated with antibiotics; however, recurrence is common and emerging antibiotic resistant
bacteria create an additional threat.
Early attempts to create a vaccine against UTIs targeted pili, hair-like protein appendages on the surface of bacteria. Such
attempts were not successful in protecting against a broad range of pathogenic bacteria, including E. coli, because of the
strain-to-strain variation in the major component of the pili. The identification of specific proteins, or "adhesins," at the end of
pili that facilitate the attachment of E. coli to human tissue, provided a novel target for vaccine development. The Company's
vaccine strategy is based on blocking these adhesins, thus preventing the disease-causing bacteria from binding and accumulating in
the bladder. The novel target of the Company's vaccine candidate is the FimH adhesin. FimH does not vary widely among the different
strains of E. coli that cause UTIs. The Company believes this is a requisite quality for development of a broadly effective UTI
vaccine.
During 2001, the Company completed enrollment in two Phase 2 clinical trials with its UTI vaccine: a 93-patient study in woman with
recurrent infection and a 305-patient study in women at risk of initial infection. No assurance can be given that these clinical
trials, or any future clinical trials will be successful, or if successful, would lead to a continuation of the programs in the
indications currently studied or at all.
Epstein Barr Virus Vaccine
The Company's Aviron subsidiary is developing a subunit vaccine against the Epstein Barr virus ("EBV"), a herpes virus that is the
leading cause of infectious mononucleosis ("mono"). This vaccine is based upon the single surface antigen apparently responsible for
most of the neutralizing antibodies stimulated by a natural EBV infection. In 1995, Aviron entered into a worldwide collaboration
with GlaxoSmithKline, excluding Korea, whereby GSK funds the development of the EBV vaccine in exchange for marketing rights. A
Phase 1 clinical study conducted by GSK in Europe showed that the vaccine was safe, well tolerated and showed evidence of an immune
response in vaccine recipients. In 2001, GSK conducted a Phase 1/2 trial in Europe in healthy adults. No assurance can be given that
this clinical trial, or any future clinical trials will be successful, or if successful, would lead to a continuation of the
development program for the current indication, or at all.
Mononucleosis affects most people. Infection at a young age may cause mild symptoms, but the most debilitating symptoms appear to
take place when infection first occurs in adolescence or young adulthood. Sore throat and swollen neck glands are followed by a
period of fatigue and lethargy which can last for weeks or even months. Many high school and college students become infected with
EBV each year in the United States, of which half or more may develop mono. The disease usually runs its course without significant
medical intervention; however, the long duration of mono can be a serious problem for high school and college students as well as
workers. No vaccine is currently available for EBV. Mono affects an estimated 250,000 young adults in the United States and Europe
annually. Studies of the U.S. population indicate that approximately 90 percent of adults have been infected with EBV.
Vitaxin
The Company is developing Vitaxin, an anti-angiogenic monoclonal antibody product, for potential use in both cancer and non-cancer
indications. Angiogenesis is the growth of new blood vessels, which in many situations is a welcome biological activity. However, in
certain diseases, such as cancer and rheumatoid arthritis, angiogenesis is an undesired event that can enhance the progression of
the disease. For example, certain solid tumors secrete growth factors that stimulate the angiogenic properties of endothelial cells.
These cells use a family of proteins called integrins to adhere to the surrounding tissue, allowing the new blood vessels to
continue their growth toward the tumor. Such new blood vessels are believed to supply the tumor nutrients and oxygen, as well as a
pathway for metastasizing to other organs. The Company believes that Vitaxin may offer a way to block the growth of new blood
vessels by binding to specific integrins, called alpha-v beta-3, found on newly sprouting blood vessels, vascular smooth muscle
cells, monocytes, macrophages, and osteoclasts.
In 1999, the Company acquired the worldwide rights to Vitaxin from Applied Molecular Evolution, Inc ("AME"), a biopharmaceutical
company engaged in the development of novel therapeutics. Pursuant to this agreement, the Company is responsible for clinical
development, manufacturing and commercialization of Vitaxin, will fund certain research to be performed by AME and will make future
milestone and royalty payments on sales of any resulting products.
During 2001, the Company initiated three important Phase 1 and Phase 1/2 trials in cancer and non-cancer indications. In March, the
Company initiated a non-randomized, open-label, dose-escalating Phase 1 pharmacokinetic study in 24 patients with refractory solid
tumors. In July, the Company initiated a Phase 1/2 open-label, single-center, dose escalation cancer study in up to 40 patients with
advanced colorectal cancer. Finally, in August, the Company announced that dosing had begun in a Phase 1 randomized, double-blind,
placebo-controlled, dose escalation trial in patients with rheumatoid arthritis, being conducted at eight sites in the U.S. and
Canada.
In 2001, the Company also signed a research and development agreement with Targesome, Inc., a private biotechnology company, to
evaluate the potential of combining Vitaxin with Targesome's proprietary nanoparticle technology. The combination could generate a
targeted nanoparticle capable of delivering a payload of a therapeutic or imaging agent for the treatment and/or diagnosis of
cancer. The goal is to create a new type of antibody therapy that could target the specific site on the endothelial cells expressing
alpha-v beta-3, and deliver a cytotoxic agent that may directly kill the new blood vessels and adjacent tumor cells. No assurance
can be given that any future clinical trials will be successful, or if successful, would lead to a continuation of the programs in
the indications currently studied or at all.
Numax
The Company intends to continue to expand its franchise in RSV prophylaxis by developing a third-generation anti-RSV product that
may be more potent than Synagis. Such a product may allow the Company to improve compliance, efficacy and patent position, thereby
further protecting its position in the RSV marketplace. The Company developed several variants of Synagis in 2000 that were at least
ten times more potent than Synagis in microneutralization studies. In 2001, the Company identified the top three Numax candidates,
and is currently evaluating them in animal models to determine which molecule to take into clinical evaluation.
No assurance can be given that any preclinical development or future clinical trials will be successful, or if successful, would
lead to a continuation of the programs in the indications currently anticipated or at all.
Anti-IL-9
MedImmune is attempting to develop therapeutics targeting IL-9 to prevent symptoms of asthma and other respiratory diseases. IL-9 is
implicated in the pathogenesis of asthma and may contribute to other respiratory disorders including chronic obstructive pulmonary
disease (COPD) and cystic fibrosis. Biopsies from asthmatic patients have shown an increase in expression of IL-9 as compared to
healthy individuals. Published findings, highlighting the central role of IL-9 in asthma, demonstrate its contribution to certain
clinical features including bronchial hyper-responsiveness, mucin production and eosinophil up-regulation in animal models and in
patients.
In 2001, the Company entered into a research collaboration and a worldwide exclusive licensing agreement with Genaera Corporation to
develop and commercialize antibodies or recombinant molecules targeting IL-9 and blocking interaction with its receptor. Pursuant to
the agreement, the companies will collaborate on the creation of specific assays and respiratory disease models for use in assessing
product candidates developed by MedImmune. MedImmune will be responsible for development, manufacturing, clinical testing, and
marketing of any resulting product.
No assurance can be given that any preclinical development or future clinical trials will be successful, or if successful, would
lead to a continuation of the programs in the indications currently anticipated or at all.
Anti-EphA2
During 2001, the Company licensed EphA2 technology from Purdue Research Foundation. EphA2 is a protein normally expressed at low
levels on most epithelial cells. However, when over-expressed, EphA2 acts as a tumor-causing protein. Preliminary studies indicate
that it is the over-expression of EphA2 that subverts normal regulation of cell growth, which then leads to tumor cell growth and
metastases. Further, these studies show that the introduction of an antibody targeting EphA2 may allow the restoration of this cell
growth regulation or induce cell killing.
Under the agreement, MedImmune is responsible for developing, manufacturing and commercializing therapeutics that target EphA2. Any
such product will potentially be used to treat a variety of aggressive tumors, including breast, colon, prostate, lung and skin
cancers, as well as to prevent metastasis. As a part of the agreement, Purdue will receive certain upfront payments and future
milestones and royalty payments on sales of any resulting products.
No assurance can be given that any preclinical development or future clinical trials will be successful, or if successful, would
lead to a continuation of the programs in the indications currently anticipated or at all.
Other Products
The Company and its subsidiaries continue to work on feasibility studies in a number of other areas, including the evaluation of
vaccines to prevent cytomegalovirus, parainfluenza virus-3 and respiratory syncytial virus. Any of these programs could become more
significant to the Company over the next 12 months; however, there can be no assurance that any of the new programs under review
will generate viable product opportunities. The Company may choose to address new opportunities for future growth in a number of
ways including, but not limited to, internal discovery and development of new products, in-licensing of products and technologies,
and/or merger or acquisition of companies with products and/or technologies. Any of these activities may require substantial capital
investment.
Products and Product Development Programs
The following table, sorted by stage of development, describes the Company's marketed and development-stage products.
MARKETED PRODUCTS
Synagis Used to prevent RSV disease in pediatric patients at high risk of RSV disease
CytoGam Used to prevent CMV disease associated with transplantation of kidney, lung, liver,
pancreas and heart
Ethyol A cytoprotective agent used to reduce: (1) the cumulative renal toxicity associated
with repeated administration of cisplatin in patients with advanced ovarian cancer or
non-small cell lung cancer; and (2) the incidence of moderate-to-severe xerostomia in
patients undergoing post-operative radiation treatment for head and neck cancer where
the radiation port includes a substantial portion of the parotid glands
RespiGam Used to prevent serious RSV disease in infants with prematurity or lung disease
NeuTrexin Used with concurrent leucovorin as an alternative treatment of moderate-to-severe
Pneumocystis carinii pneumonia in immunocompromised patients who are intolerant of, or
refractory to, trimethoprim-sulfamethoxazole therapy or for whom
trimethoprim-sulfamethoxazole is contraindicated
REGULATORY REVIEW
FluMist (frozen) A potential live, attenuated, cold-adapted influenza vaccine delivered by nasal mist
PHASE 4
- -------
Synagis Potential prophylactic against RSV disease in children under 2 years of age with
cystic fibrosis
PHASE 3
- -------
FluMist (Liquid) A liquid formulation for a potential live, attenuated, cold-adapted influenza vaccine
delivered by nasal mist
Synagis Potential prophylactic against RSV disease in children under 2 years of age with
congenital heart disease
Ethyol Potential cytoprotectant against nephrotoxicity associated with the administration of
cisplatin/vinblastine in patients with non-small cell lung cancer
Ethyol Potential prevention of hematologic and neurologic toxicities associated with the
administration of carboplatin/paclitaxel in patients with non-small cell lung cancer
Ethyol Potential prevention of mucositis associated with combined chemotherapy and radiation
therapy in non-small cell lung cancer patients
PHASE 2
- -------
Siplizumab A potential treatment for psoriasis
Urinary tract A potential vaccine to prevent urinary tract infections caused by E. coli
infection vaccine
Human A potential vaccine to prevent cervical cancer
papillomavirus
Vaccine
Epstein Barr virus A potential vaccine to prevent illness caused by the Epstein Barr virus.
vaccine
PHASE 1
- -------
Vitaxin A potential anti-angiogenic product that could be used to eliminate or impede the
advancement of certain solid tumors and/or metastasis
Vitaxin A potential rheumatoid arthritis therapy
CMV vaccine A potential vaccine to prevent cytomegalovirus disease
PRECLINICAL
- -----------
Numax A potential prophylactic to prevent RSV disease in high risk populations
Anti-IL-9 Potential asthma therapeutic
Anti-EphA2 Potential therapy for solid tumors and preventation of metastasis
PIV-3/RSV vaccine A potential vaccine to prevent parainfluenza virus type 3 and respiratory syncytial
virus
Siplizumab A potential treatment for psoriatic arthritis
Siplizumab A potential treatment for T cell lymphoma
Pneumococcal A potential vaccine to prevent Streptococcus pneumoniae
vaccine
Marketing, Research, Development and Collaborative Agreements
The Company's internal research programs are augmented by collaborative projects with a number of scientific partners. As part of
its strategy, the Company has established alliances with pharmaceutical and other biotechnology companies, academic scientists and
government laboratories. Its principal strategic alliances are listed below.
Abbott Laboratories
In December 1997, the Company entered into two agreements with Abbott Laboratories ("Abbott"). The first agreement calls for Abbott
to co-promote Synagis in the United States in exchange for a percentage of net sales in excess of annual sales thresholds. Each
company is responsible for its own selling expenses.
The second agreement allows Abbott to exclusively distribute Synagis outside the United States. The Company manufactures and sells
Synagis to Abbott at a price based on end-user sales. As of February 1, 2002, the Company and Abbott had submitted a total of 58
regulatory applications for approval to market Synagis and have received approval in the United States as well as 46 foreign
countries. No assurance can be given that any of the remaining applications submitted or any future submissions to any other
countries for marketing licensure will be approved in a timely manner or at all.
Wyeth (formerly American Home Products Corporation)
In January 1999, Aviron signed a worldwide collaborative agreement with Wyeth Lederle Vaccines, a subsidiary of Wyeth, for the
development, manufacturing, distribution, marketing, promotion, and sale of FluMist. Under this agreement, Wyeth has exclusive
worldwide rights to market FluMist, excluding Korea, Australia, New Zealand and some South Pacific countries. The two companies will
co-promote FluMist in the U.S. Wyeth holds the marketing rights for an initial term of seven years from the first commercial sale of
FluMist in the U.S. and an initial term of eight years from the first commercial sale of FluMist outside the U.S., with an option to
extend its rights both in the U.S. and internationally for an additional four years. Extending both U.S. and international rights
trigger payments to the Company in excess of $140 million.
Under the terms of the collaborative agreement with Wyeth, the two companies are to collaborate on the regulatory, clinical and
marketing programs for FluMist. As a part of the collaboration, the Company is to receive certain payments related to the
achievement of key milestones and events for FluMist. In January 2001, Aviron received $15.5 million from Wyeth related to the
acceptance by the FDA for the filing of the BLA for FluMist on December 28, 2000. Should the product be approved in the U.S., the
Company will receive a $20 million milestone payment from Wyeth. Other potential milestone payments to the Company from Wyeth
include: $20 million for advisory body recommendations and expanded label claims; $10 million for the submission of a license
application in Europe; a $27.5 million payment for the approval of a liquid formulation of FluMist and up to $50 million upon
licensure in international regions. Compensation for achieving additional development, supply and regulatory milestones is also
included in the collaboration agreement and may total up to an additional $67.5 million. The total potential value for the license
fees, milestones, financing support and term extension options that the Company could receive from Wyeth could exceed $400 million.
Under the terms of the agreement, Wyeth will distribute FluMist and record all product sales. The Company will receive approximately
50 percent of FluMist revenues, paid in the form of product transfer payments and royalties. These payments are higher in the U.S.
than internationally. The Company incurs expenses to manufacture, supply and co-promote FluMist. Wyeth shares in the product's
clinical development expenses and has agreed to spend up to $100 million for advertising and promotion of FluMist over the first
three years of commercialization in the United States.
The Company also had a strategic alliance with American Cyanamid Company, which was later acquired by American Home Products, which
is now called Wyeth, that provided for the co-development and co-promotion of RespiGam by the two companies. The agreement, entered
into in November 1993 and amended in October 1995, provided for Wyeth to fund a portion of the cost of the development of RespiGam
and to co-promote the product in the United States. Wyeth shared in the profits and losses of RespiGam in the United States. The
alliance provides for the Company to receive royalties on any sales of Wyeth's RSV subunit vaccine candidate, and for Wyeth to
receive royalties on United States sales of Synagis.
Pursuant to an amendment to the agreement signed in December 1999, Wyeth's obligation to co-promote RespiGam in the United States
was terminated. In addition, Wyeth no longer shares in any profits or losses of RespiGam in the United States; the royalty
obligations for Synagis and Wyeth's RSV subunit vaccine candidate remain unchanged.
GlaxoSmithKline
In December 1997, the Company entered into a strategic alliance with GlaxoSmithKline PLC ("GSK") to research, develop, manufacture
and commercialize therapeutic and prophylactic HPV vaccines. In exchange for exclusive worldwide rights to the Company's HPV
technology, GSK provided the Company with an up-front payment of $15 million, future funding and potential developmental and sales
milestones which together could total over $85 million, royalties on any product sales and an equity investment of $5 million. Under
the terms of the agreement, the companies have collaborated on research and development activities. The Company conducted Phase 1
and Phase 2 clinical trials and manufactured clinical material for those studies. GSK is responsible for the final development of
the product, as well as regulatory, manufacturing, and marketing activities.
In July 2000, the Company granted GSK a worldwide, exclusive license to its Streptococcus pneumoniae vaccine technology in exchange
for an up-front payment and future milestones totaling more than $30 million, plus royalties on product sales. Under the terms of
the agreement, GSK is responsible for all clinical development, manufacturing and sales and marketing activities for the S.
pneumoniae vaccine. The Company completed the technology transfer to GSK in late 2000. The technology licensed to GSK was originally
licensed from Human Genome Sciences, Inc. and St. Jude's Childrens Research Hospital.
In October 1995, Aviron signed an agreement with GSK to collaborate on its Epstein-Barr virus vaccine technology. Under the terms of
the agreement, GSK was granted an exclusive license to produce, use and sell non-live EBV (sub unit) vaccines incorporating our
technology for prophylactic and therapeutic uses on a worldwide basis, except in Korea, in exchange for an up-front payment, future
milestone payments and royalties. In addition, GSK obtained a right of first refusal to an exclusive, worldwide license, excluding
Korea, under any intellectual property rights relating to any live EBV vaccine technology developed or controlled by Aviron during
the term of this agreement. Aviron retained the right to co-distribute a monovalent formulation of the EBV vaccine in the United
States and to have GSK supply the vaccine. GSK agreed to fund Aviron's research and development efforts related the EBV vaccine in
specified minimum amounts during the first two years of the agreement. Unless otherwise terminated, this agreement will expire on a
country-by-country basis upon the expiration or invalidation of the last remaining patent covered by the agreement or 10 years from
the date of first commercial sale of the vaccine, whichever is later. GSK may terminate the agreement with respect to any country at
any time.
ALZA Corporation
MedImmune Oncology acquired U.S. marketing rights to Ethyol from ALZA Corporation, effective October 1, 2001. The rights to Ethyol
were originally scheduled to return to MedImmune Oncology on April 1, 2002, pursuant to the December 1995 co-promotion agreement
between the two companies whereby ALZA was responsible for sales and marketing of the product in the United States. In accordance
with the original agreement, MedImmune Oncology will pay ALZA a gradually diminishing royalty beginning April 1, 2002 until 2011.
BioTransplant, Inc.
In October 1995, the Company and BioTransplant, Inc. ("BTI") formed a strategic alliance for the development of products to treat
and prevent organ transplant rejection. The alliance is based upon the development of products derived from BTI's anti-CD2 antibody,
BTI-322, the Company's anti-T cell receptor antibody, MEDI-500, and future generations of products derived from these two molecules
(such as siplizumab, or humanized BTI-322). Pursuant to the alliance, the Company received an exclusive worldwide license to develop
and commercialize BTI-322 and any products based on BTI-322, with the exception of the use of BTI-322 in kits for
xenotransplantation or allotransplantation. The Company has assumed responsibility for clinical testing and commercialization of any
resulting products. The Company's clinical development efforts are focused on siplizumab. BTI may receive milestone payments which
could total up to an additional $11 million, as well as royalties on any sales of BTI-322, MEDI-500, siplizumab and future
generations of these products, if any.
Massachusetts Health Research Institute and Massachusetts Biologics Laboratories
In August 1989 and April 1990, the Company entered into a series of research, supply and license agreements with Massachusetts
Health Research Institute ("MHRI") and Massachusetts Public Health Biologics Laboratories, then a division of the Massachusetts
Department of Public Health ("The State Lab"), covering products intended for the prevention or treatment of CMV and RSV infection
and other respiratory virus infections by immune globulins or monoclonal antibodies. The Company agreed to pay royalties on all
sales using the licensed technology. Pursuant to the agreements, the Company paid $24.3 million in 2001, $23.6 million in 2000, and
$18.4 million in 1999, for royalties, process development and manufacturing.
Schering-Plough Corporation
In May 1993, MedImmune Oncology entered into an exclusive marketing and distribution agreement with Scherico, Ltd. ("Scherico"), an
affiliate of Schering, for Ethyol in the countries comprising the EU and European Free Trade Association (the "European
Territories"). Under this agreement, Scherico purchases Ethyol from the Company at a price based on a percentage of the net sales
price of Ethyol in Germany, United Kingdom, Spain, Italy and France. Scherico's exclusive rights to market the product will continue
through December 31, 2003. Following the exclusive period, the Company may co-promote Ethyol with Scherico for two years, through
December 31, 2005. Thereafter, the Company will reacquire sole marketing rights, subject to an obligation to pay Scherico a royalty
based on a percentage of net sales, if any, from the European Territories for a period of three years. Scherico may terminate the
agreement at any time by providing 180 days written notice.
MedImmune Oncology also entered into licensing agreements for Ethyol and NeuTrexin with affiliates of Schering for several
additional territories outside the United States. The licensees are required to pay the Company compensation based on their net
sales of the products, and the Company sells the products to the licensees at an agreed upon price.
CSL Limited
In June 1998, Aviron entered into a collaboration with CSL Limited ("CSL") of Victoria, Australia for the development, sale and
distribution of FluMist in Australia, New Zealand and some countries in the South Pacific. The Company's Aviron subsidiary and CSL
are jointly conducting clinical trials in Australia for FluMist. Under the agreement, CSL will sponsor the marketing application
with the Therapeutic Goods Administration, Australia's ruling regulatory agency. CSL has exclusive rights to sell and distribute
FluMist in these countries, and the Company will share the profits from these sales. The Company also will benefit from expansion of
CSL's current flu vaccine in pediatric and healthy adult market segments following the approval to market FluMist in the territory.
In addition, CSL has agreed, under an option agreement, to grant warrants to the Company to purchase CSL common stock upon CSL's
attainment of certain milestones.
Applied Molecular Evolution
On February 25, 1999, the Company and Applied Molecular Evolution ("AME") announced an alliance to develop four monoclonal
antibodies. Under the terms of the alliance, AME would use its AMEsystem directed evolution protein engineering technology to
optimize antibodies identified by the Company, and the Company would be responsible for clinical development, manufacturing and
commercialization of any resulting products. The Company made a $6.4 million equity investment in AME, funds certain research
performed by AME and will make future milestone and royalty payments on sales of any resulting products.
Also in February 1999, the Company entered into an exclusive license with AME for Vitaxin, an anti-angiogenesis monoclonal antibody.
As part of this agreement, the Company acquired worldwide rights to Vitaxin, and became responsible for all clinical development and
marketing for the product. AME will receive royalties on any future sales of the product, should it be approved for marketing.
National Institute of Allergy and Infectious Diseases
In March 1995, Aviron entered into a five-year Collaborative Research and Development Agreement with the National Institute of
Allergy and Infectious Diseases ("NIAID") of the National Institutes of Health ("NIH") to conduct clinical trials of the Company's
cold-adapted influenza vaccine. In June 2000, Aviron extended its collaboration with the NIH through June 2003. As a part of this
agreement, Aviron obtained exclusive rights to data generated from previous clinical trials conducted by the NIH and by Wyeth. Wyeth
had conducted clinical trials for FluMist under a license it had obtained from the NIH in 1991, which it subsequently relinquished
in 1993.
In September 2000, Aviron was awarded a $2.7 million Challenge Grant from the NIAID to develop a vaccine using the intranasal
delivery technology currently used in FluMist to protect against possible pandemic influenza virus strains. Aviron committed $2.7
million to the project over the three-year duration of the grant. Challenge Grants are milestone-driven awards, requiring
pre-determined product goals be met during the development process in order to receive the awarded funds.
In June 2000, Aviron entered into a clinical trial agreement with NIAID granting NIAID the right to conduct clinical trials at
various locations with Aviron's CMV vaccine technology.
In May 1996, Aviron obtained exclusive rights from NIAID to certain biological materials and clinical trial data for its PIV-3
program. The NIH granted Aviron exclusive rights in specific strains of bovine parainfluenza virus to develop, test, manufacture,
use and sell products for vaccination against human parainfluenza virus and other human and animal diseases. In addition, Aviron
obtained from NIAID the right to incorporate by reference an existing IND and certain data relating to the licensed materials. The
NIH retained rights to the licensed materials on behalf of the United States government to conduct research and to grant research
licenses to third parties under certain circumstances. In return for the rights granted by NIH, the Company's Aviron subsidiary will
make payments to NIH on the achievement of specified milestones and will make certain royalty payments to NIH. Unless otherwise
terminated, the agreement will terminate on cessation of commercial sales of licensed products by Aviron or its sublicensee. The
Company has the unilateral right to terminate the agreement in any country upon providing 60 days notice to NIH.
University of Michigan
In February 1995, Aviron entered into a materials transfer and intellectual property agreement with the University of Michigan.
Pursuant to the agreement, the University of Michigan granted Aviron exclusive worldwide rights to certain intellectual property and
technology relating to the cold-adapted influenza vaccine and proprietary master donor strains of influenza viruses useful in the
production of vaccines against influenza and potentially for gene therapy and other uses. Specifically, Aviron obtained the
exclusive right to develop, manufacture, use, market and sell products incorporating any such intellectual property or using the
master strains worldwide. Consideration granted to the University of Michigan under the agreement included a warrant to purchase
340,000 shares of common stock of Aviron at an exercise price of $10.00 per share and a warrant to purchase 50,000 shares of Aviron
common stock at $9.30 per share. In connection with the Company's acquisition of Aviron, these warrants were exchanged for warrants
to purchase 419,250 shares of MedImmune common stock in the aggregate. The agreement also provides for the issuance, upon the first
commercial sale of FluMist, of a warrant for approximately 5,150 shares of MedImmune common stock at an exercise price equal to 125%
of the acquisition price of Aviron.
Pursuant to the agreement, Aviron was required to grant to the university an irrevocable, royalty-free license for research
purposes, or for transfer to a subsequent licensee should the agreement be terminated, to (1) all improvements developed by Aviron,
its affiliates or sublicensees, whether or not patentable, relating to delivery mechanisms and processes for administration and
manufacturing of products, as well as packaging, storage and preservation processes for the master strains and (2) all new technical
information acquired by Aviron, its affiliates or sublicensees relating to the master strains and products.
The agreement terminates upon the later of (1) the last to expire of the university's patents licensed to Aviron or (2) 20 years
from the date of first commercial sale of a product incorporating the university's technology. Aviron has the right to terminate for
any reason upon 12 months notice to the university.
The Mount Sinai School of Medicine
In February 1993, Aviron entered into a technology transfer agreement with The Mount Sinai School of Medicine ("Mount Sinai"). Under
this agreement, Mount Sinai assigned to Aviron all of its right, title and interest in and to certain patents and patent
applications, as well as all associated know-how and other technical information relating to recombinant negative-strand RNA virus
expression systems and vaccines, attenuated influenza viruses and certain other technology. Mount Sinai also granted to Aviron: (1)
an option to acquire any improvements to the inventions disclosed in the assigned patents and patent applications thereafter
developed by Mount Sinai, and (2) a right of first negotiation for a license or assignment to additional related technology. Aviron
issued common stock and warrants to purchase common stock as consideration for these rights. The warrants expired in November 2001.
Other Agreements
The Company has a number of other collaborative and business agreements with academic institutions and business corporations,
including agreements with: 1) Washington University in St. Louis, Missouri covering development of pilus-based anti-bacterial
vaccines, dated July 1994; 2) Georgetown University, dated February 1993, the German Cancer Research Center, dated June 1996, and
the University of Rochester, dated October 1995, covering development of vaccines for human papillomaviruses; 3) Chiron Corporation
covering supply of MF59, a proprietary vaccine adjuvant to be used for B19 parvovirus and E. coli development, dated September 1998;
4) Alkermes to develop a pulmonary formulation of Numax targeting RSV, dated June 2000; 5) Medarex, Inc. covering the development of
fully human antibodies to multiple antigens using Medarex's HuMAb-Mouse technology, dated June 2000; 6) University of Texas covering
Fc technology to increase the half life of an antibody, dated May 1999; 7) Genaera Corporation to develop and commercialize
antibodies or recombinant molecules against IL-9 to prevent symptoms of asthma and other respiratory diseases, dated April 2001; 8)
Purdue Research Foundation for the development of EphA2 technology, dated October 2001; 9) Sang-A Pharm. Co., Ltd. for the
development, manufacture, and marketing of vaccines for EBV, CMV, HSV-2 and RSV in Korea, dated March 1995; and 10) ARCH Development
Corporation related to its HSV and EBV vaccines, and various recombinant methods and materials dated July 1992. In addition, the
Company has license agreements with third parties for CytoGam, RespiGam, Synagis, Ethyol and substantially all of its other
potential products. Under such license agreements the Company is obligated to pay royalties on any sales of these products.
Marketing and Sales
The Company has developed a sales and marketing organization which it believes is responsive to the increased importance of managed
care and the need of the healthcare industry to provide higher quality care at lower costs.
Including the Company's new Aviron subsidiary, the Company now employs approximately 320 people devoted to sales and marketing of
its products in the United States. Approximately 60 sales and managed care representatives cover approximately 500 hospitals,
managed care organizations, and clinics in the United States, which specialize in transplantation and/or pediatric/neonatal care,
for the promotion of CytoGam and Synagis or RespiGam, respectively. Each of these 60 sales representatives is responsible for
promoting all three of these products. Approximately 90 pediatric specialty sales specialists cover the top 10,000 pediatric
practices in the United States for the promotion and detailing of Synagis and RespiGam. Approximately 60 oncology/immunology
specialists are devoted to sales and marketing of Ethyol to oncologists practicing in cancer treatment centers, large hospitals and
private medical practices.
The Company has co-promotion agreements with Abbott, through its Ross Products division. Through its 500 sales representatives, the
Ross Products division details Synagis to 27,000 office-based pediatricians and 6,000 birth hospitals.
Sales outside the United States are made through distributors. Abbott serves as the Company's exclusive distributor for Synagis
outside of the United States. Scherico is the exclusive distribution partner for Ethyol in the countries comprising the European
Territories. Scherico and other affiliates of Schering have various other licensing and distribution arrangements for Ethyol and
NeuTrexin outside of the United States. In 2001, CytoGam, NeuTrexin and RespiGam were marketed outside of the United States under
distribution agreements with various companies.
Manufacturing and Supply
The Company has entered into manufacturing, supply and purchase agreements in order to provide production capacity for all of its
products.
Synagis
In December 1997 the Company entered into a manufacturing and supply agreement with Boehringer Ingelheim Pharma KG ("BI") to provide
supplemental production capacity for Synagis, a humanized monoclonal antibody product. For 2001, BI was the primary manufacturer of
Synagis. BI also fills and packages Synagis produced at its facility. The BI facility is subject to inspection and approval by the
appropriate regulatory authorities in connection with maintaining its FDA licensure as well as for obtaining and maintaining
approval from certain ex-U.S. countries. While the Company's Frederick manufacturing facility was licensed for production of Synagis
by the FDA in December 1999, the Company will continue to rely upon BI for production of additional quantities of Synagis for at
least the next few years in order to meet expected worldwide demand for the product. Should BI be unable to supply Synagis to the
Company for any reason, there can be no assurance that the Company would be able to secure an alternate manufacturer in a timely
basis or without increased cost.
The Company's manufacturing facility in Frederick, Maryland is a multi-use biologics facility containing a cell culture production
area for the manufacture of recombinant products, such as Synagis and siplizumab, if and when siplizumab is cleared for marketing by
the FDA. The Company's amendment to its BLA for approval of the facility for production of Synagis was approved in December 1999. In
August 2001, the Company received approval from the FDA to begin selling Synagis manufactured with an improved fermentation process,
called "Enhanced Yield Process" (EYP), which enables the Company to make over 300 percent more Synagis per run than in previous
seasons. There can be no assurance that the facility will receive regulatory approval for its other intended purposes. The Company
has limited experience in commercial manufacturing. Accordingly, the Company may encounter risks associated with commercial
manufacturing, including cost overruns, product defects and environmental problems. Furthermore, there can be no assurance that the
Company will be able to manufacture products at a cost that is competitive with third party manufacturing operations or that the
production yields will be comparable or better than those achieved at third party manufacturing operations.
The Company has a pilot plant facility in Gaithersburg, Maryland that produces materials for the Company's clinical trials.
Materials currently being used in clinical trials for siplizumab, the urinary tract infection vaccine, Vitaxin and MEDI-491 have
been produced at the Company's pilot plant.
The Company executed an agreement with Chiron Corporation ("Chiron") effective in April 1998, pursuant to which Chiron fills and
packages Synagis produced at the Gaithersburg pilot plant and Frederick manufacturing plant. The original term of the agreement was
for three years. In 2001, the Company renegotiated an extension of this contract for an additional three years. Should Chiron be
unable to fill and package Synagis for any reason, there can be no assurance that the Company would be able to secure an alternate
provider without increased costs or in a timely manner.
FluMist
Since 1998, supplies for all frozen FluMist clinical trials have been produced at several facilities either owned or leased by the
Company's Aviron subsidiary. The master virus seeds are prepared at the Company's Mountain View, California facility. The bulk
monovalents and diluent are produced at a facility owned and operated by Evans Vaccines Limited ("Evans") in Speke, the United
Kingdom. Blending and filling of FluMist into its trivalent formulation takes place at Aviron's Philadelphia, Pennsylvania facility.
None of these existing manufacturing facilities have yet been licensed for the manufacture of FluMist and have not yet manufactured
FluMist at a sustained commercial scale. The Company has begun the initial stages of commercial scale manufacturing of FluMist for
sale during the 2002-2003 influenza season, pending receipt of marketing approval from the FDA. No assurance can be given that such
approval will be received in time for the 2002-2003 season or at all.
In October 2000, Aviron restructured its agreement with Evans for the bulk production of the monovalents and the diluent in the
Speke, U.K. facility, subsequent to Evans purchase of this facility from Medeva Pharma Limited in September 2000. The new agreement,
which runs through June 2006, transferred responsibility for bulk production, as well as approximately 100 Evans employees, to the
Company's wholly owned U.K. subsidiary. The Company also acquired the remaining 24 years of a 25-year lease from Celltech Group Plc
of approximately eight acres of land in Speke, U.K. The Company expects to use an existing 45,000 square foot structure on this
property to build a new FluMist manufacturing facility, if and when FluMist is approved for marketing by the FDA.
In 1998, the Company's Aviron subsidiary opened a 34,000 square foot manufacturing suite in Philadelphia, Pennsylvania, where doses
of FluMist are blended and filled. This suite is located within a facility owned by Packaging Coordinators, Inc., ("PCI"), a
division of Cardinal Health, Inc., the company with which Aviron has contracted for the labeling and packaging of FluMist for
commercial sale until October 2004. In August 2000, the Company extended the term of its original agreement with PCI until December
2004, with options to extend for up to two additional terms of three years. If regulatory approval for FluMist is received, the
Pennsylvania facility is expected to be used for blending, filling, labeling, packaging and storage of commercial lots of FluMist.
No assurance can be given that the Pennsylvania facility will be granted approval by the appropriate regulatory authorities.
The production of FluMist is subject to the availability of a large number of specific pathogen-free eggs, for which there is
currently a limited number of suppliers. In June 1999, the Company entered into a non-exclusive agreement with Specific
Pathogen-Free Avian Supply, a division of Charles River Laboratories, for the purchase of pathogen-free hens' eggs through December
2001. In accordance with the terms of this agreement, the Company renewed this agreement in 2001 for an additional three years.
In August 1998, Aviron entered into a worldwide supply agreement with Becton Dickinson and Company ("Becton") whereby Becton would
supply its AccuSpray non-invasive nasal spray delivery system to the Company for the administration of FluMist. This agreement
provided for an initial term of five years with automatic renewal until terminated by either party. The Company depends on the
existing Device Master File ("DMF") application for the AccuSpray delivery system submitted to the FDA by Becton. The Company
referenced Becton's DMF as part of its BLA submission for FluMist. AccuSpray is a trademark of Becton.
The Company's current frozen formulation of FluMist is being designed to meet an acceptable level of stability for the U.S. market.
In addition to its current frozen formulation, the Company is exploring alternative formulations and presentations for FluMist that
may enable improved distribution and longer shelf life. The Company believes that a liquid formulation of FluMist will be required
to address markets outside the United States and Canada. The Company and Wyeth are jointly producing clinical trial material for the
liquid formulation of FluMist at the Company's California and Pennsylvania facilities and in Wyeth's facilities in Pennsylvania. As
part of the Company's agreement with Wyeth, both companies have the right to manufacture the liquid formulation.
Plasma Products
CytoGam and RespiGam are produced from human plasma collected from donors who have been screened to have high concentrations of
antibodies against CMV and RSV, respectively. Human plasma for CytoGam and RespiGam is converted to an intermediate raw material
(Fraction II+III paste). The State Lab, which holds the sole product and establishment licenses for CytoGam and RespiGam, processes
the Fraction II+III paste into bulk product. In December 2000, the Company received approval from the FDA for an amendment to the
establishment license held by the State Lab to allow production of Fraction II + III paste for CytoGam at the FMC. The Company has
an agreement with Aventis Pasteur ("AP") to fill and package CytoGam and RespiGam. If the State Lab or AP is unable to satisfy the
Company's product requirements on a timely basis or is prevented for any reason from manufacturing its products, the Company may be
unable to secure an alternative supplier or manufacturer without undue and materially adverse operational disruption and increased
cost.
The Company incurs significant fixed costs associated with the operation of the FMC. Further, the Company currently has unutilized
capacity in the plasma production portion of the FMC. Should the Company be unable to produce Fraction II + III paste at the FMC for
any reason there can be no assurance that an alternate manufacturer could be arranged at a comparable cost, or at all, or that the
Company would not continue to incur significant fixed costs that might not be offset by product sales.
Ethyol and NeuTrexin
The Company also operates a small volume parenteral products manufacturing facility in Nijmegen, the Netherlands. This manufacturing
facility received the approval of the Dutch regulatory authorities and is now able to manufacture Ethyol and the finished dosage
form of NeuTrexin for commercial sale in Europe. The Nijmegen manufacturing facility has also been inspected by the FDA and approved
as a manufacturing site for NeuTrexin and Ethyol for commercial sale in the United States.
The Company relies on third parties to manufacture drug substance for Ethyol and NeuTrexin, and to a decreasing but still important
extent, on third parties to manufacture these finished drug products.
Patents, Licenses and Proprietary Rights
The following table summarizes the patents issued in the United States owned or licensed by the Company and its subsidiaries:
Patents Owned or Licensed by MedImmune, Inc.
Product/ Project US Patent No. Subject Matter* Expiration Date
E. coli 4,795,803 Adhesin antigens 1/3/2006
5,804,198 Adhesin vaccines 9/8/2015
6,291,649 Anti-adhesin antibodies 3/2/2005
Vitaxin 5,753,230 Use of antibodies anti-(alpha)v(beta)3 antibodies to inhibit 5/19/2015
angiogenesis in tumors and inflamed tissue
MEDI-507 5,730,979 Anti-CD2 antibodies and their use in treating T-cell mediated immune 3/24/2015
responses
5,951,983 Anti-CD2 antibodies and their use in treating T-cell mediated immune 9/14/2016
responses
5,817,311 Use of anti-CD2 antibodies in treating T-cell mediated immune responses 10/6/2015
HPV 6,228,368 Capsomeres containing HPV L1 protein and their use in preventing and 10/6/2017
treating HPV infection
6,066,324 HPV VLPs containing L1 protein with deletions 10/9/2015
6,261,765 Disassembly/reassembly of Papillomavirus Virus Like Particles 9/5/2017
6,165,471 HPV capsomeres with reduced assembly capacity 7/2/2018
6,153,201 Oral Immunization with Papillomavirus Virus Like Particles 3/9/2013
RSV 5,824,307 Synagis(R)& other anti-RSV antibodies and their use in treating or 10/20/2015
preventing RSV infection
5,582,827 Immunoglobulin from plasma for treatment of RSV 12/10/2013
4,800,078 Treatment of respiratory disease caused by RSV using human gamma
globulin 1/24/2006
Strep 5,928,900 Pad1 protein 7/27/2016
5,981,229 DNA encoding Exp1 and PlpA proteins 11/9/2016
5,834,278 DNA encoding pneumococcal MsrA 5/1/2016
6,245,335 Streptococcal choline binding proteins 5/1/2017
IL-9 5,157,112 Antibodies which specifically bind mammalian T cell growth factor P40 10/20/2009
6,037,149 DNA and RNA molecules that encode Met-IL-9 and their use for 8/23/2016
recombinant production
5,580,753 DNA molecules encoding IL-9 and their use for recombinant production 12/3/2013
5,734,037 Nucleic acid molecules that hybridize to DNA encoding IL-9 5/23/2009
5,414,071 Human IL-9 protein 5/9/2012
5,164,317 Method for enhancing proliferation of mast cells using IL-9 3/23/2010
5,132,109 Method for enhancing IgG production using IL-9 and IL-4 10/5/2010
5,246,701 Method to inhibit IgE production using anti-IL-9 antibodies or other 10/5/2010
IL-9 inhibitors
5,962,269 Processes and hybridomas for producing anti-IL-9 receptor antibodies 10/5/2016
6,261,559 Treating asthmatic symptoms using anti-IL-9 antibodies 8/23/2016
5,789,237 Nucleic acid molecules that hybridize to DNAs encoding human and murine 8/4/2015
IL-9 receptors
5,750,377 Methods for production of mammalian T cell growth factor P40 5/12/2015
5,116,951 IL-9 receptor protein 9/19/2010
5,587,302 Nucleic acid molecules encoding mammalian T cell growth factor P40 12/24/2013
5,208,218 Mammalian T cell growth factor P40 protein 5/4/2010
5,180,678 Methods of detecting IL-9 9/19/2010
Ethyol 5,424,471 Process for preparing crystalline forms 7/13/2012
5,591,731 Dosage forms of crystalline amifostine 7/31/2012
5,824,664 Agents and methods for inhibiting HIV viral and protein expression 10/20/2015
using compounds that belong to a family which contains amifostine
5,846,958 Methods of stimulating hematopoietic progenitor cells using a compound 12/8/2015
that belong to a family which contains amifostine
5,906,984 Methods of stimulating hematopoietic progenitor cells using specific 2/17/2015
compounds, which include amifostine
5,994,409 Methods of treating toxicities associated with chemotherapy, a method 12/9/2017
of treating a nephrodisorder, and a method of treating xerostomia, all
of which use a compound that belongs to a family which contains
amifostine
6,051,563 Subcutaneous administration, method of protecting against toxicities 2/12/2017
associated with ionizing radiation
6,127,351 Methods of treating or protecting against toxicities associated with 2/12/2017
chemotherapy using a specific dosing regime, a method of stimulating
bone marrow growth, and a method of treating myelodysplastic syndrome,
all of which use a compound that belongs to a family which contains
amifostine
6,218,377 Methods of treating or protecting against toxicities associated with 2/12/2017
specific chemotherapy agents, and a method of protecting normal tissue
in cancer patients, both of which use a compound that belongs to a
family which contains amifostine
6,239,119 Methods of treating damaged or infected mucosal tissue using a 4/26/2019
compounds that belongs to a family which contains amifostine
NeuTrexin 5,716,960 Cystalline glucuronate hydrate salt 2/10/2015
6,017,921 Crystalline glucuronate salt 1/13/2015
6,017,922 Thermally stable crystalline non-salts 5/18/2018
6,258,821 Trimetrexate ascorbate and compositions comprising trimetrexate and 4/26/2019
ascorbic acid
6,258,952 Methods of producing monohydrate 5/18/2018
PALA 5,491,135 Methods of treating a viral infections (e.g., hepatitis B and C and 2/13/2013
secondary to HIV 1)
Patents Owned or Licensed by Aviron
6,322,967 Recombinant tryptophan mutants of influenza PB2 gene 2/23/2016
6,316,243 Recombinant attenuated double strand RNA viruses 11/13/2018
6,322,967 Recombinant tryptophan mutants of influenza PB2 gene 2/23/2016
6,291,236 Human CMV sequences and attenuated viruses 3/31/2015
6,090,391 Recombinant tryptophan mutants of influenza PB2 gene 2/23/2016
6,087,170 VZV gene and mutant VZV viruses 4/28/2014
6,054,130 Non-splicing variants of EBV gp350 protein and gene 4/18/2014
6,040,170 Human CMV sequences and attenuated viruses 3/31/2015
6,022,726 Attenuated negative strand RNA viruses and methods 2/8/2017
6,001,634 Recombinant negative strand RNA viruses 8/28/2009
5,925,751 Human CMV sequences and attenuated viruses 3/31/2015
5,922,328 Gamma 34.5 mutants of herpes simplex viruses 9/11/2016
5,840,520 Recombinant RSV viruses 11/24/2015
5,824,508 Non-splicing variants of EBV gp350 protein and gene 4/18/2014
5,721,354 Human CMV sequences and attenuated viruses 3/31/2015
5,690,937 Temperature sensitive mutants of influenza 6/5/2015
5,578,473 Recombinant negative strand RNA viruses 11/24/2009
5,820,871 Recombinant negative strand RNA viruses - bicistronic 10/13/2015
5,854,037 Recombinant negative strand RNA viruses 12/29/2015
5,786,199 Recombinant negative strand RNA viruses and vaccines 7/28/2015
5,166,057 Recombinant negative strand RNA viruses 11/24/2009
6,120,773 Gamma 34.5 gene modification of herpes simplex viruses 9/19/2017
6,172,047 Herpes viruses modified for use as cancer treatment 1/9/2018
6,071,692 Herpes simplex as a gene expression vector and vaccine 6/4/2004
5,714,153 Recombinant herpes simplex vaccines and vectors 12/23/2012
5,846,707 Herpes simplex as a vector 6/4/2004
5,641,651 Synthetic HSV promoters and uses 6/24/2014
5,599,691 Herpes simplex as a vector 2/4/2014
5,328,688 Recombinant herpes simplex with 34.5 gene knockout 6/12/2011
5,288,641 Herpes simplex as a vector 2/22/2011
4,859,587 Recombinant herpes simplex vectors and vaccines 8/22/2006
4,769,331 Recombinant herpes simplex cloning methods and materials 9/6/2005
4,707,358 Epstein-Barr virus gp350 subunit protein vaccine 11/17/2004
4,554,159 Vaccine against HSV-1 and HSV-2 11/19/2002
*The Company encourages any interested investor to obtain an independent legal analysis of the precise scope of the claims of the
patents listed above.
In addition, the Company owns or licenses approximately 100 patent applications currently pending in the United States.
Products currently being developed or considered for development by the Company are in the area of biotechnology, an area in which
there are extensive patent filings. The Company relies on patent protection against use of proprietary products and technologies by
competitors. The patent position of biotechnology firms generally is highly uncertain and involves complex legal and factual
questions. To date, no consistent policy has emerged regarding the breadth of claims allowed in biotechnology patents. Accordingly,
there can be no assurance that patent applications owned or licensed by the Company will result in patents being issued or that, if
issued, such patents will afford protection against competitors with similar technology.
The Company believes that there are other patents issued to third parties and/or patent applications filed by third parties which
could have applicability to each of the Company's products and product candidates and could adversely affect the Company's freedom
to make, have made, use, have used, sell, or have sold such products or use certain processes for their manufacture. Some of these
third parties have contacted the Company claiming patent infringement by the Company. The Company is unable to predict whether it
will ultimately be necessary to seek licenses from such third parties or, if such licenses were necessary, whether such licenses
would be available on terms acceptable to the Company. The necessity for such licenses could have a material adverse effect on the
Company's business.
There has been substantial litigation regarding patent and other intellectual property rights in the biotechnology industry.
Litigation may be necessary to enforce certain intellectual property rights of the Company, or to defend against unasserted
intellectual property rights of third parties. Any such litigation could result in substantial cost to and diversion of effort by
the Company.
Government Regulation
The production and marketing of the Company's products and research and development activities are subject to regulation for safety
and efficacy by numerous governmental authorities in the United States and other countries. In the United States, vaccines,
biologics, drugs and certain diagnostic products are subject to FDA review and licensure. The federal Food, Drug and Cosmetics Act,
the Public Health Service Act and other federal statutes and regulations govern or influence the testing, manufacture, safety,
labeling, storage, record keeping, licensure, advertising and promotion of such products. No assurances can be given that any
products under development will be licensed for marketing by the FDA or, if approved, that the product would be successfully
commercialized or maintained in the marketplace. Noncompliance with applicable requirements could result in fines, recall or seizure
of products, total or partial suspension of production, refusal of the government to approve product license applications,
restrictions on the Company's ability to enter into supply contracts and criminal prosecution. The FDA also has the authority to
revoke product licenses and establishment licenses previously granted.
The Orphan Drug Act was established to encourage development of drugs for rare diseases and conditions affecting a small patient
population (generally fewer than 200,000 people). Orphan designation of a product can potentially provide a company with seven years
of market exclusivity if the company is the first to receive FDA product marketing approval for the orphan drug in the designated
indication. Additionally, this designation provides a company with tax credits of 50 percent for qualified clinical research
expenses and the opportunity for clinical research grants. CytoGam, RespiGam, Ethyol and MEDI-507 have been designated as orphan
drugs for certain indications by the FDA. Accordingly, (1) CytoGam has market exclusivity for use in lung, liver, pancreas, and
heart transplants until December 2005; (2) RespiGam has market exclusivity for its currently licensed indication through January 17,
2003; and (3) Ethyol has market exclusivity for its currently licensed chemoprotective indication for patients with ovarian cancer
through December 2002, and for its radioprotective indication through June 2006. NeuTrexin's market exclusivity under the Orphan
Drug Act for its currently licensed PCP indication expired at the end of December 2000. Ethyol has also been designated as an orphan
drug for use as a chemoprotective agent for use with cyclophosphamide in the treatment of advanced ovarian carcinoma, as a
chemoprotective agent for use with cisplatin in the treatment of metastatic melanoma, for the treatment of myelodysplastic
syndromes, and for the reduction of the incidence and severity of cisplatin-induced toxicities. NeuTrexin has also been designated
as an orphan drug for the treatment of metastatic colorectal adenocarcinoma, metastatic carcinoma of the head and neck, pharynx and
larynx, pancreatic adenocarcinoma and advanced non-small cell carcinoma of the lung and osteogenic sarcoma. MEDI-507 has been
designated as an orphan drug for the treatment of graft versus host disease. Accordingly, each of these products would have market
exclusivity for seven years from the date of FDA approval if it is the first product approved by the FDA for treatment of the
designated orphan indication. The orphan drug designation for CytoGam for use in kidney transplants expired in 1997.
The Company is also subject to regulation by the Occupational Safety and Health Administration ("OSHA") and the Environmental
Protection Agency ("EPA") and to regulation under the Toxic Substances Control Act, the Resources Conservation and Recovery Act and
other regulatory statutes, and may in the future be subject to other federal, state or local regulations. OSHA and/or the EPA may
promulgate regulations concerning biotechnology that may affect the Company's research and development programs. The Company is
unable to predict whether any agency will adopt any regulation which would have a material adverse effect on the Company's
operations. The Company voluntarily attempts to comply with guidelines of the National Institutes of Health regarding research
involving recombinant DNA molecules. Such guidelines, among other things, restrict or prohibit certain recombinant DNA experiments
and establish levels of biological and physical containment that must be met for various types of research.
Sales of pharmaceutical and biopharmaceutical products outside the United States are subject to foreign regulatory requirements that
vary widely from country to country. Whether or not FDA licensure has been obtained, licensure of a product by comparable regulatory
authorities of foreign countries must be obtained prior to the commencement of marketing the product in those countries. The time
required to obtain such licensure may be longer or shorter than that required for FDA approval, and no assurance can be given that
such approval will be obtained.
Competition
The biotechnology and pharmaceutical industries are characterized by rapidly evolving technology and intense competition. The
Company's competitors include pharmaceutical, chemical and biotechnology companies, many of which have financial, technical and
marketing resources significantly greater than those of the Company. In addition, many specialized biotechnology companies have
formed collaborations with large, established companies to support research, development and commercialization of products that may
be competitive with those of the Company. Academic institutions, governmental agencies and other public and private research
organizations are also conducting research activities and seeking patent protection and may commercialize products on their own or
through joint ventures.
The Company is aware of certain potentially competitive products targeting areas of medical interest to the Company, including
influenza, respiratory syncytial virus ("RSV"), psoriasis, human papillomavirus ("HPV") infections and organ graft rejection. In the
prevention of CMV disease, the Company's CytoGam competes with several products including other antiviral drugs, such as intravenous
and oral ganciclovir, marketed by Hoffmann-La Roche Inc., and standard immune globulin preparations. The Company is aware that a
number of physicians have prescribed CytoGam in combination with ganciclovir for the prevention of CMV disease in certain patients.
The Company believes that for the prevention of RSV disease, Synagis and RespiGam are the only products currently available.
However, the Company is aware of one product in the United States, ribavirin, which is indicated for the treatment of RSV disease.
The existence of this product, or other products or treatments of which the Company is not aware, or products or treatments that may
be developed in the future, may adversely affect the marketability of products developed by the Company.
In relation to flu vaccines, the Company is aware of three main distributors of inactivated, injectible vaccines (Aventis-Pasteur,
Medeva/Evans and Wyeth). Approximately 80 million doses of these inactivated vaccines are sold annually in the United States. The
Company is also aware of one inactivated, nasally administered flu vaccine by Berna, which was previously available in Switzerland
until its removal from the market in 2001. The Company is also aware that Merck recently licensed a Russian live virus intranasal
vaccine, currently available in Russia. Any of the products listed here, as well as other products of which the Company is not
aware, may adversely affect the marketability of FluMist.
Many companies, including well-known pharmaceutical companies, are marketing anticancer drugs and drugs to ameliorate or treat the
side effects of cancer therapies, and are seeking to develop new products and technologies for these applications. Many of these
drugs, products and technologies are, or in the future may be, competitive with the Company's oncology products. In the United
States, the Company believes that Bristol-Myers Squibb Company holds the largest share of the chemotherapy market both in terms of
approved products and annual sales, and therefore dominates the marketplace. Other companies maintaining an active oncology
marketing and sales presence include Schering-Plough Corporation, Pharmacia & Upjohn, AstraZeneca, Hoffmann-La Roche, Inc., Johnson
& Johnson, Immunex Inc. (a subsidiary of American Home Products), Amgen, Inc., Chiron Corporation, Aventis SA, Eli Lilly and Company
and GlaxoSmithKline p.l.c. Many of these companies have substantially greater financial, technical, manufacturing, marketing and
other resources than the Company and may be better equipped than the Company to develop, market and manufacture these therapies. No
assurance can be given that the oncology drugs developed by the Company will be able to compete successfully against therapies
already established in the marketplace or against new therapies that may result from advances in biotechnology or other fields which
may render the Company's oncology drugs less competitive or obsolete. In addition, the Company's oncology drugs may become subject
to generic competition in the future.
The Company expects its products to compete primarily on the basis of product efficacy, safety, patient convenience, reliability,
price and patent position. In addition, the first product to reach the market in a therapeutic or preventive area is often at a
significant competitive advantage relative to later entrants to the market. The Company's competitive position will also depend on
its ability to attract and retain qualified scientific and other personnel, develop effective proprietary products, implement
product and marketing plans, obtain patent protection and secure adequate capital resources.
EXECUTIVE OFFICERS OF THE COMPANY
Officer
Name Age Position Since
- ------------------------------------------ --- --------- -----
Wayne T. Hockmeyer, Ph.D. 57 Chairman 1988
David M. Mott 36 Chief Executive Officer and Vice Chairman 1992
Melvin D. Booth 56 President and Chief Operating Officer 1998
James F. Young, Ph.D. 49 President, Research and Development 1989
Franklin H. Top, Jr., M.D. 66 Executive Vice President and Medical Director 1988
Armando Anido 44 Senior Vice President, Sales and Marketing 1999
Edward J. Arcuri, Ph.D. 51 Senior Vice President, Manufacturing 2002
Edward M. Connor, M.D. 49 Senior Vice President, Clinical Development 1999
Harry B. Greenberg, M.D. 57 Senior Vice President, Research 2002
Gregory S. Patrick 50 Senior Vice President and Chief Financial
Officer 2001
Gail Folena-Wasserman 47 Senior Vice President, Development 2002
Dr. Wayne T. Hockmeyer relinquished his position as Chief Executive Officer in October 2000 and now serves as the Chairman of the
Board of Directors. Dr. Hockmeyer founded MedImmune, Inc. in April 1988 as President and Chief Executive Officer and was elected to
serve on the Board of Directors in May 1988. He became Chairman of the Board of Directors in May 1993. Dr. Hockmeyer earned his
bachelor's degree from Purdue University and earned his Ph.D. from the University of Florida in 1972. Prior to founding MedImmune,
he served as a commissioned officer in the United States Army from 1966 to 1986. From 1980 to 1986 he was Chairman of the Department
of Immunology at the Walter Reed Army Institute of Research. In 1986, Dr. Hockmeyer joined Praxis Biologics as Vice President of
Research and Development and was there until founding MedImmune, Inc. in 1988. Active in other leadership roles, Dr. Hockmeyer was
appointed by Governor Parris Glendening to the Maryland Economic Development Commission and the Maryland Technology Development
Corporation. He is a member of the Board of Directors of Digene Corporation, Intermune Pharmaceuticals, Inc., GenVec, Inc., TolerRx,
Diversa and Advancis Pharmaceutical Corp. Dr. Hockmeyer is also a member of the Board of Directors of the Biotechnology Industry
Organization, the Technology Council of Maryland, a member of the Board of Visitors of the University of Maryland Biotechnology
Institute, and the University of Maryland Baltimore County.
Mr. Mott was appointed Chief Executive Officer and Vice Chairman in October 2000. He joined the Company in April 1992 as Vice
President with responsibility for business development, strategic planning and investor relations. In 1994, Mr. Mott assumed
additional responsibility for the medical and regulatory groups, and in March 1995 was appointed Executive Vice President and Chief
Financial Officer. In November 1995, Mr. Mott was appointed to the position of President and Chief Operating Officer and was elected
to the Board of Directors. In October 1998, Mr. Mott was appointed Vice Chairman. Prior to joining the Company, he was a Vice
President in the Health Care Investment Banking Group at Smith Barney, Harris Upham & Co., Inc. Mr. Mott is Chairman of the Board of
Directors of Conceptis Technologies and also serves on the Board of Trustees of St. James School and on the Board of Governors of
Beauvoir, the National Cathedral Elementary School. He holds a bachelor of arts degree from Dartmouth College.
Mr. Booth joined the Company in October 1998 as President and Chief Operating Officer and was elected to serve on the Board of
Directors in November 1998. Prior to joining the Company, Mr. Booth was President, Chief Operating Officer and a member of the Board
of Directors of Human Genome Sciences, Inc. from July 1995 until October 1998. Prior to this time, Mr. Booth was employed at Syntex
Corporation from 1975 to 1995, where he held a variety of positions, including President of Syntex Laboratories, Inc. from 1993 to
1995 and Vice President of Syntex Corporation from 1992 to 1995. From 1992 to 1993, he served as the President of Syntex
Pharmaceuticals Pacific. From 1991 to 1992, he served as an area Vice President of Syntex, Inc. From 1986 to 1991, he served as the
President of Syntex, Inc., Canada. Mr. Booth is a past Chairman of the Pharmaceutical Manufacturers Association of Canada, and is
currently a board member of NovaScreen Biosciences Corporation and Spacehab, Inc. Mr. Booth graduated from Northwest Missouri State
University and holds a Certified Public Accountant Certificate.
Dr. Young was promoted to the position of President, Research and Development in December 2000. He joined MedImmune in 1989 as Vice
President, Research and Development. In 1995, he was promoted to Senior Vice President and in 1999 he was promoted to Executive Vice
President, Research and Development. Dr. Young received his doctorate in microbiology and immunology from Baylor College of Medicine
in Houston, Texas and bachelor of science degrees in biology and general science from Villanova University.
Dr. Top became the Company's Medical Director in 1990. Dr. Top joined the Company in June 1988 as Executive Vice President and was
elected to the Board of Directors in July 1988. Prior to joining the Company, Dr. Top served as Senior Vice President for Clinical
and Regulatory Affairs at Praxis Biologics from 1987 to 1988. Prior to 1987, Dr. Top served for 22 years in the U.S. Army Medical
Research and Development Command, where he was appointed Director, Walter Reed Army Institute of Research in 1983. Dr. Top holds a
doctorate of medicine cum laude and a bachelor of science degree in biochemistry from Yale University.
Mr. Anido joined the Company in 1999 as Senior Vice President, Sales and Marketing. Prior to joining the Company, Mr. Anido was Vice
President of CNS Marketing at Glaxo Wellcome, Inc. from 1996 to 1999. Prior to this time, Mr. Anido served in various positions at
Lederle Laboratories from 1989 to 1995, culminating in his service as the Vice President of Anti-Infectives Marketing. Mr. Anido is
a registered pharmacist, and holds a Bachelor of Science in pharmacy and a Master of Business Administration degree from West
Virginia University.
Dr. Arcuri was appointed Senior Vice President, Manufacturing in February 2002 following the Company's acquisition of Aviron. Dr.
Arcuri was Senior Vice President, Operations of Aviron since May 2000. He joined Aviron as Vice President, Manufacturing in July
1999. Prior to joining Aviron, Dr. Arcuri served as Vice President, Manufacturing Operations and Process Development for North
American Vaccine, Inc., or NAVA, from January 1995 to July 1999. Prior to joining NAVA, Dr. Arcuri served as Senior Director,
Biological Manufacturing at Merck & Co., Inc. from 1991 to 1994. Dr. Arcuri holds a B.S. degree in Biology from the State University
of New York at Albany and a masters degree and Ph.D. in Biology from Rensselaer Polytechnic Institute.
Dr. Connor was promoted to Senior Vice President, Clinical Development in 1999. He joined the Company in 1994 as the Director of
Clinical Studies and was promoted in 1995 to Vice President of Clinical Development. Dr. Connor holds a bachelor's degree in biology
from Villanova University and a medical degree from University of Pennsylvania School of Medicine. He is board certified in
pediatrics and is a consultant in pediatric infectious diseases.
Dr. Greenberg was appointed Senior Vice President, Research in February 2002 following the Company's acquisition of Aviron. Dr.
Greenberg joined Aviron as Senior Vice President, Research and Development and Chief Scientific Officer in November 2000. Prior to
joining Aviron, Dr. Greenberg spent 17 years as a faculty member at the Stanford University School of Medicine. At Stanford, he was
most recently the Senior Associate Dean for Research and the Joseph D. Grant Endowed Professor of Medicine, and at the same time he
served as Associate Chief of Staff for Research at the Veterans Administration Palo Alto Health Care System. Dr. Greenberg served as
chair of the Vaccines Related Biological Products Advisory Committee of the U.S. Food and Drug Administration from February 1999
until beginning his position with Aviron. Dr. Greenberg holds a B.A. in History with honors from Dartmouth College and M.D. from
Columbia College of Physicians and Surgeons.
Mr. Patrick joined the Company in February 2001 as Senior Vice President and Chief Financial Officer. Prior to joining the Company,
he was Chief Financial Officer for Ventiv Health, Inc., a spin-off of global marketer Snyder Communications, from 1999 through 2000.
Prior to this time, Mr. Patrick was employed by Merck & Company, Inc. from 1985 to 1999. During this period, Mr. Patrick held a
series of positions, including Vice President and Group Controller in 1999, and Vice President and Controller of the manufacturing
division from 1991 to 1999. Mr. Patrick received a master of business administration degree in finance from New York University, and
a master of engineering degree and a bachelor of science degree in environmental engineering with a minor in chemical engineering
from Rensselaer Polytechnic Institute.
Ms. Folena-Wasserman was promoted to Senior Vice President, Development in February 2002. Ms. Folena-Wasserman joined the Company in
1991 as Director, Development and was promoted to Vice President, Development in October 1995. Prior to joining the Company, she
spent nine years in natural products isolation and biopharmaceutical process development at SmithKline Beecham Pharmaceuticals. Her
responsibilities currently include oversight of all cell culture and purification process development, clinical manufacturing,
analytical methods development, and quality control for investigational products. Ms. Folena-Wasserman holds a bachelor's degree in
biology and chemistry from Montclair State College in New Jersey, and has a master's degree in biochemistry and a doctorate in
chemistry from Pennsylvania State University.
EMPLOYEES
As of December 31, 2001, we had 877 full time employees. We consider relations with our employees to be good. As a result of the
acquisition of Aviron in January 2002, our workforce will increase significantly. Aviron employed 585 full-time employees as of
December 31, 2001.
RISK FACTORS
In addition to the other information included in this report, you should consider the following risk factors. This report contains
forward-looking statements covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve risks and uncertainties that may affect our business and prospects. Our results may differ
significantly from the results discussed in the forward-looking statements as a result of certain factors which are listed below or
discussed elsewhere in this report and our other filings with the Securities and Exchange Commission.
The seasonal nature of our business can exaggerate the consequences of any factor that adversely affects our sales and may cause
significant fluctuations in our quarterly operating results.
Our principal product, Synagis, accounted for approximately 89% of our total product sales for the year 2001. Synagis is used to
protect high-risk infants from serious lower respiratory tract disease caused by RSV. Because RSV occurs primarily during the winter
months, the major portion of Synagis sales occur during the first and fourth quarters of the calendar year. This high concentration
of product sales in a portion of the year exaggerates the adverse consequences on our profits of any manufacturing or supply delays,
any inability to satisfy product demand, or of any unsuccessful sales or marketing strategies during the RSV season and may cause
our quarter-to-quarter operating results to vary widely. Furthermore, our current product base would limit our ability to offset in
the second and third quarters any lower-than-expected Synagis sales during the RSV season, which could cause our annual financial
results to be below expectations.
If we are unable to successfully commercialize FluMist, the anticipated benefits of our acquisition of Aviron will not be realized.
We acquired Aviron in January 2002 for approximately $1.6 billion of MedImmune common stock. The principal asset of Aviron is its
lead product candidate, FluMist, which is a vaccine delivered as a nasal mist for the prevention of influenza. FluMist is not
currently approved for marketing, but its Biologic License Application is pending before the U.S. Food and Drug Administration
("FDA"). There can be no assurance that the FDA will approve FluMist for marketing. Even if it were approved for marketing, there
can be no assurance that FluMist would achieve commercial success. We will not realize the anticipated benefits of the Aviron
acquisition unless FluMist achieves commercial success.
If we fail to manage our growth properly, our business will suffer.
As a result of our acquisition of Aviron in January 2002 and the recent expansion of our marketing efforts for Synagis and Ethyol,
our workforce has expanded from 842 employees at January 31, 2001 to 1,519 employees at January 31, 2002. To accommodate our rapid
growth and compete effectively, we will need to continue to improve our management, operational and financial information systems
and controls, generate more revenue to cover a higher level of operating expenses, integrate Aviron's business and employees into
our operations, continue to attract and retain new employees, accurately anticipate demand for the products we manufacture and
maintain adequate manufacturing capacity. This rapid growth and increased scope of operations present risks we have not previously
encountered and could result in substantial unanticipated costs and time delays in product manufacture and development which could
materially and adversely affect our business.
We have invested heavily in our manufacturing operations and may not recover that investment.
Through December 31, 2001, we have invested over $80.9 million of capital expenditures in our manufacturing facilities. As a result
of our acquisition of Aviron in January 2002, which leases manufacturing facilities in Pennsylvania and the United Kingdom, we have
increased our investment in manufacturing facilities by $36.1 million. The Aviron facilities are not yet licensed by the FDA and we
currently have excess capacity in the plasma production portion of our facility in Frederick, Maryland. If we suffer manufacturing
problems, or are unable to fully utilize our capacity, we may not recover our investment in these facilities.
We have only recently begun significant manufacturing operations. Our lack of experience creates additional risk of manufacturing
difficulties.
Our manufacturing operations, which we have only recently begun on a commercial scale, expose us to a variety of significant risks,
including:
o product defects;
o contamination of product or product loss;
o environmental problems resulting from our production process; and
o inability to manufacture products at a cost that is competitive with third party manufacturing operations.
Furthermore, we have never produced FluMist on a commercial scale. Our lack of significant experience in commercial manufacturing
may make it more time consuming or expensive for us to address these problems and could adversely affect our operations.
We are dependent on third party manufacturers and suppliers which may not perform as we expect.
We are currently, and for the foreseeable future expect to be, dependent on a limited number of contract manufacturers for some or
all of the manufacture of our current and future products (if any). Although we are able to produce a portion of the Synagis we
sell, we are unable currently to produce all that we require. Accordingly, we depend on Boehringer Ingleheim Pharma KG ("BI") to
produce a portion of our Synagis requirements. BI's facility is subject to inspection and approval by both United States and foreign
regulatory authorities in order to maintain its license to manufacture our products. Should BI be unable to supply Synagis to us for
any reason, there can be no assurance that we would be able to secure an alternate manufacturer on a timely basis, without increased
cost or at all. In addition, since we do not have the capability to fill and package any of the Synagis we produce at our Frederick
Manufacturing Center, we depend on Chiron Corporation ("Chiron") for that portion of the manufacturing process. Chiron's facility is
similarly subject to inspection and approval by United States regulatory authorities in order to maintain its license to fill and
package our products. Should Chiron be unable to fill and package our Synagis for any reason, there can be no assurance that we
would be able to secure an alternate source to fill and package Synagis on a timely basis, without increased cost or at all.
We depend on the University of Massachusetts, Massachusetts Biologics Laboratories (the "State Lab") for a portion of the production
of our plasma derived products. The State Lab holds the sole product and establishment licenses from the FDA for the manufacture of
CytoGam and RespiGam. Although we perform a portion of the CytoGam production process at our Frederick facility, we rely on the
State Lab to manufacture all of the bulk product for CytoGam that we sell and to produce all of the RespiGam that we sell. We also
rely on Aventis Pasteur to package and fill all of our plasma derived products. Our manufacturing arrangements with the State Lab
are renegotiated annually. We cannot guarantee that any new arrangements will be made on terms favorable to us. In addition, we rely
on a limited number of suppliers to obtain substantially all of the plasma used as raw material for the production of CytoGam and
RespiGam. We also depend on third parties to manufacture the drug substance for Ethyol. There can be no assurance that third party
manufacturers will give our orders highest priority, or that we would be able to readily find substitute manufacturers without
significant delays or increased costs.
Our research and development activities are costly and may not be successful.
A considerable portion of our annual operating budget is spent on research, development and clinical activities. In 2001, we spent
approximately $83.0 million on research and development projects, including costs of clinical trials. We are currently developing
numerous products that may never reach clinical trials, achieve success in the clinic, be submitted to the appropriate regulatory
authorities for approval, or be approved for marketing or manufacturing by the appropriate regulatory authorities.
Further, we rely on numerous third parties to assist in various states of the development process. Third-party contract costs are
typically substantial. In addition, the third party contractors we use may be unable to complete their work in a timely fashion or
in a manner that is satisfactory to us. Should they be unable to meet our needs, we may have to incur substantial additional costs,
which could have a material adverse effect on our business.
We are dependent on third party marketing partners which may not perform as we expect.
We depend on strategic alliances with our marketing partners to accomplish many of our sales goals. For example, we have agreements
with Abbott Laboratories under which its Ross Products Division co-promotes Synagis with us in the United States. If our marketing
partners fail to devote sufficient effort and attention to achieving those goals, our product sales would be adversely affected.
Patent protection for our products may be inadequate or costly to enforce.
We may not be able to obtain effective patent protection for products we develop. We are currently developing, or considering
developing, products in the biotechnology industry, an industry in which there are extensive patent filings. The patent position of
biotechnology firms generally is highly uncertain and involves complex legal and factual questions. To date, no consistent policy
has emerged regarding the breadth of claims allowed in biotechnology patents. Accordingly, there can be no assurance that our patent
applications will result in patents being issued or that, if issued, such patents will afford protection against competitors with
similar technology. Litigation could be necessary from time to time in order to enforce our intellectual property rights. There has
been substantial litigation regarding patent and other intellectual property rights in the biotechnology industry. We are not aware
at this time of any infringement of our patents. If we were required to litigate, there could be substantial cost involved and
significant diversion of our business efforts.
If we fail to obtain any required patent licenses from third parties, our product development efforts could be limited.
We believe that there are patents issued to third parties and/or patent applications filed by third parties which could apply to
each of our products and product candidates. These patents and/or applications could limit our ability to manufacture, use or sell
our products. In such a case, we may be required to obtain a patent license in order to avoid infringing a third party's
intellectual property rights. Such licenses could impose significant royalty burdens on us. If such a license were necessary, there
can be no assurance that it would be available on terms acceptable to us or at all, which could have a material adverse effect on
our business.
Technological developments by our competitors may render our products obsolete.
If our competitors were to develop superior products or technologies, our products or technologies could be rendered noncompetitive
or obsolete. Biotechnology and pharmaceuticals are evolving fields in which developments are expected to continue at a rapid pace.
Our success depends upon achieving and maintaining a competitive position in the development of products and technologies.
Our lead product, Synagis, is marketed for the prevention of serious lower respiratory tract disease caused by RSV in pediatric
patients at high risk of RSV. Synagis accounted for approximately 89% of our product sales in 2001. We are not aware of any
competing product being marketed anywhere in the world for the prevention of RSV disease other than our product RespiGam.
Nevertheless, competition from other biotechnology and pharmaceutical companies can be intense. Many of our competitors have
substantially greater research and development capabilities, marketing, financial and managerial resources and experience in the
industry. Were a competitor to develop a better product or technology, our products or technologies could be rendered obsolete,
decreasing our product sales and resulting in a material adverse effect on our business.
Compliance with government regulations is costly and time-consuming.
Substantially all of our products require costly and time-consuming regulatory approval by governmental agencies. In particular,
human therapeutic and vaccine products are subject to rigorous preclinical and clinical testing for safety and efficacy and approval
processes by the FDA in the United States, as well as regulatory authorities in foreign countries. There can be no assurance that
required approvals will be obtained. If we were unable to obtain these approvals on a timely basis or at all, our ability to
successfully market products directly and through our collaborators, and to generate revenues from sales or royalties, would be
impaired.
All approved products are subject to continuing regulation. If we were to fail to comply with applicable requirements, we could be
subject to:
o fines, recall or seizure of products;
o total or partial suspension of production;
o refusal by the government to approve our product license applications;
o restrictions on our ability to enter into supply contracts; and
o criminal prosecution.
The FDA also has the authority to revoke product licenses and establishment licenses previously granted to us. Currently, we are
marketing Ethyol for the treatment of patients with NSCLC. This indication was approved under the FDA's Accelerated Approval
Regulations. These regulations require that we conduct clinical studies to verify and describe the clinical benefit of the approved
indication.
We have completed trials which we anticipate will be sufficient to meet the FDA's requirements. If the FDA is not satisfied that we
have met the requirements, it may withdraw its approval of Ethyol in the NSCLC indication. Should the FDA revoke any product or
establishment licenses granted to us, it could have a material adverse effect on our business.
Product liability claims may result from sales of our products and product recalls may be necessary.
As a developer, tester, manufacturer, marketer and seller of healthcare products, we are potentially subject to product liability
claims. Our blood products, such as CytoGam and RespiGam, involve heightened risks of claims, including the risk of claims resulting
from the transmission of blood-borne diseases. Defending a product liability claim could be costly and divert our focus from
business operations. Although we carry insurance that we regard as reasonably adequate to protect us from potential claims, there
can be no assurance that we will be able to maintain our current product liability insurance at a reasonable cost, or at all. If a
claim were successful, there is no guarantee that the amount of the claim would not exceed the limit of our insurance coverage.
Further, a successful claim could result in the recall of some or all of our products. Any of these occurrences could have a
material adverse effect on our business. Additionally, blood products like CytoGam and RespiGam are occasionally recalled from the
market because of risks of contamination from infectious agents or for other reasons which are often beyond our control. Any such
recall of our blood products would adversely affect our sales.
The loss of key personnel could harm our business.
Our success depends upon the continued contributions of our executive officers and scientific and technical personnel. Many key
responsibilities have been assigned to a relatively small number of individuals. Our key personnel include Mr. David M. Mott, Chief
Executive Officer and Vice Chairman of the Board; Mr. Melvin D. Booth, President and Chief Operating Officer; and Dr. James F.
Young, President, Research and Development. We have an employment agreement with each of them. The competition for qualified
personnel is intense, and the loss of services or certain key personnel could adversely affect our business. We do not maintain or
intend to purchase "key man" life insurance on any of our personnel.
Fluctuations in our common stock price over time could cause our stockholders to lose investment value.
The market price of our common stock has fluctuated significantly over time, and it is likely that the price will fluctuate in the
future. During 2001, the closing price of our common stock on the Nasdaq stock market ranged from a high of $52.36 to a low of
$28.31. Investors and analysts have been, and will continue to be, interested in our reported earnings, as well as how we perform
compared to their expectations. Announcements by us or others regarding operating results, existing and future collaborations,
results of clinical trials, scientific discoveries, commercial products, patents or proprietary rights or regulatory actions may
have a significant effect on the market price of our common stock. In addition, the stock market has experienced extreme price and
volume fluctuations that have particularly affected the market price for many biotechnology companies and that have often been
unrelated to the operating performance of these companies. These broad market fluctuations may adversely affect the market price of
our common stock.
Changes in foreign currency exchange rates or interest rates could result in losses.
We have entered into foreign exchange forward contracts which could result in losses. Because we have contracts for the future
purchase of inventory which are denominated in foreign currencies, there is a chance that foreign currency exchange rate or interest
rate changes could result in increases or decreases in the actual cost of our purchases. To reduce the risk of unpredictable changes
in the cost of our purchases, we may enter into forward foreign exchange contracts, which allow us to purchase, for a fixed price on
a specific date in the future, the amount of foreign currency necessary to pay for our contractual purchase of inventory.
Fluctuations in the anticipated payment date for the inventory could require us to adjust the date of the contract, which could
result in a change in the foreign currency exchange rate of the contracts, which in turn could have an adverse effect on our
financial results.
Expenditures relating to our manufacturing operations in the United Kingdom and the Netherlands are paid in local currency. We have
not hedged our expenditures relating to these manufacturing operations, and therefore foreign currency exchange rate fluctuations
may result in increases or decreases in the amount of expenditures recorded. Additionally, certain of our distribution agreements
outside the United States provide for us to be paid based upon sales in local currency. As a result, changes in foreign currency
exchange rates could adversely affect the amount we expect to collect under these agreements.
The success of our products may be limited by government and third-party payors.
The continuing efforts of government and third-party payors to contain or reduce the costs of health care through various means may
negatively affect sales of our products. For example, approximately 24% of all Synagis vials sold in the United States during the
2000-2001 RSV season were covered by Medicaid reimbursement programs. In many foreign markets, pricing and profitability of
pharmaceutical products is subject to governmental control. In the United States there have been, and we expect there will continue
to be, various federal and state proposals to implement similar government controls over pricing and profitability. The adoption by
the federal government or state governments of any such proposals could limit the commercial success of our existing or any future
products.
ITEM 2. PROPERTIES
The Company's principal executive and administrative offices and research and development facilities are located in Gaithersburg,
Maryland. The facilities occupy approximately 104,000 square feet and are leased until 2006. In March 2002, the Company paid
approximately $13.4 million to acquire 25 acres of land in Gaithersburg, Maryland which will serve as the site of the Company's new
corporate headquarters. The Company has contracted with a designer and general contractor for the construction of the new facility
over the next several years, at a total estimated cost of $80 million. The construction project is expected to break ground in April
2002. The Company expects to take occupancy of the first phase, which will feature a complex totaling 218,000 square feet, in the
fall of 2003. At that time the Company expects to sublease a large portion of its current facilities.
The Company also owns 56,000 square feet of administrative and warehouse space and a 91,000 square foot multi-use biologics facility
in Frederick, Maryland. The biologics facility includes a cell culture production area used for manufacture of products such as
Synagis and is also used for the manufacture of immune globulins and by-products from human plasma. In addition to its Maryland
facilities, the Company leases warehouse space in Nijmegen, the Netherlands, of approximately 9,000 square feet, which is subject to
a lease that extends through 2003.
The Company's Aviron subsidiary occupies 104,800 square feet of office and laboratory space in Mountain View, California, which is
leased through October 2005 with two options to extend for successive five-year periods. In addition, Aviron leases approximately
41,000 square feet of space in Philadelphia, Pennsylvania, pursuant to a lease agreement through December 2004, with options to
extend for up to two additional terms of three years. Aviron also occupies 64,050 square feet of office, laboratory and warehouse
space in Bensalem, Pennsylvania, pursuant to a lease agreement through June 2008. Additionally, in Santa Clara, California, Aviron
leases approximately 69,000 square feet of office, laboratory and manufacturing space through January 2019, with an option to renew
for seven years and approximately 22,500 square feet of office space, expiring in October 2004.
Aviron occupies approximately 8,900 square feet of a manufacturing facility in Speke, U.K., pursuant to a sublease expiring in June
2006, and leases approximately eight acres of land adjacent to the existing site, which includes a 60,700 square foot structure,
through 2025. In addition, Aviron leases approximately 5,100 square feet of office space in Speke under short-term leases.
The Company believes that its current facilities and anticipated additions are adequate to meet its research and development,
commercial production, and administrative needs for the near term.
ITEM 3. LEGAL PROCEEDINGS
In 1998, MediGene AG ("MediGene") initiated a legal action against Loyola University of Chicago ("Loyola") and the Company in the
U.S. District Court for the Northern District of Illinois alleging, among other things, breach of contract and tortious interference
by the Company with an alleged prospective business relationship between MediGene and Loyola. The claims relate to human
papillomavirus vaccine technology allegedly covered by contracts between MediGene and the Company and by a license agreement from
Loyola to the Company, under which the Company granted a sublicense to GlaxoSmithKline. MediGene seeks damages from the Company
ranging from $31.3 million to $86.9 million based on the tortious interference claim, and/or damages ranging from $10.2 million to
$31.3 million based on the breach of contract claim. MediGene also seeks ownership of the patents in question, as well as recission
of the Company's license agreement from Loyola or rights as a third-party beneficiary thereof. On December 22, 2000 and March 15,
2001, the District Court granted summary judgment motions in favor of the Company on all claims. The District Court ordered entry of
final judgment in favor of the Company on March 19, 2002. On March 27, 2002 MediGene filed a notice of appeal to the United States
Court of Appeals for the Federal Circuit.
In October 2000, Celltech Chiroscience Limited ("Celltech") commenced a legal proceeding against the Company in the U.K. High Court
of Justice, Chancery Division, Patents Court. Celltech alleges that the Company failed to pay royalties with respect to its sales of
Synagis as required by a license agreement dated January 19, 1998. Under the agreement, the Company obtained from Celltech a
worldwide license to make, use and/or sell product under a patent (and related applications) pertaining to humanized antibodies. In
the proceeding, Celltech seeks payment of a 2% royalty based on net sales of Synagis sold or manufactured in the United States, with
interest, and certain costs, including attorney's fees. The Company has filed answering papers denying that any royalties are due on
the basis that Celltech's U.S. patent does not cover Synagis and has sought dismissal of the case on the grounds that the legal
doctrine of prosecution history estoppel prevents Celltech from claiming that its patent covers Synagis. On July 20, 2001, the High
Court of Justice ordered a hearing, which is expected to take place in late 2002 or early 2003, on whether it will dismiss
Celltech's case on this basis. On November 29, 2001, the Company received a letter from counsel for Celltech enclosing a copy of a
patent granted by the European Patent Office on November 14, 2001. That letter requested various information concerning the
manufacture and sale of Synagis in Europe and sought confirmation that the Company would pay royalties on such sales pursuant to the
license agreement dated January 19, 1998. As of March 25, 2002, the Company had not made the royalty payments that were the subject
of Celltech's letter, and Celltech had not initiated any legal proceeding against the Company based on its European patent.
On December 18, 2001, Genentech, Inc. ("Genentech") announced that it had been granted a patent relating to certain methods and
compositions used to produce antibodies by recombinant DNA technology. Four years ago, in anticipation of any potential impact the
issuance of Genentech's patent could have on the production of Synagis, the Company obtained a license to this patent. The Company
has received from Genentech a letter, dated January 7, 2002, stating that Genentech expects to receive from the Company royalty
payments pursuant to such license. The Company is in the process of evaluating whether any valid claim of Genentech's patent, as
recently issued, covers production of Synagis. If so, the Company would pay royalties to Genentech on U.S. net sales of Synagis
commencing December 18, 2001. Pending resolution of this issue, the Company has made certain royalty payments to Genentech under
protest and with reservation of all of its rights. The Company is also evaluating whether any of its other antibody-based product
candidates, if and when approved for marketing by the U.S. Food and Drug Administration, could require a license under the Genentech
patent.
On February 28, 1996, Ichthyol Gesellschaft Cordes, Hermanni & Co. ("Ichthyol Gesellschaft") filed a complaint for refrain,
information and damages with the Regional Court of Hamburg against MedImmune Oncology on the grounds of trademark infringement in
respect of the use of the trademark "Ethyol" in Germany. No monetary amount is currently being sought in the litigation by Ichthyol.
Ichthyol is seeking injunctive relief against the use of the trademark Ethyol in Germany. The suit was dismissed on January 29, 1997
by the Regional Court of Hamburg. Ichthyol Gesellschaft filed an appeal and a judgment was rendered in favor of MedImmune Oncology
in the appellate proceedings. In January 1999, Ichthyol Gesellschaft filed an appeal on points of law with the Federal Court of
Justice, and in June 1999, Ichthyol Gesellschaft filed the grounds for the appeal on points of law. By judgment of May 3, 2001, the
Federal Court of Justice reversed the judgment of the Higher Regional Court and remitted the case to that court for another hearing.
By order of December l9, 2001, the Higher Regional Court ordered Ichthyol to make further submissions concerning the relevant facts
and legal questions. Ichthyol recently filed its submissions. Another hearing will probably be held this summer.
After consultation with its counsel, the Company believes that it has meritorious defenses to the claims referred to above and is
determined to defend its position vigorously. While it is impossible to predict with certainty the eventual outcome of these
proceedings, the Company believes they are unlikely to have a material adverse effect on its financial position but might have a
material adverse effect on its results of operations for a particular period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR MEDIMMUNE, INC.'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's common stock trades on The Nasdaq Stock Market under the symbol "MEDI". At March 14, 2002, the Company had 1,909
common stockholders of record. This figure does not represent the actual number of beneficial owners of common stock because shares
are generally held in "street name" by securities dealers and others for the benefit of individual owners who may vote the shares.
The following table shows the range of high and low prices and year end closing prices for the common stock for the two most recent
fiscal years, adjusted to reflect a three-for-one stock split on June 2, 2000.
2001 2000
---- ----
High Low High Low
---- --- ---- ---
First Quarter $54.56 $27.63 $76.25 $43.00
Second Quarter 48.05 29.19 80.69 42.00
Third Quarter 48.08 29.51 86.13 57.75
Fourth Quarter 48.95 33.47 72.63 44.63
Year End Close $46.35 $47.69
The Company has never declared or paid any cash dividends on its common stock and does not anticipate paying any cash dividends in
the foreseeable future. The Company currently intends to retain any earnings to fund future growth, product development and
operations.
ITEM 6. SELECTED FINANCIAL DATA
(in thousands, except per share data)
RESULTS FOR THE YEAR 2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Total revenues $618,679 $540,495 383,375 $227,221 105,748
Gross profit 440,822 368,483 266,622 107,988 39,315
Earnings/(loss) before cumulative effect of a
change in accounting principle 148,960 144,977 93,371² 47,187¹ (44,804)
Net earnings/(loss) 148,960 111,156 93,371² 47,187¹ (44,804)
Basic earnings/(loss) per share
Earnings
Earnings/(loss) before cumulative effect of a
change in accounting principle 0.70 0.69 0.49 0.28 (0.30)
Net earnings/(loss) 0.70 0.53 0.49 0.28 (0.30)
Diluted earnings/(loss) per share
Earnings/(loss) before cumulative effect of a
change in accounting principle 0.68 0.66 0.44 0.24 (0.30)
Net earnings/(loss) 0.68 0.50 0.44 0.24 (0.30)
YEAR END POSITION
Cash and marketable
securities $787,690 $526,254 $270,394 $176,860 $101,246
Total assets 1,219,386 1,006,575 648,424 405,777 232,717
Long-term debt 9,544 10,302 11,856 87,910 90,276
Shareholders' equity 1,044,273 843,582 537,079 248,566 87,560
PRO FORMA RESULTS
The following data represents the Company's pro forma financial results assuming retroactive adoption of the change in accounting
principle (SAB 101).
Total revenues $540,495 $385,222 $204,209 $87,624
Net earnings (loss) 144,977 94,5052 33,0581 (62,928)
Earnings/(loss) per share
Basic 0.69 0.50 0.19 (0.42)
Diluted 0.66 0.45 0.17 (0.42)
1 Includes deferred income tax benefit of $47,428.
2 Includes deferred income tax benefit of $40,973.
QUARTERLY FINANCIAL DATA (UNAUDITED)
(thousands, except per share amounts)
2001 Quarter Ended
- ------------------
Dec. 31 Sept. 30 June 30 March 31
------- -------- ------- --------
Net sales $276,021 $39,991 $28,315 $235,202
Gross profit 213,584 23,651 21,188 182,399
Net earnings (loss) 98,506 (18,974) (9,223) 78,651
Net earnings (loss) per share:
Basic $0.46 ($0.09) ($0.04) $0.37
Diluted $0.45 ($0.09) ($0.04) $0.36
2000 Quarter Ended
- ------------------
Dec. 31 Sept. 30 June 30 March 31
------- -------- ------- --------
Net sales $227,394 $47,246 $25,387 $195,776
Gross profit 172,890 31,472 13,373 150,748
Earnings (loss) before cumulative
effect of a change in accounting
principle 79,442 8,440 (5,303) 62,398
Net earnings (loss) 79,442 8,440 (5,303) 28,577
Earnings (loss) per share before
cumulative effect of change in
accounting principle:
Basic $0.38 $0.04 ($0.03) $0.30
Diluted $0.36 $0.04 ($0.03) $0.29
Net earnings (loss) per share:
Basic $0.38 $0.04 ($0.03) $0.14
Diluted $0.36 $0.04 ($0.03) $0.13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We are pleased to report to you on our financial condition and results of operations. During 2001, MedImmune achieved total revenues
of $618.7 million, a 14% increase from 2000, and net earnings grew 34% to $149.0 million. The following discussion should be read in
conjunction with the accompanying financial statements and related notes.
OVERVIEW
Since inception, we have incurred significant operating expenses developing our products and experienced substantial operating
losses until achieving profitability in 1998. The profitability was driven by sales of Synagis, our second generation anti-RSV drug
which was approved by the FDA on June 18, 1998 and by the Centralized European Agency for the Evaluation of Medicinal Products
("EMEA") in August 1999. Synagis is approved in the United States for the prevention of serious lower respiratory tract disease
caused by RSV in pediatric patients at high risk for RSV disease. Because of the seasonal nature of RSV, limited sales, if any, are
expected during the second and third quarters of any calendar year, causing results to vary significantly from quarter to quarter.
Synagis sales for the 2000/2001 and 1999/2000 RSV seasons totaled $480 million and $357 million, respectively. We also market
CytoGam for the attenuation of primary CMV disease in kidney, lung, liver, pancreas and heart transplant patients, and RespiGam for
the prevention of serious lower respiratory tract infection caused by RSV in children under 24 months of age with BPD or a history
of prematurity. RespiGam, our first generation anti-RSV drug, has been largely replaced in the marketplace by Synagis.
In November 1999, we completed a merger with U.S. Bioscience, Inc. ("USB", now known as MedImmune Oncology, Inc.) in a transaction
accounted for as a pooling-of-interests. As a consequence, historical results of MedImmune and USB have been combined. In addition
to gaining clinical, marketing and sales personnel specializing in oncology, we also added three approved products to our product
portfolio, including two oncology products. Ethyol was approved by the FDA in December 1995 as a selective cytoprotective agent to
reduce the cumulative renal (kidney) toxicity associated with repeated administration of cisplatin in patients with advanced ovarian
cancer. In 1996, the label was expanded to include patients with non-small cell lung cancer ("NSCLC"). The label was further
expanded in June 1999 to include the prevention of severe dry mouth caused by post-operative radiation treatment in certain head and
neck cancer patients. Ethyol was made commercially available by our United States distribution partner, ALZA Corporation ("ALZA"),
in March 1996.
On October 1, 2001, we accelerated the return to MedImmune Oncology of domestic Ethyol marketing rights. Thus, we are now
responsible for all sales and marketing activities for Ethyol in the United States. NeuTrexin, introduced in January 1994, is
approved for concurrent use with leucovorin administration (leucovorin protection) as an alternative therapy for the treatment of
moderate-to-severe Pneumocystis carinii pneumonia ("PCP") in immunocompromised patients, including patients with AIDS. Hexalen,
introduced in January 1991, is a cytotoxic drug for use as a single agent in the palliative treatment of patients with persistent or
recurrent ovarian cancer. In November 2000, we sold this product to MGI Pharma for approximately $7.2 million plus future royalties.
During January 2002, we completed the acquisition of Aviron through an exchange offer and merger transaction valued at approximately
$1.6 billion, net of cash. Aviron is a biopharmaceutical company headquartered in Mountain View, California, focused on prevention
of disease through innovative vaccine technologies. Aviron's lead product candidate is FluMist, a live, attenuated virus vaccine
delivered as a nasal mist for the prevention of influenza. We believe our experience in research and development, manufacturing,
marketing, and regulatory affairs are well suited to enhance Aviron's current efforts to gain regulatory approval to market the
product.
Our acquisition of Aviron will be accounted for as a purchase business combination and, consequently, the results of operations of
Aviron will be included in our consolidated operating results effective January 10, 2002. Under the terms of the transaction, we
exchanged approximately 34.0 million of our common shares for approximately 31.6 million shares of Aviron common stock, and an
additional 7.1 million of our common shares are issuable upon exercise of Aviron's outstanding options and warrants. In addition,
holders of Aviron's $200 million of convertible notes will be able to convert the notes into a total of 3.4 million of our common
shares at a conversion price of $58.14 per share.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of consolidated financial statements requires us to make estimates and judgments with respect to the selection and
application of accounting policies that affect the reported amounts of assets, liabilities, revenues and expenses, and the
disclosures of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies and significant judgments and estimates have the greatest impact on the
preparation of our consolidated financial statements.
Product Sales - We generally sell our products to a limited number of wholesalers and distributors. We recognize revenue on product
sales when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and
collectibility is probable. These criteria are generally met when the product is received by our customers. In certain of the
Company's distribution agreements the total sales price received from the customer is variable based, in part, on the end-user sales
price. When all of the other revenue criteria have been met, the Company recognizes revenue to the extent that the customer has an
obligation to pay, if the customer has limited or no control over the end-user sales price and, accordingly, any subsequent
adjustments to the recorded revenue are not expected to be significant. Subsequent adjustments to recorded revenue that result from
variances between amounts previously invoiced and the total sales price received are recorded as an adjustment to product sales in
the quarter in which they become known. Product sales are recorded net of allowances for estimated chargebacks, government rebates,
discounts, returns, and other reductions to product sales. Both in the United States and elsewhere, sales of pharmaceutical products
depend on the availability of reimbursement to the consumer from third-party payors, such as government and private insurance plans.
Third-party payors are increasingly challenging the prices charged for products, and are limiting reimbursement levels offered to
consumers for these products, possibly resulting in an incremental reduction of reimbursements from third-party payors. Synagis is
currently widely reimbursed by Medicaid and other government programs. The Company estimates the portion of its sales that will
occur to this end-user market and records allowances at a level that management believes is sufficient to cover estimated
requirements for rebates. If our estimates of government rebates vary significantly from actual results, adjustments to recorded
revenues may be required.
Contract Revenues - We recognize revenue from upfront and milestone payments under collaborative agreements using the
contingency-adjusted performance model for revenue recognition. Under this method, payments received that are related to future
performance are deferred and recorded as revenues as they are earned over specified future performance periods. The amount of
revenue recognized during each period is based on a percentage-of-completion model of actual costs incurred relative to the total
projected costs to be incurred under the collaborative agreement. When the performance criteria for a non-refundable milestone
payment are met, the cost of the effort that has been incurred to date is divided by the total projected costs under the development
arrangement (i.e., ratio of performance), and revenue is recognized for that milestone to the extent of the ratio of performance to
date. We follow this method since reasonably dependable estimates of the revenue and costs applicable to various stages of a
collaboration agreement can be made. Recognized revenues are subject to revisions as the collaboration efforts progress and
estimated costs to complete are revised. Revisions in revenue estimates are recorded to income in the period in which the facts that
give rise to the revision become known.
Trade Receivable Bad Debt Reserves - We maintain allowances for doubtful accounts for estimated losses resulting from the inability
of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be required.
Co-promotion Expenses - In connection with our agreement with Abbott Laboratories to co-promote Synagis in the United States, we are
required to pay Abbott an increasing percentage of net domestic sales based on Abbott achieving certain sales thresholds over the
annual contract year. The contract year extends from July to June each year and generally coincides with the annual respiratory
syncytial virus ("RSV") season, which occurs primarily in the fourth and first quarters in the Northern Hemisphere. We estimate our
net sales and resulting co-promotion expense for the entire contract year to determine a proportionate percentage of expense to
apply across all Synagis sales during that contract year. Any adjustments to the co-promotion expense that result from variances
between estimated and actual net sales are recorded as an adjustment to expense in the quarter they become known. During 2001, 2000
and 1999, the adjustments were immaterial. If actual net sales are significantly different from the estimates, the adjustment to
co-promotion expense may be significant.
Taxes - We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.
While we have considered future taxable income and ongoing tax planning strategies in assessing the need for the valuation
allowance, in the event we were to determine that we would be able to realize deferred tax assets in the future in excess of their
net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made.
Likewise, should we determine that we would not be able to realize all or part of the net deferred tax asset in the future, an
adjustment to the deferred tax asset would be charged to income in the period such determination was made.
Inventory Reserves - We record an inventory reserve for estimated obsolescence or unmarketable inventory in an amount equal to the
difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserves may be
required.
Other Operating Expenses - We currently record in other operating expenses charges from the plasma production section of the
Frederick facility, which currently has excess capacity. These charges are expected to continue for the foreseeable future until the
plasma production section of the facility is fully utilized for its intended purpose.
Investments - We record investments in marketable securities at fair value, with unrealized gains and losses reported, net of tax,
as a component of other comprehensive income. The fair value of these investments is sensitive to changes in interest rates and the
credit-worthiness of the security issuers. We hold minority interests in companies having operations or technology in areas within
our strategic focus, some of which are publicly traded and have highly volatile share prices. We record an investment impairment
charge when we believe an investment has experienced a decline in value that is other-than-temporary. Adverse changes in market
conditions or poor operating results of underlying investments could result in future losses.
Derivative Financial Instruments - We have contracts for the future purchase of inventory which are denominated in foreign
currencies. To hedge the effect of fluctuating foreign currencies in our financial statements, we periodically enter into foreign
forward exchange contracts which allow us to purchase, for a fixed price on a specific date in the future, the amount of foreign
currency necessary to pay for the contractual purchase of inventory. We enter into foreign exchange forward contracts for purposes
of hedging future cash flows, and never for speculative or trading purposes. We record all derivative financial instruments on our
balance sheet at fair value, with changes in the fair value reported in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction, and if so, depending on the type of hedge transaction. The gains
and losses on these derivatives that are reported in other comprehensive income are reclassified as earnings in the periods in which
the related inventory is sold. Fluctuations in the anticipated payment date for the inventory could create hedge ineffectiveness,
which could give rise to gains or losses for the fair value of the hedge.
Commitments and Contingencies - We have entered into manufacturing, supply and purchase agreements in order to provide production
capability for our products, and to provide a supply of certain raw materials. We are involved in litigation and administrative
proceedings arising in the ordinary course of business. We evaluate potential loss contingencies on a regular basis and accrue any
such losses if and when they become probable and reasonably estimable. Future changes in our assessment of the probability of a loss
contingency could have a material impact on our results of operations in the period the assessment changes.
RESULTS OF OPERATIONS
2001 Compared to 2000
Revenues
Product Sales (In Millions) 2001 2000
---- ----
Synagis $516.4 $427.0
CytoGam $ 32.3 $36.5
Ethyol $ 20.3 $21.4
Other Products $ 10.5 $10.9
TOTAL $579.5 $495.8
Product sales of $579.5 million in 2001 grew 17% over 2000 levels of $495.8 million primarily due to increased sales of Synagis, and
were also impacted by our reacquisition of Ethyol domestic marketing rights from ALZA. Synagis, our largest product, accounted for
approximately 89% and 86%, respectively, of our 2001 and 2000 product sales. Sales of Synagis for the year ended December 31, 2001
increased 21% over 2000. Contributing to the growth in 2001 sales was a 20% increase in domestic Synagis sales to $479.7 million in
2001 from $399.5 million in 2000. The growth was attributable to increased demand in the United States, resulting in a 19% increase
in domestic sales unit volumes, and a 3.6% increase in the domestic selling price of Synagis effective in the second quarter of
2001. The increase in sales was partially offset by an increase in Medicaid rebates, which are accounted for as a reduction to
product sales, as Synagis usage by patients eligible for Medicaid grew over the prior year. Contributing to the growth in
international sales during 2001 was an increase in the per unit sales price recognized upon delivery of product to Abbott
International ("Abbott") under the terms of our international distribution agreement. The terms of the distribution agreement (a)
mandated an increase in the transfer price effective May 1, 2001 and (b) requires the entire purchase price to be payable upon
delivery of product to Abbott. Under the revised terms, the price earned by the Company is determinable at the time of delivery.
Under the previous contract terms, the Company invoiced Abbott and recognized revenue on sales to Abbott when Synagis was delivered
based on a contractually stipulated transfer price, which approximated 60 percent of the ultimate revenue value to us. Following the
end of each quarter, Abbott remitted a report to us detailing end-user sales for the quarter along with an additional amount due in
excess of the transfer price. We recognized revenue for the additional amount due in excess of the transfer price at that time.
Units shipped to Abbott during 2001 decreased approximately 16% from 2000, which we believe reflects reductions in Abbott's
inventory stocking levels rather than reduced product demand by end users. Furthermore, we have been working with Abbott to expand
the number of countries where we are licensed to sell Synagis. As of February 1, 2002, international registrations have been filed
in 58 countries for the approval of Synagis, for which approval in the United States and 46 foreign countries had been obtained.
There can be no assurance that approvals by the appropriate regulatory authorities will continue to be granted. Additionally, we may
not receive pricing and reimbursement approvals in countries where we have received regulatory approval.
CytoGam accounted for approximately 6% of our 2001 product sales, compared to 7% in 2000. CytoGam sales decreased to $32.3 million
in 2001 from $36.5 million in 2000, a decrease of 12%. Domestic sales units decreased 21%, which was partially offset by a domestic
price increase of 8% effective in the second quarter of 2001 and a decrease in government rebates for the product. We believe that a
portion of the CytoGam sales that occurred in 2000 were the result of product substitution occurring because of the then worldwide
shortage of standard IVIG products. In late 2000, the supply of standard IVIG products increased, and certain Medicaid agencies
began to limit or discontinue reimbursement of CytoGam as a substitute for IVIG. Thus, CytoGam sales for the year ended December 31,
2001 relating to product substitution decreased significantly. We expect the future use of CytoGam as a substitute for standard IVIG
products will be limited.
Ethyol accounted for approximately 4% and 5% of our product sales in 2001 and 2000, respectively. Ethyol revenues decreased 5% from
$21.4 million in 2000 to $20.3 million in 2001. Sales of Ethyol for the year ended December 31, 2001 were impacted by our early
assumption of domestic marketing responsibility for Ethyol from ALZA. The transfer of marketing responsibility from ALZA was
originally scheduled to occur in April 2002. However, in September 2001, we reached an agreement with ALZA to accelerate to October
1, 2001 the transfer to us of Ethyol marketing rights. In anticipation of that transfer, we ceased sales of Ethyol to ALZA during
the third quarter of 2001, and we purchased ALZA's remaining Ethyol inventory as of September 30, 2001, which we recorded as a
reduction to product sales in the amount of $2.3 million. In addition, we believe ALZA's domestic marketing focus on Ethyol during
the first nine months of 2001 was adversely affected by the acquisition in 2001 of ALZA by Johnson & Johnson which, in turn,
adversely affected ALZA's 2001 sales of Ethyol. Beginning October 1, 2001, we record all revenues from domestic sales of Ethyol and,
beginning April 1, 2002, we will pay ALZA a declining royalty for nine years thereafter based on sales of Ethyol in the U.S. We
recorded net domestic product sales of Ethyol of $12.7 million during the fourth quarter of 2001. Prior to October 1, 2001, we had
recorded Ethyol domestic product sales based on a price of 25% to 35% of ALZA's net unit selling price. Our international sales of
Ethyol to our distribution partner, Schering-Plough Corporation ("Schering"), declined slightly to $6.0 million during 2001 as
compared to $6.5 million in 2000, as unit sales decreased 3%. We record Ethyol international product sales based on a percentage of
Schering's end user sales. We believe the decrease in international sales was primarily due to reductions in inventory stocking
levels at our international distribution partner.
Sales of other products in 2001, which include sales of NeuTrexin, RespiGam, and by-products that result from the CytoGam
manufacturing process, were comparable to 2000 sales. Results for the year ended December 31, 2000 also included net sales of
Hexalen. We sold this product to MGI Pharma in November 2000 and, therefore we no longer record product sales of Hexalen; rather, we
recognize royalty income and other income pursuant to our agreement with MGI Pharma, which are included in other revenues for 2001.
The level of future product sales will be dependent on several factors, including, but not limited to, the timing and extent of
future regulatory approvals of our products and product candidates, availability of finished product inventory, approval and
commercialization of competitive products and the degree of acceptance of our products in the marketplace.
Other revenues for the year ended December 31, 2001 decreased $5.5 million, or 12%, to $39.2 million in 2001 from $44.7 million in
2000. Other revenues during both years consisted primarily of revenues under collaborative agreements. We recognized revenue of
$21.4 million in 2001 versus $21.1 million in 2000 related to upfront and milestone payments under these agreements. We recognize
non-refundable fees and milestone payments in connection with research and development and commercialization agreements as the
contractual obligations and performance requirements are fulfilled, using the contingency adjusted performance model for revenue
recognition. Under this method, the amount of revenue recognized during each period is based on a percentage of completion model of
actual costs incurred relative to the total projected costs. The expected timing of revenues to be recognized through 2005 under the
major collaborative agreements for which we have deferred a portion of the upfront and milestone payments received, based on current
estimates of costs to complete, are as follows (in thousands):
2002 2003 2004 2005
---- ---- ---- ----
Abbott Laboratories $7,500 $2,700 $-- $--
GlaxoSmithKline 700 -- -- --
Schering-Plough Corporation 400 400 400 400
------ ------ ---- ----
Total $8,600 $3,100 $400 $400
====== ====== ==== ====
Future changes in estimated total costs or differences between actual costs and projected costs in any one period could cause the
actual recorded amounts to differ from the projected amounts.
Other revenues also include research funding from GlaxoSmithKline ("GSK") for the development of an HPV vaccine. Funding decreased
$5 million to $2.8 million in 2001, as our responsibilities under the collaboration agreement, primarily Phase I and II clinical
trials and preparation of clinical material, are nearing completion. Other revenues during 2001 also include approximately $5.3
million in 2001 and $1.2 million in 2000 from MGI Pharma related to the agreement for the sale of our Hexalen business. During 2001,
we also entered into an agreement to sell excess production capacity to a third party and recorded $7.5 million in other revenues
under the arrangement. Other revenues in both years also include royalty income from ALZA in accordance with the terms of the Ethyol
distribution agreement. Other revenues during 2000 also included $10.0 million related to the license agreement signed with GSK for
our Streptococcus pneumoniae vaccine technology. The level of contract revenues in future periods will depend primarily upon the
extent to which we enter into other collaborative contractual arrangements, if any, and the extent to which we achieve certain
milestones provided for in existing agreements.
Cost of Sales - Cost of sales for 2001 increased 9% to $138.7 million from $127.3 million in 2000 due to increases in sales volumes.
Gross margins for the year ended December 31, 2001 improved to 76% from 74% for the year ended December 31, 2000. Gross margins in
2001 were principally improved as a result of increased sales of Synagis, which has more favorable margins, as well as lower
manufacturing costs following implementation of an improved manufacturing process at the Frederick Manufacturing Center ("FMC")
which increases Synagis yields. Additionally, margins in 2000 were adversely affected by a $2.4 million charge associated with the
write-off of certain Synagis inventory, as a result of a contamination in the manufacturing process at the FMC, as well as a $1.5
million charge associated with the write-off of by-product inventory associated with our plasma production activities. We expect
that gross margins may vary significantly from quarter to quarter, based on the product mix. We expect that on an annual basis, our
gross margin percentage for 2002 should be lower than 2001, as a result of expenses for initial manufacturing operations of Aviron
in anticipation of possible FDA approval of FluMist, which may or may not be granted.
Research and Development Expenses - Research and development expenses of $83.0 million in 2001 increased 25% from $66.3 million in
2000, primarily due to a larger number of active clinical trials. During 2001, we initiated nine new clinical trials and completed
patient enrollment in 12 trials. Currently, our clinical trials include a Synagis Phase 3 study in infants with congenital heart
disease, a trial with adults using a liquid formulation of Synagis, three Phase 2 and one Phase 1 human papillomavirus vaccine
trials, one Phase 1 trial and three Phase 2 trials for use of MEDI-507 in psoriasis patients, two Phase 2 trials for our urinary
tract infection (UTI) vaccine, and two Phase 1 and one Phase 2 Vitaxin trials. In addition, to accommodate more research and
development activity, we expanded our workforce and facilities, resulting in increased wages and occupancy expense. We expect
clinical spending to increase significantly in the coming quarters as more of our product candidates move into the clinic, we expand
trials on products already in the clinic, and we include Aviron's expenses in our results. Additionally, we expect to incur
significant charges in 2002 for the write-off of purchased in-process research and development relating to our acquisition of
Aviron. We are currently performing a valuation of all tangible and intangible assets and liabilities, including the acquired
in-process research and development. Preliminarily, we have estimated that $1,145 million of the purchase price will be allocated to
in-process research and development, and will be recognized as an expense during the first quarter of 2002. We expect to finalize
the valuation of the purchased in-process research and development by March 31, 2002.
During 2001, we incurred significant costs related to the development of various products and product candidates. A summary of our
more significant research and development efforts is as follows:
Stage of
Development-Stage Products Description Development
- -------------------------- ----------- -----------
Synagis Potential treatment of RSV in infants with
congenital heart disease Phase 3
Siplizumab Potential treatment for psoriasis Phase 2
Urinary tract infection Potential vaccine to prevent urinary tract
vaccine infections caused by E. coli Phase 2
Human papillomavirus vaccine Potential vaccine to prevent cervical cancer Phase 2
Vitaxin Potential anti-angiogenic product to impede tumor
growth, and potential rheumatoid arthritis therapy Phase 1
The development-stage efforts listed above and other research and development projects may never reach clinical trials, achieve
success in the clinic, be submitted to the appropriate regulatory authorities for approval, or be approved for marketing or
manufacturing by the appropriate regulatory authorities. Further, we rely on numerous third parties to assist us in various stages
of the development process. Should they be unable to meet our needs, we may incur substantial additional costs. Any of such
uncertainties, if they should occur, could have a material adverse effect on our financial condition and results of operations.
Selling, General, and Administrative Expense - Selling, general and administrative ("SG&A") expense was $194.8 million and $157.3
million in 2001 and 2000, respectively, an increase of 24%. As a percentage of product sales, SG&A expense increased to 34% in 2001
from 32% in 2000. A portion of the increase in SG&A expense in 2001 versus 2000 is reflective of expenses related to our accelerated
acquisition of Ethyol marketing rights from ALZA. We recorded $13.4 million in termination fees relating to our agreement with ALZA.
In addition, we incurred increased salary and related expenses for the expansion of our Ethyol sales force of approximately 40
additional sales representatives and increased marketing expenses for the relaunch of Ethyol during the second half of 2001. SG&A
expense also increased due to increased wage and related expenses for our pediatric sales force which was established in mid-year
2000, costs for expanded Synagis marketing programs, and increased co-promotion expense to the Ross Products Division of Abbott
Laboratories for the promotion of Synagis in the United States. Co-promotion expense is based on a percentage of net domestic sales
of Synagis and thus increases as net domestic Synagis sales increase. Offsetting these increases was a decrease in legal expenses
from 2000, as several legal matters outstanding in 2000 have since been resolved. For 2002, we expect SG&A expenses to decrease
slightly as a percentage of total revenues.
Other Operating Expenses - Other operating expenses, which reflect manufacturing start-up costs and other manufacturing related
costs, increased in 2001 to $9.6 million from $9.2 million in 2000. The slight increase is mainly attributable to charges in 2001 of
$1.3 million to record certain plasma inventories at their net realizable value. The plasma was intended for the start-up operations
of our manufacturing plant and was not approved for use in the current production process. In December 2000, the FDA granted
approval of an amendment to the Biologic License Application for CytoGam to allow us to perform a portion of the CytoGam production
process at our Frederick facility. Currently, the plasma production section of the Frederick facility has excess capacity, which
results in charges to other operating expenses. These charges are expected to continue for the foreseeable future until the plasma
production section of the facility is fully utilized. Other operating expenses are expected to increase significantly in 2002 as a
result of manufacturing-related and start-up costs associated with Aviron's operations in anticipation of possible FDA approval of
FluMist, which may or may not be granted.
Interest Income and Expense - We earned interest income of $36.5 million during 2001 versus $29.6 million in 2000, reflecting higher
cash balances available for investment and a shift in our investment strategy to include investments with longer maturities,
partially offset by a decline in interest rates which lowered our portfolio yield. Interest expense was comparable in 2001 to 2000.
Taxes - We recorded income tax expense of $79.5 million for the year ended December 31, 2001, resulting in an effective tax rate of
34.8%. This compares to tax expense of $64.4 million recorded for the year ended December 31, 2000, based on an effective tax rate
of 30.8%. The variation in the effective tax rate for 2001 versus 2000 results from differences in the amount of credits taken for
research and development activities and credits earned for orphan drug status of certain research and development activities. These
credits will vary from year to year depending on the activities of the Company. In addition, due to state tax law changes for the
year ended December 31, 2001, the value of our state deferred tax assets decreased. We believe this change in tax law will
ultimately lower our tax rates; however, we were required to reduce our deferred tax assets and accompanying valuation allowance to
value them at the new rate, resulting in a $2.4 million additional charge to tax expense during 2001. We expect that our
year-to-date effective tax rate in future periods will approximate our statutory rate of 37.0%.
Cumulative Effect of a Change in Accounting Principle - We recorded a non-cash charge to 2000 earnings of $33.8 million, net of tax,
or $0.16 on a diluted per share basis, as the cumulative effect of a change in accounting principle for the implementation of SAB
101. The adjustment was applied to the first quarter of 2000 as required by the SAB and includes amounts recognized as revenue prior
to 2000. These amounts related to up-front payments or milestone payments which we received in prior years under arrangements for
which performance obligations related to the up-front or milestone payments had been met, but for which we were contractually
obligated to perform additional research and development activities or other activities in future periods. Accounting principles
generally accepted in the United States previously required us to record the revenue from the up-front and milestone payments as
received, when the performance obligations associated with those payments had been fully met. However, following the adoption of SAB
101, accounting principles generally accepted in the United States now require that we recognize the revenue received in conjunction
with up-front or milestone payments over the remaining performance period under the contract as those obligations are fulfilled.
Net earnings - Earnings for the year ended December 31, 2001 were $149.0 million, compared to earnings for the year ended December
31, 2000 of $145.0 million, before the cumulative effect of a change in accounting principle of $33.8 million. Net earnings for the
year ended December 31, 2001 were $149.0 million, or $0.70 basic and $0.68 diluted earnings per share. Shares used in computing
basic and diluted earnings per share were 213.4 million and 220.1 million, respectively. Net earnings for the year ended December
31, 2000, which include the cumulative effect of a change in accounting principle, were $111.2 million, or $0.53 basic and $0.50
diluted earnings per share. Shares used in computing basic and diluted earnings per share were 209.1 million and 220.4 million,
respectively.
We do not believe inflation had a material effect on our financial statements.
These results were consistent with our objectives for the year and with the continued development of our products. The factors that
affected 2001 results may continue to affect near-term financial results.
2000 Compared to 1999
Revenues
Product Sales (In Millions) 2000 1999
---- ----
Synagis $427.0 $293.0
CytoGam 36.5 34.7
Ethyol 21.4 19.6
Other Products 10.9 9.5
TOTAL $495.8 $356.8
Product sales in 2000 increased 39% to $495.8 million. The increase was attributable to a number of factors including:
An increase in sales of Synagis, our largest product, which accounted for 86% and 82% of our 2000 and 1999 product sales,
respectively. Sales of Synagis in 2000 increased 46% to $427.0 million over 1999 sales of $293.0 million. Increased domestic demand
for the product resulted in a 35% increase in unit volume. A 3.1% domestic price increase which took effect in the second quarter of
2000 also contributed to the sales increase. International sales increased 233% to $27.5 million in 2000 and reflected primarily an
increase in unit volume of 215% over the prior year, following approval of Synagis by the EMEA in August 1999. The unit volume
increase reflected greater demand for the product as well as inventory stocking by Abbott International. Sales made to Abbott may
not reflect the ultimate demand for the product by the end users. Abbott International acts as our exclusive distributor for Synagis
sales outside of the United States. The terms of our agreement with Abbott provide for us to receive 40 to 50 percent of end user
sales. We initially recognized sales to Abbott when Synagis was shipped to Abbott based on a contractual, guaranteed transfer price;
this amount approximated 60 to 75 percent of the total sales revenue expected to be received for each vial. Following the end of
each quarter, Abbott remitted a report to us detailing end user sales by Abbott for the quarter and we recognized revenue for the
additional amount due in excess of the transfer price and up to 40 to 50 percent of the end user selling price. As of December 31,
2000, we and Abbott International had filed international registrations in 58 countries for the approval of Synagis, of which
approvals in 43 countries had been obtained.
CytoGam sales increased to $36.5 million, or 5% over 1999 sales of $34.7 million. We believe that a portion of the CytoGam sales
that occurred in both years was the result of product substitution occurring because of a worldwide shortage of standard IVIG
products. During 2000, the supply of standard IVIG products increased, and certain Medicaid agencies began to limit or discontinue
reimbursement of CytoGam as a substitute for IVIG. Thus, we believe CytoGam sales for the 2000 period relating to product
substitution decreased significantly. Partially offsetting the decrease in the substitution business was a moderate increase in
usage in transplantation. Overall, unit volumes decreased 5% domestically and 40% internationally when compared to the 1999 year.
Despite the unit volume decrease, sales dollars increased due to a domestic price increase of approximately 7% implemented during
the second quarter of 2000, and due to decreased government rebates paid for the product, principally for Medicaid, related to the
IVIG substitution sales.
Sales of Ethyol increased approximately 9% to $21.4 million over 1999 sales of $19.6 million. Ethyol was sold through distribution
partners in the United States and internationally; we received a percentage of end user sales and recorded all related cost of goods
sold. In 2000, revenue for Ethyol from ALZA, our United States distributor, was $14.8 million versus $14.0 million in 1999. We
achieved an increase in sales volumes of 7% domestically and 9% internationally as a result of increased demand by the distribution
partners. Sales made to our distribution partners may not reflect the ultimate demand for the product by the end users. In 2000, we
estimated that end user demand for Ethyol in the United States increased by approximately 28%. The difference between end user
demand and demand from our distributor represents fluctuations in wholesaler and distributor inventories.
Sales of other products in 2000 increased $1.4 million, or 15% from the prior year. Sales of other products included primarily sales
of NeuTrexin and RespiGam. Also included in other product sales were sales of Hexalen. In November 2000, we sold this product to MGI
Pharma.
Other revenues for the year ended December 31, 2000 of $44.7 million increased 68% from 1999 other revenues of $26.6 million. This
increase was largely due to the implementation of SAB 101 in the fourth quarter of 2000, retroactively to January 1, 2000. SAB 101
summarizes certain of the SEC's views in applying generally accepted accounting principles to certain revenue transactions in
financial statements. The implementation of SAB 101 included amounts previously recognized as revenue relating to up-front payments
or milestone payments received by us in prior years under arrangements for which performance obligations related to the up-front or
milestone payments had been met, but for which we were contractually obligated to perform additional research and development
activities or other activities in future periods. Generally accepted accounting principles previously required us to record the
revenue from the up-front and milestone payments as received, when the performance obligations associated with those payments had
been fully met. However, following the adoption of the SAB, generally accepted accounting principles now require that the revenue
received in conjunction with up-front or milestone payments be recognized over the remaining performance period under the contract
as those obligations are fulfilled. In accordance with the SAB, we recognized $21.1 million in licensing revenues for the year 2000
related to up-front fees and milestone payments received in prior years. Excluding these revenues, other revenues would have
decreased $3.0 million, or 11%, as compared to 1999's level of $26.6 million, and included primarily $10.0 million from
GlaxoSmithKline ("GSK") related to the sale of our Streptococcus pneumoniae vaccine technology, $7.8 million earned under a
collaborative agreement with GSK for HPV vaccine development, and royalty income due from ALZA in accordance with the terms of the
Ethyol distribution agreement. Other revenues in 1999 primarily included $6.2 million received under the HPV vaccine development
collaboration with GSK and a payment of $15.0 million from Abbott upon European approval of Synagis.
Cost of Goods Sold - Cost of goods sold rose 41% in 2000 to $127.3 million versus $90.2 million in 1999. This increase was primarily
a result of increased 2000 sales volumes. Gross margins were 74% for 2000, as compared to 75% for 1999. Included in cost of goods
sold for 2000 was a $2.4 million charge associated with the write-off of certain Synagis inventory as a result of a contamination in
the manufacturing process at the FMC, as well as a $1.5 million charge associated with the write-off of by-product inventory
associated with our plasma production activities. We expect gross margins to vary from quarter to quarter, based on the product mix.
Research and Development Expenses - Research, development and clinical spending expenses increased 11% over the prior year from
$59.6 million in 1999 to $66.3 million in 2000, primarily due to higher expenditures on our clinical trials and increased
infrastructure costs needed to support the growing number of ongoing clinical trials. We are currently administering multiple trials
for our products, primarily including: Synagis in infants with congenital heart disease, human papillomavirus vaccine trials, and
several trials using MEDI-507.
Selling, General, and Administrative Expense - Selling, general and administrative ("SG&A") expense was $157.3 million in 2000
versus $139.4 million in 1999, an increase of 13%. As a percent of product sales, however, SG&A expenses in 2000 decreased from
39% of product sales in 1999 to 32% of product sales in 2000. 1999 expenses included one-time items of $21.2 million for merger and
severance related costs associated with the acquisition of USB, which was completed on November 23, 1999. The charge consisted of
approximately $14.7 million of deal-related costs (i.e., banking fees, audit and tax fees, printing fees, and other fees),
approximately $5.6 million of involuntary employee termination costs, and approximately $0.9 million of other costs. Of the amount
expensed, approximately $1.2 million of severance costs were accrued as of December 31, 1999. No material adjustments were made to
the accrual during 2000. A significant portion of the increase in SG&A expense in 2000 related to co-promotion expenses due to
the Ross Products Division of Abbott Laboratories for the promotion of Synagis in the United States; these expenses increased as the
domestic sales for Synagis increased. Co-promotion expense is recorded ratably as a percentage of net domestic Synagis sales.
Further increases in 2000 were attributable to wage and related expenses incurred in connection with the establishment of our
pediatric sales force during 2000 and legal costs related to several outstanding legal matters, including those related to the
MediGene AG and Celltech matters. During the fourth quarter of 1999, we favorably resolved a prior dispute with one of our partners
resulting in the receipt of approximately $6.8 million. Such settlement amount was recorded as a reduction to selling,
administrative and general expense in the fourth quarter of 1999.
Other Operating Expenses - Other operating expenses, which reflect manufacturing start-up costs, decreased 47% in 2000 to $9.2
million from $17.4 million in 1999. Expenses in both years included start-up costs for the Company's Frederick Manufacturing Center
("FMC"). Expenses in both the 2000 and 1999 periods included charges for the write-off of certain equipment associated with our
plasma production activities of $1.8 million and $1.4 million, respectively. In December 2000, the FDA granted approval for the
amendment to the BLA for CytoGam to allow for a portion of the production of CytoGam at the Frederick facility. We were granted FDA
approval for the manufacture of Synagis at the Frederick facility in December 1999. Currently, the plasma production section of the
Frederick facility has excess capacity.
Interest Income and Expense - Interest income increased 134% to $29.6 million from $12.6 million in 1999 as a result of higher cash
balances available for investment and increased yields on investments in the 2000 investment portfolio due to more favorable market
conditions. Interest expense in 2000 decreased due to debt paydowns.
Taxes - We recorded income tax expense in 2000 of $64.4 million as compared to a benefit of $7.1 million recorded in 1999. Our
effective tax rate for 2000 was 30.8%. The variation from the statutory rate of 38.6% was principally due to increased credits for
research and development expenditures and credits earned for orphan drug status of certain research and development activities. The
benefit in 1999 included the reversal of the valuation allowance against deferred taxes related to federal net operating losses of
USB in the amount of $41.0 million. The recognition of these deferred tax assets had no impact on our 1999 cash flows. Excluding the
reversal of the valuation allowance, income tax expense would have been $33.9 million in 1999, an effective rate of 39.3%. The
variation from the statutory rate was also principally due to tax credits for research and development expenditures and credits
earned for orphan drug status of certain R&D expenditures, offset by the nondeductibility of certain merger related expenses.
Cumulative effect of a change in accounting principle- We recorded a non-cash charge to 2000 earnings of $33.8 million, net of tax,
as the cumulative effect of a change in accounting principle for the implementation of SAB 101. The adjustment was applied to the
first quarter of 2000 as required by the SAB and included amounts previously recognized as revenue related to up-front payments or
milestone payments received in prior years under arrangements for which performance obligations related to the up-front or milestone
payments had been met, but for which we are contractually obligated to perform additional research and development activities or
other activities in future periods. Generally accepted accounting principles previously required us to record the revenue from the
up-front and milestone payments as received, when the performance obligations associated with those payments had been fully met.
However, following the adoption of the SAB, generally accepted accounting principles required that the revenue received in
conjunction with up-front or milestone payments be recognized over the remaining performance period under the contract as those
obligations are fulfilled.
Net Earnings - 2000 net earnings, which included the cumulative effect of a change in accounting principle, were $111.2 million
compared to 1999 net earnings of $93.4 million. Basic earnings per share in 2000 of $0.53 on 209.1 million shares compared to basic
earnings of $0.49 in 1999 on 190.4 million shares. Diluted earnings per share in 2000 of $0.50 on 220.4 million shares compared to
diluted earnings per share in 1999 of $0.44 on 212.3 million shares. Year 2000 earnings before the cumulative effect of a change in
accounting principle were $145.0 million, or $0.69 basic and $0.66 diluted earnings per share. Pro forma net income, which assumed
that SAB 101 had been applied retroactively to prior years, was $145.0 million in 2000, or $0.69 basic and $0.66 diluted earnings
per share. Pro forma net income in 1999 was $93.7 million, or $0.49 basic and $0.44 diluted earnings per share. 1999 share and per
share amounts have been restated to reflect the three-for-one stock split effected in June 2000.
We do not believe inflation had a material effect on our financial statements.
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities were $787.7 million at December 31, 2001, an increase of 50% over 2000. Working capital was $429.9
million at December 31, 2001, versus $526.3 million at December 31, 2000. The decrease in working capital reflects our decision
during 2001 to invest a portion of our cash in longer-term investments, which are not included in working capital.
Operating Activities
Net cash provided by operating activities increased to $250.9 million in 2001 as compared to $173.0 million in 2000, primarily as
the result of higher earnings. Additionally, allowances for trade accounts receivable increased $9.6 million to adequately reserve
for increased government rebates primarily affecting Synagis sales. Accounts payable and accrued expenses increased $25.5 million,
primarily for increased amounts due to Abbott Laboratories for Synagis co-promotion expense, due to the increase in domestic Synagis
sales, and $13.4 million for termination fees due to ALZA.
Investing Activities
Cash used for investing activities during 2001 amounted to $188.2 million, as compared to $199.3 million in 2000, excluding
capitalized interest of $0.3 million. Cash used for investing activities in 2001 included net additions to our investment portfolio
of $168.4 million, $10.0 million of which was an investment in convertible preferred equity securities of a strategic partner
related to the in-licensing of the IL-9 asthma antibody technology; $18.3 million for capital expenditures, primarily for expansion
of the Synagis manufacturing area at our Frederick manufacturing facility and updated manufacturing and accounting systems; and a
$1.5 million investment in a strategic alliance for the research and development of a tumor-targeting particle.
Financing Activities
Financing activities generated $23.6 million in cash in 2001, as compared to $74.8 million in 2000. Approximately $24.3 million was
received upon the exercise of employee stock options in 2001, as compared to $76.3 million received in 2000, reflecting the lower
average price for our common shares during 2001. In 2001 and 2000, repayments on long-term debt were $0.7 million and $1.5 million,
respectively.
We are obligated in 2002 to provide $27.9 million in funding for various clinical trials, research and development and license
agreements with certain institutions. We have also agreed to make milestone payments in the future in the aggregate amount of $119.4
million, the timing of which is uncertain and dependent on the occurrence of certain events such as the granting by the FDA of a
license for product marketing in the United States for some of the product candidates covered by the Company's agreements. We have
firm commitments with BI for planned production through March 2004 for approximately 43.7 million Euros, payment for which is
subject to manufacturing and delivery schedules. During March 2002, we paid approximately $13.4 million to acquire 25 acres of land
in Gaithersburg, Maryland, which will serve as the site of our new corporate headquarters. We have contracted with a designer and
general contractor for the construction of the new facility over the next several years, at a total estimated cost of $80 million.
The construction project is expected to break ground in April 2002 and we expect to take occupancy of the first phase in the fall of
2003. The Company's existing funds, together with funds contemplated to be generated from product sales and investment income, are
expected to provide sufficient liquidity to meet the anticipated needs of the business for the foreseeable future, absent the
occurrence of any unforeseen events.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about our risk-management activities includes "forward-looking statements" that involve risks and
uncertainties. Actual results could differ materially from those projected in the forward-looking statements.
Our primary market risks as of December 31, 2001 are the exposures to loss resulting from changes in interest rates, foreign
currency exchange rates, and equity prices. Market risk exposure with respect to interest rates and equity prices exceeds that of
December 31, 2000 due to the increase in the size of our investment portfolio. Also, during 2001 we revised our investment strategy
to include investments with longer maturities.
As of December 31, 2001, our excess cash balances are primarily invested in marketable debt securities with investment grade credit
ratings. Substantially all of our cash and cash equivalents, and short-term and long-term investments are held in custody by three
major U.S. financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally,
these deposits may be redeemed upon demand and, therefore, bear minimal risk. Our investments include U.S. corporate commercial
paper and debt securities, international bank CD'S, and U.S. Government and Agency notes and bonds. The maturities range from three
months to five years. Our investment guidelines are intended to limit the amount of investment exposure as to institution, maturity,
and investment type. The fair value of these investments is sensitive to changes in interest rates. Further, interest income earned
on variable rate debt securities is exposed to changes in the general level of interest rates. The following table presents
principal cash flows and weighted average interest rates by expected maturity dates for each class of security with similar
characteristics.
Fair
2002 2003 2004 2005 2006 Total Value
---- ---- ---- ---- ---- ----- -----
U.S. Government and
Agencies $ -- $ -- $ -- $ -- $ 8,000 $ 8,000 $ 8,310
Interest Rate -- -- -- -- 5.5%
Corporate Debt Securities $141,375 $70,522 $117,375 $92,350 $108,735 $530,357 $556,494
Interest Rate 4.5% 6.8% 5.9% 7.2% 6.0%
Foreign Bank CD's $ -- $ -- $ 6,000 $ -- $ 22,000 $ 28,000 $ 30,464
Interest Rate -- -- 5.0% -- 7.4%
We are exposed to equity price risks related to the marketable equity securities included in our investment portfolio. As of
December 31, 2001, we owned approximately 907,000 shares of stock in a publicly-traded company with which we previously formed a
strategic alliance. In accordance with FAS 115, "Accounting for Certain Investments in Debt and Equity Securities," we value the
investment at its market price. Since the company's initial public offering in July 2000, the market price of the shares has
fluctuated significantly. We expect this volatility to continue and, thus, the value assigned to this investment could change
significantly from its market value of $11.2 million at December 31, 2001. For each one percent change in the fair value of the
underlying security, the fair value of our investment would change by approximately $0.1 million. As of December 31, 2000, the fair
value of the investment was $15.5 million.
During 2001, we invested approximately $10.0 million in the convertible preferred equity securities of a strategic partner, which is
a publicly-traded biopharmaceutical company. In accordance with accounting principles generally accepted in the United States of
America, we carry the investment at cost, adjusted for any other-than-temporary declines in value. We evaluate the investment for
potential other-than-temporary impairments on a periodic basis, and determined that no such other-than-temporary impairments
occurred during 2001.
Changes in interest rates do not affect interest expense incurred on our outstanding indebtedness of $9.5 million and $10.3 million
at December 31, 2001 and 2000, respectively, because the borrowings are in the form of notes which bear interest at fixed rates.
Maturities of long-term debt for the next five years are as follows: 2002, $0.8 million; 2003, $0.8 million; 2004, $0.9 million;
2005, $0.9 million; and 2006, $1.0 million. The estimated fair value of our long-term debt at December 31, 2001 and 2000, based on
quoted market prices or discounted cash flows at currently available borrowing rates, was $10.0 million and $10.9 million,
respectively.
The Company's contract for the purchase of Synagis from BI is denominated in Euros. Currently, we have firm commitments with BI for
planned production through March 2004 for approximately 43.7 million Euros, payment for which is subject to manufacturing and
delivery schedules. In an effort to reduce the impact of fluctuations in the rate of exchange between the U.S. Dollar and the Euro
on the cost of the Company's purchases of Synagis, the Company periodically enters into foreign exchange forward contracts. These
contracts permit the Company to purchase Euros to fund a portion of its inventory purchase obligations at a fixed exchange rate.
Each contract terminates on the day the Company expects to make payment for a shipment of Synagis. The Company does not enter into
foreign exchange forward contracts for speculative or trading purposes. As of December 31, 2001, the Company did not have any open
foreign exchange forward contracts. As of December 31, 2000, the Company had outstanding forward Euro contracts in the amount of
$11.1 million, all expiring within one year. Fair value of the outstanding contracts at December 31, 2000 was $0.5 million.
On January 1, 2001, the Company adopted Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments
and Hedging Activities." SFAS 133 establishes new accounting and reporting standards for derivative financial instruments and
hedging activities. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in
fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and if it is, depending on the type of hedge transaction. For foreign
currency cash-flow hedge transactions in which the Company is hedging the variability of cash flows related to inventory purchases,
changes in the fair value of the derivative instruments will be reported in other comprehensive income. The gains and losses on
these derivatives that are reported in other comprehensive income will be reclassified as earnings in the periods in which the
related inventory is sold. The ineffective portion, if any, of all hedges will be recognized in current-period earnings.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MedImmune, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
December 31, 2001 December 31, 2000
----------------- -----------------
Assets
Cash and cash equivalents $ 171,255 $ 84,974
Marketable securities 227,067 406,455
Trade receivables, net 108,902 115,635
Inventory, net 50,836 46,633
Deferred tax assets 27,280 22,319
Other current assets 9,063 11,796
---------- ----------
Total current assets 594,403 687,812
Property and equipment, net 95,402 86,383
Deferred tax assets, net 136,361 194,761
Marketable securities 389,368 34,825
Other assets 3,852 2,794
---------- ----------
Total assets $1,219,386 $1,006,575
========== ==========
Liabilities and Shareholders' Equity
Accounts payable, trade $ 5,873 $ 3,090
Accrued expenses 94,965 72,159
Product royalties payable 47,720 40,553
Deferred revenue 13,839 33,966
Other current liabilities ---------- ---------
2,149 1,697
---------- ---------
Total current liabilities 164,546 151,465
Long-term debt 8,791 9,595
Other liabilities 1,776 1,933
------------- --------------
Total liabilities 175,113 162,993
------------- --------------
Commitments and Contingencies (Note 17)
Shareholders' Equity
Preferred Stock, $.01 par value; authorized
5,524,525 shares; none issued or outstanding -- --
Common Stock, $.01 par value; authorized
320,000,000 shares; issued and outstanding
214,484,084 and 211,347,825 at December 31,
2001 and 2000, respectively 2,145 2,113
Paid-in capital 891,627 842,815
Accumulated earnings (deficit) 141,875 (7,085)
Accumulated other comprehensive income 8,626 5,739
-------------- --------------
Total shareholders' equity 1,044,273 843,582
-------------- --------------
Total liabilities and shareholders' equity $1,219,386 $1,006,575
============== ==============
The accompanying notes are an integral part of these financial statements.
MedImmune, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
For the year ended December 31,
2001 2000 1999
---- ---- ----
Revenues
Product sales $579,529 $495,803 $356,815
Other revenue 39,150 44,692 26,560
------- ------- -------
Total revenues 618,679 540,495 383,375
------- ------- -------
Costs and Expenses
Cost of sales 138,707 127,320 90,193
Research and development 82,985 66,296 59,565
Selling, general, and administrative 194,841 157,330 139,389
Other operating expenses 9,606 9,231 17,409
------- ------- -------
Total expenses 426,139 360,177 306,556
------- ------- -------
Operating income 192,540 180,318 76,819
Interest income 36,516 29,569 12,633
Interest expense (590) (474) (3,176)
------- ------- -------
Earnings before income taxes and cumulative
effect of a change in accounting principle 228,466 209,413 86,276
Provision (benefit) for income tax 79,506 64,436 (7,095)
------- ------- -------
Earnings before cumulative effect of a change in
accounting principle 148,960 144,977 93,371
Cumulative effect of a change in accounting principle,
net of tax benefit of $21,262 -- (33,821) --
-------- ------- -------
Net earnings $148,960 $111,156 $93,371
======== ======== =======
Basic earnings per share:
Earnings before cumulative effect of a change in
accounting principle $0.70 $0.69 $0.49
Cumulative effect of a change in accounting principle,
net of tax -- (0.16) --
--------- -------- --------
Net earnings $0.70 $0.53 $0.49
========= ======== ========
Shares used in calculation of basic earnings per share 213,378 209,101 190,421
========= ======== ========
Diluted earnings per share:
Earnings before cumulative effect of a change in
accounting principle $0.68 $0.66 $0.44
Cumulative effect of a change in accounting principle,
net of tax -- (0.16) --
--------- -------- --------
Net earnings $0.68 $0.50 $0.44
========= ======== ========
Shares used in calculation of diluted earnings per share 220,101 220,428 212,310
========= ======== ========
Pro forma amounts assuming the change in accounting
principle was applied retroactively:
Net earnings $144,977 $94,505
======== ========
Basic earnings per share $0.69 $0.50
======== ========
Diluted earnings per share $0.66 $0.45
======== ========
The accompanying notes are an integral part of these financial statements.
MedImmune, Inc.
Consolidated Statements of Cash Flows
(in thousands)
For the year ended December 31,
-------------------------------
2001 2000 1999
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $148,960 $111,156 $93,371
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Cumulative effect of a change in accounting principle,
net of tax -- 33,821 --
Deferred taxes 76,398 68,024 (7,457)
Deferred revenue (21,430) (21,117) --
Depreciation and amortization 9,124 7,322 5,001
Change in reserve for loss on disposal of fixed assets (88) 1,635 --
Capitalized interest -- (295) (1,707)
Compensation element of stock options/grants -- -- 575
Amortization of discount on marketable securities (2,024) (2,798) (78)
Increase (decrease) in allowances for sales discounts,
returns, bad debts, chargebacks, and government rebates 9,599 (125) (3,509)
Increase (decrease) in provision for inventory reserve 2,910 (1,018) (1,668)
Other (50) 526 1,481
Increase (decrease) in cash due to changes in assets
and liabilities:
Trade receivables (2,866) (28,616) (49,974)
Inventory (6,559) (11,999) (6,839)
Other assets 2,697 (2,833) (600)
Accounts payable and accrued expenses 25,451 6,849 18,596
Product royalties payable 7,166 12,026 13,579
Other liabilities 1,627 410 (1,918)
--------- -------- -------
Net cash provided by operating activities 250,915 172,968 58,853
--------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in securities available for sale (852,589) (685,207) (333,849)
Maturities of securities available for sale 312,954 430,845 201,044
Proceeds from sales of securities available for sale 371,230 63,375 30,642
Capital expenditures (18,258) (8,293) (12,203)
Investment in strategic alliance (1,499) -- (6,350)
--------- -------- -------
Net cash used in investing activities (188,162) (199,280) (120,716)
--------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock and private
placement of securities 24,339 76,286 69,843
Deferred costs from debt issuance -- -- (2)
Repayments on long-term debt (742) (1,505) (15,869)
-------- -------- -------
Net cash provided by financing activities 23,597 74,781 53,972
-------- -------- -------
Effect of exchange rate changes on cash (69) (65) (269)
Net increase (decrease) in cash equivalents 86,281 48,404 (8,160)
Cash and cash equivalents at beginning of year 84,974 36,570 44,730
-------- -------- -------
Cash and cash equivalents at end of year $171,255 $84,974 $36,570
========= ======== =======
The accompanying notes are an integral part of these financial statements.
MedImmune, Inc.
Consolidated Statements of Shareholders'
Equity
(in thousands, except share data)
Accumu- Accumulated
lated Other
Common Stock, $.01 par Paid-in Earnings Treasury Comprehensive
Shares Amount Capital (Deficit) Stock Income (Loss) Total
------ ------ ------- --------- ----- ------------- -----
Balance, December 31, 1998 174,927,966 $1,749 $459,005 $(211,612) $(145) $(431) $248,566
Net earnings -- -- -- 93,371 -- -- 93,371
Foreign currency translation
adjustment, net of tax -- -- -- -- -- (633) (633)
Unrealized loss on investments, net
of tax -- -- -- -- -- (539) (539)
--------
Comprehensive income 92,199
--------
Common stock options exercised 9,152,823 92 43,780 -- -- -- 43,872
Private placement of common stock,
February 1999 1,209,027 12 19,957 -- -- -- 19,969
Tax benefit associated with the exercise of
stock options -- -- 67,149 -- -- -- 67,149
Compensation related to stock
options/grants 16,077 -- 575 -- -- -- 575
Conversion of debentures, net of
unamortized expenses of $1,253 18,292,635 183 58,564 -- -- -- 58,747
Exercise of warrants 241,806 2 6,000 -- -- -- 6,002
Cancellation of treasury stock -- -- (145) -- 145 -- --
---------- ----- -------- -------- ----- ------- -------
Balance, December 31, 1999 203,840,334 2,038 654,885 (118,241) -- (1,603) 537,079
Net earnings -- -- -- 111,156 -- -- 111,156
Foreign currency translation adjustment,
net of tax -- -- -- -- -- (8) (8)
Unrealized gain on investments, net of tax -- -- -- -- -- 7,350 7,350
-------
Comprehensive income 118,498
-------
Common stock options exercised 7,507,491 75 76,210 -- -- -- 76,285
Tax benefit associated with the exercise
of stock options -- -- 111,720 -- -- -- 111,720
---------- ----- ------- ------- ----- ------ -------
Balance, December 31, 2000 211,347,825 2,113 842,815 (7,085) -- 5,739 843,582
Net earnings -- -- -- 148,960 -- -- 148,960
Foreign currency translation
adjustment, net of tax -- -- -- -- -- (216) (216)
Unrealized gain on investments, net of tax -- -- -- -- -- 3,071 3,071
Unrealized gain on hedged inventory
purchases, net of tax -- -- -- -- -- 32 32
-------
Comprehensive income 151,847
-------
Common stock options exercised 3,092,283 31 22,818 -- -- -- 22,849
Issuance of common stock under the
employee stock purchase plan 43,976 1 1,489 -- -- -- 1,490
Tax benefit associated with the exercise
of stock options -- -- 24,505 -- -- -- 24,505
----------- ------ -------- -------- ------ ------ ----------
Balance, December 31, 2001 214,484,084 $2,145 $891,627 $141,875 $0 $8,626 $1,044,273
=========== ====== ======== ======== ====== ====== ==========
The accompanying notes are an integral part of these financial statements.
MedImmune, Inc.
Notes to Consolidated Financial Statements
1. ORGANIZATION
MedImmune, Inc., a Delaware corporation (together with its subsidiaries, the "Company"), is a biotechnology company headquartered in
Gaithersburg, Maryland. The Company currently markets five products and maintains a diverse product portfolio. The Company is
focused on using advances in immunology and other biological sciences to develop important new products that address significant
medical needs in areas such as infectious diseases, immune regulation and oncology.
During January 2002, the Company completed the acquisition of Aviron, a biopharmaceutical company headquartered in Mountain View,
California, through an exchange offer and merger transaction. The acquisition will be accounted for as a purchase, and the results
of operations of Aviron will be included in the results of the Company effective January 10, 2002 (see Note 21).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies applied in the preparation of these financial statements are as follows:
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity of three months or less at date of purchase to be cash
equivalents.
Marketable Securities
Investments consist principally of commercial paper and debt securities of United States corporations, international bank
certificates of deposit, and United States Government and Agency notes and bonds. Investments with original maturities of three to
24 months are considered current assets, while those with maturities in excess of two years are considered non-current assets. The
securities are held for an unspecified period of time and may be sold to meet liquidity needs and therefore are classified as
available-for-sale as defined by Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." Accordingly, the Company records these investments at fair value, with unrealized gains and losses
on investments reported, net of tax, as a component of other comprehensive income (loss). The Company also holds minority interests
in companies having operations or technology in areas within its strategic focus, some of which are publicly traded and have highly
volatile share prices. The Company records an investment impairment charge when it believes an investment has experienced a decline
in value that is other-than-temporary.
Concentration of Credit Risk
Substantially all of the Company's cash and cash equivalents, and short-term and long-term investments, are held in custody by three
major U.S. financial institutions. The majority of the Company's cash equivalents consist of U.S. Government Federal Agency
Securities, short-term marketable securities, and overnight repurchase agreements. Deposits held with banks may exceed the amount of
insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and, therefore, bear minimal risk. The
Company's short-term and long-term investments generally consist of marketable securities with investment grade credit ratings and
deposits with major banks. The Company's investment guidelines are intended to limit the amount of investment exposure as to
institution, maturity, and investment type. Maturities generally range from three months to five years. The fair values of these
investments are sensitive to changes in interest rates and the credit-worthiness of the security issuers. Further, interest income
earned on variable rate debt securities is exposed to changes in the general level of interest rates. The Company has not realized
any significant losses on its investments.
The Company sells its products primarily to a limited number of pharmaceutical wholesalers and distributors without requiring
collateral. The Company periodically assesses the financial strength of these customers and establishes allowances for anticipated
losses when necessary.
The Company currently markets five products. Sales of Synagis, the Company's largest selling product, comprised approximately 89%,
86%, and 82% of total product sales for the years ended December 31, 2001, 2000, and 1999, respectively.
As of December 31, 2001, trade accounts receivable included two customers that each accounted for 29% and 26% of net trade accounts
receivable, respectively. As of December 31, 2000, trade accounts receivable included three customers that each accounted for 32%,
22%, and 15% of net trade accounts receivable, respectively.
Inventory
Inventory is stated at the lower of cost or market. Cost is determined using a weighted-average approach that approximates the
first-in, first-out method. Where the Company has a firm contract for their purchase, by-products that result from production of the
Company's principal products are accounted for as a reduction of the cost of the principal products. The Company records an
inventory reserve for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of
inventory and the estimated market value based upon assumptions about future demand and market conditions.
Product Sales
The Company recognizes revenue on product sales when persuasive evidence of an arrangement exists, delivery has occurred, the sales
price is fixed or determinable and collectibility is probable. These criteria are generally met upon receipt of the product by our
customers. In certain of the Company's international distribution agreements the total sales price received from the customer is
variable based, in part, on the end-user sales price. When all of the other revenue criteria have been met, the Company recognizes
revenue to the extent that the customer has an obligation to pay, if the customer has limited or no control over the end-user sales
price and, accordingly, any subsequent adjustments to the recorded revenue are not expected to be significant. Subsequent
adjustments to recorded revenue that result from variances between amounts previously invoiced and the total sales price received
are recorded as an adjustment to product sales in the quarter in which they become known. Product sales are recorded net of
allowances for estimated chargebacks, returns, discounts, and government rebates. Both in the United States and elsewhere, sales of
pharmaceutical products depend on the availability of reimbursement to the consumer from third-party payors, such as government and
private insurance plans. The Company estimates the portion of its sales that will occur to this end-user market and records
allowances at a level that management believes is sufficient to cover estimated requirements for rebates. The Company maintains
allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments.
Allowances for discounts, returns, chargebacks, government rebates and bad debts, which are netted against accounts receivable,
totaled $26.9 million and $17.3 million at December 31, 2001 and 2000, respectively. Product royalty expense is recognized
concurrently with the recognition of product revenue. Royalty expense, included in cost of sales, was $86.3 million, $69.2 million,
and $46.7 million for the years ended December 31, 2001, 2000 and 1999, respectively.
Contract Revenues
Contract revenues are recognized over the fixed term of the contract as the related expenses are incurred. Upfront fees and
milestone payments under collaborative agreements are recognized when they are earned in accordance with the applicable performance
requirements and contractual terms, using the contingency adjusted performance model for revenue recognition. Under this method,
payments received that are related to future performance are deferred and recorded as revenues as they are earned over specified
future performance periods. The amount of revenue recognized during each period is based on a percentage of completion model of
actual costs incurred relative to the total projected costs. When the performance criteria for a non-refundable milestone payment
are met, the cost of the effort that has been incurred to date is divided by the total projected costs under the development
arrangement (i.e., ratio of performance), and revenue is recognized for that milestone to the extent of the ratio of performance to
date. Recognized revenues are subject to revisions as the collaboration efforts progress and estimated costs to complete are
revised.
Co-promotion Expense
In connection with the agreement with Abbott Laboratories to co-promote Synagis in the United States, the Company is required to pay
Abbott an increasing percentage of net domestic sales based on Abbott achieving certain sales thresholds over the annual contract
year. The contract year extends from July to June each year and generally coincides with the annual respiratory syncytial virus
("RSV") season, which occurs primarily in the fourth and first quarters in the Northern Hemisphere. The Company estimates its net
sales and resulting co-promotion expense for the entire contract year to determine a proportionate percentage of expense to apply
across all Synagis sales during that contract year. Any adjustments to the co-promotion expense that result from variances between
estimated and actual net sales are recorded as an adjustment to expense in the quarter they become known. During 2001, 2000, and
1999, the adjustments were immaterial.
Property and Equipment
Property and equipment are stated at cost. Interest cost incurred during the period of construction of plant and equipment and prior
to FDA licensure is capitalized. Depreciation and amortization expense commence when the asset is placed in service for its intended
purpose. Depreciation and amortization is computed using the straight-line method based upon the following estimated useful lives:
Years
Building and improvements 15-30
Manufacturing, laboratory, and facility equipment 5-15
Office furniture, computers and equipment 3-7
Amortization of leasehold improvements is computed on the straight-line method based on the shorter of the estimated useful life of
the improvement or the term of the lease. Depreciation and amortization expense for the years ended December 31, 2001, 2000, and
1999 was $9.1 million, $7.3 million, and $5.0 million, respectively.
Upon the disposition of assets, the costs and related accumulated depreciation are removed from the accounts and any resulting gain
or loss is included in the statements of operations. Repairs and maintenance costs are expensed as incurred and were $3.3 million,
$4.1 million, and $2.9 million for the years ended December 31, 2001, 2000, and 1999, respectively.
Long-Lived Assets
The Company evaluates the recoverability of the carrying value of property and equipment and intangible assets in accordance with
the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of." The Company considers
historical performance and anticipated future results in its evaluation of the potential impairment. Accordingly, when the
indicators of impairment are present, the Company evaluates the carrying value of these assets in relation to the operating
performance of the business and future undiscounted cash flows expected to result from the use of these assets. Impairment losses
are recognized when the sum of the expected future cash flows are less than the assets' carrying value. To date, the Company has
recorded no impairment losses.
Forward Exchange Contracts
The Company is obligated to make certain payments to foreign suppliers in local currency. To hedge the effect of fluctuating foreign
currencies in its financial statements, the Company may enter into foreign forward exchange contracts. Gains or losses associated
with the forward contracts are computed as the difference between the foreign currency contract amount at the spot rate on the
balance sheet date and the forward rate on the contract date.
On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133 establishes new accounting and reporting standards for derivative financial instruments and hedging activities. SFAS 133
requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in fair value of derivatives are
recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a
hedge transaction and if so, depending on the type of hedge transaction. For foreign currency cash-flow hedge transactions in which
the Company is hedging the variability of cash flows related to inventory purchases, changes in the fair value of the derivative
instruments are reported in other comprehensive income. The gains and losses on these derivatives that are reported in other
comprehensive income are reclassified as earnings or losses in the periods in which the related inventory is sold. The ineffective
portion, if any, of all hedges or gains or losses on cash-flow hedges related to inventory transactions that subsequently become
probable of not occuring are recognized in the current period. In accordance with the transition provisions of SFAS 133, the Company
recorded a net-of-tax cumulative-effect-type gain of $0.3 million in accumulated other comprehensive income as of January 1, 2001 to
recognize at fair value all derivatives, which are designated as foreign currency cash-flow hedging instruments.
Fair Value of Financial Instruments
The carrying amount of financial instruments, including cash and cash equivalents, trade receivables, contracts receivable, other
current assets, accounts payable, and accrued expenses, approximate fair value as of December 31, 2001 and 2000 due to the short
maturities of these instruments.
Income Taxes
Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized and are reversed at such time that realization is believed to be
more likely than not. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets
and liabilities, exclusive of amounts related to the exercise of stock options which benefit is recognized directly as an increase
in shareholders' equity.
Earnings Per Share
Basic earnings per share is computed by dividing the net earnings available to common shareholders by the weighted average number of
common shares outstanding during the period. Diluted earnings per share is computed by dividing net earnings available to common
shareholders by the weighted average number of common shares outstanding after giving effect to all dilutive potential common shares
that were outstanding during the period. Potential common shares are not included in the computation of diluted earnings per share
if they are antidilutive.
Comprehensive Income
Under SFAS No.130 "Reporting Comprehensive Income," the Company is required to display comprehensive income and its components as
part of the financial statements. Comprehensive income is comprised of net earnings and other comprehensive income (loss), which
includes certain changes in equity that are excluded from net earnings. The Company includes foreign currency translation
adjustments, unrealized holding gains and losses, net of tax, on available-for-sale securities, and unrealized gains and losses on
foreign currency hedges in other comprehensive income (loss).
A significant portion of other comprehensive income (loss) for the year ended December 31, 2001 relates to unrealized holding gains
and losses on available-for-sale marketable securities. The Company maintains an investment in a company with which it previously
formed a strategic alliance, which is carried at its fair value. Due to market volatility associated with this investment, the value
of the Company's investment has fluctuated significantly since the company's initial public offering, and may continue to do so in
the future.
New Accounting Standards
The Company adopted SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS 140"), for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001.
SFAS 140 establishes accounting and reporting standards for transfers and servicing of financial assets and extinguishments of
liabilities. The adoption of SFAS 140 did not have a material impact on the Company's financial position, results of operations or
cash flows.
During June 2001, the Company adopted SFAS No.141, "Business Combinations" ("SFAS 141"), which addresses financial accounting and
reporting for business combinations and supersedes APB Opinion No. 16 and SFAS 38, "Accounting for Preacquisition Contingencies of
Purchased Enterprises." All business combinations under the scope of this statement consummated after June 30, 2001 are to be
accounted for using one method, the purchase method. In accordance with the standard, the Company prospectively adopted SFAS 141
effective for business combinations consummated after June 30, 2001. The adoption did not have a material impact on the Company's
financial position, results of operations, or cash flows for all periods presented. The Company's acquisition of Aviron during
January 2002 will be accounted for using the purchase method, in accordance with SFAS 141.
SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), was issued in June 2001 and addresses financial accounting and
reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." Under SFAS 142,
goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed at least annually for impairment. The
amortization provisions of SFAS 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill
and intangible assets acquired prior to July 1, 2001, the Company is required to adopt SFAS 142 effective January 1, 2002. The
Company anticipates that SFAS 142 will not have a material impact on the Company's financial position, results of operations, or
cash flows.
SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"), was issued in June 2001 and addresses financial accounting
and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement
costs. It applies to all entities and legal obligations associated with the retirement of long-lived assets that result from the
acquisition, construction, development, and normal operation of long-lived assets. SFAS 143 is effective for the Company's fiscal
year beginning January 1, 2003. The Company anticipates that SFAS 143 will not have a material impact on the Company's financial
position, results of operations, or cash flows.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), was issued in August 2001 and addresses
the financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS 144 is effective for the Company's
fiscal year beginning January 1, 2002. The Company anticipates that SFAS 144 will not have a material impact on the Company's
financial position, results of operations, or cash flows.
Stock-based Compensation
Compensation costs attributable to stock option and similar plans are recognized based on any excess of the quoted market price of
the stock on the date of grant over the amount the employee is required to pay to acquire the stock, in accordance with the
intrinsic-value method under Accounting Principles Board Opinion No. 25 ("APB 25"). Such amount, if any, is accrued over the related
vesting period, as appropriate. In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company
makes pro forma disclosures of net earnings as if the fair-value-based method of accounting had been applied.
Foreign Currency Translation
All balance sheet accounts of the Company's foreign subsidiaries have been translated from their respective functional currencies to
U.S. dollars using the exchange rate in effect at the balance sheet date. Income statement amounts have been translated using
monthly average exchange rates for the year. The gains and losses resulting from the changes in exchange rates from year to year
have been reported separately as a component of other comprehensive income (loss).
Reclassification
Certain prior year amounts have been reclassified to conform to the current presentation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the financial statement date and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. ACCOUNTING CHANGE
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"). SAB 101
summarizes certain of the SEC's views in applying accounting principles generally accepted in the United States of America to
certain revenue transactions in financial statements. The implementation of SAB 101 as of January 1, 2000 affected amounts
previously recognized as revenue relating to up-front payments or milestone payments received by the Company in years prior to 2000
under arrangements for which performance obligations related to the up-front or milestone payments had been met, but for which the
Company is contractually obligated to perform additional research and development activities or other activities in future periods.
Accounting principles generally accepted in the United States of America previously required the Company to record the revenue from
the up-front and milestone payments as received, when the performance obligations associated with those payments had been fully met.
However, following the adoption of the SAB, accounting principles generally accepted in the United States of America now require
that the revenue received in conjunction with up-front or milestone payments be recognized over the remaining performance period
under the contract as those obligations are fulfilled, using the contingency adjusted performance model for revenue recognition.
The Company implemented SAB 101 effective January 1, 2000. As of December 31, 2001 and 2000, the Company has recorded on the balance
sheet current deferred revenue of $13.8 million and $34.0 million, respectively. The deferred revenue is being recognized over the
period of fulfillment of the contractual obligations. The effect of adopting SAB 101 on 2000 earnings before the cumulative effect
of the change in accounting principle was additional income, net of tax, of $13.0 million, or $0.06 per diluted share. The effect on
2000 net earnings (including a non-cash, after tax charge of $33.8 million or $0.16 per diluted share) was a charge of $20.8
million, or $0.10 per share. If the Company had been required to account for transactions in accordance with SAB 101 in earlier
periods, the Company would have reported additional other revenue and earnings before the cumulative effect of a change in
accounting principle of $4.3 million and $2.6 million, respectively, in the fourth quarter of 1999. Both basic and diluted earnings
per share would have increased by $0.01 for the fourth quarter of 1999.
4. SEGMENT INFORMATION
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information" establishes annual and interim reporting
standards for an enterprise's operating segments and related disclosures about its products, services, geographic areas and major
customers. Under SFAS No. 131, the Company's operations are considered one operating segment as the Company's chief operating
decision makers review the profit and loss of the Company on an aggregate basis and manage the operations of the Company as a single
operating segment.
The Company sells its products primarily to a limited number of pharmaceutical wholesalers and distributors. During 2001, two
mergers occurred involving four of the pharmaceutical wholesalers and distributors to which the Company sells its products. Three of
the four companies individually accounted for at least ten percent of the Company's product sales prior to the mergers. Customers
individually accounting for at least ten percent of the Company's product sales during the past three years are as follows:
2001 2000 1999
---- ---- ----
Company A 26% 27% 27%
Company B 18% 19% 22%
Company C 13% 16% 15%
Company D 12% 11% 11%
--- --- ---
Total % of product sales 69% 73% 75%
=== === ===
The Company relies on a limited number of distributor agents/affiliates to sell CytoGam and NeuTrexin internationally. The Company
has also entered into contractual agreements with Abbott International, a division of Abbott Laboratories, for distribution of
Synagis outside of the United States and with affiliates of Schering-Plough Corporation for international distribution of Ethyol.
The breakdown of product sales by geographic region is as follows (in thousands):
2001 2000 1999
------- ------- -------
United States $531,483 $456,311 $335,161
All other 48,046 39,492 21,654
-------- -------- --------
Total product sales $579,529 $495,803 $356,815
======== ======== ========
The breakdown of long-lived assets by geographic region is as follows (in thousands):
2001 2000
------- -------
United States $ 92,498 $83,094
All other 2,904 3,289
-------- -------
Total long-lived assets $ 95,402 $86,383
======== =======
Other revenue of $39.2 million, $44.7 million, and $26.6 million in 2001, 2000, and 1999, respectively, consists mainly of United
States distribution, licensing, milestone revenues, corporate funding, and contract manufacturing revenues.
5. INVESTMENTS
Investments are comprised of the following (in thousands):
Cost/ Fair Value at Gross Gross
Principal Amortized Balance Sheet Unrealized Unrealized
Amount Cost Date Gains Losses
------ --------- ---- ----- ------
December 31, 2001:
Equity Securities $ -- $ 16,350 $ 21,167 $ 4,817 $ --
U.S. Government and Agencies 8,000 8,078 8,310 232 --
Corporate Debt Securities 530,357 546,943 556,494 9,900 (349)
Foreign Bank CD's 28,000 29,860 30,464 604 --
-------- -------- -------- ------- -------
Total $566,357 $601,231 $616,435 $15,553 $ (349)
======== ======== ======== ======= =======
December 31, 2000:
Equity Securities $ -- $ 6,350 $ 15,478 $ 9,128 $ --
U.S. Government and Agencies 35,900 36,120 36,174 62 (8)
Corporate Debt Securitites 357,002 361,534 362,832 1,636 (338)
Foreign Bank CD's 25,750 26,797 26,796 7 (8)
-------- -------- -------- ------- ------
Total $418,652 $430,801 $441,280 $10,833 $ (354)
======== ======== ======== ======= ======
The amortized cost and fair market value of investments at December 31, 2001 and 2000, by contractual maturities are (in thousands):
2001 2000
---- ----
Cost/ Cost/
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ----- -----
Equity Securities $ 16,350 $21,167 $ 6,350 $ 15,478
Due in one year or less 37,805 37,899 105,594 105,670
Due after one year through two years 165,007 168,001 284,021 285,308
Due after two years through five years 382,069 389,368 34,836 34,824
-------- -------- -------- --------
Total $601,231 $616,435 $430,801 $441,280
======== ======== ======== ========
Gross gains recognized on sales of securities in 2001 and 2000 were $2.1 million and $1.6 million, respectively, as determined by
specific identification. Gross losses were immaterial during both 2001 and 2000, as determined by specific identification. During
1999, there were no material gains or losses on sales of securities.
6. INVENTORY
Inventory at December 31, is comprised of the following (in thousands):
2001 2000
---- ----
Raw materials $16,805 $14,715
Work in process 13,731 21,091
Finished goods 22,155 13,159
------- -------
52,691 48,965
Less noncurrent (1,855) (2,332)
------- -------
$50,836 $46,633
======= =======
Noncurrent inventory at December 31, 2001 and 2000 is comprised of some of the Company's raw plasma. Noncurrent inventory at
December 31, 2001 also includes certain CytoGam production lots that are being tested for long-term stability which are not expected
to be available for sale within the next 12 months.
Inventory balances are net of reserves for RespiGam inventory, for which minimal product sales are expected to result for the
foreseeable future. RespiGam inventory and reserve balances were $4.9 million and $5.9 million, and $4.2 and $4.7 million, at
December 31, 2001 and 2000, respectively.
7. PROPERTY AND EQUIPMENT
Property and equipment, stated at cost at December 31, is comprised of the following (in thousands):
2001 2000
---- ----
Land and land improvements $ 2,313 $ 2,186
Buildings and building improvements 54,291 50,936
Leasehold improvements 15,236 15,750
Laboratory, manufacturing and facilities equipment 33,114 32,152
Office furniture, computers, and equipment 14,953 12,267
Construction in progress 10,035 --
------- -------
129,942 113,291
Less accumulated depreciation and amortization (34,540) (26,908)
------- -------
$95,402 $86,383
======= =======
As of December 31, 2001 and 2000, buildings includes costs associated with four facilities. They are: 1) the portion of the
Company's Frederick manufacturing facility that was granted approval by the FDA for the production of Synagis in December 1999, and
was placed in service on December 31, 1999; 2) the portion of the Company's Frederick manufacturing facility that was granted
approval by the FDA for the production of CytoGam intermediate paste in December 2000, and was placed in service on December 31,
2000; 3) warehouse, laboratory and administrative space adjacent to the manufacturing facility in Frederick, Maryland; and 4) the
Company's manufacturing facility in Nijmegen, the Netherlands. As of December 31, 2001, construction in progress primarily includes
engineering, construction, and equipment costs associated with the expansion of the cell culture production area in the Company's
Frederick manufacturing facility, which will be placed in service upon FDA approval.
8. ACCRUED EXPENSES
Accrued expenses at December 31, is comprised of the following (in thousands):
2001 2000
----- ----
Accrued contracts $12,634 $10,139
Accrued manufacturing 4,232 4,200
Accrued sales and marketing 55,204 46,608
Accrued contract termination fees (Note 15) 13,440 --
Accrued other 9,455 11,212
------- -------
$94,965 $72,159
======= =======
9. FACILITIES LEASES
The Company leases warehouse, laboratory and administrative space under numerous operating leases. Under the leases, the Company is
obligated to pay a basic monthly rent which will increase each lease year. The leases also require the Company to pay for utilities
and its proportionate share of taxes, assessments, insurance and maintenance costs. Rent expense for the years ended December 31,
2001, 2000, and 1999 was $2.2 million, $3.4 million, and $2.6 million, respectively.
The Company's future minimum lease payments under operating leases are as follows (in thousands):
Year ending December 31,
------------------------
2002 $1,901
2003 1,962
2004 2,025
2005 2,089
2006 1,780
Thereafter --
-------
$9,757
=======
10. LONG-TERM DEBT
Long-term debt at December 31, is comprised of the following (in thousands):
2001 2000
---- ----
4% notes due to Maryland Department of Business and Economic Development
due 2016 $5,731 $6,015
7.53% note due to Maryland Industrial Development Finance Authority, due
2007 3,564 3,987
Note due to Cooperative Rabobank, B.A., due 2009
Variable interest rate 249 300
------ ------
9,544 10,302
Less current portion included in other current liabilities (753) (707)
------ ------
$8,791 $9,595
====== ======
Principal and interest payments on the Maryland notes began in 1998. Pursuant to the terms of the agreements, the Company is
required to meet certain financial and non-financial covenants including maintaining minimum cash balances and net worth ratios. The
Company maintains a $0.4 million compensating balance related to the notes, which is included in other assets. The notes are
collateralized by the land, buildings and building fixtures of the Frederick manufacturing facility. The agreements include a
provision for early retirement of the notes by the Company.
In May 1994, USB Pharma B.V. entered into a mortgage loan with Cooperative Rabobank B.A. in the amount of 1.2 million Dutch guilders
collateralized by the land and buildings of its manufacturing facility in Nijmegen, the Netherlands and guaranteed by the Company.
Proceeds from the loan were used to partially fund the purchase of additional equipment for the facility. The mortgage loan, for
which principal payments began in March 1995, has a 15-year term and bears interest at a quarterly variable rate. The current
interest rate is 6.05%.
Maturities of long-term debt for the next five years are as follows: 2002, $0.8 million; 2003, $0.8 million; 2004, $0.9 million;
2005, $0.9 million; and 2006, $1.0 million. Interest paid was $0.6 million, $0.5 million, and $5.2 million, for the years ended
December 31, 2001, 2000, and 1999, respectively.
The estimated fair values of the Company's long-term debt at December 31, 2001 and 2000, respectively, based on quoted market prices
or discounted cash flows based on currently available borrowing rates, was $10.0 million and $10.9 million compared to its carrying
values of $9.5 million and $10.3 million.
11. Shareholders' Equity
In July 1997, the Company's Board of Directors adopted a Stockholder Rights Plan. Pursuant to the terms of the Plan, common stock
purchase Rights were distributed as a dividend at the rate of one Right for each share of common stock of the Company held by
stockholders of record as of the close of business on July 21, 1997. The Rights will be exercisable only if a person or group
acquires beneficial ownership of 20 percent or more of the Company's common stock or commences a tender or exchange offer upon
consummation of which such a person or group would beneficially own 20 percent or more of the Company's stock. The Rights will
expire on July 9, 2007.
In February 1999, the Company closed two private placements resulting in the issuance of 1.2 million new shares of common stock to
institutional investors for net proceeds of $20.0 million. In connection with the private placements, warrants to purchase 0.2
million shares of common stock at $24.82 per share were issued. These warrants were exercised in November 1999 for net proceeds of
$6.0 million.
In July 1999, $60 million of the Company's 7% convertible subordinated notes were converted into common stock. The transaction
resulted in the issuance of 18.3 million shares of common stock and increased shareholders' equity by $58.7 million, the carrying
amount of the converted debt on the date of the conversion.
In June 2001, the Company introduced an employee stock purchase plan under which 3,000,000 shares of common stock were reserved for
issuance. Eligible employees may purchase a limited number of shares of the Company's common stock at 85% of the market value at
plan-defined dates. Employees purchased 43,976 shares for $1.5 million during 2001 under this plan.
12. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of the diluted EPS computation for the years ended December 31,
2001, 2000, and 1999.
2001 2000 1999
---- ---- ----
Numerator (in thousands):
Net earnings $148,960 $111,156 $93,371
Interest on 7% convertible notes, net
of amounts capitalized and related taxes -- -- 720
-------- -------- -------
Numerator for diluted EPS $148,960 $111,156 $94,091
======== ======== =======
Denominator (in thousands):
Weighted average shares outstanding 213,378 209,101 190,421
Effect of dilutive securities:
Stock options 6,723 11,327 12,714
7% convertible notes -- -- 9,175
-------- -------- -------
Denominator for diluted EPS 220,101 220,428 212,310
======== ======== =======
The following table shows the number of shares and related price ranges of those shares that were excluded from the EPS computations
above. These options to purchase shares of common stock were outstanding in the periods reported, but were not included in the
computation of diluted earnings per share as the exercise prices for these options were greater than the average market price of the
common stock during the period reported, and therefore would be antidilutive.
Year ended Year ended Year ended
December 31, 2001 December 31, 2000 December 31, 1999
----------------- ----------------- -----------------
Price range of stock options:
$40.50-$83.25 6,555,197
$61.50-$83.25 886,425
$28.33-$67.11 1,074,054
13. COMMON STOCK OPTIONS
The Company currently grants stock options under certain of the following stock option plans:
Shares Authorized for Option
Plan Description Grants
---- ----------- ------
Old Plan Provides option incentives to employees, consultants 1,500,000
and advisors of the Company
1991 Plan Provides option incentives to employees, consultants 33,000,000
and advisors of the Company
Non-Employee Directors Provides option incentives to non-employee directors 1,500,000
Plan
1999 Plan Provides option incentives to employees, consultants 19,250,000
and advisors of the Company
Non-Executive Stock Provided option incentives to employees who are not 1,012,500
Option Plan officers or directors of USB, consultants and advisors
of the Company
1992 Stock Option Plan Provided option incentives to officers and directors of 1,282,500
USB
1996 Non-Employee Provided option incentives to elected non-employee 22,500
Directors Stock Option directors of USB
Plan
1999 Stock Option Plan Provided option incentives to employees, consultants 1,350,000
and advisors of USB
1991 Special Provided option incentives to employees, consultants 450,000
Non-Statutory Plan and advisors of USB
1987 Special Non Provided option incentives to employees and 225,000
Statutory Plan non-employees of USB
1987 Non Statutory Plan Provided option incentives to employees and 450,000
non-employee members of The Board of Directors of USB
1987 Incentive Stock Provided option incentives to employees, consultants, 450,000
Option Plan and advisors of USB
Options under all plans normally vest over a three to five year period and have a maximum term of 10 years. The Company has reserved
a total of 31,077,759 shares of common stock for issuance under these plans as of December 31, 2001. Related stock option activity,
is as follows:
Options Granted Prior to
Establishment of the 1991 Non-Employee
Plan 1991 and 1999 Plans Directors Plan USB Plans
------------------------- -------------------- -------------- ---------
Wtd. Avg. Wtd. Avg. Wtd. Avg. Wtd. Avg.
Exercise Exercise Exercise Exercise
Price Per Price Per Price Per Price Per
Shares Share Shares Share Shares Share Shares Share
- ------------------------------------------------------------------------------------------------------------------------------------
Balance,
Dec. 31, 1998 915,612 $0.76 20,856,648 4.79 675,000 3.62 2,404,443 $21.23
Granted - - 6,473,100 22.35 120,000 24.04 235,341 22.33
Exercised (882,012) 0.79 (7,117,674) 3.24 (165,000) 2.82 (1,019,685) 20.07
Canceled - - (349,938) 12.04 - - (142,476) 22.08
-------- ---------- -------- ---------
Balance,
Dec. 31, 1999 33,600 0.13 19,862,136 10.94 630,000 7.72 1,477,623 22.12
Granted - - 7,209,500 59.75 150,000 72.75 - -
Exercised (30,600) 0.13 (5,984,307) 7.76 (165,000) 5.33 (1,341,829) 21.77
Canceled - - (745,292) 38.75 - - (1,125) 35.28
-------- ---------- -------- ---------
Balance,
Dec. 31, 2000 3,000 0.13 20,342,037 28.15 615,000 24.23 134,669 25.52
Granted - - 4,731,980 38.14 150,000 47.20 - -
Exercised (3,000) $0.13 (3,014,418) 7.15 (22,500) 12.51 (60,196) 20.70
Canceled - - (1,886,740) 43.87 - - (1,050) 21.96
-------- ---------- -------- ----------
Balance,
Dec. 31, 2001 - - 20,172,859 $32.17 742,500 $29.22 73,423 $29.52
========= ========== ======== ==========
Additional information related to the plans as of December 31, 2001 is as follows:
Options Outstanding Options Exercisable
------------------- -------------------
Wtd Avg
remaining Wtd Avg
Range of Options contractual Exercise Options Wtd Avg
exercise prices outstanding Life (yrs) Price Exercisable Exercise Price
- ------------------------- ---------------- ----------------- ---------------- --------------------------- ------------------
$0.01-$20.00 8,773,259 6.0 $10.38 4,817,959 $7.95
$20.01-$40.00 5,568,143 8.7 $34.63 1,209,581 $33.08
$40.01-$60.00 2,008,095 8.8 $49.96 305,008 $52.99
$60.01-$80.00 4,613,685 8.2 $62.10 1,107,861 $62.01
$80.01-$100.00 25,600 8.6 $80.68 5,468 $80.70
---------- ---------
20,988,782 7.5 $32.06 7,445,877 $21.97
========== =========
In May 2001, the Company's shareholders voted to increase the maximum number of shares of common stock reserved for issuance under
the 1999 Plan from 14,250,000 to 19,250,000 shares. There were 7,108,595 and 330,000 shares available for future option grants at
December 31, 2001 under the 1999 Plan and the Non-Employee Directors Plan, respectively.
The Company has adopted the disclosure only provisions of SFAS 123 as they pertain to financial statement recognition of
compensation expense attributable to option grants. As such, no compensation cost has been recognized for the Company's option
plans. If the Company had elected to recognize compensation cost for all of its stock option plans consistent with SFAS 123, the
Company's net earnings and earnings per share on a pro forma basis would be:
2001 2000 1999
---- ---- ----
Net earnings - as reported $148,960 $111,156 $93,371
Net earnings - pro forma $69,143 $58,329 $70,492
Basic earnings per share-as reported $0.70 $0.53 $0.49
-pro forma $0.32 $0.28 $0.37
Diluted earnings per share-as reported $0.68 $0.50 $0.44
-pro forma $0.31 $0.26 $0.33
The pro forma expense related to the stock options is recognized over the vesting period, generally five years. The fair value of
each option grant was estimated using the Black-Scholes option pricing model with the following weighted average assumptions for
each year:
2001 2000 1999
---- ---- ----
Risk-free interest rate 4.72% 6.20% 5.78%
Expected life of options - years 6 7 7
Expected stock price volatility 69% 69% 65%
Expected dividend yield N/A N/A N/A
The weighted average fair value of options granted during 2001, 2000, and 1999 was $26.18, $44.03, and $18.19, respectively.
14. INCOME TAXES
The components of the provision (benefit) for income taxes are as follows:
Year ended December 31, 2001 2000 1999
---- ---- ----
Current:
Federal $3,306 $ -- $ --
State -- -- --
Foreign 254 80 --
------- ------- -------
Total current expense 3,560 80 --
Deferred:
Federal 71,072 60,505 (10,502)
State 4,874 3,851 3,407
Foreign -- -- --
------- ------- -------
Total deferred expense (benefit) 75,946 64,356 (7,095)
------- ------- -------
Total tax expense (benefit) $79,506 $64,436 ($7,095)
======= ======= ========
Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's
deferred tax assets and liabilities at December 31, are as follows:
2001 2000
---- ----
Deferred tax assets:
Net operating loss carryforwards $107,054 $172,276
U.S. General business credit carryforwards 31,313 26,818
Accrued expenses not currently deductible 20,590 16,655
Accounts receivable allowances and reserves 8,697 6,410
Deferred revenue 4,638 13,143
Other 5,823 1,747
-------- --------
Total deferred tax assets 178,115 237,049
Valuation allowance (14,474) (19,969)
-------- --------
Net deferred tax assets $163,641 $217,080
======== ========
The provision (benefit) for income taxes varies from the income taxes provided based on the federal statutory rate (35%) as follows:
Year ended December 31, 2001 2000 1999
---- ---- ----
Tax at U.S. federal statutory rate $79,964 $73,295 $30,197
State taxes, net of federal benefit 1,599 2,503 2,702
Change in valuation allowance - 177 (48,525)
Change in valuation allowance reflected in equity - - 9,964
U.S. General business credits (4,855) (12,420) (2,921)
Foreign taxes, net - - 94
Change in state statutory rate 2,413 - -
Other 385 881 1,394
------- ------- -------
Total $79,506 $64,436 $(7,095)
======= ======= =======
At December 31, 2001 the Company had consolidated net operating loss carryforwards for federal tax reporting purposes of
approximately $272.4 million expiring between 2009 to 2020. The Company also has general business credit carryforwards comprised of
federal research and experimentation and orphan drug credit carryforwards of approximately $31.3 million at December 31, 2001
expiring through 2021. The timing and manner in which the Company will utilize the net operating loss and general business credit
carryforwards in any year, or in total, will be limited by provisions of the Internal Revenue Code Section 382, regarding changes in
ownership of the Company.
Deferred taxes are not provided for the earnings of the Company's foreign subsidiaries, as those earnings are considered permanently
reinvested in the operations of the foreign subsidiaries.
Due to state tax law changes during the year ended December 31, 2001, the Company's net deferred tax asset decreased, resulting in a
net tax expense of $2.4 million during 2001. This net adjustment is comprised of a reduction of $7.9 million in the deferred tax
asset related to the state tax effect of net operating loss carryforwards and other future deductible items, as well as a reduction
of $5.5 million in the valuation allowance associated with a portion of those deferred tax assets.
Because management is uncertain of the realization of the tax benefit associated with a portion of the deferred tax assets
attributable to the state net operating losses, foreign net operating losses, and the general business credits which were generated
by USB prior to its acquisition by the Company, a full valuation allowance remains for these deferred tax assets at December 31,
2001 and 2000.
15. Collaborative Arrangements
Abbott Laboratories
In December 1997, the Company signed two agreements with Abbott Laboratories ("Abbott"). The first agreement calls for Abbott to
co-promote Synagis in the United States. The second agreement allows Abbott International, a division of Abbott, to exclusively
distribute Synagis outside the United States. Under the terms of the United States co-promotion agreement, Abbott receives a
percentage of net United States sales based on defined annual sales thresholds. Expenses associated with the co-promotion agreement
are included in selling, general and administrative expenses on the accompanying statements of operations. Each company is
responsible for its own selling expenses. Under the terms of the distribution agreement, the Company manufactures and sells Synagis
to Abbott International at a price based on end-user sales. Pursuant to the distribution agreement, the Company received a $15
million payment in each of the years 1999, 1998 and 1997. In accordance with SAB 101, a portion of these payments was deferred in
2000 and is being recorded as other revenue as the Company fulfills certain obligations under the agreement. During 2001, the
Company revised its estimate of the total cost to fulfill its obligations under the agreement, based on significant progress at less
effort than originally expected towards obtaining regulatory approval in Japan, which was officially granted during January 2002.
The Company recorded the cumulative effect of this change in estimate, which resulted in the recognition of additional revenues of
$3.6 million during the year ended December 31, 2001, which are included in other revenues. The Company could receive up to an
additional $15 million based on the achievement of certain milestones.
ALZA Corporation
In December 1995, U.S. Bioscience, Inc. entered into an exclusive marketing and distribution agreement with ALZA Corporation
("ALZA") for Ethyol in the United States. Under the terms of the agreement, ALZA had exclusive rights to market Ethyol in the United
States and was responsible for sales and marketing of the product. The original term of the agreement expired in April 2001, and
during 2000 ALZA exercised a one-time option to extend the agreement to April 1, 2002. In September 2001, the Company amended the
agreement with ALZA to accelerate to October 1, 2001 the transfer to the Company of Ethyol marketing rights. Under the terms of the
agreement, the Company received $35 million in up-front and milestone payments prior to 2000. In accordance with SAB 101, a portion
of these payments was deferred in 2000 and is recorded as other revenue in 2001, as the Company fulfilled certain obligations under
the agreement and completed the transfer of marketing rights. Under the terms of the agreement, the Company's oncology/immunology
sales force co-promoted the product with ALZA in the United States. The Company sold Ethyol to ALZA at a price based on a percentage
of the net sales price of Ethyol in the United States, and ALZA then sold Ethyol to the distributors and wholesalers that supply
Ethyol for prescription sales.
In anticipation of the October 2001 transfer, the Company ceased sales of Ethyol to ALZA during the third quarter of 2001, and
purchased ALZA's remaining Ethyol inventory as of September 30, 2001, which was recorded as a reduction to product sales in the
amount of $2.3 million. During the third quarter of 2001, the Company recognized the remaining deferred revenues of $2.2 million,
which are included in other revenues, and recorded to selling general and administrative expense $13.4 million in termination fees
due to ALZA, which is included in accrued expenses as of December 31, 2001. Beginning October 1, 2001, the Company records all
revenues from domestic sales of Ethyol, and beginning April 1, 2002, the Company will pay ALZA a declining royalty for nine years,
based on sales of Ethyol in the United States.
ALZA was co-promoting NeuTrexin and Hexalen in the United States until mid-1999. At that time, the Company regained sole
responsibility for the distribution, marketing and promotion of these products in the United States.
Schering-Plough Corporation
In May 1993, U.S. Bioscience, Inc. entered into an exclusive marketing and distribution agreement with Scherico, Ltd. ("Scherico"),
an affiliate of Schering-Plough Corporation, for Ethyol in the countries comprising the EU and European Free Trade Association.
Under this agreement, Scherico purchases Ethyol from the Company at a price based on a percentage of the net sales of Ethyol in
Germany, United Kingdom, Spain, Italy and France. Scherico's exclusive rights to market the product will continue through December
31, 2003. At the end of the exclusive period, the Company may co-promote Ethyol with Scherico for two years, through December 31,
2005. Thereafter, the Company will reacquire sole marketing rights, subject to an obligation to pay Scherico a royalty based on a
percentage of net sales, if any, from the European territories for a period of three years. Scherico may terminate the agreement at
any time by providing 180 days written notice. Prior to 2000, the Company received payments of $11 million under the terms of the
agreement, a portion of which was deferred in 2000 in accordance with SAB 101, and is being recorded as other revenue as the Company
fulfills certain obligations under the agreement.
The Company also entered into licensing agreements for Ethyol and NeuTrexin with affiliates of Schering for several territories
outside the United States. The licensees are required to pay the Company compensation based on their net sales of the products, and
the Company sells the products to the licensees at an agreed upon price.
GlaxoSmithKline
In December 1997, the Company and GlaxoSmithKline ("GSK") entered into a strategic alliance to develop and commercialize human
papillomavirus (HPV) vaccines for the prevention of cervical cancer and genital warts. In exchange for exclusive worldwide rights to
the Company's HPV technology, GSK agreed to provide the Company with an up-front payment, future funding and potential developmental
and sales milestones which together could total over $85 million, as well as royalties on any product sales. Under the terms of the
agreement, the companies will collaborate on research and development activities. The Company conducts Phase 1 and Phase 2 clinical
trials and manufactures clinical material for those studies. GSK is responsible for the final development of the product, as well as
regulatory, manufacturing, and marketing activities. In January 1998, the Company received a $15 million payment from GSK upon
commencement of the agreement. In accordance with SAB 101, a portion of this payment was deferred in 2000 and is being recorded as
other revenue as the Company fulfills certain obligations under the agreement. During 2001, the Company revised its estimate of the
total cost to fulfill its obligations under the agreement, based on significant progress at lower cost than previously estimated.
The Company recorded the cumulative effect of this change in estimate, which resulted in additional revenues of $0.5 million, for a
total of $0.9 million for the year ended December 31, 2001, which are included in other revenues. Research funding of $2.8 million,
$7.8 million, and $6.2 million associated with the agreement has been included in other revenues for the years ended December 31,
2001, 2000, and 1999, respectively.
In July 2000, the Company granted GlaxoSmithKline a worldwide, exclusive license to its Streptococcus pneumoniae vaccine technology
in exchange for an up-front payment of $10 million and future milestones totaling more than $20 million, plus royalties on any
product sales. Under the terms of the agreement, GSK is responsible for all clinical development, manufacturing and sales and
marketing activities for the S. pneumoniae vaccine. The Company completed the technology transfer to GSK by the end of 2000. The
up-front payment is included in other revenue in 2000.
Wyeth
On November 8, 1993, the Company signed a definitive agreement with American Cyanamid Company, which was later acquired by American
Home Products which is now called Wyeth, to co-promote and share profits or losses on the Company's original RSV product, RespiGam,
which was licensed for marketing by the FDA on January 18, 1996. Pursuant to an amendment to the agreement signed in December 1999,
Wyeth's obligation to co-promote RespiGam in the United States was terminated. In addition, Wyeth no longer shares in any profits or
losses of RespiGam in the United States. The Company recorded a credit of $6.8 million to selling, general and administrative
expense in 1999 related to the signing of the amendment.
Other Agreements
The Company has entered into research, development and license agreements with various federal and academic laboratories and other
institutions to further develop its products and technology and to perform clinical trials. Under these agreements, the Company is
obligated to provide funding of approximately $27.9 million and $7.4 million in 2002 and 2003, respectively. The Company has also
agreed to make milestone payments in the aggregate amount of $119.4 million on the occurrence of certain events such as the granting
by the FDA of a license for product marketing in the United States for some of the product candidates covered by these agreements.
In exchange for the licensing rights for commercial development of proprietary technology, the Company has agreed to pay royalties
on sales using such licensed technologies.
16. Forward Exchange Contracts
The Company enters into foreign forward exchange contracts to hedge against foreign exchange rate fluctuations that may occur on
certain of the Company's foreign currency denominated obligations. As of December 31, 2001 the Company had no outstanding forward
contracts. As of December 31, 2000, the Company had outstanding forward Euro contracts in the amount of $11.1 million, all expiring
within one year. Fair value of the outstanding contracts at December 31, 2000 was $0.5 million. Unrealized gains and losses on
foreign forward exchange contracts that are designated and effective as hedges are deferred and recognized in the same period that
the hedged obligation is recognized. During the year ended December 31, 2001, net unrealized gains on forward exchange contracts of
$0.1 million, net of tax, were reclassified as earnings during the year as the related inventory was sold. As of December 31, 2001,
deferred gains on forward exchange contracts included in accumulated other comprehensive income are immaterial. During the year
ended December 31, 2001, the Company did not reclassify any material gains or losses relating to ineffective hedges to current
period earnings. The notional principal amounts for off-balance sheet instruments provide one measure of the transaction volume
outstanding as of year end, and does not represent the amount of the Company's exposure to credit or market loss. The Company's
exposure to market risk will vary over time as a function of currency rates. As of January 1, 2001 the Company adopted SFAS 133
"Accounting for Derivatives and Similar Financial Instruments." See Note 2.
17. COMMITMENTS AND CONTINGENCIES
Manufacturing, Supply and Purchase Agreements
The Company has entered into manufacturing, supply and purchase agreements in order to provide production capability for CytoGam and
RespiGam, and to provide a supply of human plasma for production of both products. No assurance can be given that an adequate supply
of plasma will be available from the Company's suppliers. Human plasma for CytoGam is converted to an intermediate raw material
(Fraction II+III paste) at the Company's Frederick manufacturing facility. The intermediate material is then supplied to the
manufacturer of the bulk product, the State Lab. Pursuant to the agreements with the State Lab, the Company paid $6.8 million in
2001, $8.7 million in 2000, and $8.3 million in 1999 for production and process development. The Company has an informal arrangement
with the State Lab for planned production of CytoGam and RespiGam through June 2003 for $8.4 million and $0.6 million, respectively,
subject to production level adjustments. If the State Lab, which holds the sole product and establishment licenses from the FDA for
the manufacture of CytoGam and RespiGam, is unable to satisfy the Company's requirements for CytoGam on a timely basis or is
prevented for any reason from manufacturing CytoGam, the Company may be unable to secure an alternative manufacturer without undue
and materially adverse operational disruption and increased cost. The Company also has an agreement with Aventis Pasteur to fill and
package CytoGam through 2002.
In December 1997, the Company entered into an agreement with Boehringer Ingelheim Pharma KG ("BI"), to provide supplemental
manufacturing of the Company's second generation RSV product, Synagis. The Company paid $14.3 million in 2001, $26.4 million in
2000, and $21.1 million in 1999 related to production and scale-up of production as part of this agreement. The Company has firm
commitments with BI for planned production through March 2004 for approximately 43.7 million Euros. Should the manufacturer be
unable to supply Synagis to the Company for any reason, there can be no assurance that the Company will be able to secure an
alternate manufacturer in a timely basis or without increased cost.
18. OTHER OPERATING EXPENSES
Other operating expenses, which reflect other manufacturing related costs, include primarily manufacturing startup costs incurred
prior to FDA approval for the Company's Frederick Manufacturing Center ("FMC") as well as excess capacity related to the plasma
production portion of the FMC. Expenses in 2001 also include a $1.3 million charge to reserve for noncurrent raw plasma inventory
not eligible for processing at the FMC. Expenses in both 2000 and 1999 also include charges of $1.8 million and $1.4 million,
respectively, for the write-off of certain equipment associated with the Company's plasma production activities. Other operating
expenses are expected to continue until the plasma production portion of the FMC is fully utilized.
19. PENSION PLAN
The Company has defined contribution 401(k) pension plans and other defined contribution plans available to all full-time employees.
Employee contributions are voluntary and are determined on an individual basis subject to the maximum allowable under federal tax
regulations. Participants are always fully vested in their contributions. The Company also makes employer contributions. During
2001, 2000, and 1999 the Company contributed $1.1 million, $0.9 million, and $1.1 million, respectively, in cash to the plans. Prior
to the merger with U.S. Bioscience, a deferred compensation program was provided for certain executives of U.S. Bioscience. The
program was terminated in December 1999 and all vested balances were paid in full. Expense related to the deferred compensation plan
was $0.1 million in 1999.
20. LEGAL PROCEEDINGS
In 1998, MediGene AG ("MediGene") initiated a legal action against Loyola University of Chicago ("Loyola") and the Company in the
U.S. District Court for the Northern District of Illinois alleging, among other things, breach of contract and tortious interference
by the Company with an alleged prospective business relationship between MediGene and Loyola. The claims relate to human
papillomavirus vaccine technology allegedly covered by contracts between MediGene and the Company and by a license agreement from
Loyola to the Company, under which the Company granted a sublicense to GlaxoSmithKline. MediGene seeks damages from the Company
ranging from $31.3 million to $86.9 million based on the tortious interference claim, and/or damages ranging from $10.2 million to
$31.3 million based on the breach of contract claim. MediGene also seeks ownership of the patents in question, as well as recission
of the Company's license agreement from Loyola or rights as a third-party beneficiary thereof. On December 22, 2000 and March 15,
2001, the District Court granted summary judgment motions in favor of the Company on all claims. The District Court ordered entry of
final judgment in favor of the Company on March 19, 2002. On March 27, 2002 MediGene filed a notice of appeal to the United States
Court of Appeals for the Federal Circuit.
In October 2000, Celltech Chiroscience Limited ("Celltech") commenced a legal proceeding against the Company in the U.K. High Court
of Justice, Chancery Division, Patents Court. Celltech alleges that the Company failed to pay royalties with respect to its sales of
Synagis as required by a license agreement dated January 19, 1998. Under the agreement, the Company obtained from Celltech a
worldwide license to make, use and/or sell product under a patent (and related applications) pertaining to humanized antibodies. In
the proceeding, Celltech seeks payment of a 2% royalty based on net sales of Synagis sold or manufactured in the United States, with
interest, and certain costs, including attorney's fees. The Company has filed answering papers denying that any royalties are due on
the basis that Celltech's U.S. patent does not cover Synagis and has sought dismissal of the case on the grounds that the legal
doctrine of prosecution history estoppel prevents Celltech from claiming that its patent covers Synagis. On July 20, 2001, the High
Court of Justice ordered a hearing, which is expected to take place in late 2002 or early 2003, on whether it will dismiss
Celltech's case on this basis. On November 29, 2001, the Company received a letter from counsel for Celltech enclosing a copy of a
patent granted by the European Patent Office on November 14, 2001. That letter requested various information concerning the
manufacture and sale of Synagis in Europe and sought confirmation that the Company would pay royalties on such sales pursuant to the
license agreement dated January 19, 1998. As of March 25, 2002, the Company had not made the royalty payments that were the subject
of Celltech's letter, and Celltech had not initiated any legal proceeding against the Company based on its European patent.
On December 18, 2001, Genentech, Inc. ("Genentech") announced that it had been granted a patent relating to certain methods and
compositions used to produce antibodies by recombinant DNA technology. Four years ago, in anticipation of any potential impact the
issuance of Genentech's patent could have on the production of Synagis, the Company obtained a license to this patent. The Company
has received from Genentech a letter, dated January 7, 2002, stating that Genentech expects to receive from the Company royalty
payments pursuant to such license. The Company is in the process of evaluating whether any valid claim of Genentech's patent, as
recently issued, covers production of Synagis. If so, the Company would pay royalties to Genentech on U.S. net sales of Synagis
commencing December 18, 2001. Pending resolution of this issue, the Company has made certain royalty payments to Genentech under
protest and with reservation of all of its rights. The Company is also evaluating whether any of its other antibody-based product
candidates, if and when approved for marketing by the U.S. Food and Drug Administration, could require a license under the Genentech
patent.
On February 28, 1996, Ichthyol Gesellschaft Cordes, Hermanni & Co. ("Ichthyol Gesellschaft") filed a complaint for refrain,
information and damages with the Regional Court of Hamburg against MedImmune Oncology on the grounds of trademark infringement in
respect of the use of the trademark "Ethyol" in Germany. No monetary amount is currently being sought in the litigation by Ichthyol.
Ichthyol is seeking injunctive relief against the use of the trademark Ethyol in Germany. The suit was dismissed on January 29, 1997
by the Regional Court of Hamburg. Ichthyol Gesellschaft filed an appeal, and a judgment was rendered in favor of MedImmune Oncology
in the appellate proceedings. In January 1999, Ichthyol Gesellschaft filed an appeal on points of law with the Federal Court of
Justice, and in June 1999, Ichthyol Gesellschaft filed the grounds for the appeal on points of law. By judgment of May 3, 2001, the
Federal Court of Justice reversed the judgment of the Higher Regional Court and remitted the case to that court for another hearing.
By order of December l9, 2001, the Higher Regional Court ordered Ichthyol to make further submissions concerning the relevant facts
and legal questions. Ichthyol recently filed its submissions. Another hearing will probably be held this summer.
After consultation with its counsel, the Company believes that it has meritorious defenses to the claims referred to above and is
determined to defend its position vigorously. While it is impossible to predict with certainty the eventual outcome of these
proceedings, the Company believes they are unlikely to have a material adverse effect on its financial position but might have a
material adverse effect on its results of operations for a particular period.
21. SUBSEQUENT EVENTS
During January 2002, the Company completed its acquisition of Aviron through an exchange offer and merger transaction pursuant to
the definitive merger agreement between the two parties dated December 3, 2001. Aviron is a biopharmaceutical company headquartered
in Mountain View, California, focused on prevention of diesease through innovative vaccine technologies. Aviron's lead product
candidate is FluMist, a live, attenuated virus vaccine delivered as a nasal mist for the prevention of influenza.
Under the terms of the agreement, the Company exchanged approximately 34.0 million of its common shares for approximately 31.6
million shares of Aviron common stock, and an additional 7.1 million shares are issuable upon the exercise of Aviron's outstanding
options and warrants. In addition, holders of Aviron's $200 million of convertible notes will be able to convert the notes into a
total of 3.4 million shares of the Company's common stock at a conversion price of $58.14 per share. The transaction was valued at
approximately $1.6 billion, net of Aviron cash. Following the exchange, a wholly-owned subsidiary of the Company merged into Aviron,
as a result of which Aviron has become a wholly-owned subsidiary of the Company. The acquisition will be accounted for as a
purchase. Effective January 10, 2002, the results of operations of Aviron will be included in the results of the combined entity.
The purchase price allocation has not yet been finalized. The Company is currently performing a valuation of all tangible and
intangible assets and liabilities, including the acquired in-process research and development and other intangible assets. The
Company's preliminary estimate is that the purchase price will be allocated as $1,145 million of in-process research and
development, $447 million of cash and marketable securities, and the remainder to other tangible and intangible assets and
liabilities. The Company will not finalize the purchase accounting until it completes the valuation of all tangible and intangible
assets and liabilities. Accordingly, the Company is not able to present a condensed balance sheet as of January 10, 2002.
During March 2002, the Company paid approximately $13.4 million to acquire 25 acres of land in Gaithersburg, Maryland, which will
serve as the site of the Company's new corporate headquarters. The Company has contracted with a designer and general contractor for
the construction of the new facility over the next several years, at a total estimated cost of $80 million. The construction project
is expected to break ground in April 2002. The Company expects to take occupancy of the first phase, which will feature a complex
totaling 218,000 square feet, in the fall of 2003.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of MedImmune, Inc.
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of shareholders'
equity and of cash flows present fairly, in all material respects, the financial position of MedImmune, Inc. and its subsidiaries at
December 31, 2001 and December 31, 2000, and the results of their operations and their cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
January 24, 2002 except for Notes 20 and 21
as to which the date is March 27, 2002
McLean, Virginia
Report of Management
The management of the Company is responsible for the preparation of the financial statements and related financial information
included in this annual report. The statements were prepared in conformity with accounting principles generally accepted in the
United States of America and, accordingly, include amounts that are based on informed estimates and judgments.
Management maintains a system of internal controls to provide reasonable assurance that assets are safeguarded and that transactions
are properly authorized and accurately recorded. The concept of reasonable assurance is based on the recognition that there are
inherent limitations in all systems of internal accounting control and that the costs of such systems should not exceed the benefits
expected to be derived. The Company continually reviews and modifies these systems, where appropriate, to maintain such assurance.
The system of internal controls includes careful selection, training and development of operating and financial personnel,
well-defined organizational responsibilities and communication of Company policies and procedures throughout the organization.
The selection of the Company's independent accountants, PricewaterhouseCoopers LLP, has been approved by the Board of Directors and
ratified by the shareholders. The Audit Committee of the Board of Directors, comprised solely of outside directors, meets
periodically with the Company's independent accountants and management to review the financial statements and related information
and to confirm that they are properly discharging their responsibilities. In addition, the independent accountants and the Company's
legal counsel meet with the Audit Committee, without the presence of management, to discuss their findings and their observations on
other relevant matters. Recommendations made by PricewaterhouseCoopers LLP are considered and appropriate action is taken to respond
to these recommendations.
/s/David M. Mott
Chief Executive Officer
/s/Gordon S. Macklin
Chairman of the Audit Committee
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF MEDIMMUNE, INC.
Information with respect to directors is included in the Company's Proxy Statement to be filed pursuant to Regulation 14A (the
"Proxy Statement") under the caption "Election of Directors," and such information is incorporated herein by reference. Set forth in
Part I, Item 1, are the names and ages (as of February 28, 2002), the positions and offices held by, and a brief account of the
business experience during the past five years of each executive officer.
All directors hold office until the next annual meeting of shareholders and until their successors are elected and qualified.
Officers are elected to serve, subject to the discretion of the Board of Directors, until their successors are appointed.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" and the information set forth under the caption "Election of Directors-Director
Compensation" included in the Proxy Statement are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The common stock information in the section entitled "Principal Shareholders" of the Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Transactions" of the Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON
FORM 8-K
The following documents or the portions thereof indicated are filed as a part of this report.
a) Documents filed as part of the Report
1. Financial Statements and Supplemental Data
a. Consolidated Balance Sheets at December 31, 2001 and 2000
b. Consolidated Statements of Operations for the years ended December 31, 2001, 2000, and 1999
c. Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000, and 1999
d. Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2000, and 1999
e. Notes to Consolidated Financial Statements
f. Report of Independent Accountants
g. Report of Management
2. Supplemental Financial Statement Schedule
Report of Independent Accountants on Financial Statement Schedules
Schedule I - Valuation and Qualifying Accounts Page S-1
b) Reports on Form 8-K
Date Filed Event Reported
---------- --------------
December 21, 2001 MedImmune has held license to Genentech antibody patent since 1997.
December 27, 2001 MedImmune completes enrollment in clinical trials for Synagis(R)and siplizumab.
C) ITEM 601 EXHIBITS
Those exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index beginning on page E1 and such
listing is incorporated by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
MEDIMMUNE, INC.
/s/ David M. Mott
Date: March 26, 2002 By: David M. Mott
Vice Chairman and
Chief Executive Officer
Date: March 26, 2002 /s/ Gregory S. Patrick
By: Gregory S. Patrick
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in
the capacities and on the dates indicated.
Date: March 26, 2002 /s/ Wayne T. Hockmeyer
Wayne T. Hockmeyer, Chairman
/s/ M. James Barrett
Date: March 26, 2002 M. James Barrett,Director
/s/ Melvin D. Booth
Date: March 26, 2002 Melvin D. Booth, Director
/s/ James H. Cavanaugh
Date: March 26, 2002 James H. Cavanaugh, Director
/s/ Barbara Hackman Franklin
Date: March 26, 2002 Barbara Hackman Franklin, Director
/s/ Gordon S. Macklin
Date: March 26, 2002 Gordon S. Macklin, Director
/s/ Franklin H. Top, Jr.
Date: March 26, 2002 Franklin H. Top, Jr., Director
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of MedImmune, Inc.:
Our audits of the consolidated financial statements referred to in our report dated January 24, 2002, except for Notes 20 and 21, as
to which the date is March 27, 2002, appearing in this Annual Report on Form 10-K also included an audit of the financial statement
schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, the financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
McLean, Virginia
January 24, 2002
Schedule I
MedImmune, Inc.
Valuation and Qualifying Accounts
(in thousands)
Balance at Balance at
beginning end of
Description of period Additions Deductions period
------------ --------- --------- ---------- ------
For the year ended
December 31, 2001
Trade and Contract
Receivables Allowance $15,720 $76,753 ($68,113) $24,360
Trade Receivables Bad
Debt Reserve 1,562 2,274 (1,316) 2,520
Inventory Reserve 6,230 12,703 (9,793) 9,140
Physical Asset Reserve 2,463 -- (89) 2,374
------- ------- ------- -------
$25,975 $91,730 ($79,311) $38,394
======= ======= ======== =======
For the year ended
December 31, 2000
Trade and Contract Receivables Allowance $16,103 $58,898 ($59,281) $15,720
Trade Receivables
Bad Debt Reserve 1,304 1,575 (1,317) 1,562
Inventory Reserve 8,004 3,550 (5,324) 6,230
Physical Asset Reserve 828 2,536 (901) 2,463
------- ------- -------- -------
$26,239 $66,559 ($66,823) $25,975
======= ======= ========= =======
S-1
For the year ended
December 31, 1999
Trade and Contract
Receivables Allowance $29,589 $43,779 ($57,265) $16,103
Trade Receivables Bad
Debt Reserve 368 1,390 (454) 1,304
Inventory Reserve 9,747 803 (2,546) 8,004
Physical Asset Reserve -- 1,682 (854) 828
------- ------- -------- -------
$39,704 $47,654 ($61,119) $26,239
======= ======= ======== =======
S-2
c) Item 601 Exhibits
2.1(29) Agreement and Plan of Merger, dated as of December 2, 2001, among MedImmune, Inc., Apple Merger Corp. and
Aviron
3.1(4) Restated Certificate of Incorporation, dated May 14, 1991
3.2(3) By-Laws, as amended
3.3(24) By-Laws, as amended
3.4 Certificate of Amendment to the Restated Certificate of Incorporation, dated August 5, 1996*
3.5 Certificate of Amendment to the Restated Certificate of Incorporation, dated June 15, 1998*
3.6 Certificate of Amendment to the Restated Certificate of Incorporation, dated May 18, 2000*
3.7 By-Laws, as amended*
4.1 (19) Amended and Restated Rights Agreement, dated as of October 31, 1998, between MedImmune, Inc., and American
Stock Transfer and Trust Company, as Rights Agent
4.2 Certificate of Designations of Series B Junior Preferred Stock*
4.3 Warrant for Common Stock, issued to University of Michigan (incorporated by reference to Exhibit 4.14 to
Aviron's Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Securities and
Exchange Commission March 8, 2000).
4.4 Indenture entered into between Aviron and HSBC Bank USA as Trustee, dated February 7, 2001 (incorporated by
reference to Exhibit 4.22 to Aviron's Annual Report on Form 10-K405 for the year ended December 31, 2000,
filed with the Securities and Exchange Commission March 27, 2001).
4.5 Officer's Certificate pursuant to Section 2.01 of the Subordinated Indenture, dated February 7, 2001
(incorporated by reference to Exhibit 4.22 to Aviron's Annual Report on Form 10-K405 for the year ended
December 31, 2000, filed with the Securities and Exchange Commission March 27, 2001).
4.6 Warrant for Common Stock, issued to University of Michigan (incorporated by reference to Exhibit 4.25 to
Aviron's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 filed with the Securities and
Exchange Commission May 15, 2001).
10.1(1)(3) License Agreement dated November 15, 1990 between the Company and Merck & Co., Inc. ("Merck")
10.2(3) Plasma Supply Agreement dated May 31, 1990 between the Company and Plasma Alliance, Inc.
10.3 (3) Termination Agreement dated June 29, 1990 between the Company and Pediatric Pharmaceuticals, Inc. ("PPI")
(formerly MedImmune, Inc.)
10.4(3) RSV Research Agreement dated August 1, 1989 between the Company, PPI and the Massachusetts Health Research
Institute, Inc. ("MHRI")
E1
10.5(3) RSV License Agreement dated August 1, 1989 between the Company, PPI and MHRI
10.6(3) RSV Supply Agreement dated August 1, 1989 between the Company, PPI, MHRI and the Massachusetts Public Health
Biologic Laboratory ("MPHBL")
10.7(3) CMV License Agreement dated April 23, 1990 between the Company and MHRI
10.8(3) First Amendment to CMV License Agreement dated May 3, 1991 between the Company and MHRI
10.9(3) CMV Research Agreement dated April 23, 1990 between the Company, MHRI and MPHBL
10.10(3) License Agreement dated November 8, 1989 between the Company, PPI, and the Henry M. Jackson Foundation for the
Advancement of Military Medicine ("HMJ")
10.11(1)(3) License Agreement dated November 15, 1990 between Company and Merck & Co., Inc.
10.11(3) Research Agreement dated November 8, 1989 between the Company, PPI and HMJ
10.12(1)(3) Research and License Agreement dated April 1, 1990 between the Company and New York University
10.13 (1)(3) Research and License Agreement dated January 2, 1991 between the Company and the University of Pittsburgh
10.14 (3) Patent License Agreement between the Company and the National Institutes of Health regarding parvovirus
10.15 (3) License Agreement dated September 1, 1988 between the Company and Albany Medical College of Union College
10.16 (3) License Agreement dated July 5, 1989 between the Company, Albert
Einstein College of Medicine of Yeshiva University, The Whitehead Institute and Stanford University
10.17 (3) License Agreement dated July 1, 1989 between the Company and the National Technical Information Service
("NTIS")
10.18 (3) License Agreement dated September 1, 1989 between the Company and NTIS
10.19 (5) Form of Stock Option Agreement, as amended
10.20 (3) Convertible Preferred Stock and Warrant Purchase Agreement between HCV, Everest Trust and the Company dated
January 12, 1990 with form of Warrant
10.21 (3) Restated Stockholders' Agreement dated May 15, 1991
10.22 (3) Lease Agreement between Clopper Road Associates and the Company dated February 14, 1991
10.23 (7) 1991 Stock Option Plan
10.24 (3) Sublease between the Company and Pharmavene, Inc.
10.25 (4) Agreement between New England Deaconess Hospital Corporation and the Company, dated as of August 1, 1991
10.26 (1)(4) Research Collaboration Agreement between Merck and the Company effective as of November 27, 1991
E2
10.27 (1)(4) Co-promotion Agreement between Merck and the Company effective as of November 27, 1991
10.28 (1)(4) License Agreement between Merck and the Company effective as of November 27, 1991
10.29 (1)(5) Letter Agreement between Merck and the Company, dated January 26, 1993
10.30 (1)(5) Termination, Purchase and Royalty Agreement between CLI and the
Company, dated December 24, 1992
10.30.1(1)(12) Amendment to Termination, Purchase and Royalty Agreement between Connaught Technology Corporation and
MedImmune, Inc. dated December 31, 1995
10.31 (1)(5) Research and License Agreement between Cell Genesys, Inc. and the Company, dated April 29, 1992
10.31(a)(5) Unredacted pages 2-5 of Exhibit 10.31
10.32 (5) Form of 1993 Non-Employee Director Stock Option Plan
10.33 (1)(8) Sponsored Research and License Agreement between Georgetown University and the Company dated February 25, 1993
10.34 (1)(8) License Agreement between Roche Diagnostic Systems, Inc. and the Company dated March 8, 1993
10.35 (1)(8) Pip/Tazo Co-Promotion Agreement between American Cyanamid Company and the Company dated November 8, 1993
10.35.1(12) Agreement dated October 26, 1995 between American Cyanamid Company and the Company
10.36(1)(8) RSVIG Co-Development and Co-Promotion Agreement between American Cyanamid Company and the Company dated
November 8, 1993
10.36.1(12) Agreement dated October 26, 1995 between American Cyanamid Company and the Company
10.37 (1)(8) RSV MAB Co-Development and Co-Promotion Agreement between American Cyanamid Company and the Company dated
November 8, 1993
10.37.1(12) Agreement dated October 26, 1995 between American Cyanamid Company and the Company
10.38 (1)(8) RSV Vaccine Co-Development and Co-Promotion Agreement between American Cyanamid Company and the Company dated
November 8, 1993
10.38.1(12) Agreement dated October 26, 1995 between American Cyanamid Company and the Company
10.39 (1)(10) Fraction II + III Paste Supply Agreement between Baxter Healthcare Corporation and the Company dated
September 1, 1994
10.40 (11) Employment Agreement between David P. Wright and the Company dated January 2, 1995
10.41 (11) Employment Agreement between Bogdan Dziurzynski and the Company dated February 1, 1995
10.42 (11) Employment Agreement between Wayne T. Hockmeyer and the Company dated February 1, 1995
E3
10.43 (11) Employment Agreement between David M. Mott and the Company dated February 1, 1995
10.44 (11) Employment Agreement between Franklin H. Top, Jr. and the Company dated February 1, 1995
10.45 (11) Employment Agreement between James F. Young and the Company dated February 1, 1995
10.46 (1)(11) License Agreement between Symbicom AB and the Company dated May 20, 1994
10.47 (1)(11) License Agreement between the University of Kentucky Research Foundation and the Company effective June 10,
1994
10.48 (1)(11) Research and Development Agreement between the University of Kentucky Research Foundation and the Company
effective June 10, 1994
10.49 (1)(11) Research and License Agreement between Washington University and the Company effective July 1, 1994
10.50 (1)(11) Research and License Agreement between Washington University and the Company effective March 1, 1995
10.51 (1)(9) License Agreement between Baxter Healthcare Corporation and MedImmune, Inc. effective June 2, 1995
10.52 (1)(9) Stock Purchase Agreement between Baxter Healthcare Corporation and MedImmune, Inc. dated June 22, 1995
10.53 (2)(10) Alliance Agreement between BioTransplant, Inc. and MedImmune, Inc. dated October 2, 1995
10.54 (12) Stock Purchase Agreement dated October 25, 1995 between MedImmune, Inc. And American Home Products
10.55 (2)(12) Collaboration and License Agreement dated as of July 27, 1995 between MedImmune, Inc. And Human Genome
Sciences, Inc.
10.56 (12) Stipulation of Settlement in reference to MedImmune, Inc. Securities Litigation, Civil Action No. PJM93-3980
10.57 (2)(13) Plasma Supply Agreement dated effective as of February 8, 1996, by and between DCI Management Group, Inc. and
MedImmune, Inc.
10.58 (2)(13) License and Research Support Agreement dated as of April 16, 1996, between The Rockefeller University and
MedImmune, Inc.
10.59(14) First Amendment of Lease Between Clopper Road Associates and MedImmune, Inc. dated June 8, 1993.
10.60(14) Second Amendment of Lease Between Clopper Road Associates and MedImmune, Inc. dated June 30, 1993.
10.61(14) Third Amendment of Lease between Clopper Road Associates and MedImmune, Inc. effective as of January 1, 1995.
10.62(14) Fourth Amendment of Lease between Clopper Road Associates and MedImmune, Inc. dated October 3, 1996.
10.63(14) Fifth Amendment of Lease between Clopper Road Associates and MedImmune, Inc. dated October 3, 1996.
E4
10.64(1)(14) Engineering, Procurement, Construction and Validation Services Agreement between MedImmune, Inc. and Fluor
Daniel, Inc. effective as of July 31, 1996.
10.65(2)(14) Research and License Agreement between OraVax Merieux Co. and MedImmune, Inc. effective as of November 1, 1996
10.66 (15) Employment Agreement between Wayne T. Hockmeyer and MedImmune, Inc. effective April 1, 1997.
10.67 (15) Employment Agreement between David M. Mott and MedImmune, Inc. effective April 1, 1997.
10.68 (15) Employment Agreement between Franklin H. Top and MedImmune, Inc. effective April 1, 1997.
10.69 (15) Employment Agreement between David P. Wright and MedImmune, Inc. effective April 1, 1997.
10.70 (15) Employment Agreement between James F. Young and MedImmune, Inc.effective April 1, 1997.
10.71 (15) Employment Agreement between Bogdan Dziurzynski and MedImmune, Inc. effective April 1, 1997.
10.72 (16) Master Loan & Security Agreement, dated June 16, 1997 by and between Transamerica and MedImmune, Inc.
10.73 (1)(16) Patent License Agreement, (MEDI-493) dated July 17, 1997 by and between Protein Design Labs and MedImmune,Inc.
10.74 (1) Patent License Agreement, (MEDI-507) dated July 17, 1997 by and between Protein Design Labs and MedImmune,Inc.
10.75 (17) Sixth Amendment of Lease between ARE-QRS Corp. and MedImmune, Inc. dated September 10, 1997.
10.76(1)(17) Co-Promotion Agreement between Abbott Laboratories and MedImmune, Inc. dated November 26, 1997
10.77(1)(17) Contract Research and Development Agreement between MedImmune, Inc. and Dr. Karl Thomae GmbH dated November
27, 1997.
10.78(1)(17) Manufacturing Agreement between MedImmune, Inc. and Dr. Karl Thomae GmbH dated November 27, 1997.
10.79(1)(17) Distribution Agreement between MedImmune, Inc. and Abbott International, Ltd. dated November 26, 1997.
10.80(1)(17) License Agreement between Loyola University of Chicago and MedImmune, Inc. dated December 3, 1997.
10.81(1)(17) Research Collaboration and License Agreement between SmithKline Beecham and MedImmune, Inc. dated
December 10, 1997.
10.82 (18) Termination of MEDI-SB Letter Agreement of October 10, 1996.
10.83 (18) Second Amendment between MedImmune, Inc. and Lonza Biologics PLC of 228 Bath Road, Slough, Berkshire SL1 4DY
England
10.84(22) Employment Agreement between Wayne T. Hockmeyer and MedImmune, Inc. effective November 1, 1998.
10.85(22) Employment Agreement between Melvin Booth and MedImmune, Inc. effective November 1, 1998.
E5
10.86(22) Employment Agreement between David M. Mott and MedImmune, Inc. effective November 1, 1998.
10.87(22) Employment Agreement between Franklin H. Top and MedImmune, Inc. effective November 1, 1998.
10.88(22) Employment Agreement between David P. Wright and MedImmune, Inc. effective November 1, 1998.
10.89(22) Employment Agreement between James F. Young and MedImmune, Inc.effective November 1, 1998.
10.90(22) Employment Agreement between Bogdan Dziurzynski and MedImmune, Inc. effective November 1, 1998.
10.91(2)(22) License Agreement between Connaught Laboratories, Inc. and MedImmune, Inc. effective November 20,1998.
10.92(2)(22) Termination of Purchase and Royalty Agreement Second Amendment between Connaught Technology Corporation and
MedImmune, Inc. effective September 30, 1998.
10.93(22) Purchase Contract Agreement between Aid Association and MedImmune, Inc. effective November 25, 1998.
10.94 Seventh Amendment of Lease between ARE-QRS CORP. and MedImmune, Inc. effective August 1, 1998.
10.95 (20)(2) Research and Assignment and License Agreement, dated as of February 24, 1999 by and between IXSYS, Inc. and
MedImmune, Inc.
10.96 (20)(2) License Agreement, dated as of February 24, 1999 by and between IXSYS, Inc. and MedImmune, Inc.
10.97(20)(2) Selection Agreement, dated as of February 24, 1999 by and between IXSYS, Inc. and MedImmune, Inc.
10.98(20)(2) Stock Purchase Agreement, dated as of February 24, 1999 by and between IXSYS, Inc. and MedImmune, Inc.
10.99 (21) Employment Agreement between Armando Anido and MedImmune, Inc. effective August 30, 1999
10.100 (21) Amendment to Lease Agreement for MOR Bennington LLLP and MedImmune, Inc.
10.101(2)(24) RSVIG Termination Agreement dated December 17, 1999 between MedImmune, Inc. and Wyeth-Ayerst Pharmaceuticals,
Inc. ("Wyeth")
10.102 Agreement dated August 9, 1991, between U.S. Bioscience, Inc. and Warner-Lambert Company, as amended by
Amendment No. 1 dated December 12, 1991, Amendment No. 2 dated March 10, 1994 and Amendment No. 3 dated March
11, 1994 (incorporated by reference to Exhibit 10.01 to the U.S. Bioscience, Inc. Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 28, 1994)
10.103 Office Lease Agreement, dated September 1990, between U.S. Bioscience, Inc. and Tower Bridge Associates
(incorporated by reference to Exhibit 10(k) to the U.S. Bioscience, Inc. Registration Statement on Form S-1
(File No. 33-39576) filed with the Securities and Exchange Commission on March 22, 1991)
E6
10.103 (a) Amendment No. 1, dated August 31, 1991, to Office Lease Agreement between U.S. Bioscience, Inc. and Tower
Bridge Associates (incorporated by reference to Exhibit 10(I)(ii) to the U.S. Bioscience, Inc. Annual Report
on form 10-K filed with the Securities and Exchange Commission on March 27, 1992)
10.103 (b) Addendum, dated April 8, 1992, to Amendment No. 1 of Office Lease Agreement between U.S. Bioscience and Tower
Bridge Associates (incorporated by reference to Exhibit 10.2.2 to the U.S. Bioscience, Inc. Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 31, 1993)
10.103 (c) Amendment No. 2, dated June 30, 1995, to Office Lease Agreement between U.S. Bioscience, Inc. and Tower Bridge
Associates (incorporated by reference to Exhibit 10.2.3 to the U.S. Bioscience, Inc. Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 20, 1996)
10.103 (d) Amendment No. 3, dated May 12, 1998, to Office Lease Agreement between U.S. Bioscience and Tower Bridge
Associates (incorporated by reference to Exhibit 10.2.3.1 to the U.S. Bioscience, Inc. Quarterly Report on Form
10-Q filed with the Securities and Exchange Commission on July 31, 1998)
10.104 Lease Agreement, dated June 15, 1992, between U.S. Bioscience, Inc. and Pickering Acquisition Associates
(incorporated by reference to Exhibit 10.3 to the U.S. Bioscience, Inc. Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1993)
10.104 (a) Amendment No. 1, dated March 17, 1993, to Lease Agreement between the U.S. Bioscience, Inc. and Pickering
Acquisition Associates (incorporated by reference to Exhibit 10.3.1 to the U.S. Bioscience, Inc. Annual Report
on Form 10-K filed with the Securities and Exchange Commission on March 31, 1993)
10.104 (b) Second Amendment to Lease Agreement between U.S. Bioscience and Pickering Acquisition Associates dated February
8, 1995 (incorporated by reference to Exhibit 10.3.2 to the U.S. Bioscience, Inc. Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 28, 1995)
10.104 (c) Third Amendment to Lease Agreement between U.S. Bioscience, Inc. and Pickering Associates dated October 12,
1995 (incorporated by reference to Exhibit 10.3.3 to the U.S. Bioscience, Inc. Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 20, 1998)
10.104 (d) Fourth Amendment to Lease Agreement between U.S. Bioscience, Inc. and Pickering Acquisition Associates dated
January 20, 1998 (incorporated by reference to Exhibit 10.3.4 to the U.S. Bioscience, Inc. Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 20, 1998)
E7
10.105 License Agreement Dated January 30, 1995 between Registrant and National Institutes of Health (incorporated by
reference to Exhibit 10.6 to the U.S. Bioscience, Inc. Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 28, 1995)
10.106 Agreement for Assignment of Rights, dated January 8, 1988, between U.S. Bioscience, Inc. and Wyeth
Laboratories, Inc. (incorporated by reference to Exhibit 10.18 to the U.S. Bioscience, Inc. Registration
Statement on Form 10 filed with the Securities and Exchange Commission on September 21, 1989)
10.107 Amended and Restated License Agreement, effective as of May 1, 1993, between U.S. Bioscience, Inc. and
Southern Research Institute (incorporated by reference to Exhibit 10.8 to the U.S. Bioscience, Inc. Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 28, 1994)
10.108 Agreement, dated as of November 25, 1988, between U.S. Bioscience, Inc. and Warner-Lambert Company
(incorporated by reference to Exhibit 10.23 to the U.S. Bioscience, Inc. Registration Statement on Form 10
filed with the Securities and Exchange Commission on September 21, 1989)
10.108 (a) Amendment No. 1, dated March 13, 1992 to Agreement dated as of November 25, 1988, between U.S. Bioscience,Inc.
and Warner-Lambert Company (incorporated by reference to Exhibit 10(o)(ii) to the U.S. Bioscience, Inc. Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 1992)
10.109 Agreement, dated as of January 1, 1995, between U.S. Bioscience, Inc. and Applied Analytical Industries, Inc.
(incorporated by reference to Exhibit 10.11 to the U.S. Bioscience, Inc. Annual Report on Form 10-K filed with
the Securities and Exchange commission on March 28, 1995)
10.109 (a) Amendment, dated April 12, 1995, to Agreement dated January 1995 between U.S. Bioscience, Inc. and Applied
Analytical Industries, Inc. (incorporated by reference to Exhibit 10.11 to the U.S. Bioscience, Inc. Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1997).
10.109 (b) Second Amendment, dated May 6, 1996 to Agreement dated January 1, 1995 between U.S. Bioscience, Inc. and
Applied Analytical Industries, Inc. (incorporated by reference to Exhibit 10.11.2 to the U.S. Bioscience, Inc.
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1997)
10.110 Agreement, dated as of September 23, 1993, between U.S. Bioscience, Inc. and Ben Venue Laboratories, Inc.
(incorporated by reference to Exhibit 10.12 to the U.S. Bioscience, Inc. Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 28, 1994)
E8
10.110 (a) Amendment, dated April 11, 1995, to Agreement dated September 23, 1993 between U.S. Bioscience, Inc. and Ben
Venue Laboratories, Inc. (incorporated by reference to Exhibit 10.12.1 to the U.S. Bioscience, Inc. Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1997)
10.110 (b) Amendment, dated December 12, 1995, to Agreement dated September 23, 1993 between U.S. Bioscience, Inc. and Ben
Venue Laboratories, Inc. (incorporated by reference to Exhibit 10.12.2 to the U.S. Bioscience, Inc. Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1997)
10.111 License Agreement, dated February 14, 1992, between U.S. Bioscience, Inc. and Schering Overseas Limited
(incorporated by reference to Exhibit 10.14 to the U.S. Bioscience, Inc. Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1993)
10.111 (a) Amendment dated October 15, 1993 to License Agreement between U.S. Bioscience, Inc. and Schering Overseas
Limited (incorporated by reference to Exhibit 10.14.1 to the U.S. Bioscience, Inc. Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 28, 1994)
10.112 Amended and restated License Agreement dated May 10, 1994 between U.S. Bioscience, Inc. and Scherico, Ltd.
(incorporated by reference to Exhibit 10.15 to the U.S. Bioscience, Inc. Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 20, 1998)
10.113 (1) Distribution and Supply Agreement, dated as of May 10, 1993 between U.S. Bioscience, Inc. and Scherico, Ltd.
(incorporated by reference to Exhibit 10.16 to the U.S. Bioscience, Inc. Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 28, 1995)
10.113 (a)(1) Amendment to Distribution and Supply Agreement, dated as of August 31, 1996 between U.S. Bioscience, Inc. and
Scherico, Ltd. (incorporated by reference to Exhibit 10.16.1 to the U.S. Bioscience, Inc. Current Report on
Form 8-K/A dated September 19, 1996 filed with the Securities and Exchange Commission on December 19, 1996)
10.114 Agreement, dated as of March 10, 1994 between U.S. Bioscience, Inc. and Sipsy S.A. (incorporated by reference
to Exhibit 10.17 to the U.S. Bioscience, Inc. Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 28, 1994)
10.115 License Agreement, effective November 28, 1990 between U.S. Bioscience, Inc. and National Technical Information
Service (incorporated by reference to Exhibit 10.18 to the U.S. Bioscience, Inc. Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 28, 1994)
E9
10.116 (1) Ethyol (Amifostine) Distribution and Marketing Collaboration Agreement between U.S. Bioscience, Inc. and ALZA
Corporation dated December 12, 1995 (incorporated by reference to Exhibit 5 to the U.S. Bioscience, Inc.
Current Report on Form 8-K dated December 22, 1995)
10.116 (a) Amendment No. 2 to distribution and Marketing Collaboration Agreement between U.S. Bioscience, Inc. and ALZA
Corporation dated as of February 3, 1997 (incorporated by reference to Exhibit 10.25.2 to the U.S. Bioscience,
Inc. Current Report on Form 8-K dated February 3, 1997)
10.117 License Agreement between U.S. Bioscience, Inc. and Scherico, Ltd. dated as of November 6, 1997 (incorporated
by reference to Exhibit 10.27 to the U.S. Bioscience, Inc. Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 20, 1998)
10.117 (a) Amendment No. 1 to License Agreement dated as of November 6, 1997 between U.S. Bioscience, Inc. and Scherico,
Ltd. (incorporated by reference to Exhibit 10.27.1 to the U.S. Bioscience, Inc. Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 20, 1998)
10.118 Agreement between U.S. Bioscience, Inc. and Philip S. Schein, M.D. dated as of March 10, 1998 (incorporated by
reference to Exhibit 10.28.1 to the U.S. Bioscience, Inc. Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 20, 1998)
10.119 (23) Agreement and Plan of Merger dated as of September 21, 1999 among MedImmune, Inc. and Marlin Merger Sub Inc.
and U. S. BioScience, Inc.
10.120 (25) Amendment to Employment Agreement for Wayne Hockmeyer.
10.121 (26) Employment Agreement between James F. Young and MedImmune, Inc. dated November 1, 2000.
10.122 (26) Asset Purchase Agreement dated October 26, 2000 by and between MedImmune Oncology, Inc. and MGI Pharma, Inc.
10.123 (26) Amendment to Employment Agreement for Armando Anido, dated November 16, 2000.
10.124 (26) Amendment to Employment Agreement for Melvin Booth, dated November 16, 2000.
10.125 (26) Amendment to Employment Agreement for Bogdan Dziurynski, dated November 16, 2000.
10.126 (26) Amendment to Employment Agreement for Franklin Top, Jr., M.D. dated November 16, 2000.
10.127 (26) Amendment to Employment Agreement for David Mott, dated November 16, 2000.
10.128 (2)(27) Supply Transfer Agreement between Immunex Corporation and MedImmune, Inc.
10.129 (2)(28) Amendment No. 3 to Distribution and Marketing collaboration Agreement between MedImmune Oncology, Inc. and
ALZA Corporation.
E10
10.130 Employment Agreement between Gregory F. Patrick and MedImmune, Inc. dated February 15, 2001.*
10.131 Employment Agreement between Edward M. Connor, M.D. and MedImmune, Inc. dated February 15, 2001.*
10.132 Employment agreement between Gail Folena-Wasserman and MedImmune, Inc. dated April 18, 2001.*
10.133 Employment agreement between Edward J. Arcuri, Ph.D. and MedImmune, Inc. dated February 25, 2002.*
10.134 Employment agreement between Harry B. Greenberg and MedImmune, Inc. dated March 26, 2002.*
10.135 (1) Materials Transfer and Intellectual Property Agreement between the Registrant and the Regents of the
University of Michigan, dated February 24, 1995 (incorporated by reference to Exhibit 10.3 to Aviron's
Registration Statement on Form S-1 filed with the Securities and Exchange Commission June 5, 1996).
10.136 Stock Transfer Agreement between the Registrant and the Regents of the University of Michigan, dated
February 24, 1995 (incorporated by reference to Exhibit 10.4 to Aviron's Registration Statement on Form
S-1 filed June 5, 1996).
10.137 (1) Cooperative Research and Development Agreement between the Registrant and the National Institutes of Health,
dated May 30, 1995 (incorporated by reference to Exhibit 10.6 to Aviron's Registration Statement on Form S-1
filed June 5, 1996).
10.138 First Amendment to Facility Reservation Agreement, dated as of August 1, 2000, by and between Aviron and
Packaging Coordinators, Inc. (incorporated by reference to Exhibit 10.32 to Aviron's Quarterly Report on Form
10-Q for the quarter ended September 30, 2000 filed November 14, 2000).
10.139 1996 Equity Incentive Plan, as amended as of June 1, 2000 (incorporated by reference to Exhibit 99.1 to
Aviron's Registration Statement on Form S-8 filed August 23, 2000).
10.140 Industrial Lease between the Registrant and the Vanni Business Park General Partnership, dated August 29, 1995
(incorporated by reference to Exhibit 10.12 to Aviron's Registration Statement on Form S-1 filed June 5, 1996).
10.141 (1) Biological Materials License Agreement between the Registrant and the National Institutes of Health, dated
May 31, 1996 (incorporated by reference to Exhibit 10.14 to Aviron's Registration Statement on Form S-1/A
filed June 20, 1996).
10.142 (2) Amended and Restated Production Agreement, dated as of August 1, 2000, by and between Aviron and Packaging
Coordinators, Inc. (incorporated by reference to Exhibit 10.31 to Aviron's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2000 filed November 14, 2000 and Appendix 5 of this exhibit is incorporated by
reference to Exhibit 10.17 to Aviron's Registration Statement on Form S-3 filed December 5, 1997).
E11
10.143 (1) Production Agreement between the Registrant and Packaging Coordinators, Inc., dated as of October 31, 1997
(incorporated by reference to Exhibit 10.16 to Aviron's Registration Statement on Form S-3 filed December 5,
1997).
10.144 Facility Reservation Agreement between the Registrant and Packaging Coordinators, Inc., dated as of
October 31, 1997 (incorporated by reference to Exhibit 10.17 to Aviron's Registration Statement on Form S-3
filed December 5, 1997).
10.145 (1) Supply Agreement between the Registrant and Becton Dickinson and Company dated July 1, 1998 (incorporated by
reference to Exhibit 10.19 to Aviron's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998
filed November 16, 1998).
10.146 (1) United States License and Co-Promotion Agreement between the Registrant and Wyeth Lederle Vaccines dated
January 11, 1999 (incorporated by reference to Exhibit 10.20 to Aviron's Annual Report on Form 10-K for the
year ended on December 31, 1998 filed March 31, 1999).
10.147 (1) International FluMist(TM) License Agreement between the Registrant and Wyeth dated January 11, 1999
(incorporated by reference to Exhibit 10.21 to Aviron's Annual Report on Form 10-K for the year ended on
December 31, 1998 filed March 31, 1999).
10.148 (1) FluMist(TM) Supply Agreement between the Registrant and Wyeth Lederle Vaccines dated January 11, 1999
(incorporated by reference to Exhibit 10.22 to Aviron's Annual Report on Form 10-K for the year ended on
December 31, 1998 filed March 31, 1999).
10.149 (1) Credit Agreement between the Registrant and American Home Products Corporation dated January 11, 1999
(incorporated by reference to Exhibit 10.23 to Aviron's Annual Report on Form 10-K for the year ended on
December 31, 1998 filed March 31, 1999).
10.150 (1) Letter Amendment to the Materials Transfer and Intellectual Property Agreement between the Registrant and the
Regents of the University of Michigan dated February 24, 1999 (incorporated by reference to Exhibit 10.24 to
Aviron's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 filed May 13, 1999).
10.151 Real Property Lease by and between the Registrant and Spieker Properties, L.P. dated February 5, 1999
(incorporated by reference to Exhibit 10.25 to Aviron's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999 filed August 13, 1999).
10.152 (1) First Amendment to the Influenza Vaccine Collaboration and License and Distribution Agreement by and between
the Registrant and CSL Limited, A.C.N. dated June 7, 1999 (incorporated by reference to Exhibit 10.26 to
Aviron's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 filed August 13, 1999).
E12
10.153 Real Property Lease by and between the Registrant and MELP VII L.P., dated October 20, 1999 (incorporated by
reference to Exhibit 10.30 to Aviron's Annual Report on Form 10-K for the year ended December 31, 1999 filed
March 8, 2000).
10.154 Amendment No. 1 to Stock Transfer Agreement by and between the Registrant and The Regents of the University of
Michigan, dated February 16, 2000 (incorporated by reference to Exhibit 10.33 to Aviron's Annual Report on
Form 10-K for the year ended December 31, 1999 filed March 8, 2000).
10.155 1999 Non-Officer Equity Incentive Plan, as amended as of September 24, 2001 (incorporated by reference to
exhibit 4.1 to Aviron's Registration Statement on Form S-8 filed October 23, 2001).
10.156 Stock Option Agreement for C. Boyd Clarke (incorporated by reference to Exhibit 99.4 to Aviron's Registration
Statement on Form S-8 filed August 23, 2000).
10.157 (2) Agreement for Lease of AVU Premises at Gaskill Road, Speke, dated October 11, 2000 (incorporated by reference
to Exhibit 10.38 to Aviron's Annual Report on Form 10-K405 for the year ended December 31, 2000, filed with
the Securities and Exchange Commission March 27, 2001).
10.158 (2) Underlease of AVU Premises at Gaskill Road Speke, dated October 11, 2000 (incorporated by reference to Exhibit
10.39 to Aviron's Annual Report on Form 10-K405 for the year ended December 31, 2000, filed with the
Securities and Exchange Commission March 27, 2001).
10.159 (2) Agreement for Lease of AVU Extension Premises at Gaskill Road Speke, dated October 11, 2000 (incorporated by
reference to Exhibit 10.40 to Aviron's Annual Report on Form 10-K405 for the year ended December 31, 2000,
filed with the Securities and Exchange Commission March 27, 2001).
10.160 (2) Underlease of AVU Extension Premises at Gaskill Road Speke, dated October 11, 2000 (incorporated by reference
to Exhibit 10.41 to Aviron's Annual Report on Form 10-K405 for the year ended December 31, 2000, filed with
the Securities and Exchange Commission March 27, 2001).
10.161 (2) Agreement for the Sale and Purchase of Leasehold Property known as Plot 6 Boulevard Industry Park, Halewood,
Merseyside, dated October 10, 2000 (incorporated by reference to Exhibit 10.42 to Aviron's Annual Report on
Form 10-K405 for the year ended December 31, 2000, filed with the Securities and Exchange Commission March 27,
2001).
E13
10.162 (2) Underlease of Plot 6 Boulevard Industry Park Halewood Merseyside, dated February 17, 2000 (incorporated by
reference to Exhibit 10.43 to Aviron's Annual Report on Form 10-K405 for the year ended December 31, 2000,
filed with the Securities and Exchange Commission March 27, 2001).
10.163 (2) Master Agreement by and between Powderject Pharmaceuticals Limited, Evans Vaccines Limited, the Registrant and
Aviron UK, dated October 11, 2000 (incorporated by reference to Exhibit 10.44 to Aviron's Annual Report on
Form 10-K405 for the year ended December 31, 2000, filed with the Securities and Exchange Commission
March 27, 2001).
10.164 (2) Agreement Relating to the Sharing and Provision of Certain Services, by and between Evans Vaccines Limited and
Aviron UK Limited (incorporated by reference to Exhibit 10.45 to Aviron's Annual Report on Form 10-K405 for
the year ended December 31, 2000, filed with the Securities and Exchange Commission March 27, 2001).
10.165 (2) Transfer Agreement by and between Evans Vaccines Limited and Aviron UK Limited, dated October 11, 2000
(incorporated by reference to Exhibit 10.46 to Aviron's Annual Report on Form 10-K405 for the year ended
December 31, 2000, filed with the Securities and Exchange Commission March 27, 2001).
10.166 (2) Amended and Restated Contract Manufacture Agreement by and between Evans Vaccines Limited and the Registrant,
dated October 11, 2000 (incorporated by reference to Exhibit 10.47 to Aviron's Annual Report on Form 10-K405
for the year ended December 31, 2000, filed with the Securities and Exchange Commission March 27, 2001).
10.167 (2) Know How Licence Agreement by and between Evans Vaccines Limited and Aviron UK Limited, dated October 11, 2000
(incorporated by reference to Exhibit 10.48 to Aviron's Annual Report on Form 10-K405 for the year ended
December 31, 2000, filed with the Securities and Exchange Commission March 27, 2001).
10.168 FluMist(TM) Supply Agreement Amendment, dated January 1, 2001 (incorporated by reference to Exhibit 10.49 to
Aviron's Annual Report on Form 10-K405 for the year ended December 31, 2000, filed with the Securities and
Exchange Commission March 27, 2001).
10.169 (2) Amendment Number One (1) to Cooperative Research and Development Agreement AI-000062, by and between NIAID and
Aviron, dated as of August 3, 1999 (incorporated by reference to Exhibit 10.50 to Aviron's Annual Report on
Form 10-K405 for the year ended December 31, 2000, filed with the Securities and Exchange Commission March 27,
2001).
E14
10.170 (2) Amendment Number Two (2) to Cooperative Research and Development Agreement AI-000062, by and between NIAID and
Aviron, dated as of June 12, 2000 (incorporated by reference to Exhibit 10.51 to Aviron's Annual Report on
Form 10-K405 for the year ended December 31, 2000, filed with the Securities and Exchange Commission
March 27, 2001).
10.171 Amendment No. 2 to Stock Transfer Agreement by and between the Registrant and The Regents of the University of
Michigan, dated March 29, 2001 (incorporated by reference to Exhibit 10.52 to Aviron's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2001 filed with the Securities and Exchange Commission May 15, 2001)
10.172 Real Estate Lease entered into between Aviron and The Realty Associates Fund IV, L.P., dated May 8, 2001
(incorporated by reference to Exhibit 10.53 to Aviron's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001 filed with the Securities and Exchange Commission August 13, 2001).
10.173 (2) Amendment Number Three (3) to Cooperative Research and Development Agreement AI-0062, by and between NIAID and
Aviron, dated as of July 16, 2001 (incorporated by reference to Exhibit 10.54 to Aviron's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2001 filed with the Securities and Exchange Commission November
13, 2001).
21 Subsidiaries of MedImmune, Inc.*
23.1 Consent of PricewaterhouseCoopers LLP*
* Filed herewith.
(1) Confidential treatment has been granted by the SEC. The copy filed as an exhibit omits the information subject
to the confidentiality grant.
(2) Confidential treatment has been requested. The copy filed as an exhibit omits the information subject to the
confidentiality request.
(3) Incorporated by reference to exhibit filed in connection with the Company's Registration Statement
No. 33-39579.
(4) Incorporated by reference to exhibit filed in connection with the Company's Registration Statement
No. 33-43816.
(5) Incorporated by reference to exhibit filed in connection with the Company's Annual Report on Form 10-K for the
year ended December 31, 1992.
(6) Incorporated by reference to exhibit filed in connection with the Company's Annual Report on Form 10-K for the
year ended December 31, 1991.
(7) Incorporated by reference to exhibit filed in connection with the Company's Registration Statement
No. 33-46165.
E15
(8) Incorporated by reference to exhibit filed in connection with the Company's Annual Report on Form 10-K for the
year ended December 31, 1993.
(9) Incorporated by reference to exhibit filed in connection with the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995.
(10) Incorporated by reference to exhibit filed in connection September 30, 1995.
(11) Incorporated by reference to exhibit filed with the Company's Annual Report on Form 10-K for December 31, 1994
(12) Incorporated by reference to exhibit filed with the Company's Annual Report on Form 10-K for December 31,1995.
(13) Incorporated by reference to exhibit filed with the Company's Quarterly Report on Form 10-Q for the Quarter
ended June 30, 1996.
(14) Incorporated by reference to exhibit filed with the Company's Annual Report on Form 10-K for December 31, 1996
(15) Incorporated by reference to exhibit filed with the Company's Quarterly Report on Form 10-Q for the Quarter
ended March 31, 1997
(16) Incorporated by reference to exhibit filed with the Company's Quarterly Report on Form 10-Q for the Quarter
ended September 30, 1997.
(17) Incorporated by reference to exhibit filed with the Company's annual Report on Form 10K for December 31, 1997.
(18) Incorporated by reference to exhibit filed with the Company's Quarterly Report on Form 10-Q for the Quarter
ended June 30, 1998.
(19) Incorporated by reference to Exhibit 99.2 filed with the Company's Registration Statement on Form 8A/A, filed
with the Securities and Exchange Commission on December 1, 1998.
(20) Incorporated by reference to exhibit filed in connection with the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999.
(21) Incorporated by reference to exhibit filed in connection with the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999.
(22) Incorporated by reference to exhibit filed with the Company's annual Report on Form 10K for December 31, 1998.
(23) Incorporated by reference to exhibit filed on Form S-4 filed on October 12, 1999.
(24) Incorporated by reference to exhibit filed with the Company's Annual Report on Form 10-K for December 31, 1999.
(25) Incorporated by reference to exhibit filed in connection with the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2000.
E16
(26) Incorporated by reference to exhibit filed with the Company's Annual Report on Form 10-K for December 31, 2000
(27) Incorporated by reference to exhibit filed with the Company's Quarterly Report on Form 10-Q/A for the Quarter
ended June 30, 2001.
(28) Incorporated by reference to exhibit filed with the Company's Quarterly Report on Form 10-Q/A for the Quarter
ended September 30, 2001.
(29) Incorporated by reference to exhibit filed on Form S-4/A filed on January 3, 2002.
E17