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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 2002
Commission File Number 000-31191
The Medicines Company
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 04-3324394
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5 Sylvan Way, Parsippany, NJ 07054
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (973) 656-1616
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 the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date: As of October 23, 2002, there
were 39,299,967 shares of Common Stock, $0.001 par value per share, outstanding.
THE MEDICINES COMPANY
TABLE OF CONTENTS
Part I. Financial Information.................................................1
Item 1 - Unaudited Condensed Consolidated Financial Statements..............1
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................8
Item 3 - Quantitative and Qualitative Disclosures About Market Risk........26
Item 4 - Controls and Procedures...........................................27
Part II. Other Information....................................................28
Item 6 - Exhibits and Reports on Form 8-K..................................28
SIGNATURES....................................................................29
CERTIFICATIONS................................................................30
PART I. FINANCIAL INFORMATION
ITEM 1 - UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THE MEDICINES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
SEPTEMBER 30, DECEMBER 31,
2002 2001
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 44,855,840 $ 53,884,376
Available for sale securities 6,883,486 125,000
Accrued interest receivable 134,352 6,757
------------- -------------
51,873,678 54,016,133
------------- -------------
Accounts receivable, net of allowances of approximately $2.2 million
at September 30, 2002 and $823,000 at December 31, 2001 7,258,107 5,346,684
Inventories 17,602,036 16,610,928
Prepaid expenses and other current assets 1,084,402 550,564
------------- -------------
Total current assets 77,818,223 76,524,309
Fixed assets, net 873,903 1,223,528
Other assets 191,643 153,076
------------- -------------
Total assets $ 78,883,769 $ 77,900,913
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,820,837 $ 8,805,476
Accrued expenses 14,555,856 7,974,473
------------- -------------
Total current liabilities 16,376,693 16,779,949
Deferred revenue 1,427,083 --
Commitments and contingencies -- --
------------- -------------
Total liabilities 17,803,776 16,779,949
Stockholders' equity:
Common stock, $.001 par value, 75,000,000 shares authorized at
September 30, 2002 2002 and December 31, 2001, respectively;
39,279,839 and 34,606,582 shares issued and outstanding at
September 30, 2002 and December 31, 2001, respectively 39,280 34,607
Additional paid-in capital 352,785,612 321,041,704
Deferred compensation (4,383,063) (8,593,773)
Accumulated deficit (287,437,831) (251,443,682)
Accumulated other comprehensive income 75,995 82,108
------------- -------------
Total stockholders' equity 61,079,993 61,120,964
------------- -------------
Total liabilities and stockholders' equity $ 78,883,769 $ 77,900,913
============= =============
See accompanying notes to condensed consolidated financial statements.
Page 1
THE MEDICINES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net revenue $ 9,133,199 $ 3,526,234 $ 24,004,230 $ 7,435,063
Operating expenses:
Cost of revenue 2,227,178 564,835 4,959,808 1,216,278
Research and development 9,866,139 6,325,575 28,567,263 27,229,728
Selling, general and administrative 8,467,569 8,732,412 27,199,457 27,359,289
------------ ------------ ------------ ------------
Total operating expenses 20,560,886 15,622,822 60,726,528 55,805,295
Loss from operations (11,427,687) (12,096,588) (36,722,298) (48,370,232)
Other income (expense):
Interest income 215,927 787,659 760,996 2,852,188
Interest expense -- -- (32,847) --
Loss on sale of investments -- -- -- (850,000)
------------ ------------ ------------ ------------
Net loss (11,211,760) (11,308,929) (35,994,149) (46,368,044)
============ ============ ============ ============
Basic and diluted net loss attributable
to common stockholders per
common share $ (0.29) $ (0.33) $ (0.99) $ (1.43)
============ ============ ============ ============
Shares used in computing net loss
attributable to common stockholders
per common share:
Basic and diluted 39,161,664 34,502,886 36,409,258 32,382,878
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
Page 2
THE MEDICINES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2002 2001
------------ ------------
Cash flows from operating activities:
Net loss $(35,994,149) $(46,368,044)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 409,748 355,324
Amortization of deferred stock compensation 2,434,243 3,195,698
Loss on sales of fixed assets -- 520
Changes in operating assets and liabilities:
Accrued interest receivable (127,595) 1,132,242
Accounts receivable (1,911,423) (3,011,355)
Inventory (1,017,707) (4,868,735)
Prepaid expenses and other current assets (532,210) (241,064)
Other assets (38,567) 96,926
Accounts payable (6,985,831) (1,068,655)
Accrued expenses 6,580,263 (1,191,672)
Deferred revenue 1,427,083 --
------------ ------------
Net cash used in operating activities (35,756,145) (51,968,815)
Cash flows from investing activities:
Purchases of available for sale securities (6,749,399) (7,430,886)
Maturities and sales of available for sale securities -- 44,025,759
Purchase of fixed assets (54,026) (614,020)
------------ ------------
Net cash (used in) provided by investing activities (6,803,425) 35,980,853
Cash flows from financing activities:
Proceeds from issuances of common stock, net 33,525,590 42,386,974
Repurchases of common stock (542) (11)
------------ ------------
Net cash provided by financing activities 33,525,048 42,386,963
Effect of exchange rate changes on cash 5,986 26,139
------------ ------------
(Decrease)/increase in cash and cash equivalents (9,028,536) 26,425,140
Cash and cash equivalents at beginning of period 53,884,376 36,802,356
------------ ------------
Cash and cash equivalents at end of period $ 44,855,840 $ 63,227,496
============ ============
See accompanying notes to condensed consolidated financial statements.
Page 3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. NATURE OF BUSINESS
The Medicines Company (the Company) was incorporated in Delaware on July 31,
1996. The Company is a specialty pharmaceutical company engaged in the
acquisition, development and commercialization of late-stage development drugs
or drugs approved for marketing. The U.S. Food and Drug Administration approved
Angiomax(R) (bivalirudin) for use as an anticoagulant in patients with unstable
angina undergoing percutaneous transluminal coronary angioplasty in December
2000 and the Company commenced sales of Angiomax in the United States in the
first quarter of 2001. The Company was considered to be a development-stage
enterprise, as defined in Statement of Financial Accounting Standards No. 7,
"Accounting and Reporting by Development Stage Enterprises" through December 31,
2000. With the commencement of sales in 2001, the Company is no longer
considered to be a development-stage enterprise.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all the information and footnotes required by
accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, the accompanying financial
statements include all adjustments, consisting only of normal recurring
accruals, considered necessary for a fair presentation of the Company's
financial position, results of operations, and cash flows for the periods
presented.
The results of operations for the three- and nine-month periods ended September
30, 2002 are not necessarily indicative of the results that may be expected for
the entire fiscal year ending December 31, 2002. These condensed consolidated
financial statements should be read in conjunction with the audited financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2001, filed with the Securities and Exchange Commission.
Cash, Cash Equivalents and Available for Sale Securities
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Cash equivalents at
September 30, 2002 and December 31, 2001 consist of investments in money market
funds. These investments are carried at cost, which approximates fair value. The
Company considers securities with original maturities of greater than three
months to be available for sale securities. Securities under this classification
are recorded at fair market value and unrealized gains and losses are recorded
as a separate component of stockholders' equity. The estimated fair value of the
available for sale securities is determined based on quoted market prices or
rates for similar instruments.
Page 4
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
At September 30, 2002, the Company held various certificates of deposit,
corporate bonds and United States government agency notes with fair value
totaling $6.9 million, all with less than one-year terms. At December 31, 2001,
the Company held a certificate of deposit for $125,000 that was pledged as a
security deposit on its facility lease in Parsippany, New Jersey.
Revenue Recognition
The Company recognizes revenue from product sales in accordance with generally
accepted accounting principles in the United States, including the guidance in
Staff Accounting Bulletin 101. Revenue from product sales is recognized when
there is persuasive evidence of an arrangement, delivery has occurred, the price
is fixed and determinable, and collectibility is reasonably assured. However,
because the Company's products are sold with limited rights of return, the
Company's recognition of revenue from product sales is also subject to Statement
of Financial Accounting Standards No. 48 (SFAS 48) "Revenue Recognition When
Right of Return Exists." Under SFAS 48, revenue is recognized when the price to
the buyer is fixed, the buyer is obligated to pay the Company and the obligation
to pay is not contingent on resale of the product, the buyer has economic
substance apart from the Company, the Company has no obligation to bring about
the sale of the product and the amount of returns can be reasonably estimated.
The Company reserves for estimated returns at the time of sale and revenues are
reported net of such amounts.
The Company does not offer price protection to its customers. The Company sells
its products primarily to wholesalers and distributors who, in turn, sell to
hospitals. Hospitals that have signed contracts with the Company or that
participate in group purchasing organizations that have signed contracts with
the Company receive rebates based on their volume of purchases. The Company
provides for such estimated rebates at the time of sale and revenues are
reported net of such amounts.
Revenue from collaborative agreements may include non-refundable fees or
milestone payments. These payments are recorded as deferred revenue when
contractual performance obligations have been satisfied, and they are recognized
ratably over the term of these agreements. When the period of deferral cannot be
specifically identified from the contract, the Company must estimate the period
based upon other critical factors contained within the contract. The Company
reviews these estimates, at least annually, possibly resulting in a change in
the deferral period.
3. NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net loss per
share for the three and nine months ended September 30, 2002 and 2001.
Page 5
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
BASIC AND DILUTED
Net loss $(11,211,760) $(11,308,929) $(35,994,149) $(46,368,044)
Weighted average common shares outstanding 39,172,483 34,542,242 36,423,982 32,449,717
Less: unvested restricted common shares
outstanding (10,819) (39,356) (14,724) (66,839)
------------ ------------ ------------ ------------
Weighted average common shares used to
compute net loss per share 39,161,664 34,502,886 36,409,258 32,382,878
============ ============ ============ ============
Basic and diluted net loss per share $ (0.29) $ (0.33) $ (0.99) $ (1.43)
============ ============ ============ ============
Options to purchase 4,427,298 and 4,161,465 shares of common stock outstanding
as of September 30, 2002 and 2001, respectively, have not been included in the
computation of diluted net loss per share, as their effect would have been
antidilutive. Outstanding warrants to purchase 2,873,688 and 3,156,073 shares of
common stock as of September 30, 2002 and 2001, respectively, were also excluded
from the computation of diluted net loss per share, as their effect would have
been antidilutive.
During the period January 1, 2000 to September 30, 2000, the Company issued
options to purchase a total of 2,273,624 shares of common stock at exercise
prices below the estimated fair value of the Company's common stock as of the
date of grant of such options based on the estimated price of the Company's
common stock in the Company's initial public offering. The total deferred stock
compensation associated with these options is approximately $17.3 million. No
additional deferred stock compensation was recorded during the nine months ended
September 30, 2002 or during the full year 2001 because all grants of stock
options during these periods were issued at the fair market value on the date of
grant. The Company amortizes deferred stock compensation over the respective
vesting periods of the individual stock options. Total deferred compensation is
reduced when the associated options are cancelled prior to exercise. During the
nine months ended September 30, 2002, cancellation of options that had not been
exercised resulted in a reduction in the total deferred stock compensation of
approximately $1.8 million.
Included in the results of operations is compensation expense of approximately
$634,000 and $2.4 million for the three and nine months ended September 30,
2002, respectively, and approximately $977,000 and $3.2 million for the three
and nine months ended September 30, 2001, respectively, associated with such
options. We expect to record amortization expense for the remaining deferred
stock compensation as follows: approximately $693,000 for the remainder of 2002,
approximately $2.7 million in 2003 and approximately $943,000 in 2004, assuming
the continued vesting of the associated options.
Page 6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
4. COMPREHENSIVE LOSS
Comprehensive losses are primarily comprised of net losses, unrealized losses on
available for sales securities and currency translation adjustments.
Comprehensive losses for the three and nine months ended September 30, 2002 were
$11.2 million and $36.0 million, respectively, and for the three and nine months
ended September 30, 2001 were $11.4 million and $46.3 million, respectively.
5. SALE OF COMMON STOCK
On June 25, 2002, the Company sold through a public offering 4.0 million shares
of its common stock at a price of $8.20 per share. The Company is using and
expects to continue to use the $30.9 million net proceeds from the sale of
common stock to fund working capital and other general corporate purposes,
including additional clinical trials of Angiomax and clevidipine and other
product development activities, further commercialization activities of
Angiomax, and for the acquisition of additional product candidates and approved
products.
6. LOAN AND SECURITY AGREEMENT WITH COMERICA BANK
On March 26, 2002, the Company signed a loan and security agreement with
Comerica Bank-California providing for borrowings of up to $10.0 million. On
August 12, 2002, the Company terminated this loan and security agreement.
7. SALES, MARKETING AND DISTRIBUTION AGREEMENT WITH NYCOMED DANMARK A/S
On March 25, 2002, the Company entered into a collaboration with Nycomed Danmark
A/S, a European pharmaceutical company, under which Nycomed will serve as the
exclusive distributor of Angiomax in 35 countries, including 12 countries in the
European Union. Nycomed paid an initial fee of $1.5 million and agreed to pay up
to $2.5 million in milestone payments upon receipt of regulatory approvals in
Europe. In addition, Nycomed purchased 79,428 shares of the Company's common
stock for a total purchase price of approximately $1.0 million, which
represented the fair market value of the shares at the time of purchase. The
Company and Nycomed will work together to obtain regulatory approvals in the
countries covered by the agreement and share costs of clinical trials used to
extend indications in Europe beyond coronary angioplasty.
Page 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Our management's discussion and analysis of financial condition and results of
operations contains forward-looking statements and is subject to important
factors that could cause our future results to differ materially from those
indicated. See "Factors that May Affect Future Results" beginning on page 16.
GENERAL
We operate as a pharmaceutical company selling and developing products for the
treatment of hospital patients. We acquire, develop and commercialize
pharmaceutical products that are in late stages of development or have been
approved for marketing. In December 2000, we received marketing approval from
the U.S. Food and Drug Administration for Angiomax(R), our lead product, for use
as an anticoagulant in combination with aspirin in patients with unstable angina
undergoing coronary balloon angioplasty. Coronary balloon angioplasty is a
procedure used to restore normal blood flow in an obstructed artery in the
heart. We began selling Angiomax in U.S. hospitals in January 2001 as an
anticoagulant replacement for heparin in these procedures.
In March 2002, we entered into a study and exclusive option agreement with
AstraZeneca AB relating to the licensing, development and commercialization of
clevidipine, an intravenous, short-acting calcium channel blocker, for which
Phase 3 clinical trials are planned. Prior to our signing this agreement,
AstraZeneca conducted Phase I and Phase 2 clinical trials of clevidipine. These
clinical trials demonstrated that clevidipine acts to reduce blood pressure
almost immediately after intravenous infusion. We have initiated a clinical
trial to compare clevidipine to nitroglycerin for blood pressure control in
patients undergoing coronary artery bypass graft surgery. If this clinical trial
achieves satisfactory results, we will then enter into a license agreement with
AstraZeneca for clevidipine.
In the first quarter of 2002, we also entered into an agreement with Nycomed
Danmark A/S under which Nycomed will serve as the exclusive distributor of
Angiomax in 35 countries, including 12 countries in the European Union. We have
not received marketing approval for Angiomax in any of these countries. In
addition, in March 2002, we received an approvable letter from the U.S. Food and
Drug Administration for a second-generation process for the manufacture of
Angiomax bulk drug material, known as the Chemilog process.
On October 9, 2002, we received a Notice of Compliance from the Therapeutic
Products Directorate of Canada, enabling us to market Angiomax in Canada.
Since our inception, we have incurred significant losses, including a net loss
of $11.2 million and $36.0 million for the three and nine months ended
September 30, 2002, respectively. Most of our expenditures to date have been for
research and development activities and selling, general and administrative
expenses. Research and development expenses represent costs incurred for product
acquisition, clinical trials, and activities relating to regulatory filings and
manufacturing development efforts. We generally outsource our clinical trials
and manufacturing development activities to independent organizations to
maximize efficiency and minimize our internal
Page 8
overhead. Selling, general and administrative expenses consist primarily of
salaries and related expenses, general corporate activities and costs associated
with product sales and marketing activities.
We expect to continue to incur operating losses for the foreseeable future as a
result of research and development activities attributable to new and existing
products and costs associated with the sale and marketing of our products. To
achieve and maintain profitability we will need to generate significantly
greater revenues than we have to date.
We have not generated taxable income to date. At December 31, 2001, net
operating losses available to offset future taxable income for federal income
tax purposes were approximately $174.3 million. If not utilized, federal net
operating loss carryforwards will expire at various dates beginning in 2011 and
ending in 2021. We have not recognized the potential tax benefit of our net
operating losses in our statements of operations. The future utilization of our
net operating loss carryforwards may be limited pursuant to regulations
promulgated under the Internal Revenue Code of 1986, as amended.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The discussion and analysis of our financial condition and results of operations
is based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported assets and liabilities, revenues and
expenses, and other financial information. Actual results may differ
significantly from these estimates under different assumptions and conditions.
The SEC has indicated that critical accounting estimates and judgments are those
which are both important to the portrayal of the company's financial condition
and results and require management's most difficult, subjective or complex
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain.
Our significant accounting policies are more fully described in Note 2 in the
Notes To Condensed Consolidated Financial Statements section of this Quarterly
Report on Form 10-Q and in Note 2 of the Company's Annual Report on Form 10-K
for the year ended December 31, 2001. Not all of these significant accounting
policies, however, require management to make difficult, complex or subjective
judgments or estimates. We believe that our accounting policies relating to
inventory, as described under the caption "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Critical Accounting
Policies" in our Form 10-K as of December 31, 2001, fit the definition of
"critical accounting estimates and judgments." In addition, we believe our
accounting policies relating to revenue recognition, as described below, fit the
definition.
Revenue Recognition
We recognize revenue from product sales in accordance with generally accepted
accounting principles in the United States, including the guidance in Staff
Accounting Bulletin 101. Revenue from product sales is recognized when there is
persuasive evidence of an arrangement,
Page 9
delivery has occurred, the price is fixed and determinable, and collectibility
is reasonably assured. However, because our products are sold with limited
rights of return, our recognition of revenue from product sales is also subject
to Statement of Financial Accounting Standards No. 48 (SFAS 48) "Revenue
Recognition When Right of Return Exists." Under SFAS 48, revenue is recognized
when the price to the buyer is fixed, the buyer is obligated to pay us and the
obligation to pay is not contingent on resale of the product, the buyer has
economic substance apart from the us, we have no obligation to bring about the
sale of the product and the amount of returns can be reasonably estimated.
We do not offer price protection to our customers. We sell our products
primarily to wholesalers and distributors, who, in turn, sell to hospitals.
Hospitals that have signed contracts with us or that participate in group
purchasing organizations that have signed contracts with us receive rebates
based on their volume of purchases.
We record allowances for product returns, rebates and discounts, and report
revenue net of such allowances. We must make significant judgments and estimates
in preparing the allowances, that could require adjustments in the future. For
instance, our customers have the right to return any unopened product with less
than six months to the labeled expiration date. Therefore, we must estimate the
likelihood that product sold to wholesalers might remain in their inventory to
within six months of expiration, and at what points within that six-month period
the wholesaler might decide to return the product, if at all. We base our
estimates on information from customers, historic patterns of returns and on the
expiration dates of product currently being shipped.
We do not recognize revenue unless collectibility is reasonably assured. 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 and result in an impairment of
their ability to make payments, additional allowances may be required.
Revenue from collaborative agreements with partners may include non-refundable
fees or milestone payments. These payments are recorded as deferred revenue when
contractual performance obligations have been satisfied, and they are recognized
ratably over the term of these agreements. When the period of deferral cannot be
specifically identified from the contract, management must estimate the period
based upon other critical factors contained within the contract. We review these
estimates, at least annually, which could result in a change in the deferral
period. For example, we received $1.5 million from Nycomed as a non-refundable
distributor fee. This payment has been recorded as deferred revenue and is being
recognized ratably over the term of that agreement, which we estimate to be
twelve years.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2002 and 2001
Net Revenue. Net revenue increased 159% to $9.1 million for the three months
ended September 30, 2002 from $3.5 million for the three months ended September
30, 2001. Virtually all the revenue for the three-month periods ended September
30, 2002 and 2001 came from U.S. sales
Page 10
of Angiomax, which we commercially launched during the first quarter of 2001.
The increase in 2002 was due primarily to increased use of Angiomax at an
increasing number of hospitals.
Cost of Revenue. Cost of revenue for the three months ended September 30, 2002
was $2.2 million, or 24% of net revenue, compared to $564,000, or 16% of net
revenue, for the three months ended September 30, 2001. Cost of revenue consists
of expenses in connection with the manufacture of the Angiomax sold, the
logistics costs of selling Angiomax and royalty expenses. Our cost of
manufacturing as a percentage of net revenue increased substantially in the
three months ended September 30, 2002 compared to the three months ended
September 30, 2001. The cost of manufacturing as a percentage of net revenue was
approximately 10% for the three months ended September 30, 2002 and
approximately 2% for the three months ended September 30, 2001. Prior to the
second quarter of 2002, we sold only Angiomax product manufactured before the
date of FDA approval of Angiomax in December 2000. The costs associated with the
manufacture of Angiomax prior to the date of FDA approval of Angiomax were
expensed as research and development in the accounting periods prior to December
2000 and were not included in our cost of manufacturing for the three months
ended September 30, 2001. In the three months ended September 30, 2002, we sold
Angiomax product that was manufactured both before and after the date of FDA
approval of Angiomax, resulting in higher costs of manufacturing. In the fourth
quarter of 2002, we expect to sell a greater percentage of Angiomax manufactured
after the date of FDA approval, and as a result, we expect the cost of
manufacturing as a percentage of net revenue to continue to increase.
Research and Development Expenses. Research and development expenses increased
56% to $9.9 million for the three months ended September 30, 2002, from $6.3
million for the three months ended September 30, 2001. The increase in research
and development expenses of $3.6 million was primarily due to higher clinical
development costs mostly related to our REPLACE-2 trial.
We have a number of clinical trial programs currently underway, or about to
commence, for expanding the applications of Angiomax in the treatment of
ischemic heart disease and for use as a procedural anticoagulant. The funding
for Angiomax, our main product, has represented and will continue to represent a
significant portion of research and development spending. For the three-month
periods ended September 30, 2002 and 2001, research and development expenses
related to Angiomax included the costs of clinical trials, development
manufacturing costs for the bulk drug product and the cost associated with
preparation of U.S. and worldwide marketing applications. Our current primary
clinical trial of Angiomax, REPLACE-2, completed enrollment and thirty-day
follow-up during the third quarter of 2002. As a result, we expect that costs
incurred with respect to REPLACE-2 will decrease significantly in the fourth
quarter of 2002. We are currently working on a second generation manufacturing
process for Angiomax bulk drug substance, called Chemilog, for which we have
received an approvable letter from the FDA, and will continue to incur research
and development expenses until we receive FDA approval of this process. In the
fourth quarter of 2002, we anticipate receipt of Angiomax bulk material from our
supplier, UCB Bioproducts, produced using the Chemilog process. The approximate
$4 million manufacturing cost of this material will be charged to development
expense if FDA approval of this process has not been received. The amount of
future research and development expenses associated with Angiomax is not
reasonably certain as these costs are dependent upon the regulatory process and
the timing for obtaining marketing approval for other
Page 11
applications of the product in the United States and other countries. However,
we expect them to be substantial.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased 3% to $8.5 million for the three months ended
September 30, 2002, from $8.7 million for the three months ended September 30,
2001. The decrease in selling, general and administrative expenses of $265,000
was primarily due to lower marketing promotion expenses relating to the sale and
marketing of Angiomax.
Other Income and Expense. Interest income decreased 73% to $216,000 for the
three months ended September 30, 2002, from $788,000 for the three months ended
September 30, 2001. The decrease in interest income of $572,000 was primarily
due to lower cash and available for sale securities balances as a result of
spending for operating expenses and working capital requirements and lower
available interest rates on securities. Interest income for the three months
ended September 30, 2002 and September 30, 2001 was primarily attributable to
the investment of the remaining proceeds from our sale of 4.0 million shares of
our common stock in a private placement in May 2001. A portion of our interest
income for the three months ended September 30, 2002 was attributable to the
investment of the proceeds from our sale of 4.0 million shares of our common
stock in a public offering in June 2002.
We had no interest expense for either the three months ended September 30, 2002
or the three months ended September 30, 2001.
Nine Months Ended September 30, 2002 and 2001
Net Revenue. Net revenue increased 223% to $24.0 million for the nine months
ended September 30, 2002, from $7.4 million for the nine months ended September
30, 2001. Virtually all the revenue for the nine-month periods ended September
30, 2002 and 2001 came from U.S. sales of Angiomax, which we commercially
launched during the first quarter of 2001. The increase in 2002 was due
primarily to increased use of Angiomax in an increasing number of hospitals.
Cost of Revenue. Cost of revenue for the nine months ended September 30, 2002
was $5.0 million, or 21% of net revenue, compared to $1.2 million, or 16% of net
revenue, for the nine months ended September 30, 2001. Our cost of manufacturing
as a percentage of net revenue increased substantially in the nine months ended
September 30, 2002 compared to the nine months ended September 30, 2001. The
cost of manufacturing as a percentage of net revenue was approximately 9% for
the nine months ended September 30, 2002 and approximately 2% for the nine
months ended September 30, 2001. In the nine months ended September 30,2002, we
began selling Angiomax product manufactured both before and after the date of
FDA approval of Angiomax in December 2000. The costs associated with the
manufacture of Angiomax prior to the date of FDA approval of Angiomax were
expensed as research and development in the accounting periods prior to December
2000.
Research and Development Expenses. Research and development expenses increased
5% to $28.6 million for the nine months ended September 30, 2002, from $27.2
million for the nine months ended September 30, 2001. The increase in research
and development expenses of $1.3
Page 12
million was primarily due to higher clinical development costs relating to our
REPLACE-2 trial and $2.5 million of manufacturing development cost incurred in
connection with our receipt of the final Chemilog validation batch in the nine
months ended September 30, 2002, partly offset by lower clinical development
costs relating to the HERO-2 trial program, our Phase 3 trial in acute
myocardial infarction that was completed in 2001.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased 1% to $27.2 million for the nine months ended
September 30, 2002, from $27.4 million for the nine months ended September 30,
2001. The decrease in selling, general and administrative expenses of $160,000
was primarily due to lower marketing and selling expenses and corporate
infrastructure costs relating to the sales and marketing of Angiomax.
Other Income and Expense. Interest income decreased 73% to $761,000 for the nine
months ended September 30, 2002, from $2.9 million for the nine months ended
September 30, 2001. The decrease in interest income of $2.1 million was
primarily due to lower cash and available for sale securities balances
attributable to operating expenses and working capital requirements and lower
available interest rates on securities. For the nine months ended September 30,
2002, interest income was primarily attributable to the investment of the
proceeds of our sale of shares of common stock in a private placement in May
2001. For the nine months ended September 30, 2001, interest income was
primarily attributable to the investment of the remaining proceeds of our
initial public offering in August and September 2000.
We had interest expense of $33,000 during the nine months ended September 30,
2002 associated with the draw down of our revolving line of credit at the end of
March 2002. We terminated the revolving line of credit in August. We had no
interest expense for the nine months ended September 30, 2001. In the nine
months ended September 30, 2001, we liquidated our $3.0 million principal
investment in Southern California Edison 5 7/8 % bonds, which were originally
due on January 15, 2001, recognizing a loss of $850,000 on the sale.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations through the sale of common
and preferred stock, sales of convertible promissory notes and warrants,
interest income, draw downs from a revolving line of credit and revenues from
sales of Angiomax.
In August and September 2000, we received $101.4 million in net proceeds from
the sale of common stock in our initial public offering. We received an
additional $41.8 million in net proceeds in May 2001 from the sale of 4.0
million shares of our common stock in a private placement, and we received an
additional $30.9 million in net proceeds in June 2002 from the sale of 4.0
million shares of our common stock in a public offering. Prior to the initial
public offering, we had received net proceeds of $79.4 million from the private
placement of equity securities, primarily redeemable convertible preferred
stock, and $19.4 million from the issuance of convertible notes and warrants.
In March 2002, we entered into a collaboration agreement with Nycomed Danmark
A/S. Under
Page 13
the agreement, Nycomed paid us an initial non-refundable fee of $1.5 million and
agreed to pay up to $2.5 million in additional milestones based on regulatory
approvals in Europe. In addition, Nycomed purchased 79,428 shares of our common
stock for a total purchase price of approximately $1.0 million.
In March 2002, we entered into a loan and security agreement with Comerica
Bank-California. Under the agreement, we were able to borrow up to $10.0
million. In August 2002, we terminated this loan and security agreement.
On April 23, 2002, we filed a registration statement on Form S-3 with the
Securities and Exchange Commission registering 4.0 million shares of our common
stock. The registration statement was declared effective by the SEC on May 1,
2002, and the Company sold all 4.0 million shares of the common stock on June
25, 2002 at a price to the public of $8.20 per share. Net proceeds from the sale
totaled $30.9 million.
As of September 30, 2002, we had $51.9 million in cash, cash equivalents,
available for sale securities and accrued interest receivable, as compared to
$54.0 million as of December 31, 2001. The decrease in cash, cash equivalents,
available for sale securities and accrued interest receivable of $2.3 million
was primarily attributable to spending for operating expenses and working
capital requirements during the nine-month period ended September 30, 2002. This
decrease was partially offset by the proceeds from our public offering in June
2002, the $2.5 million received from Nycomed Danmark A/S, consisting of a
non-refundable upfront license fee of $1.5 million and $1.0 million in proceeds
from the sale of shares of our common stock to Nycomed, and from collections on
sales of Angiomax.
We used net cash of $35.8 million in operating activities during the nine months
ended September 30, 2002. This consisted of a net loss of $36.0 million,
combined with increases in accounts receivable of $1.9 million and inventory of
$1.0 million and a decrease in accounts payable of $7.0 million, offset by
increases in accrued expenses of $6.6 million and deferred revenue of $1.4
million associated with the Nycomed agreement and from non-cash amortization of
deferred stock compensation of $2.4 million and depreciation of $410,000. The
increase in inventory of $1.0 million was primarily attributable to the
scheduled receipt of bulk Angiomax from our supplier, UCB Bioproducts, during
the nine months ended September 30, 2002. The decrease in accounts payable
primarily was related to payments for bulk product from UCB along with several
large REPLACE-2 related payments. The increase in accrued expenses was largely
the result of higher clinical development costs associated with the REPLACE-2
trial. We expect to receive additional Angiomax bulk material in December 2002.
During the nine months ended September 30, 2002, we used approximately $6.8
million of cash in net investing activities, which consisted principally of the
purchase of available for sale securities. During the nine months ended
September 30, 2002, we received $33.5 million from financing activities, which
consisted of $30.9 million in proceeds from the sale of 4.0 million shares of
our common stock in a public offering in June, $1.0 million in proceeds from the
sale of shares of our common stock to Nycomed, and $1.6 million in proceeds from
employees purchasing stock under our stock plans.
We expect to continue to devote substantial resources to our research and
development efforts
Page 14
and to our sales, marketing and manufacturing programs associated with the
commercialization of our products. Our funding requirements will depend on
numerous factors including:
- whether Angiomax is commercially successful;
- the progress, level and timing of our research and development
activities;
- the cost and outcomes of regulatory reviews;
- the continuation or termination of third party manufacturing or sales
and marketing arrangements;
- the cost and effectiveness of our sales and marketing programs;
- the status of competitive products;
- our ability to defend and enforce our intellectual property rights;
and
- the establishment of additional strategic or licensing arrangements
with other companies or acquisitions.
We believe, based on our current operating plan, plus anticipated revenues from
Angiomax and interest income, that our current cash, cash equivalents and
available for sale securities will be sufficient to fund our operations for at
least 18 months. If our existing resources are insufficient to satisfy our
liquidity requirements due to slower than anticipated revenues from Angiomax or
otherwise, or if we acquire additional product candidates, we may need to sell
additional equity or debt securities or seek additional financing through other
arrangements.
The sale of additional equity or debt securities may result in additional
dilution to our stockholders, and we cannot be certain that additional public or
private financing will be available in amounts or on terms acceptable to us, if
at all. If we are unable to obtain this additional financing, we may be required
to delay, reduce the scope of, or eliminate one or more of our planned research,
development and commercialization activities, which could harm our financial
condition and operating results. In addition, in order to obtain additional
financing, we may be required to relinquish rights to products, product
candidates or technologies that we would not otherwise relinquish.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
Our contractual obligations and commercial commitments include:
- operating leases for our facilities in Cambridge, Massachusetts and
Parsippany, New Jersey, which expire in August 2003 and December 2012,
respectively. Future annual minimum payments under these operating
leases are $185,000 for the remainder of 2002, and $712,000 - 2003;
$503,000 - 2004; $492,000 - 2005; $495,000 - 2006; $503,000 - 2007;
and a total of $2.6 million for the years 2008 through 2012.
- a purchase order that was placed in March 2002 to UCB Bioproducts for
the purchase of approximately $5.3 million of Angiomax bulk drug
product. We expect to take delivery under this purchase order in
December of 2002 and in the first quarter of 2003.
Page 15
FACTORS THAT MAY AFFECT FUTURE RESULTS
This Quarterly Report includes forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A
of the Securities Act of 1933, as amended. For this purpose, any statements
contained herein regarding our strategy, future operations, financial position,
future revenues, projected costs, clinical trials, prospects, plans and
objectives of management, other than statements of historical facts, are
forward-looking statements. The words "anticipates," "believes," "estimates,"
"expects," "intends," "may," "plans," "projects," "will," "would" and similar
expressions are intended to identify forward-looking statements, although not
all forward-looking statements contain these identifying words. We cannot
guarantee that we actually will achieve the results, plans, intentions or
expectations disclosed in our forward-looking statements. There are a number of
important factors that may cause actual results or events to differ materially
from those disclosed in the forward-looking statements we make. These important
factors include the risk factors set forth below. Although we may elect to
update forward-looking statements in the future, we specifically disclaim any
obligation to do so, even if our estimates change, and readers should not rely
on those forward-looking statements as representing our views as of any date
subsequent to the filing date of this Quarterly Report.
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF NET LOSSES, AND WE EXPECT TO CONTINUE TO INCUR NET LOSSES
AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY
We have incurred net losses since our inception, including net losses of
approximately $11.2 million and $36.0 million for the three and nine months
ended September 30, 2002, respectively. As of September 30, 2002, we had an
accumulated deficit of approximately $287.4 million. We expect to make
substantial expenditures to further develop and commercialize our products,
including costs and expenses associated with clinical trials, regulatory
approval and commercialization of products. As a result, we are unsure when we
will become profitable, if at all, and if we do become profitable, we may not
remain profitable for any substantial period of time. If we fail to achieve
profitability within the time frame expected by investors or securities
analysts, the market price of our common stock may decline.
OUR BUSINESS IS VERY DEPENDENT ON THE COMMERCIAL SUCCESS OF ANGIOMAX
Other than Angiomax, our products are in clinical phases of development and,
even if approved by the FDA, are a number of years away from entering the
market. As a result, Angiomax will account for almost all of our revenues for
the foreseeable future. The commercial success of Angiomax will depend upon its
acceptance by physicians, patients and other key decision-makers as a safe,
therapeutic and cost-effective alternative to heparin and other products used in
current practice. If Angiomax is not commercially successful, we will have to
find additional sources of revenues or curtail or cease operations.
FAILURE TO RAISE ADDITIONAL FUNDS IN THE FUTURE MAY AFFECT THE DEVELOPMENT,
MANUFACTURE AND SALE OF OUR PRODUCTS
Our operations to date have generated substantial and increasing needs for cash.
Our negative cash flow from operations is expected to continue into the
foreseeable future. The clinical development and regulatory approval of Angiomax
for additional indications, the development and regulatory approval of our other
product candidates and the acquisition and development of
Page 16
additional product candidates by us will require a commitment of substantial
funds. Our future capital requirements are dependent upon many factors and may
be significantly greater than we expect.
As of the date of this Quarterly Report, we believe, based on our current
operating plan, plus anticipated sales of Angiomax and interest income, that our
current cash, cash equivalents and available for sale securities will be
sufficient to fund our operations for at least 18 months. If our existing
resources are insufficient to satisfy our liquidity requirements due to slower
than anticipated sales of Angiomax or otherwise, or if we acquire additional
product candidates, we may need to sell additional equity or debt securities or
seek additional financing through other arrangements. The sale of additional
equity or debt securities may result in additional dilution to our stockholders,
and we cannot be certain that additional public or private financing will be
available in amounts or on terms acceptable to us, if at all. If we are unable
to obtain this additional financing, we may be required to delay, reduce the
scope of, or eliminate one or more of our planned research, development and
commercialization activities, which could harm our financial condition and
operating results. In addition, in order to obtain additional financing, we may
be required to relinquish rights to products, product candidates or technologies
that we would not otherwise relinquish.
WE CANNOT EXPAND THE INDICATIONS FOR ANGIOMAX UNLESS WE RECEIVE FDA APPROVAL FOR
EACH ADDITIONAL INDICATION. FAILURE TO EXPAND THESE INDICATIONS WILL LIMIT THE
SIZE OF THE COMMERCIAL MARKET FOR ANGIOMAX
In December 2000, we received approval from the FDA for the use of Angiomax as
an anticoagulant in combination with aspirin in patients with unstable angina
undergoing coronary balloon angioplasty. One of our key objectives is to expand
the indications for which the FDA will approve Angiomax. In order to do this, we
will need to conduct additional clinical trials and obtain FDA approval for each
proposed indication. If we are unsuccessful in expanding the approved
indications for the use of Angiomax, the size of the commercial market for
Angiomax will be limited.
FAILURE TO OBTAIN REGULATORY APPROVAL IN FOREIGN JURISDICTIONS WILL PREVENT US
FROM MARKETING ANGIOMAX ABROAD
We intend to market our products in international markets, including Europe. In
order to market our products in the European Union and many other foreign
jurisdictions, we or our distribution agents must obtain separate regulatory
approvals. In February 1998, we submitted a Marketing Authorization Application
("MAA") to the European Agency for the Evaluation of Medicinal Products, or the
EMEA, for use of Angiomax in unstable angina patients undergoing angioplasty.
Following extended interaction with European regulatory authorities, the
Committee of Proprietary Medicinal Products of the EMEA voted in October 1999
not to recommend Angiomax for approval in angioplasty. The United Kingdom and
Ireland dissented from this decision. We have withdrawn our application to the
EMEA and, as of the date of this Quarterly Report, plan to resubmit an MAA with
the results of the REPLACE-2 trial, if positive. We may not be able to obtain
approval from any or all of the jurisdictions in which we seek approval to
market Angiomax. Obtaining foreign approvals may require additional trials and
additional expense.
THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS MAY BE TERMINATED OR
DELAYED, AND THE COSTS OF DEVELOPMENT AND COMMERCIALIZATION MAY INCREASE, IF
THIRD PARTIES WHO WE RELY ON TO MANUFACTURE AND SUPPORT THE DEVELOPMENT AND
COMMERCIALIZATION OF OUR PRODUCTS DO NOT FULFILL THEIR OBLIGATIONS
Page 17
Our development and commercialization strategy entails entering into
arrangements with corporate and academic collaborators, contract research
organizations, distributors, third-party manufacturers, licensors, licensees and
others to conduct development work, manage our clinical trials, manufacture our
products and market and sell our products outside of the United States. Although
we manage these services, we do not have the expertise or the resources to
conduct such activities on our own and, as a result, are particularly dependent
on third parties in most areas.
We may not be able to maintain our existing arrangements with respect to the
commercialization of Angiomax or establish and maintain arrangements to develop
and commercialize clevidipine or any additional product candidates or products
on terms that are acceptable to us. Any current or future arrangements for the
development and commercialization of our products may not be successful. If we
are not able to establish or maintain agreements relating to Angiomax,
clevidipine or any additional products on terms which we deem favorable, our
financial condition would be materially adversely affected.
Third parties may not perform their obligations as expected. The amount and
timing of resources that third parties devote to developing, manufacturing and
commercializing our products may not be within our control. Furthermore, our
interests may differ from those of third parties that manufacture or
commercialize our products. Disagreements that may arise with these third
parties could delay or lead to the termination of the development or
commercialization of our product candidates, or result in litigation or
arbitration, which would be time consuming and expensive.
If any third party that manufactures or supports the development or
commercialization of our products breaches or terminates its agreement with us,
or fails to conduct its activities in a timely manner, such breach, termination
or failure could:
- delay or otherwise adversely impact the development or
commercialization of Angiomax, clevidipine, our other product
candidates or any additional product candidates that we may acquire or
develop;
- require us to undertake unforeseen additional responsibilities or
devote unforeseen additional resources to the development or
commercialization of our products; or
- result in the termination of the development or commercialization of
our products.
WE ARE DEPENDENT ON A SINGLE SUPPLIER FOR THE PRODUCTION OF ANGIOMAX BULK DRUG
SUBSTANCE AND A DIFFERENT SINGLE SUPPLIER TO CARRY OUT ALL FILL-FINISH
ACTIVITIES FOR ANGIOMAX
We have no experience in manufacturing, and we lack the facilities and personnel
to manufacture products in accordance with FDA regulations. As of the date of
this Quarterly Report, we obtain all of our Angiomax bulk drug substance from
one manufacturer, UCB Bioproducts S.A., and rely on another manufacturer, Ben
Venue Laboratories, Inc., to carry out all fill-finish activities for Angiomax,
which include final formulation and transfer of the drug into vials where it is
then freeze-dried and sealed.
The FDA requires that all manufacturers of pharmaceuticals for sale in or from
the United States achieve and maintain compliance with the FDA's current Good
Manufacturing Practice, or cGMP, regulations and guidelines. There are a limited
number of manufacturers that operate
Page 18
under cGMP regulations capable of manufacturing Angiomax. As of the date of this
Quarterly Report, we do not have alternative sources for production of Angiomax
bulk drug substance or to carry out fill-finish activities. In the event that
either of our current manufacturers is unable to carry out its respective
manufacturing obligations to our satisfaction, we may be unable to obtain
alternative manufacturing, or obtain such manufacturing on commercially
reasonable terms or on a timely basis. If we were required to transfer
manufacturing processes to other third party manufacturers, we would be required
to satisfy various regulatory requirements, which could cause us to experience
significant delays in receiving an adequate supply of Angiomax. Any delays in
the manufacturing process may adversely impact our ability to meet commercial
demands for Angiomax on a timely basis and supply product for clinical trials of
Angiomax.
IF WE DO NOT SUCCEED IN DEVELOPING A SECOND-GENERATION PROCESS FOR THE
PRODUCTION OF BULK ANGIOMAX DRUG SUBSTANCE, OUR GROSS MARGINS MAY BE BELOW
INDUSTRY AVERAGES
As of the date of this Quarterly Report, we are developing with UCB Bioproducts
a second-generation process for the production of bulk Angiomax drug substance,
which is referred to as the Chemilog process. This process, for which we have
received an approvable letter from the FDA, involves changes to the early
manufacturing steps of our current process and, we expect, will improve our
gross margins on the future sales of Angiomax. If regulatory approval of the
process is not obtained or is delayed, then our ability to improve our gross
margins on future sales of Angiomax may be limited.
CLINICAL TRIALS OF OUR PRODUCT CANDIDATES ARE EXPENSIVE AND TIME-CONSUMING, AND
THE RESULTS OF THESE TRIALS ARE UNCERTAIN
Before we can obtain regulatory approvals for the commercial sale of any product
that we wish to develop, we will be required to complete pre-clinical studies
and extensive clinical trials in humans to demonstrate the safety and efficacy
of such product. As of the date of this Quarterly Report, we are conducting
clinical trials of Angiomax for use in the treatment of ischemic heart disease
and for additional potential hospital applications as a procedural
anticoagulant. There are numerous factors that could delay our clinical trials
or prevent us from completing our trials successfully. We, or the FDA, may
suspend a clinical trial at any time on various grounds, including a finding
that patients are being exposed to unacceptable health risks.
The rate of completion of clinical trials depends in part upon the rate of
enrollment of patients. Patient enrollment is a function of many factors,
including the size of the patient population, the proximity of patients to
clinical sites, the eligibility criteria for the trial, the existence of
competing clinical trials and the availability of alternative or new treatments.
In particular, the patient population targeted by some of our clinical trials
may be small. Delays in future planned patient enrollment may result in
increased costs and program delays.
In addition, clinical trials, if completed, may not show any potential product
to be safe or effective. Results obtained in pre-clinical studies or early
clinical trials are not always indicative of results that will be obtained in
later clinical trials. Moreover, data obtained from pre-clinical studies and
clinical trials may be subject to varying interpretations. As a result, the FDA
or other applicable regulatory authorities may not approve a product in a timely
fashion, or at all. Even if regulatory approval to market a product is granted,
the regulatory approval may impose limitations on the indicated use for which
the product may be marketed.
Page 19
OUR FAILURE TO ACQUIRE AND DEVELOP ADDITIONAL PRODUCT CANDIDATES OR APPROVED
PRODUCTS WILL IMPAIR OUR ABILITY TO GROW
As part of our growth strategy, we intend to acquire and develop additional
pharmaceutical product candidates or approved products. The success of this
strategy depends upon our ability to identify, select and acquire pharmaceutical
products in late-stage development or that have been approved and that meet the
criteria we have established. Because we neither have, nor intend to establish,
internal scientific research capabilities, we are dependent upon pharmaceutical
and biotechnology companies and other researchers to sell or license product
candidates to us.
Any product candidate we acquire will require additional research and
development efforts prior to commercial sale, including extensive pre-clinical
and/or clinical testing and approval by the FDA and corresponding foreign
regulatory authorities. All of our product candidates are prone to the risks of
failure inherent in pharmaceutical product development, including the
possibility that the product candidate will not be safe, non-toxic and effective
or approved by regulatory authorities. In addition, we cannot assure you that
any approved products that we develop or acquire will be:
- manufactured or produced economically;
- successfully commercialized; or
- widely accepted in the marketplace.
In addition, proposing, negotiating and implementing an economically viable
product acquisition is a lengthy and complex process. Other companies, including
those with substantially greater financial, marketing and sales resources, may
compete with us for the acquisition of product candidates and approved products.
We may not be able to acquire the rights to additional product candidates and
approved products on terms that we find acceptable, or at all.
IF WE BREACH ANY OF THE AGREEMENTS UNDER WHICH WE LICENSE COMMERCIALIZATION
RIGHTS TO PRODUCTS OR TECHNOLOGY FROM OTHERS, WE COULD LOSE LICENSE RIGHTS THAT
ARE IMPORTANT TO OUR BUSINESS
We license commercialization rights to products and technology that are
important to our business, and we expect to enter into additional licenses in
the future. For instance, we acquired our first three products through exclusive
licensing arrangements, and we expect to enter into an exclusive license for
clevidipine, provided we achieve a successful outcome from our pilot study of
the product. Under these licenses we are, or will be, subject to
commercialization and development, sublicensing, royalty, insurance and other
obligations. If we fail to comply with any of these requirements, or otherwise
breach these license agreements, the licensor may have the right to terminate
the license in whole or to terminate the exclusive nature of the license. In
addition, upon the termination of the license we may be required to license to
the licensor the intellectual property that we developed.
OUR ABILITY TO MANAGE OUR BUSINESS EFFECTIVELY COULD BE HAMPERED IF WE ARE
UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL AND CONSULTANTS
The specialty pharmaceutical industry has experienced a high rate of turnover of
management personnel in recent years. We are highly dependent on our ability to
attract and retain qualified personnel for the acquisition, development and
commercialization activities we conduct or sponsor. If we lose one or more of
the members of our senior management, including our
Page 20
executive chairman, Dr. Clive A. Meanwell, or our chief executive officer, David
M. Stack, or other key employees or consultants, our ability to implement
successfully our business strategy could be seriously harmed. Our ability to
replace these key employees may be difficult and may take an extended period of
time because of the limited number of individuals in the biotechnology industry
with the breadth of skills and experience required to develop and commercialize
products successfully. Competition to hire from this limited pool is intense,
and we may be unable to hire, train, retain or motivate such additional
personnel.
WE FACE SUBSTANTIAL COMPETITION, WHICH MAY RESULT IN OTHERS DISCOVERING,
DEVELOPING OR COMMERCIALIZING COMPETING PRODUCTS BEFORE OR MORE SUCCESSFULLY
THAN WE DO
The specialty pharmaceutical industry is highly competitive. Our success will
depend on our ability to acquire and develop products and apply technology, and
our ability to establish and maintain a market for our products. Potential
competitors in the United States and other countries include major
pharmaceutical and chemical companies, specialized biotechnology firms,
universities and other research institutions. Many of our competitors have
substantially greater research and development capabilities and experience, and
greater manufacturing, marketing and financial resources, than we do.
Accordingly, our competitors may develop or license products or other novel
technologies that are more effective, safer or less costly than existing
products or technologies or products or technologies that are being developed by
us or may obtain FDA approval for products more rapidly than we are able.
Technological development by others may render our products or product
candidates noncompetitive. We may not be successful in establishing or
maintaining technological competitiveness.
BECAUSE THE MARKET FOR THROMBIN INHIBITORS IS COMPETITIVE, OUR PRODUCT MAY NOT
OBTAIN WIDESPREAD USE
We have positioned Angiomax as a replacement for heparin, which is widely used
and inexpensive, for use in patients with ischemic heart disease. Because
heparin is inexpensive and has been widely used for many years, medical
decision-makers may be hesitant to adopt our alternative treatment. In addition,
due to the high incidence and severity of cardiovascular diseases, competition
in the market for thrombin inhibitors is intense and growing. There are a number
of thrombin inhibitors currently on the market, awaiting regulatory approval and
in development, including orally administered agents.
THE LIMITED RESOURCES OF THIRD-PARTY PAYERS MAY LIMIT THE USE OF OUR PRODUCTS
In general, anticoagulant drugs may be classified in three groups: drugs that
directly or indirectly target and inhibit thrombin, drugs that target and
inhibit platelets and drugs that break down fibrin. Because each group of
anticoagulants acts on different components of the clotting process, we believe
that there will be continued clinical work to determine the best combination of
drugs for clinical use. We expect Angiomax to be used with aspirin alone or in
conjunction with other therapies. Although we are not positioning Angiomax as a
direct competitor to platelet inhibitors or fibrinolytic drugs, platelet
inhibitors and fibrinolytic drugs may compete with Angiomax for the use of
hospital financial resources. Many U.S. hospitals receive a fixed reimbursement
amount per procedure for the angioplasties and other treatment therapies they
perform. Because this amount is not based on the actual expenses the hospital
incurs, U.S. hospitals may have to choose among Angiomax, platelet inhibitors
and fibrinolytic drugs.
FLUCTUATIONS IN OUR OPERATING RESULTS COULD AFFECT THE PRICE OF OUR COMMON STOCK
Our operating results may vary from period to period based on the amount and
timing of sales of
Page 21
Angiomax, the availability and timely delivery of a sufficient supply of
Angiomax, the timing and expenses of clinical trials, announcements regarding
clinical trial results and product introductions by our competitors, the
availability and timing of third-party reimbursement and the timing of approval
for our product candidates. If our operating results do not match the
expectations of securities analysts and investors as a result of these and other
factors, the trading price of our common stock will likely decrease.
WE MAY UNDERTAKE STRATEGIC ACQUISITIONS IN THE FUTURE AND ANY DIFFICULTIES FROM
INTEGRATING SUCH ACQUISITIONS COULD DAMAGE OUR ABILITY TO ATTAIN OR MAINTAIN
PROFITABILITY
We may acquire additional businesses and products that complement or augment our
existing business. Integrating any newly acquired businesses or product could be
expensive and time-consuming. We may not be able to integrate any acquired
business or product successfully or operate any acquired business profitably.
Moreover, we may need to raise additional funds through public or private debt
or equity financing to acquire any businesses, which may result in dilution for
stockholders and the incurrence of indebtedness.
OUR REVENUES ARE SUBSTANTIALLY DEPENDENT ON A LIMITED NUMBER OF WHOLESALERS TO
WHICH WE SELL ANGIOMAX, AND SUCH REVENUES MAY FLUCTUATE FROM QUARTER TO QUARTER
BASED ON THE BUYING PATTERNS OF THESE WHOLESALERS
We sell Angiomax primarily to a limited number of national medical and
pharmaceutical distributors and wholesalers with distribution centers located
throughout the United States. During the three and nine months ended September
30, 2002, revenues from the sale of Angiomax to four wholesalers totaled
approximately 96% of our net revenues. Our reliance on this small number of
wholesalers could cause our revenues to fluctuate from quarter to quarter based
on the buying patterns of these wholesalers. In addition, if any of these
wholesalers fail to pay us on a timely basis or at all, our financial position
and results of operations could be materially adversely affected.
RISKS RELATED TO OUR INDUSTRY
IF WE DO NOT OBTAIN FDA APPROVALS FOR OUR PRODUCTS OR COMPLY WITH GOVERNMENT
REGULATIONS, WE MAY NOT BE ABLE TO MARKET OUR PRODUCTS AND MAY BE SUBJECT TO
STRINGENT PENALTIES
Except for Angiomax, which has been approved for sale in the United States,
Canada, Israel and New Zealand, we do not have a product approved for sale in
the United States or any foreign market. We must obtain approval from the FDA in
order to sell our product candidates in the United States and from foreign
regulatory authorities in order to sell our product candidates in other
countries. We must successfully complete our clinical trials and demonstrate
manufacturing capability before we can file with the FDA for approval to sell
our products. The FDA could require us to repeat clinical trials as part of the
regulatory review process. Delays in obtaining or failure to obtain regulatory
approvals may:
- delay or prevent the successful commercialization of any of our
product candidates;
- diminish our competitive advantage; and
- defer or decrease our receipt of revenues or royalties.
The regulatory review and approval process is lengthy, expensive and uncertain.
Extensive pre-clinical data, clinical data and supporting information must be
submitted to the FDA for each additional indication to obtain such approvals,
and we cannot be certain when we will receive these regulatory approvals, if
ever.
Page 22
In addition to initial regulatory approval, our products and product candidates
will be subject to extensive and rigorous ongoing domestic and foreign
government regulation. Any approvals, once obtained, may be withdrawn if
compliance with regulatory requirements is not maintained or safety problems are
identified. Failure to comply with these requirements may also subject us to
stringent penalties.
WE MAY NOT BE ABLE TO OBTAIN OR MAINTAIN PATENT PROTECTION FOR OUR PRODUCTS, AND
WE MAY INFRINGE THE PATENT RIGHTS OF OTHERS
The patent positions of pharmaceutical and biotechnology companies like us are
generally uncertain and involve complex legal, scientific and factual issues.
Our success depends significantly on our ability to:
- obtain U.S. and foreign patents;
- protect trade secrets;
- operate without infringing the proprietary rights of others; and
- prevent others from infringing our proprietary rights.
We may not have any patents issued from any patent applications that we own or
license. If patents are granted, the claims allowed may not be sufficiently
broad to protect our technology. In addition, issued patents that we own or
license may be challenged, invalidated or circumvented. Our patents also may not
afford us protection against competitors with similar technology. Because patent
applications in the United States and many foreign jurisdictions are typically
not published until eighteen months after filing and because publications of
discoveries in the scientific literature often lag behind actual discoveries, we
cannot be certain that others have not filed or maintained patent applications
for technology used by us or covered by our pending patent applications without
our being aware of these applications.
We exclusively license U.S. patents and patent applications and corresponding
foreign patents and patent applications relating to Angiomax, IS-159 and CTV-05.
In all, as of the date of this Quarterly Report, we exclusively license ten
issued U.S. patents. The principal U.S. patent that covers Angiomax expires in
2010. The U.S. Patent and Trademark Office has rejected our application for an
extension of the term of the patent beyond 2010 because the application was not
filed on time. We filed the application in connection with FDA approval of
Angiomax. We are exploring an alternative to extend the term of the patent, but
we can provide no assurance that we will be successful. We have not yet filed
any independent patent applications.
We may not hold proprietary rights to some patents related to our product
candidates. In some cases, others may own or control these patents. As a result,
we may be required to obtain licenses under third-party patents to market some
of our product candidates. If licenses are not available to us on acceptable
terms, we will not be able to market these products.
We may become a party to patent litigation or other proceedings regarding
intellectual property rights. The cost to us of any patent litigation or other
proceeding, even if resolved in our favor, could be substantial. If any patent
litigation or other intellectual property proceeding in which we are involved is
resolved unfavorably to us, we may be enjoined from manufacturing or selling
Page 23
our products without a license from the other party, and we may be held liable
for significant damages. We may not be able to obtain any required license on
commercially acceptable terms, or at all.
IF WE ARE NOT ABLE TO KEEP OUR TRADE SECRETS CONFIDENTIAL, OUR TECHNOLOGY AND
INFORMATION MAY BE USED BY OTHERS TO COMPETE AGAINST US
We rely significantly upon unpatented proprietary technology, information,
processes and know-how. We seek to protect this information by confidentiality
agreements with our employees, consultants and other third-party contractors, as
well as through other security measures. We may not have adequate remedies for
any breach by a party to these confidentiality agreements. In addition, our
competitors may learn or independently develop our trade secrets.
WE COULD BE EXPOSED TO SIGNIFICANT LIABILITY CLAIMS IF WE ARE UNABLE TO OBTAIN
INSURANCE AT ACCEPTABLE COSTS AND ADEQUATE LEVELS OR OTHERWISE PROTECT OURSELVES
AGAINST POTENTIAL PRODUCT LIABILITY CLAIMS
Our business exposes us to potential product liability risks, which are inherent
in the testing, manufacturing, marketing and sale of human healthcare products.
Product liability claims might be made by patients in clinical trials,
consumers, health care providers or pharmaceutical companies or others that sell
our products. These claims may be made even with respect to those products that
are manufactured in licensed and regulated facilities or otherwise possess
regulatory approval for commercial sale.
These claims could expose us to significant liabilities that could prevent or
interfere with the development or commercialization of our products. Product
liability claims could require us to spend significant time and money in
litigation or pay significant damages. As of the date of this Quarterly Report,
we are covered, with respect to our commercial sales in the United States and
New Zealand and our clinical trials, by primary product liability insurance in
the amount of $20.0 million per occurrence and $20.0 million annually in the
aggregate on a claims-made basis. This coverage may not be adequate to cover any
product liability claims.
As we commercialize our products, we may wish to increase our product liability
insurance. Product liability coverage is expensive. In the future, we may not be
able to maintain or obtain such product liability insurance on reasonable terms,
at a reasonable cost or in sufficient amounts to protect us against losses due
to product liability claims.
OUR ABILITY TO GENERATE FUTURE REVENUE FROM PRODUCTS WILL DEPEND ON
REIMBURSEMENT AND DRUG PRICING
Acceptable levels of reimbursement of the cost of developing and manufacturing
drugs and treatments related to those drugs by government authorities, private
health insurers and other organizations will have an effect on the successful
commercialization of, and attracting collaborative partners to invest in the
development of, our product candidates. We cannot be sure that reimbursement in
the United States or elsewhere will be available for any products we may develop
or, if already available, will not be decreased in the future. If reimbursement
is not available or is available only to limited levels, we may not be able to
commercialize our products, and may not be able to obtain a satisfactory
financial return on our products.
Third-party payers increasingly are challenging prices charged for medical
products and services. Also, the trend toward managed health care in the United
States and the changes in health insurance programs, as well as legislative
proposals to reform health care or reduce government
Page 24
insurance programs, may result in lower prices for pharmaceutical products,
including any products that may be offered by us. Cost-cutting measures that
health care providers are instituting, and the effect of any health care reform,
could materially adversely affect our ability to sell any products that are
successfully developed by us and approved by regulators. Moreover, we are unable
to predict what additional legislation or regulation, if any, relating to the
health care industry or third-party coverage and reimbursement may be enacted in
the future or what effect such legislation or regulation would have on our
business.
Page 25
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk is confined to our cash, cash equivalents and
available for sale securities. We place our investments in high-quality
financial instruments, primarily money market funds, United States government
agency notes, and corporate debt securities with maturities or auction dates of
less than one year, which we believe are subject to limited credit risk. We
currently do not hedge interest rate exposure. At September 30, 2002, we held
$51.7 million in cash, cash equivalents, and available for sale securities, all
due within one year, which had an average interest rate of approximately 2.0%.
We do not believe that a 10% increase or decrease in interest rates in effect at
September 30, 2002 would have a material impact on our results of operations or
cash flows.
Most of our transactions are conducted in U.S. dollars. We do have certain
development and commercialization agreements with vendors located outside the
United States. Transactions under certain of these agreements are conducted in
U.S. dollars, subject to adjustment based on significant fluctuations in
currency exchange rates. Transactions under certain other of these agreements
are conducted in the local foreign currency. We do not believe that a 10%
increase or decrease in foreign currency exchange rates would have a material
impact on our results of operations or cash flows.
Page 26
ITEM 4 - CONTROLS AND PROCEDURES
1. Evaluation of disclosure controls and procedures. Based on their
evaluation of the Company's disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) as of a
date within 90 days of the filing date of this Quarterly Report on Form 10-Q,
the Company's principal executive officers and principal financial officer have
concluded that the Company's disclosure controls and procedures are designed to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms and are operating in an effective manner.
2. Changes in internal controls. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
these controls subsequent to the date of their most recent evaluation.
Page 27
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
See the Exhibit Index on the page immediately preceding the exhibits
for a list of exhibits filed as part of this Quarterly Report, which
Exhibit Index is incorporated herein by this reference.
b) Reports on Form 8-K
On July 25, 2002, the Company filed with the SEC a Current Report on
Form 8-K dated July 23, 2002 in connection with its announcement of
financial results for the quarter and six-month period ended June 30,
2002.
Page 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE MEDICINES COMPANY
Date: October 31, 2002 By: /s/ Steven H. Koehler
-----------------------------
Steven H. Koehler
Chief Financial Officer
Page 29
CERTIFICATIONS
I, Clive A. Meanwell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Medicines
Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/s/ Clive A. Meanwell
--------------------------------
Dated: October 31, 2002 Clive A. Meanwell
Executive Chairman
Page 30
I, David M. Stack, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Medicines
Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/s/ David M. Stack
------------------------------------
Dated: October 31, 2002 David M. Stack
President and Chief Executive Officer
Page 31
I, Steven H. Koehler, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Medicines
Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/s/ Steven H. Koehler
------------------------------------
Dated: October 31, 2002 Steven H. Koehler
Chief Financial Officer
Page 32
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
99.1 Executive Chairman - Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
99.2 Chief Executive Officer - Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.3 Chief Financial Officer - Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Page 33