Back to GetFilings.com
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 March 31, 2003
Commission File Number 000-31191
The Medicines Company
(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.)
8 Campus Drive, Parsippany, NJ 07054
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (973) 656-9898
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No __
As of April 30, 2003, the registrant had 46,796,043 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.............................................. 10
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...... 29
ITEM 4 - CONTROLS AND PROCEDURES......................................... 29
PART II. OTHER INFORMATION................................................. 30
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS....................... 30
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K................................ 30
SIGNATURES.................................................................. 31
CERTIFICATIONS.............................................................. 32
EXHIBIT INDEX............................................................... 35
PART I. FINANCIAL INFORMATION
ITEM 1 - UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THE MEDICINES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2003 2002
------------- -------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 116,519,727 $ 36,777,007
Available for sale securities 14,314,065 6,731,728
Accrued interest receivable 218,658 129,414
Accounts receivable, net of allowances of approximately $0.72 million
and $0.64 million at March 31, 2003 and December 31, 2002, respectively 13,875,311 15,078,488
Inventories 10,169,350 14,178,660
Prepaid expenses and other current assets 866,926 660,720
------------- -------------
Total current assets 155,964,037 73,556,017
Fixed assets, net 1,214,765 924,497
Other assets 233,854 233,854
------------- -------------
Total assets $ 157,412,656 $ 74,714,368
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,340,861 $ 8,291,995
Accrued expenses 13,108,934 11,092,134
------------- -------------
Total current liabilities 15,449,795 19,384,129
Deferred revenue 1,364,583 1,395,833
Commitments and contingencies -- --
------------- -------------
Total liabilities 16,814,378 20,779,962
Stockholders' equity:
Preferred stock, $1.00 par value per share, 5,000,000 shares authorized;
no shares issued and outstanding -- --
Common stock, $.001 par value per share, 75,000,000 shares authorized
at March 31, 2003 and December 31, 2002, respectively; 46,695,932 and
39,894,285 shares issued and outstanding at March 31, 2003 and
December 31, 2002, respectively 46,696 39,894
Additional paid-in capital 446,677,857 354,239,193
Deferred compensation (2,432,846) (3,125,494)
Accumulated deficit (303,690,473) (297,274,830)
Accumulated other comprehensive (loss) income (2,956) 55,643
------------- -------------
Total stockholders' equity 140,598,279 53,934,406
------------- -------------
Total liabilities and stockholders' equity $ 157,412,656 $ 74,714,368
============= =============
See accompanying notes to unaudited condensed consolidated financial statements.
Page 1
THE MEDICINES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS ENDED MARCH 31,
2003 2002
------------ ------------
Net revenue $ 16,705,292 $ 7,714,901
Operating expenses:
Cost of revenue 6,262,755 1,085,489
Research and development 7,250,397 9,309,072
Selling, general and administrative 9,779,216 9,331,837
------------ ------------
Total operating expenses 23,292,369 19,726,398
Loss from operations (6,587,077) (12,011,497)
Other income (expense):
Interest income 171,433 378,177
Interest expense -- (7,986)
------------ ------------
Net loss (6,415,643) (11,641,306)
============ ============
Basic and diluted net loss
per common share $ (0.16) $ (0.34)
============ ============
Shares used in computing net loss per common share:
Basic and diluted 41,091,244 34,627,723
============ ============
See accompanying notes to unaudited condensed consolidated financial statements.
Page 2
THE MEDICINES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
THREE MONTHS ENDED MARCH 31,
--------------------------------
2003 2002
------------- -------------
Cash flows from operating activities:
Net loss $ (6,415,643) $ (11,641,306)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 148,247 132,367
Amortization of premiums on available for sale securities (32,411) --
Amortization of deferred stock compensation 565,351 984,611
Loss on disposals of fixed assets 2,127 --
Changes in operating assets and liabilities:
Accrued interest receivable (89,244) 6,743
Accounts receivable 1,203,177 (1,309,747)
Inventory 4,009,310 (2,883,463)
Prepaid expenses and other current assets (206,200) (267,142)
Other assets -- (1,395)
Accounts payable (5,951,487) 3,388,681
Accrued expenses 2,015,184 397,841
Deferred revenue (31,250) 1,489,583
------------- -------------
Net cash used in operating activities (4,782,839) (9,703,227)
Cash flows from investing activities:
Purchases of available for sale securities (8,768,329) --
Maturities and sales of available for sale securities 1,200,000 --
Purchase of fixed assets (439,474) (6,182)
------------- -------------
Net cash used in investing activities (8,007,803) (6,182)
Cash flows from financing activities:
Proceeds from revolving line of credit borrowings -- 10,000,000
Proceeds from issuances of common stock, net 92,572,768 1,285,554
------------- -------------
Net cash provided by financing activities 92,572,768 11,285,554
Effect of exchange rate changes on cash (39,406) 3,546
------------- -------------
Increase in cash and cash equivalents 79,742,720 1,579,691
Cash and cash equivalents at beginning of period 36,777,007 53,884,376
------------- -------------
Cash and cash equivalents at end of period $ 116,519,727 $ 55,464,067
============= =============
See accompanying notes to unaudited condensed consolidated financial statements.
Page 3
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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. In December 2000 the U.S. Food and Drug
Administration approved Angiomax(R) (bivalirudin), the Company's first product,
for use as an anticoagulant in combination with aspirin in patients with
unstable angina undergoing coronary angioplasty. The Company commenced sales of
Angiomax in the United States in the first quarter of 2001.
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-month period ended March 31, 2003 are
not necessarily indicative of the results that may be expected for the entire
fiscal year ending December 31, 2003. 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, 2002, filed with the Securities and Exchange Commission.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassification
Certain reclassifications have been made to the prior year's information to
conform to the 2003 presentation.
Page 4
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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
March 31, 2003 and December 31, 2002 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. The cost of debt securities in this category is
adjusted for amortization of premium and accretion of discount to maturity.
At March 31, 2003, the Company held various certificates of deposit, corporate
bonds and United States government agency notes with fair value totaling $14.3
million, $5.0 million of which had original maturities of more than one year but
less than two years and $9.3 million of which had original maturities of more
than three months and less than one year.
Revenue Recognition
The Company sells its products primarily to wholesalers and distributors who, in
turn sell to hospitals. Revenue from product sales is not recognized until there
is persuasive evidence of an arrangement, delivery has occurred, the price is
fixed and determinable, and collectibility is reasonably assured. Also, because
the Company's products are sold with limited rights of return, revenue is not
recognized until 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 obligations to bring about sale of the product and the amount of returns
can be reasonably be estimated. The Company reserves for estimated returns at
the time of sale and revenues are reported net of such amounts.
The Company records allowances for product returns, rebates and discounts at the
time of sale, and reports revenue net of such allowances. The Company must make
significant judgments and estimates in determining the allowances. For instance:
- The Company's customers have the right to return any unopened product
during the 18 month period beginning six months prior to the labeled
expiration date and ending 12 months after the labeled expiration date. As
a result, in calculating the allowance for product returns, the Company
must estimate the likelihood that product sold to wholesalers might remain
in their inventory to within six months of expiration and determine if it
will be returned. The Company bases its estimates on information from
customers, historic patterns of returns, industry data and on the
expiration dates of product currently being shipped.
Page 5
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- Certain hospitals purchasing the Company's products from wholesalers have
the right to receive a discounted price and a volume-based rebate if they
participate in a group purchasing organization that has a contract with
the Company. As a result, the Company must estimate the likelihood that
product sold to wholesalers might be ultimately sold to a participating
hospital. The Company bases its estimates on information from customers,
industry data, historic patterns of discounts and customer rebate
thresholds.
If actual results differ, the Company will likely be required to make
adjustments to these allowances in the future.
Revenue from collaborative agreements may include non-refundable fees or
milestone payments. These payments are recorded as deferred revenue until
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, which could result in a change in the
deferral period.
Inventories
Inventory is recorded upon the transfer of title from our vendors. Inventory
is stated at the lower of cost or market value with cost determined using a
weighted average of costs. All costs associated with the manufacture of Angiomax
bulk drug product and finished product to which the title transferred to us
prior to FDA approval of Angiomax and of its original manufacturing process were
expensed as research and development. In December 2000, we received FDA approval
for Angiomax and its original manufacturing process. Any Angiomax bulk drug
product manufactured according to its original manufacturing process to which we
took title after FDA approval is recorded as inventory. Together with UCB
Bioproducts, the Company has developed, but not yet received FDA approval of, a
second generation chemical synthesis process, the Chemilog process, for the
manufacture of Angiomax bulk drug substance. All Angiomax bulk drug product
manufactured using the Chemilog process to which title has transferred to the
Company to date has been expensed as research and development. The Company
reviews the inventory for slow moving or obsolete amounts based on expected
revenues. If actual revenues are less than expected, allowances for excess
amounts may be required in the future.
Page 6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, DECEMBER, 31
INVENTORIES 2003 2002
----------- -----------
Raw materials ...................... $ 241,582 4,126,870
Work-in-progress ................... 7,130,341 8,370,949
Finished Goods ..................... 2,797,427 1,680,841
----------- -----------
TOTAL ......................... $10,169,350 $14,178,660
=========== ===========
Research and Development
Expenditures for research and development costs are expensed as incurred.
Stock-Based Compensation
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation" encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value.
Statement of Financial Accounting Standards (SFAS) No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" requires the disclosure of
the impacts of SFAS No. 123 in quarterly reports. The Company has elected to
account for stock-based compensation using the intrinsic value method prescribed
in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees."
The following table illustrates the effect on net loss and loss per share if the
Company had applied the fair value recognition and share based compensation
costs provisions of SFAS No. 123 and SFAS No. 148 to stock-based employee
compensation:
THREE MONTHS ENDED MARCH 31,
------------------------------
2003 2002
------------ ------------
Net loss - As reported $ (6,415,643) $(11,641,306)
Add: Total stock-based employee compensation
expense included in net income as reported 565,351 $ 984,611
Less: Total stock-based compensation expense
determined under fair value based method for
all stock option awards and discounts under
the 2000 Employee Stock Purchase Plan (2,667,294) (1,082,008)
Net loss - Proforma (8,517,586) (11,738,702)
============ ============
Net loss per share - As reported $ (0.16) $ (0.34)
============ ============
Net loss per share - Proforma $ (0.21) $ (0.34)
============ ============
Page 7
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions:
THREE MONTHS ENDED MARCH 31,
------------------------ ---
2003 2002
---- ----
Expected dividend yield 0% 0%
Expected stock price volatility 86% 90%
Risk-free interest rate 2% 3%
Expected option term 2.74 2.79
3. NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net loss per
share for the three months ended March 31, 2003 and 2002.
THREE MONTHS ENDED MARCH 31,
------------------------------
2003 2002
------------ ------------
BASIC AND DILUTED
Net loss $ (6,415,643) $(11,641,306)
Weighted average common shares outstanding 41,097,330 34,645,176
Less: unvested restricted common shares
outstanding (6,086) (17,453)
------------ ------------
Weighted average common shares used to
compute net loss per share 41,091,244 34,627,723
============ ============
Basic and diluted net loss per share $ (0.16) $ (0.34)
============ ============
Options to purchase 4,967,107 and 4,548,677 shares of common stock outstanding
as of March 31, 2003 and 2002, 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 805,146 and 2,873,688 shares of
common stock as of March 31, 2003 and 2002, 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
2,273,624 options 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
price of the Company's common stock in
Page 8
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
connection with 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 three months
ended March 31, 2003 or during the full year 2002 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
three months ended March 31, 2003, cancellation of options that had not been
exercised resulted in a reduction in the total deferred stock compensation of
approximately $127,000.
Included in the results of operations for the three months ended March 31, 2003
and 2002 is compensation expense of approximately $565,000 and $985,000,
respectively, associated with such options. We expect to record amortization
expense for the remaining deferred stock compensation as follows: approximately
$1.7 million for the remainder of 2003, and approximately $800,000 in 2004,
assuming the continued vesting of the associated options.
4. SALE OF COMMON STOCK
On March 19, 2003, the Company sold through a public offering 5.6 million shares
of its common stock at a price of $17.50 per share. The Company is using and
expects to continue to use the $91.6 million net proceeds from the sale of
common stock to fund further clinical development and commercialization of
Angiomax, to fund research and development of clevidipine and for working
capital and other general corporate purposes.
5. 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 months ended March 31, 2003 and 2002 were
$6.5 million and $11.6 million, respectively.
Page 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial
condition and results of operations together with our financial statements and
accompanying notes in this quarterly report. In addition to the historical
information, the discussion in this quarterly report contains certain
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated by the forward-looking
statements due to factors including, but not limited to, those set forth under
"Factors That May Affect Future Results" below.
OVERVIEW
We are a specialty pharmaceutical company with growing revenue from sales of
our first product, Angiomax, a direct thrombin inhibitor used as an
anticoagulant in patients undergoing coronary angioplasty. The U.S Food and Drug
Administration, or FDA, approved Angiomax in December 2000 for use as an
anticoagulant in combination with aspirin in patients with unstable angina
undergoing coronary angioplasty, and we began selling the product in the United
States in January 2001.
Since our inception we have generated significant losses. We expect to
continue to spend significant amounts on the development of our products and on
the sales and marketing of Angiomax in the balance of 2003 and thereafter. In
the remainder of 2003, we plan on increasing our sales and marketing expenses in
connection with anticipated increased customer demands, including expenses
related to the increase in the size of our sales force from 86 to 97 persons. We
also plan to continue to invest in clinical studies to expand the use of
Angiomax and to develop clevidipine, an intravenous compound for the short-term
control of high blood pressure in patients undergoing cardiac surgery.
Additionally, we plan to continue to evaluate possible acquisitions of
development-stage or approved products that would fit within our growth
strategy. Accordingly, we will need to generate significantly greater revenues
to achieve and then maintain profitability.
Our revenues to date have been generated almost entirely from sales of
Angiomax in the United States. In November 2002, we announced the results of our
REPLACE-2 clinical trial, which was designed to evaluate Angiomax as the
foundation anticoagulant for coronary angioplasty within the context of modern
therapeutic products and technologies, including coronary stents. Since that
time, sales of Angiomax have increased significantly, additional hospitals have
granted Angiomax formulary approval and hospital demand for the product has
increased. We believe that continued increased use of Angiomax by existing
hospital customers, as well as penetration to new hospitals, will be critical
elements of our ability to increase revenues.
In March 2003, we received $91.6 million in net proceeds from a public
offering of 5.6 million shares of our common stock at a price of $17.50 per
share. We are using and expect to continue to use the proceeds from the offering
to fund further clinical development and commercialization of Angiomax, to fund
research and development of clevidipine and for working capital and other
general corporate purposes.
Page 10
In March 2002, we entered into a study and exclusive option agreement with
AstraZeneca AB relating to the further study and potential licensing,
development and commercialization of clevidipine. Prior to our signing this
agreement, AstraZeneca conducted Phase 2 clinical trials of clevidipine. These
clinical trials demonstrated that clevidipine acts to reduce blood pressure
rapidly after intravenous infusion. In March 2003, we agreed with AstraZeneca to
accelerate our acquisition of clevidipine, for which we now hold exclusive
worldwide (excluding Japan) license rights. We plan to commence a Phase 3
program in 2003 in patients undergoing cardiac surgery to investigate the
potential of clevidipine to simplify and improve the treatment of these
patients.
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 acquisitions, clinical
trials, and activities relating to regulatory filings and manufacturing
development efforts. We outsource our clinical trials and manufacturing
development activities to independent organizations to maximize efficiency and
minimize our internal overhead. We expense our research and development costs as
they are incurred. Selling, general and administrative expenses consist
primarily of salaries and related expenses, general corporate activities and
costs associated with promotion and marketing activities.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
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 our reported assets and liabilities,
revenues and expenses, and other financial information. Actual results may
differ significantly from these estimates under different assumptions and
conditions. In addition, our reported financial condition and results of
operations could vary due to a change in the application of a particular
accounting standard.
We regard an accounting estimate underlying our financial statements as a
"critical accounting estimate" if the accounting estimate requires us to make
assumptions about matters that are highly uncertain at the time of estimation
and if different estimates that reasonably could have been used in the current
period, or changes in the estimate that are reasonably likely to occur from
period to period, would have had a material effect on the presentation of
financial condition, changes in financial condition, or results of operations.
Our significant accounting policies are more fully described in the Notes to
Unaudited Consolidated Financial Statements section of this quarterly report on
Form 10-Q and in Note 2 of the Notes to Consolidated Financial Statements in our
annual report on Form 10-K for the year ended December 31, 2002. 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 revenue recognition and inventory, as described
under the caption "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Application of Critical Accounting
Policies" in our annual report on Form 10-K for the year ended December 31,
2002, fit the definition of "critical accounting estimates and judgments."
Page 11
RESULTS OF OPERATIONS
Three Months Ended March 31, 2003 and 2002
Net Revenue. Net revenue increased 117% to $16.7 million for the three months
ended March 31, 2003 as compared to $7.7 million for the three months ended
March 31, 2002. Virtually all the revenue was from U.S. sales of Angiomax. The
growth in 2003 was due primarily to increased use of Angiomax by existing
hospital customers and penetration to new hospitals. Since we announced the
results of the REPLACE-2 clinical trial in November 2002, additional hospitals
have granted Angiomax formulary approval and hospital demand for the product has
increased.
Cost of Revenue. Cost of revenue for the three months ended March 31, 2003
was $6.3 million, or 37% of net revenue, compared to $1.1 million, or 14% of net
revenue, for the three months ended March 31, 2002. Cost of revenue for the
three months ended March 31, 2003 consisted of expenses in connection with the
manufacture of the Angiomax sold, which represented 70% of the 2003 cost of
revenue, royalty expenses under our agreement with Biogen which represented 20%
of the 2003 cost of revenue and the logistics costs of selling Angiomax, such as
distribution, storage, and handling, which represented 10% of the 2003 cost of
revenue. Cost of revenue for the three months ended March 31, 2002 consisted of
expenses in connection with the manufacture of the Angiomax sold, which
represented 29% of the 2002 cost of revenue, royalty expenses under our
agreement with Biogen, which represented 56% of the 2002 cost of revenue, and
the logistics costs of selling Angiomax, such as distribution, storage, and
handling, which represented 15% of the 2002 cost of revenue. Prior to obtaining
FDA approval for Angiomax and its original manufacturing process, all costs of
manufacturing Angiomax were expensed as research and development costs. In late
2000, after obtaining FDA approval for Angiomax and its original manufacturing
process, we began recording the costs of manufacturing Angiomax as a cost of
revenue rather than as research and development expense. As a result, our cost
of manufacturing as a percentage of net revenue increased substantially in 2003
because all of the product we sold in the three months ended March 31, 2003 was
product manufactured after the date of FDA approval of Angiomax.
We have developed with UCB Bioproducts S.A. a second-generation process for
the production of Angiomax bulk drug substance, which we refer to as the
Chemilog process. During 2002 and for the three months ended March 31, 2003, we
took delivery of drug material manufactured using the Chemilog process, which we
expensed as research and development. The Chemilog process must be approved by
the FDA before we can sell product manufactured using this process to the
public. Since the Chemilog process has not yet received FDA approval, we have
expensed all costs of manufacturing Angiomax using the Chemilog process as
research and development. If we receive FDA approval of the Chemilog process by
July 2003, we expect to begin selling in the third or fourth quarter of 2003
Angiomax produced by the Chemilog process whose cost of manufacturing was
previously expensed. In that case, we would expect our cost of manufacturing as
a percentage of net revenue to remain at current levels through the third
quarter and then, subject to FDA approval of the Chemilog process, decrease
substantially by the end of 2003.
We have partially funded development activities relating to the Chemilog
process, paying
Page 12
total development expenses through March 31, 2003 of approximately $13.2
million, which includes validation and process batch costs of approximately $4.8
million, $6.7 million and $1.1 million incurred in 2001, 2002 and 2003,
respectively, and approximately $600,000 of other development costs. We expensed
all of these development costs as research and development in the appropriate
period. We are committed to purchase approximately $8.6 million of additional
drug material manufactured using the Chemilog process during the remainder of
2003. To the extent UCB Bioproducts transfers title to this drug material to us
prior to FDA approval of the Chemilog process, we will expense these costs as
research and development.
Research and Development Expenses. Research and development expenses for the
three months ended March 31, 2003 decreased 22% to $7.3 million, from $9.3
million for the three months ended March 31, 2002. The decrease in research and
development expenses was primarily due to lower development costs relating to
clinical trials and manufacturing. We incurred $2.8 million less in the 2003
period than in the 2002 period for our REPLACE-2 trial, and we incurred $1.4
million less in the 2003 period than in the 2002 period for receipt of Angiomax
manufacturing using the Chemilog process. These lower costs were partly offset
by the $1.0 million license fee payable to Astra Zeneca in connection with the
licensing of clevidipine and related start-up costs of our planned Phase 3 trial
program of clevidipine, and other Angiomax clinical development program costs.
We have a number of clinical trial programs currently underway, or about to
commence, for expanding the applications of Angiomax for use as an intravenous
anticoagulant in the treatment of arterial thrombosis. As of the date of this
quarterly report, we:
- have recently completed enrollment in a Phase 3 trial program studying the
use of Angiomax in the treatment of patients with an clinical condition
known as heparin-induced thrombocytopenia and thrombosis syndrome, or
HIT/HITTS, undergoing coronary angioplasty, the results of which we expect
to report in 2003;
- are conducting a Phase 2/3 trial program studying the use of Angiomax as
an anticoagulant in patients undergoing coronary artery bypass graft
surgery, or CABG, with and without the use of a bypass pump, and in
HIT/HITTS patients undergoing CABG, with and without the use of a bypass
pump;
- plan to start a randomized Phase 3 trial program to study the use of
Angiomax in patients presenting to the emergency department with coronary
syndromes who may be medically managed or ultimately treated in the
catheterization laboratory or operating room;
- are conducting a Phase 2 trial program to study the use of Angiomax in
neonates and infants up to six months old with active thrombosis; and
- are supporting a number of investigations, including clinical studies, of
Angiomax in patients undergoing percutaneous peripheral angioplasties.
The funding for Angiomax has represented and will continue to represent a
significant portion
Page 13
of research and development spending. For the three months ended March 31, 2003
and 2002, 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. For the three months ended March 31, 2003, research and
development expenses relating to clevidipine consisted of a non-recurring
license fee and start-up costs relating to the planned Phase 3 clinical trial.
The amount of future research and development expenses associated with Angiomax
and clevidipine is not reasonably certain as these costs are dependent upon the
clinical trial process, the regulatory process and, in the case of Angiomax, the
timing for obtaining marketing approval for other applications of the product in
the United States and other countries.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 5% to $9.8 million for the three months ended
March 31, 2003, from $9.3 million for the three months ended March 31, 2002. The
increase in selling, general and administrative expenses of $447,000 was
primarily due to additional administrative and recruiting expenses.
Deferred Stock Compensation. In connection with our initial public offering,
during the year ended December 31, 2000, we recorded deferred stock compensation
on the grant of stock options of approximately $17.3 million, representing the
difference between the exercise price of such options and the fair market value
of our common stock at the date of grant of such options. The exercise prices of
these options were below the estimated fair market value of our common stock as
of the date of grant based on the estimated price of our common stock in our
initial public offering. No additional deferred compensation was recorded during
the three months ended March 31, 2003 or during the full year 2002 because all
of the exercise prices of all grants of stock options during these periods were
at the fair market value of our common stock on the date of grant.
We amortize the deferred stock compensation that was recorded in 2000 over
the respective vesting periods of the individual stock options. We recorded
amortization expense for deferred compensation of approximately $565,000 and
$985,000 for the three months ended March 31, 2003 and March 31, 2002,
respectively. We expect to record additional amortization expense for the
deferred compensation of approximately $1.7 million in 2003 and approximately
$800,000 in 2004. The amortization expense is included in our operating expenses
in the consolidated statements of operations.
Other Income and Expense. Interest income decreased 55% to $171,000 for the
three months ended March 31, 2003, from $378,000 for the three months ended
March 31, 2002. The decrease in interest income of $207,000 was primarily due to
lower average cash and available for sale securities balances and lower
available interest rates on securities. For the three months ended March 31,
2003, interest income was attributable to the investment of the remaining
proceeds of our sales of shares of common stock in a private placement in May
2001 and in public offerings in 2002 and 2003. In the three months ended March
31, 2002, interest income was primarily attributable to the investment of the
remaining proceeds of our initial public offering in August and September 2000
and our private placement in May 2001.
We had no interest expense during the three months ended March 31, 2003 as
compared to interest expense of $8,000 during the three months ended March 31,
2002 that was associated
Page 14
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 2002.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity. 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 and revenues from sales of Angiomax.
In March 2002, we entered into a collaboration agreement 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. Under 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 2003, we filed registration statements on Forms S-3 with the
Securities and Exchange Commission registering 5.6 million shares of our common
stock, including 697,280 shares that the underwriters had the option to purchase
to cover over-allotments. We sold all 5.6 million shares of the common stock on
March 19, 2003 at a price to the public of $17.50 per share. Net proceeds from
the sale totaled $91.6 million.
Cash Flows. As of March 31, 2003, we had $116.5 million in cash and cash
equivalents, as compared to $36.8 million as of December 31, 2002. The major
uses of cash during the three months ended March 31, 2003 included net cash used
in operating activities of $4.8 million and net cash used in investing
activities of $8.0 million, which was offset by $92.6 million received from
financing activities.
We used net cash of $4.8 million in operating activities during the three
months ended March 31, 2003. This use of cash consisted of funding a net loss of
$6.4 million and a decrease in accounts payable of $6.0 million, partly offset
by a decrease in accounts receivable of $1.2 million, a decrease in inventory of
$4.0 million and increases in accrued expenses of $2.0 million, non-cash stock
compensation of $565,000, and depreciation of $148,000. The decrease in accounts
payable can be largely attributed to the $4.2 million payment for UCB for
Chemilog product purchased in December 2002. The decrease in inventory can be
largely attributed to growth in product sales and the continued expensing of
Chemilog product purchases prior to FDA approval.
During the three months ended March 31, 2003, we used $8.0 million in cash in
net investing activities, which consisted principally of the purchase of
available for sale securities.
Cash provided by financing activities of $92.6 million during the three
months ended March 31, 2003 consisted primarily of the proceeds of the public
offering of 5.6 million shares of our common stock in March 2003 that resulted
in net proceeds of $91.6 million. In addition, employees purchased stock related
to option exercises and our employee stock purchase plan for
Page 15
aggregate net proceeds to us of approximately $947,000.
Funding Requirements. We expect to devote substantial resources to our
research and development efforts 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
related to our additional clinical trials with respect to Angiomax and to
our other product candidates;
- 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 operating plan as of the date of this quarterly
report, which includes 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 the foreseeable future. However, we
expect to periodically assess our financing alternatives and access the capital
markets opportunistically. In addition, 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. Any 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.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
Our long-term contractual commitments consist of operating leases for our
facilities in Parsippany, New Jersey and Cambridge, Massachusetts, which expire
in January 2013 and August 2003, respectively. Future annual minimum payments
under these operating leases are:
Page 16
MINIMUM OPERATING LEASE OBLIGATION
YEAR(S) AMOUNT
----------
2003 ....................................................... $ 541,000
2004 ....................................................... 554,000
2005 ....................................................... 508,000
2006 ....................................................... 505,000
2007 ....................................................... 511,000
Later years ................................................ 2,690,000
----------
Total operating lease obligation ................. $5,309,000
==========
In addition to amounts accrued or payable as of March 31, 2003, we have
commitments to make payments to UCB Bioproducts of a total of $8.6 million
during the remainder of 2003 for Angiomax bulk drug substance to be produced
using the Chemilog process. We also have $2.1 million in contractual commitments
for 2003 related to research and development activities.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q 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, 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 plans, intentions or expectations disclosed in
our forward-looking statements. There are a number of important factors that
could cause actual results or events to differ materially from those disclosed
in the forward-looking statements we make. These important factors include our
"critical accounting estimates" and the risk factors set forth below under the
caption "Factors That May Affect Future Results." 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 date of this quarterly report.
FACTORS THAT MAY AFFECT FUTURE RESULTS
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF NET LOSSES, AND WE EXPECT TO CONTINUE TO INCUR ADDITIONAL
NET LOSSES AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY
We have incurred net losses since our inception, including net losses of
approximately $6.4 million for the three months ended March 31, 2003. At March
31, 2003, we had an accumulated deficit of approximately $303.7 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. We will need to generate
significantly greater revenues to achieve and then maintain profitability.
However, we remain unsure as to when we
Page 17
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
Angiomax is our only commercial product and, we expect, will account for almost
all of our revenues for the foreseeable future. The commercial success of
Angiomax will depend upon its acceptance by regulators, physicians, patients and
other key decision-makers as a safe, therapeutic and cost-effective alternative
to heparin and other products used in current practice, or currently being
developed. If Angiomax is not commercially successful, we will have to find
additional sources of funding or curtail or cease operations.
NEAR-TERM GROWTH IN OUR SALES OF ANGIOMAX IS HIGHLY DEPENDENT ON PHYSICIAN
ACCEPTANCE OF THE REPLACE-2 TRIAL
In the fall of 2002, we completed a 6,002 patient post-marketing Phase 3b/4
clinical trial of Angiomax in coronary angioplasty called REPLACE-2. In November
2002, the principal investigators of the clinical trial announced that, based on
30-day patient follow-up results, Angiomax met all of the primary and secondary
objectives of the trial. In March 2003 we released the results of the detailed
cost analysis study to examine per-patient total hospital resource consumption
at U.S. clinical trial sites. We believe that the near-term commercial success
of Angiomax will depend upon the extent to which physicians, patients and other
key decision-makers accept the results of the REPLACE-2 trial. Since the results
were announced, additional hospitals have granted Angiomax formulary approval
and hospital demand for the product has increased. We cannot be certain,
however, that these trends will continue. Some commentators have challenged
various aspects of the trial design of REPLACE-2, the conduct of the study and
the analysis and interpretation of the results from the study, including how we
define bleeding and the clinical relevance of types of ischemic events. If
physicians, patients and other key decision-makers do not accept the trial
results, adoption of Angiomax may suffer, and our business will be materially
adversely affected.
We are continuing to follow the patients involved in the REPLACE-2 trial for
six-month and one-year follow-up periods. If the extended follow-up data are
less favorable than the 30-day patient follow-up data announced to date
physician adoption of Angiomax may be adversely affected.
IF WE DO NOT SUCCEED IN OBTAINING TIMELY APPROVAL FOR A SECOND-GENERATION
PROCESS FOR THE PRODUCTION OF ANGIOMAX BULK DRUG SUBSTANCE, WE MAY NOT BE ABLE
TO SUPPLY OUR CUSTOMERS
All Angiomax bulk drug substance used to date has been produced by UCB
Bioproducts by means of a chemical synthesis process. Using this validated
manufacturing process, UCB Bioproducts has completed the manufacture of bulk
drug substance to meet our anticipated commercial supply requirements through
the third quarter of 2003. As of the date of this quarterly report, we do not
intend to purchase any additional product manufactured using this process.
Page 18
We have developed, with UCB Bioproducts, a second-generation process for the
production of Angiomax bulk drug substance, which is referred to as the Chemilog
process. This process involves changes to the early manufacturing steps of our
current process and, we expect, will reduce our Angiomax manufacturing costs in
the future. We received approvable letters from the FDA with respect to the
Chemilog process on March 14, 2002 and December 12, 2002. In August 2002, we
responded to the March 2002 approvable letter. In the December 2002 approvable
letter to us and in a corresponding letter to UCB Bioproducts, the FDA requested
additional data. In February 2003, we submitted what we believe to be the
additional data requested by the FDA from us. Concurrently, UCB Bioproducts
submitted what we believe to be the additional data requested by the FDA from
UCB Bioproducts. If the FDA does not approve the Chemilog process by July 2003,
we would expect to consider purchasing additional product produced using our
current process, but potentially on less favorable terms. This product would
likely not be available for a significant period of time, and we could be forced
to reject or limit customer orders for Angiomax until such product is available.
In such event, sales of Angiomax would suffer and our business would be
materially adversely affected.
WE CANNOT EXPAND THE INDICATIONS FOR WHICH WE ARE MARKETING 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 angioplasty. One of our key objectives is to expand the
indications for which Angiomax is approved for marketing by the FDA. In order to
market Angiomax for these expanded indications, we will need to complete our
clinical trials that are currently underway, conduct additional clinical trials,
obtain positive results from those trials and obtain FDA approval for such
proposed indications. 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 Angiomax through distribution partners in international
markets, including Europe. In order to market Angiomax in the European Union and
many other foreign jurisdictions, we or our distribution partners must obtain
separate regulatory approvals. Obtaining foreign approvals may require
additional trials and expense. In February 1998, we submitted a Marketing
Authorization Application, or MAA, to the European Agency for Evaluation of
Medicinal Products, or the EMEA, for use of Angiomax in unstable angina patients
undergoing coronary 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 coronary
angioplasty. We withdrew our application to the EMEA in 1999 and plan to
resubmit an MAA with the results of the REPLACE-2 trial. We may not be able to
obtain approval or may be delayed in obtaining approval from any or all of the
jurisdictions in which we seek approval to market Angiomax.
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
Our development and commercialization strategy entails entering into
arrangements with
Page 19
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. 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
we may acquire on terms that are acceptable to us. Any current or future
arrangements for development and commercialization may not be successful. If we
are not able to establish or maintain agreements relating to Angiomax,
clevidipine or any additional products we may acquire on terms which we deem
favorable, our results of operations 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 are not 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.
FAILURE TO ACHIEVE OUR REVENUE TARGETS OR RAISE ADDITIONAL FUNDS IN THE FUTURE
MAY AFFECT THE DEVELOPMENT, MANUFACTURE AND SALE OF OUR PRODUCTS
We will need to generate significantly greater revenues to achieve and
then maintain profitability. The clinical development and regulatory approval of
Angiomax for additional indications, the clinical development and regulatory
approval of clevidipine and the acquisition and development of additional
product candidates by us will require a commitment of substantial funds. Our
future funding requirements depend upon many factors, including our ability to
achieve our revenue targets, and may be significantly greater than we expect.
As of the date of this quarterly report, we believe, based on our current
operating plan, which includes anticipated revenues from Angiomax and interest
income that our current cash, cash
Page 20
equivalents and available for sale securities will be sufficient to fund our
operations for the foreseeable future. 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. Any 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 DEPEND 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 do not manufacture any of our products and do not plan to develop any
capacity to manufacture them. As of the date of this quarterly report, we obtain
all of our Angiomax bulk drug substance from one manufacturer, UCB Bioproducts,
and rely on another manufacturer, Ben Venue Laboratories, to carry out all
fill-finish activities for Angiomax, which includes final formulation and
transfer of the drug into vials where it is then freeze-dried and sealed. The
terms of our agreement with UCB Bioproducts require us to purchase a substantial
portion of our Angiomax bulk drug product from UCB Bioproducts, which could
hinder our ability to obtain an additional supplier for Angiomax.
The FDA requires that all manufacturers of pharmaceuticals for sale in or from
the United States achieve and maintain compliance with the FDA's cGMP
regulations and guidelines. There are a limited number of manufacturers that
operate 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 UCB Bioproducts or Ben Venue is unable to carry out its
respective manufacturing obligations, 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.
WE DO NOT OWN THE TECHNOLOGY UNDERLYING THE CHEMILOG PROCESS AND MAY BE UNABLE
TO UTILIZE THE CHEMILOG PROCESS IF UCB BIOPRODUCTS BREACHES OUR AGREEMENT
Our agreement with UCB Bioproducts for the supply of Angiomax bulk drug
substance provides that UCB Bioproducts owns all of the proprietary technology
that was used to develop and that is employed in the Chemilog process. Although
the agreement requires that UCB Bioproducts transfer this technology to a
secondary supplier of Angiomax bulk drug substance or to us or an
Page 21
alternate supplier at the expiration of the agreement, if UCB Bioproducts fails
or is unable to transfer successfully this technology, we would be unable to
employ the Chemilog process to manufacture our Angiomax bulk drug substance,
which could cause us to experience delays in the manufacturing process and
increase our manufacturing costs in the future.
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 to market any product for a particular
indication, we will be required to complete pre-clinical studies and extensive
clinical trials in humans to demonstrate the safety and efficacy of such product
for such indication. We are evaluating Angiomax in clinical trials for
additional uses in open vascular surgery such as CABG, in medical conditions
that require urgent treatment such as unstable angina, in patients with heparin
allergy, in children and in peripheral angioplasty. 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 a product candidate to
be safe or effective for the intended use. 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.
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
product candidates or approved products. The success of this strategy depends
upon our ability to identify, select and acquire pharmaceutical products 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 product candidates are prone to the
Page 22
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
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.
A BREACH OF ANY OF THE AGREEMENTS UNDER WHICH WE LICENSE COMMERCIALIZATION
RIGHTS TO PRODUCTS OR TECHNOLOGY FROM OTHERS COULD CAUSE US TO LOSE LICENSE
RIGHTS THAT ARE IMPORTANT TO OUR BUSINESS OR SUBJECT US TO CLAIMS BY OUR
LICENSORS
We license 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
have exclusively licensed the patents and patent applications relating to
Angiomax from Biogen and relating to clevidipine from AstraZeneca. Under these
agreements, we are subject to commercialization and development, sublicensing,
royalty, patent prosecution and maintenance, insurance and other obligations.
Any failure by us to comply with any of these obligations or any other breach by
us of these license agreements could give the licensor the right to terminate
the license in whole, terminate the exclusive nature of the license or bring a
claim against us for damages. Any such termination or claim, particularly
relating to our agreement with Biogen, could have a material adverse effect on
our business. Even if we contest any such termination or claim and are
ultimately successful, our stock price could suffer. In addition, upon any
termination of a license agreement, we may be required to license to the
licensor any related intellectual property that we developed.
WE MAY NOT BE ABLE TO MANAGE OUR BUSINESS EFFECTIVELY IF WE ARE UNABLE TO
ATTRACT AND RETAIN KEY PERSONNEL AND CONSULTANTS
Page 23
Our 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 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 our 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.
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 a widely
used, inexpensive, generic drug used in patients with arterial thrombosis.
Because heparin is inexpensive and has been widely used for many years,
physicians and medical decision-makers may be hesitant to adopt Angiomax. 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 direct and indirect thrombin inhibitors currently on the market,
awaiting regulatory approval and in development, including orally administered
agents. The thrombin inhibitors on the market include products for use in the
treatment of patients with a clinical condition known as HIT/HITTS, patients
with unstable angina and patients with deep vein thrombosis.
ANGIOMAX MAY COMPETE WITH ALL GROUPS OF ANTICOAGULANT DRUGS, INCLUDING PLATELET
INHIBITORS AND FIBRINOLYTIC DRUGS, WHICH MAY LIMIT THE USE OF ANGIOMAX
In general, anticoagulant drugs may be classified into four groups: drugs that
directly target and inhibit thrombin, drugs that 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 platelet inhibitors or
fibrinolytic drugs. Although platelet inhibitors and fibrinolytic drugs may be
complementary to Angiomax, we recognize that Angiomax may compete with these and
other anticoagulant drugs to the extent Angiomax and any of these anticoagulant
drugs are approved for the same indication.
In addition, platelet inhibitors and fibrinolytic drugs may compete with
Angiomax for the use of hospital financial resources. For example, 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, hospitals may be forced to
use either Angiomax or platelet inhibitors or fibrinolytic drugs but not
necessarily several of the drugs together.
Page 24
WE FACE SUBSTANTIAL COMPETITION, WHICH MAY RESULT IN OTHERS DISCOVERING,
DEVELOPING OR COMMERCIALIZING COMPETING PRODUCTS BEFORE OR MORE SUCCESSFULLY
THAN WE DO
Our 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 markets for our products. Potential competitors in the United
States and other countries include major pharmaceutical and chemical companies,
specialized pharmaceutical companies and 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.
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 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 us
or our competitors, the availability and timing of third-party reimbursement and
the timing of regulatory approvals. 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 business 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 or products, 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 quarter ended March 31, 2003, revenues
from the sale of Angiomax to three 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 fails to pay us on a
timely basis or at all, our financial position and results of operations could
be materially adversely affected.
Page 25
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
for use as an anticoagulant in patients undergoing coronary angioplasty and
which has been approved for sale in Canada, Israel and New Zealand for
indications similar to those approved by the FDA, 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.
In addition to initial regulatory approval, our product and product
candidates are subject to extensive and rigorous ongoing domestic and foreign
government regulation of, among other things, the research, development,
testing, manufacture, labeling, promotion, advertising, distribution and
marketing of our products and product candidates. 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 companies like us are generally
uncertain and involve complex legal, scientific and factual issues. Our success
depends significantly on our ability to:
- obtain and maintain U.S. and foreign patents;
- protect trade secrets;
Page 26
- 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 and
clevidipine. As of the date of this quarterly report, we exclusively license six
issued U.S. patents relating to Angiomax and three issued U. S. patents relating
to clevidipine. 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 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 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.
Page 27
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,
Israel 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 drug treatments by government
authorities, private health insurers and other organizations will have an effect
on our ability to successfully commercialize, and attract collaborative partners
to invest in the development of, 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 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 28
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, corporate debt and U.S.
government agency 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 March 31, 2003, we held $130.8 million in cash,
cash equivalents and available for sale securities, of which 96% were due within
one year and had an average interest rate of approximately 1.0%.
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. If the applicable exchange rate
undergoes a change of 10.0%, we do not believe that it would have a material
impact on our results of operations or cash flows.
ITEM 4 - CONTROLS AND PROCEDURES
a.) Evaluation of disclosure controls and procedures. Based on their
evaluation of the our 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, our
principal executive officers and principal financial officer have concluded that
our disclosure controls and procedures are designed to ensure that information
required to be disclosed by us in the reports that we file or submit 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.
b.) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their most recent evaluation.
Page 29
PART II.OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended March 31, 2003, we received notices of the
following exercises of outstanding common stock purchase warrants:
- On January 13, 2003, an existing investor exercised warrants
covering an aggregate of 3,352 shares of our common stock;
- On February 14, 2003, an existing investor exercised warrants
covering an aggregate of 843,604 shares of our common stock;
- On March 27, 2003, existing investors exercised warrants covering an
aggregate of 200,081 shares of our common stock.
In each of these warrant exercises, the purchase price of $5.92 per share
was paid in the form of cancellation of a portion of the warrants, in accordance
with the cashless exercise provision included in the warrants; accordingly, we
received no proceeds from the issuance of the shares. In each case, the shares
were issued to an "accredited investor" without registration under the
Securities Act of 1933, as amended, or the securities laws of certain states, in
reliance on the exemptions provided by Section 3(a)(9) of the Securities Act and
in reliance on similar exemptions under applicable state laws.
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 February 13, 2003, we filed a current report on Form 8-K with the SEC
in connection with our announcement of financial results for the quarter and
full year periods ended December 31, 2002.
Page 30
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: May 13, 2003 By: /s/ Steven H. Koehler
----------------------
Steven H. Koehler
Chief Financial Officer
Page 31
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: May 13, 2003 Clive A. Meanwell
Executive Chairman
Page 32
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: May 13, 2003 David M. Stack
President and Chief Executive Officer
Page 33
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: May 13, 2003 Steven H. Koehler
Chief Financial Officer
Page 34
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
10.1 2000 Outside Director Stock Option Plan, as amended
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 35