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UNITED STATES
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, 2004

Commission File Number 000-31191

The Medicines Company
(Exact Name of Registrant as Specified in Its Charter)

Registrant's telephone number, including area code: (973) 656-1616

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý    No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ý    No o

Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date: As of April 30, 2004, there were 47,696,253 shares of Common Stock, $0.001 par value per share, outstanding.

THE MEDICINES COMPANY
TABLE OF CONTENTS

THE MEDICINES COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to condensed consolidated financial statements.

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THE MEDICINES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

See accompanying notes to condensed consolidated financial statements.

2

THE MEDICINES COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

See accompanying notes to condensed consolidated financial statements.

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1.     Nature of Business

        The Medicines Company (the Company) was incorporated in Delaware on July 31, 1996. The Company is a pharmaceutical company that specializes in acute hospital care products and is 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® (bivalirudin), a direct thrombin inhibitor, for use as an anticoagulant in combination with aspirin in patients with unstable angina undergoing coronary angioplasty. The Company has concentrated its commercial sales and marketing resources on the United States hospital market, and revenues to date have been generated almost entirely from sales of Angiomax in the United States. In addition to Angiomax, the Company is currently developing two pharmaceutical products as potential acute hospital care products. The first of these, Clevelox™ (clevidipine), is an intravenous drug intended for the short-term control of blood pressure in patients undergoing cardiac surgery. The second potential product, cangrelor, is an anticoagulant that prevents platelet clotting factors from activating, which may have potential uses in coronary angioplasty and cardiac surgery.

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 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, 2004 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2004. 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, 2003, 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.

Cash, Cash Equivalents and Available for Sale Securities

        The Company considers all highly liquid investments purchased with an original maturity at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents at March 31, 2004 consisted of $21.0 million in demand deposits and money market funds. Cash and cash equivalents at December 31, 2003 consisted of $30.6 million in demand deposits and money market funds and $12.8 million of corporate bonds with original maturities of less than three months. 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

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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, 2004, the Company held available for sale securities with fair value totaling $106.9 million. These available for sale securities included various certificates of deposit, corporate debt securities and United States government agency notes, $40.5 million of which had original maturities of more than three months and up to one year and $66.4 million of which had original maturities of more than one year and up to two years. At December 31, 2003, the Company held available for sale securities with fair value totaling $92.5 million. These available for sale securities included various certificates of deposit, corporate debt securities and United States government agency notes, $37.0 million of which had original maturities of more than three months and up to one year and $55.5 million of which had original maturities of more than one year and up to two years.

Revenue Recognition

        The Company sells its products primarily to wholesalers and distributors, who, in turn, sell to hospitals. The Company does not recognize revenue from product sales until there is persuasive evidence of an arrangement, delivery has occurred, the price is fixed and determinable, the buyer is obligated to pay the Company, the obligation to pay is not contingent on resale of the product, the buyer has economic substance apart from the Company, the Company has no obligation to bring about sale of the product, the amount of returns can be reasonably estimated and collectibility is reasonably assured.

        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 these allowances. For instance:

•

The Company's wholesaler 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 wholesalers, historic patterns of returns, industry data and the expiration dates of product currently being shipped.



•

Certain hospitals purchasing the Company's products from wholesalers have the right to receive a discounted price and a volume-based rebate if they have a direct contract with the Company or 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 wholesalers and hospitals, industry data, historic patterns of discounts and customer rebate thresholds.

        If actual results differ from the Company's estimates, the Company will be required to make adjustments to these allowances in the future.

        Revenue from collaborative agreements with partners may include 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.

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Inventories

        Inventory is recorded upon the transfer of title from the Company's vendors. Inventory is stated at the lower of cost or market value. Angiomax bulk product is classified as raw materials and its costs are determined using a weighted average of acquisition costs. Work-in-progress costs of filling, finishing and packaging are recorded against specific product batches. Prior to FDA approval of Angiomax and its original manufacturing process in December 2000, the Company expensed all of these costs as research and development. The Company recorded as inventory any Angiomax bulk drug product manufactured according to its original manufacturing process to which the Company took title after FDA approval.

        Together with its contract-manufacturing partner, UCB Bioproducts S.A., the Company has developed a second-generation chemical synthesis process, the Chemilog process, for the manufacture of Angiomax bulk drug substance. In May 2003, the Company received FDA approval of this process. All Angiomax bulk drug product manufactured using the Chemilog process to which title had transferred to the Company prior to approval was expensed as research and development, and all bulk drug product manufactured after FDA approval of the Chemilog process has been and will be recorded as inventory upon transfer of title from the Company's vendors.

        The major classes of inventory were as follows:

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 costs for stock-based employee compensation plans at fair value. 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 income/(loss) and earnings/(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:

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        For purposes of the table above, the Company estimated the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

        During the period from January 1, 2000 to September 30, 2000, the Company granted options to purchase 2,273,624 shares of the Company's common stock (Common Stock) at exercise prices below the estimated fair value of the Common Stock as of the date of grant of such options based on the price of the Common Stock in connection with the Company's initial public offering. The total deferred stock compensation associated with these options is approximately $17.3 million. 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, 2004, cancellation of options that had not been exercised resulted in a reduction in the total deferred stock compensation of approximately $18,430. 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 $0.1 million.

        Included in the results of operations is deferred stock compensation expense associated with these options of $0.4 million for the three months ended March 31, 2004, and $0.6 million the three months ended March 31, 2003. We expect to record amortization expense for the remaining deferred stock compensation associated with these options of approximately $0.3 million for the remainder of 2004 assuming the continued vesting of the associated options.

        In May 2003, the Company granted options to a non-employee consultant to purchase 50,000 shares at an exercise price based on the fair market value of Common Stock on the date of the consulting agreement. These options were valued utilizing the Black-Scholes option-pricing model. Included in selling, general and administrative expenses in the results of operations for the three

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months ended March 31, 2004 was $0.1 million of non-cash stock compensation expense associated with these options. These options will be revalued and expensed over the two months remaining of their vesting term.

        During the three months ended March 31, 2004, there were 171,811 shares of Common Stock issued in connection with the exercise of stock options and purchases under the 2000 Employee Stock Purchase Plan.

3.    Net Income/(Loss) per Share

        The following table sets forth the computation of basic and diluted net income/(loss) per share for the three months ended March 31, 2004 and 2003.

        As of March 31, 2004, there were options to purchase 5,077,697 shares of Common Stock and warrants to purchase 795,432 shares of Common Stock outstanding. These options and warrants have been included in the computation of diluted net income per share for the three months ended March 31, 2004. The number of dilutive Common Stock equivalents was calculated using the treasury stock method. As of March 31, 2003, there were 4,967,107 options and 805,146 warrants to purchase shares of Common Stock outstanding. The Company has not included the dilutive effects of such options and warrants for the three months ended March 31, 2003, as the effects would have been antidilutive.

4.    Comprehensive Income/(Loss)

        Comprehensive income and losses are primarily comprised of net income/(loss) and unrealized gain/(loss) on marketable securities and currency translation adjustments. Comprehensive income/(loss) for the three month ended March 31, 2004 and March 31, 2003 are detailed below.

5.    Litigation and related costs

       In November 2003, the Company received a notice from the Equal Employment Opportunity Commission, or EEOC, that a current employee had filed a Charge of Discrimination with the EEOC alleging that the Company had engaged in sexual discrimination and sexual harassment in violation of Title VII of the Civil Rights Act of 1964 and the New Jersey Law Against Discrimination. In March 2004, the Company reached a settlement with the employee, in which we agreed to financial terms without admitting any of the facts of the complaint. The associated legal costs and settlement expenses are included in selling, general and administrative expense in the condensed consolidated statement of operations for the three months ended March 31, 2004.

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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 pharmaceutical company that specializes in acute hospital care with growing revenue from sales of our first product, Angiomax® (bivalirudin). Angiomax is a direct thrombin inhibitor that was approved by the FDA in December 2000 for use as an anticoagulant in combination with aspirin in patients with unstable angina undergoing coronary angioplasty. We began selling the product in the United States in January 2001. Our revenues to date have been generated almost entirely from sales of Angiomax in the United States.

        We focus on increased use of Angiomax by existing hospital customers, as well as penetration to new hospitals, to evaluate our operating performance. Since the announcement of the results of our REPLACE-2 clinical trial in November 2002, additional hospitals have granted Angiomax formulary approval and hospital demand for the product has increased, which are critical elements of our ability to increase revenues. In the first quarter of 2004, based on data from a third-party industry source, the number of hospitals purchasing Angiomax increased by approximately 7% as compared to the fourth quarter of 2003 and the number of hospitals purchasing four or more boxes of Angiomax increased by approximately 11% as compared to the fourth quarter of 2003.

        Since our inception we have generated significant losses, although we were profitable for the second consecutive quarter in the first quarter of 2004. Most of our expenditures to date have been for research and development activities and selling, general and administrative expenses. Research and development expenses represent costs incurred for product acquisition, clinical trials, 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.

        We expect to continue to spend significant amounts on the development of our products in the future. For the remainder of 2004, we plan to continue to invest in clinical studies to expand the use of Angiomax and to develop Clevelox. In addition, we plan to invest in the manufacturing development of cangrelor. We also plan to continue our sales and marketing programs to educate and inform physicians, nurses, pharmacists and other medical decision-makers about the benefits of Angiomax. In light of these activities, as well as our plan to continue to evaluate possible acquisitions of development-stage or approved products that would fit within our growth strategy, we will likely need to generate greater revenues to maintain profitability.

        We have accrued for U.S. alternative minimum taxes, which could apply if we achieve profitability on an annual basis in 2004, state taxes based on net worth and some income taxes in international jurisdictions. At December 31, 2003, net operating losses available to offset future taxable income for federal income tax purposes were approximately $235.2 million. If not utilized, federal net operating loss carryforwards will expire at various dates beginning in 2011 and ending in 2023. We have not recognized the potential tax benefit of our net operating losses in our balance sheets or statements of operations. The future utilization of our net operating loss carryforwards may be limited based upon

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changes in ownership pursuant to regulations promulgated under the Internal Revenue Code of 1986, as amended.

Application of Critical Accounting Policies

        The discussion and analysis of our financial condition and results of operations is based on our unaudited condensed 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 or assumption underlying our financial statements as a "critical accounting estimate" where:

•

the nature of the estimate or assumption is material due to the level of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and



•

the impact of the estimates and assumptions on financial condition or operating performance is material.

        Our significant accounting policies are more fully described in the Notes to Unaudited Condensed Consolidated Financial Statements section of this quarterly report on Form 10-Q and Note 2 of the Notes to Consolidated Financial Statements in our annual report on Form 10-K for the year ended December 31, 2003. Not all of these significant accounting policies, however, fit the definition of "critical accounting estimates." We have discussed our accounting policies with the audit committee of our board of directors, and we believe that our estimates relating to revenue recognition and inventory 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, 2003, fit the definition of "critical accounting estimates."

Results of Operations

Three Months Ended March 31, 2004 and 2003

        Net Revenue.    Net revenue for the three months ended March 31, 2004 increased 87% to $31.3 million as compared to $16.7 million for the three months ended March 31, 2003. Virtually all of the revenue in both periods was from U.S. sales of Angiomax. We believe that the growth in 2004 has been due primarily to increased use of Angiomax by existing hospital customers, adoption of Angiomax by new hospital customers and higher prices.

        Cost of Revenue.    Cost of revenue for the three months ended March 31, 2004 was $4.0 million, or 13% of net revenue, compared to $6.3 million, or 37% of net revenue, for the three months ended March 31, 2003. Cost of revenue for the three months ended March 31, 2004 consisted of expenses in connection with the manufacture of Angiomax that was sold during the period, which represented 21% of the 2004 cost of revenue, royalty expenses under our agreement with Biogen Idec, Inc. (Biogen), which represented 52% of the 2004 cost of revenue, and the logistics costs of selling Angiomax, such as distribution, storage, and handling, which represented 27% of the 2004 cost of revenue. 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, which represented 10% of the 2003 cost of revenue.

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        Early in 2003, we took delivery of drug material manufactured using the Chemilog process. Because this material was manufactured prior to FDA approval of the Chemilog process, we expensed all costs of manufacturing as research and development. This process was approved by the FDA on May 23, 2003, and we are recording all costs of manufacturing Angiomax incurred after May 23, 2003 as inventory.

        In the first quarter of 2004, we sold mostly Angiomax produced using the Chemilog process whose cost of manufacturing was previously expensed. As a result, our cost of manufacturing as a percentage of net revenue decreased substantially in the first quarter of 2004 versus the first quarter of 2003, when we sold Angiomax produced using the original manufacturing process, whose cost had not been previously expensed. Late in the first quarter of 2004, we sold a small amount of Angiomax produced using the Chemilog process to which we took title after FDA approval of the process. In the second quarter of 2004 and for the foreseeable future we expect to sell Angiomax produced using the Chemilog process that has not been previously expensed, which will result in an increase in our cost of manufacturing as a percentage of net revenue.

        Research and Development Expenses.    The funding for Angiomax has represented and will continue to represent a significant portion of our research and development spending. Approximately 79% of our research and development expenses for the three months ended March 31, 2004 and 72% of our research and development expenses for the three months ended March 31, 2003 related to Angiomax. For the three months ended March 31, 2004 and 2003, research and development expenses relating to Angiomax included the costs of clinical trials and infrastructure. In addition, for the three months ended March 31, 2003, Angiomax manufacturing development costs included $1.1 million for bulk Chemilog drug product.

        For the three months ended March 31, 2004, research and development expenses relating to Clevelox, which represented 20% of our total research and development expenses, consisted of expenses in connection with Phase 2 and Phase 3 clinical trials that commenced in the fourth quarter of 2003 in patients undergoing cardiac surgery. Research and development expenses for the three months ended March 31, 2003 relating to Clevelox represented 25% of total research and development expenses and included a $1.0 million license fee to AstraZeneca and manufacturing development expenses. We did not incur any direct expenses for the three months ended March 31, 2004 and 2003 relating to cangrelor.

        Research and development expenses increased 34% to $9.8 million for the three months ended March 31, 2004, from $7.3 million for the three months ended March 31, 2003. The increase in research and development expenses was primarily due to a net $2.8 million increase of Angiomax clinical trial costs in 2004, reflecting a $3.0 million increase in costs for ACUITY, our study of Angiomax in patients presenting to the emergency department with acute coronary syndromes, an increase of $0.7 million in infrastructure expenses, mostly related to an increase in headcount, offset in part by $1.0 million in lower manufacturing development costs.

        The following table identifies for each of our major research and development projects, our spending for the three months ended March 31, 2004 and 2003. Spending for past periods is not necessarily indicative of spending in future periods.

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Major Research and Development Projects

        We currently plan to spend approximately $49 million to $52 million on research and development in 2004, of which approximately 80% is planned for Angiomax.

        Angiomax.    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 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 treatment of patients with an clinical condition known as heparin-induced thrombocytopenia and thrombosis syndrome, or HIT/HITTS, who were undergoing CABG, with and without the use of a bypass pump;



•

a randomized Phase 3 trial called ACUITY 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; and



•

a Phase 2 trial program to study the use of Angiomax in neonates and infants up to six months old with active thrombosis.

        We also completed three Phase 4 programs during the three months ended March 31, 2004, two of which investigated the use of Angiomax with drug-eluting stents and one that investigated Angiomax in patients undergoing percutaneous peripheral angioplasties.

        Clevelox.    We have commenced a Phase 2 clinical trial comparing Clevelox with nitroglycerin, a drug that is typically used to control high blood pressure in patients undergoing cardiac surgery. We have also commenced a Phase 3 clinical trial program in cardiac surgery.

        We cannot reasonably estimate or know the nature, timing and estimated costs of the efforts necessary to complete the development of, or the period in which material net cash inflows are expected to commence from, any of our product candidates due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:

•

the scope, rate of progress and cost of our clinical trials and other research and development activities;



•

the financial contributions of our third-party distributors to the costs of our clinical trials;



•

future clinical trial results;



•

the terms and timing of any collaborative, licensing and other arrangements that we may establish;

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•

the cost and timing of regulatory approvals;



•

the cost and timing of establishing sales, marketing and distribution capabilities;



•

the cost of establishing clinical and commercial supplies of our product candidates;



•

the effect of competing technological and market developments; and



•

the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

        Selling, General and Administrative Expenses.    Selling, general and administrative expenses for the three months ended March 31, 2004 increased 39% to $13.6 million from $9.8 million for the three months ended March 31, 2003. The increase in selling, general and administrative expenses of $3.8 million in the 2004 period was primarily due to increased headcount, Angiomax promotion expenses and legal costs, including costs of settlement, relating to an Equal Employment Opportunity Commission complaint.

        Non-cash Stock Compensation.    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 such deferred compensation of approximately $0.4 million and $0.6 million for the three months ended March 31, 2004 and 2003, respectively. We expect to record additional amortization expense for the deferred compensation associated with these options of approximately $0.3 million in 2004. The amortization expense is included in our operating expenses in the consolidated statements of operations.

        In May 2003, we granted options to a non-employee consultant to purchase 50,000 shares at an exercise price based on the market value of our common stock on the date of the consulting agreement. We recorded $0.1 million in non-cash stock compensation expense during the three months ended March 31, 2004 associated with these options. The remaining unvested options will be revalued, utilizing the Black-Scholes option pricing model, and expensed over the remaining two months of their one-year vesting term.

        Other Income.    Other income for the three months ended March 31, 2004, which is almost completely comprised of interest income, increased 175% to $0.5 million from $0.2 million for the three months ended March 31, 2003. The increase of $0.3 million was primarily due to higher cash and available for sale securities balances attributable to our public offering in 2003.

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. We experienced our second consecutive quarterly profit during the three months ended March 31, 2004. We had $127.9 million in cash, cash equivalents and available for sale securities at March 31, 2004.

        In March 2003, we received approximately $91.5 million in net proceeds from the sale of 5.6 million shares of our Common Stock in a public offering, at a price of $17.50 per share.

        Cash Flows.    As of March 31, 2004, we had $21.0 million in cash and cash equivalents, as compared to $43.4 million as of December 31, 2003. Our major uses of cash the three months ended March 31, 2004 include net cash used for operating activities of $9.4 million and net cash used in investing activities of $15.0 million, which was offset by $2.0 million received from employee stock option exercises.

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        We used net cash of $9.4 million in operating activities during the three months ended March 31, 2004. Cash provided by operations consisted of net income of $4.2 million, approximately $1.0 million of non-cash items including non-cash stock compensation expense, depreciation on fixed assets and amortization of premium on available for sale securities and an increase of $0.5 million in accrued expenses. These cash sources, were more than offset by cash used to fund increases in accounts receivable of $9.5 million, attributable to the timing of cash receipts from our wholesaler customers and the growth in our inventory of $2.1 million, relating to purchases of Angiomax bulk drug product from our contract manufacturer. We also used cash to fund the decreases in accounts payable of $3.2 million and prepaid expenses of $0.5 million.

        During the three months ended March 31, 2004, we used $15.0 million in cash in net investing activities, which consisted principally of the purchase and reinvestment of available for sale securities.

        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:

•

the extent to which Angiomax is commercially successful;



•

the progress, level and timing of our research and development activities related to our clinical trials with respect to Angiomax, Clevelox and cangrelor;



•

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.

        As of the date of this quarterly report, we believe, based on our operating plan, 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 into 2005 and beyond, without requiring us to obtain external financing. We expect, however, to periodically assess our financing alternatives and access the capital markets opportunistically. 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

        As of March 31, 2004, our contractual obligations had not changed materially from those described under the caption "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations" in our annual report on Form 10-K for the year ended December 31, 2003.

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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. 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 expressed or implied in our forward-looking statements. There are a number of important factors that could cause actual results, levels of activity, performance or events to differ materially from those expressed or implied in the forward-looking statements we make. These important factors include our "critical accounting estimates" and the risk factors set forth below. Although we may elect to update forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our estimates change, and readers should not rely on those forward-looking statements as representing our views as of any date subsequent to the date of this quarterly report.

Factors that May Affect Future Results

Risks Related to Our Business

We have a history of net losses, and may not achieve or maintain profitability on an annual basis

        We have incurred net losses on an annual basis since our inception. As of March 31, 2004, we had an accumulated deficit of approximately $309.9 million. We expect to make substantial expenditures to further develop and commercialize our products, including costs and expenses associated with clinical trials, regulatory approvals and commercialization. Although we have achieved profitability in two consecutive quarters, in light of our planned expenditures, we will likely need to generate significantly greater revenues to maintain profitability. We remain unsure as to when we will become profitable on an annual basis, if at all, or whether we will remain profitable for any substantial period of time. If we fail to achieve profitability on an annual basis 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 continued 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 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. In September 2003, the principal investigators of the clinical trial announced that, based on six-month patient follow-up results, Angiomax again met all of the primary and secondary objectives of the trial.

15

In November 2003, the principal investigators presented one-year follow-up mortality data from the trial, which confirmed the 30-day and six-month mortality results.

        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 original 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 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, and we withdrew our application to the EMEA. In August 2003, we resubmitted an MAA with the results of the REPLACE-2 trial, and we are in discussions with regulatory authorities regarding the resubmitted MAA. 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 on which we rely 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 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.

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        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 Clevelox, cangrelor 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, Clevelox, cangrelor or any additional products we may acquire on terms that 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, Clevelox, cangrelor or any additional products 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 on an annual basis. The product development, including clinical trials, manufacturing development and regulatory approvals, of Angiomax for additional indications, Clevelox and cangrelor, 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 equivalents and available for sale securities will be sufficient to fund our operations into 2005 and beyond, without requiring us to obtain external financing. 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.

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We depend on single suppliers for the production of Angiomax and Clevelox bulk drug substance and different single suppliers to carry out all fill-finish activities

        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.

        As of the date of this quarterly report, we obtain all of our Clevelox bulk drug substance for use in clinical trials from one manufacturer, Pharm-Eco, a Johnson Matthey Company. We will rely on a different single supplier, Fresnius Kabi Clayton, L.P., and its proprietary formulation technology, for the manufacture of all finished Clevelox product, as well as for release testing and clinical packaging.

        The FDA requires that all manufacturers of pharmaceuticals for sale in or from the United States achieve and maintain compliance with the FDA's current good manufacturing practices, or 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 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 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 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. As of the date of this quarterly report, we are evaluating Angiomax in clinical trials for additional uses in open vascular surgery such as CABG surgery, in medical conditions that require urgent treatment such as unstable angina, in patients with heparin allergy and in children. As of the date of this quarterly report, we have commenced a Phase 3 trial program in patients undergoing cardiac surgery to investigate the potential of Clevelox to simplify and improve the treatment of these patients. 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

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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

        We have a single product approved for marketing. In order to generate additional revenues, we intend to acquire and develop additional product candidates or approved products. The success of this growth 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. We will be required to integrate any acquired products into our existing operations. Managing the development of a new product entails numerous financial and operational risks, including difficulties in attracting qualified employees to develop the product.

        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 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.

        We have previously acquired rights to products and, after having conducted development activities, determined not to devote further resources to those products. We cannot assure you that any additional products that we acquire will be successfully developed.

        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.

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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 patents and patent applications relating to Angiomax from Biogen and relating to Clevelox and cangrelor 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

        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 acquire, 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

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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.

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 factors including 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, 2004, revenues from the sale of Angiomax to three wholesalers totaled approximately 98% 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

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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.

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 other countries for indications similar to that 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 additional studies 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;



•

operate without infringing the proprietary rights of others; and



•

prevent others from infringing our proprietary rights.

        We may not have any additional patents issued from any patent applications that we own or license. If additional 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

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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, Clevelox, cangrelor and CTV-05. As of the date of this quarterly report, we exclusively license six issued U.S. patents relating to Angiomax, three issued U.S. patents relating to Clevelox, four issued U.S. patents relating to cangrelor and three issued U.S. patents relating to CTV-05. 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.

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 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

23

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.

Item 3—Quantitative and Qualitative Disclosures About Market Risk

        Market risk is the risk of change in fair value of a financial instrument due to changes in interest rates, equity prices, creditworthiness, financing, exchange rates or other factors. Our primary market risk exposure relates to changes in interest rates in 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 interest rate and credit risk. We currently do not hedge interest rate exposure. At March 31, 2004, we held $127.9 million in cash, cash equivalents and available for sale securities which had an average interest rate of approximately 1.5%. Of this amount, approximately 48% of the cash, cash equivalents and available for sale securities were due on demand or within one year and had an average interest rate of approximately of 1.0%. The remaining 52% were due within two years and had an average interest rate of approximately 1.9%.

        Most of our transactions are conducted in U.S. dollars. We do have certain agreements with parties 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

        Our management, with the participation of our chief executive officers and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2004. Based on this evaluation, our chief executive officers and chief financial officer concluded that, as of March 31, 2004, our disclosure controls and procedures were (1) designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our chief executive officers and chief financial officer

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by others within those entities, particularly during the period in which this report was being prepared and (2) effective, in that they provide reasonable assurance 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.

        No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended March 31, 2004 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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Part II.    Other Information

Item 1.    Legal Proceedings

        In November 2003, the Company received a notice from the Equal Employment Opportunity Commission, or EEOC, that a current employee of the Company had filed a Charge of Discrimination with the EEOC alleging that the Company had engaged in sexual discrimination and sexual harassment in violation of Title VII of the Civil Rights Act of 1964 and the New Jersey Law Against Discrimination. In March 2004, the Company and the employee reached a settlement, in which the Company agreed to financial terms without admitting any of the facts of the complaint.

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 10, 2004, we furnished a current report on Form 8-K with the SEC in connection with our announcement of financial results for the quarter and year ended December 31, 2003.

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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.

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EXHIBIT INDEX

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QuickLinks

Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3—Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures

Item 1. Legal Proceedings
Item 6—Exhibits and Reports on Form 8-K