<PAGE> 1
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 June 30, 2000
Commission File Number 000-22347
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.)
One Cambridge Center, Cambridge, MA 02142
----------------------------------- -----
(Address of Principle Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (617) 225-9099
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 No X
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date: As of September 15, 2000, there
were 30,297,532 shares of Common Stock, $0.001 par value per share, outstanding.
<PAGE> 2
THE MEDICINES COMPANY
TABLE OF CONTENTS
<TABLE>
<S> <C>
Part I. Financial Information....................................................................................1
Item 1 - Unaudited Consolidated Financial Statements...........................................................1
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of
Operations..........................................................................................7
Item 3 - Quantitative and Qualitative Disclosures About Market Risk...........................................11
Part II. Other Information......................................................................................12
Item 2 - Changes in Securities and Use of Proceeds............................................................12
Item 6 - Exhibits and Reports on Form 8-K.....................................................................12
SIGNATURE........................................................................................................13
EXHIBIT INDEX ...................................................................................................14
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1 - UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THE MEDICINES COMPANY
(a company in the development stage)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,184,759 $ 6,643,266
Marketable securities -- 539,274
Accrued interest receivable 340,788 55,225
Prepaid expenses and other current assets 861,292 154,967
------------- -------------
Total current assets 12,386,839 7,392,732
Fixed assets, net 403,701 430,061
Other assets 177,568 168,605
------------- -------------
Total assets $ 12,968,108 $ 7,991,398
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 10,911,698 $ 7,815,028
Accrued expenses 5,706,216 3,680,293
------------- -------------
Total current liabilities 16,617,914 11,495,321
Convertible notes -- 5,776,319
Redeemable Convertible Preferred Stock, $1.00 par value; 37,550,000 shares
authorized; 28,908,716 and 22,962,350 shares issued and outstanding at June
30, 2000 and December 31, 1999, respectively, at redemption value
(Liquidation value of $115,001,309 at June 30, 2000 and $86,167,821
at December 31, 1999) 114,240,173 85,277,413
Stockholders' deficit:
Common stock, $.001 par value, 36,000,000 shares authorized; 981,525
and 833,400 shares issued and outstanding at June 30, 2000 and 982 834
December 31, 1999, respectively
Additional paid-in capital 57,544,920 339,144
Deferred compensation (12,160,583) --
Deficit accumulated during the development stage (163,294,268) (94,925,028)
Accumulated other comprehensive income, principally
foreign currency translation 18,970 27,395
------------- -------------
Total stockholders' deficit (117,889,979) (94,557,655)
------------- -------------
Total liabilities and stockholders' deficit $ 12,968,108 $ 7,991,398
============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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THE MEDICINES COMPANY
(a company in the development stage)
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Period
Three Months ended June 30, Six Months ended June 30, July 31, 1996
--------------------------- --------------------------- (date of inception)
2000 1999 2000 1999 to June 30, 2000
---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
Operating expenses:
Research and development $ 6,195,330 $ 10,039,402 $ 16,837,196 $ 17,246,602 $ 88,058,296
General and administrative 2,510,791 1,675,207 3,708,762 2,951,249 18,087,094
------------ ------------ ------------ ------------ -------------
Total operating expenses 8,706,121 11,714,609 20,545,958 20,197,851 106,145,390
Loss from operations (8,706,121) (11,714,609) (20,545,958) (20,197,851) (106,145,390)
Other income (expense):
Interest income 181,890 345,130 285,725 691,308 3,175,351
Interest expense (11,883,389) -- (19,390,414) -- (19,617,104)
------------ ------------ ------------ ------------ -------------
Net loss (20,407,620) (11,369,479) (39,650,647) (19,506,543) (122,587,143)
Dividends and accretion to redemption
value of redeemable preferred stock (27,188,837) (1,436,114) (28,718,593) (2,872,228) (40,707,125)
------------ ------------ ------------ ------------ -------------
Net loss attributable to
common stockholders $(47,596,457) $(12,805,593) $(68,369,240) $(22,378,771) $(163,294,268)
============ ============ ============ ============ =============
Basic and diluted net loss attributed
to common stockholders per
common share $ (68.65) $ (25.62) $ (106.56) $ (46.92)
Unaudited pro forma basic and
diluted net loss attributable to
common stockholders per common
share $ (0.38) $ (0.66) $ (0.96) $ (1.15)
Shares used in computing net loss
attributable to common stockholders
per common share:
Basic and diluted
693,339 499,921 641,582 476,984
Unaudited pro forma basic and diluted 22,270,246 17,105,523 21,040,410 16,945,298
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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THE MEDICINES COMPANY
(a company in the development stage)
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Six Months Ended June 30, Period July 31, 1996
------------------------- (date of inception)
2000 1999 to June 30, 2000
---- ---- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (39,650,647) $ (19,506,543) $(122,587,143)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 105,751 87,107 447,273
Amortization of discount on convertible notes 19,013,486 -- 19,115,160
Amortization of deferred stock compensation 607,320 -- 607,320
Changes in operating assets and liabilities:
Accrued interest receivable (285,563) 443,709 (340,788)
Prepaid expenses and other current assets (707,131) 74,161 (861,652)
Other assets (9,582) -- (177,820)
Accounts payable 3,099,635 693,344 10,913,557
Accrued expenses 2,271,875 3,469,805 5,949,976
------------- ------------- -------------
Net cash used in operating activities (15,554,856) (14,738,417) (86,934,116)
Cash flows from investing activities:
Purchases of marketable securities -- -- (60,045,287)
Maturities and sales of marketable securities 541,400 12,158,488 60,045,287
Purchase of fixed assets (82,052) (235,294) (852,118)
------------- ------------- -------------
Net cash provided by (used in) investing activities 459,348 11,923,194 (852,118)
Cash flows from financing activities:
Proceeds from issuance of convertible notes and warrants 13,348,779 -- 19,348,779
Proceeds from issuances of preferred stock, net 6,095,520 -- 79,395,347
Proceeds from issuances of common stock 203,947 -- 218,795
Repurchases of common stock (30) (73) (255)
Dividends paid in cash -- -- (10,946)
------------- ------------- -------------
Net cash provided by (used in) financing activities 19,648,216 (73) 98,951,720
Effect of exchange rate changes on cash (11,215) 5,487 19,274
------------- ------------- -------------
Increase (decrease) in cash and cash equivalents 4,541,493 (2,809,809) 11,184,759
Cash and cash equivalents at beginning of period 6,643,266 8,987,745 --
------------- ------------- -------------
Cash and cash equivalents at end of period $ 11,184,759 $ 6,177,936 $ 11,184,759
============= ============= =============
Non-cash transactions:
Dividends paid on preferred stock $ -- $ -- $ 8,212,178
============= ============= =============
Supplemental disclosure of cash flow information:
Interest paid $ 255,781 $ -- $ 285,016
============= ============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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THE MEDICINES COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
by The Medicines Company, also referred to as the Company, 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, including normal recurring accruals, considered
necessary for a fair presentation of financial position, results of operations,
and cash flows for the periods presented.
The results of operations for the three and six months ended June 30, 2000 are
not necessarily indicative of the results that may be expected for the entire
fiscal year ended December 31, 2000.
2. NET LOSS AND UNAUDITED PRO FORMA NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted, and
unaudited pro forma basic and diluted, net loss per share for the three and six
months ended June 30, 2000 and 1999. The unaudited pro forma basic and diluted
net loss per share gives effect to the conversion of redeemable convertible
preferred stock and accrued dividends and convertible notes and accrued interest
as if converted at the date of original issuance.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic and diluted
Net loss $(20,407,620) $(11,369,479) $(39,650,647) $(19,506,543)
Dividends and accretion to redemption
value of redeemable preferred stock (27,188,837) (1,436,114) (28,718,593) (2,872,228)
------------ ------------ ------------ ------------
Net loss attributable to
common stockholders $(47,596,457) $(12,805,593) $(68,369,240) $(22,378,771)
============ ============ ============ ============
Weighted average common shares
Outstanding 880,057 839,778 856,168 864,641
Less: unvested restricted common
shares outstanding (186,718) (339,857) (214,586) (387,657)
------------ ------------ ------------ ------------
Weighted average common shares
used to compute net loss per share 693,339 499,921 641,582 476,984
============ ============ ============ ============
Basic and diluted net loss per share $ (68.65) $ (25.62) $ (106.56) $ (46.92)
============ ============ ============ ============
</TABLE>
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THE MEDICINES COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Unaudited pro forma basic and diluted
Net loss $(20,407,620) $(11,369,479) $(39,650,647) $(19,506,543)
Interest expense on convertible notes 11,981,079 -- 19,488,104 --
------------ ------------ ------------ ------------
Net loss used to compute pro forma
net loss per share $ (8,426,541) $(11,369,479) $(20,162,543) $(19,506,543)
============ ============ ============ ============
Weighted average common shares
used to compute pro forma net loss
per share 693,339 499,921 641,582 476,984
Weighted average number of common
shares assuming the conversion of all
redeemable convertible preferred
stock and convertible notes and accrued
interest at the date of original issuance 21,577,087 16,605,602 20,398,828 16,468,314
------------ ------------ ------------ ------------
Weighted average common shares
used to compute pro forma net loss
per share 22,270,426 17,105,523 21,040,410 16,945,298
============ ============ ============ ============
Unaudited pro forma basic and diluted
pro forma net loss per share $ (0.38) $ (0.66) $ (0.96) $ (1.15)
============ ============ ============ ============
</TABLE>
Options to purchase 1,916,780 and 859,743 shares of common stock outstanding as
of June 30, 2000 and 1999, 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 3,269,564 shares of common stock
as of June 30, 2000 were excluded from the computation of diluted net loss per
share as their effect would have been antidilutive.
During the three and six months ended June 30, 2000, the Company issued
1,036,892 and 1,611,329 options, respectively, at exercise prices below the
estimated fair value of the Company's common stock as of the date of grant of
such options, based on the estimated price of the Company's common stock in
connection with the Company's initial public offering. The total deferred
compensation associated with these options during the three and six months ended
June 30, 2000 was approximately $8.9 million and $12.8 million, respectively.
Included in the results of operations for the three and six months ended June
30, 2000 is compensation expense of approximately $457,000 and $607,000,
respectively, associated with such options.
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3. REDEEMABLE PREFERRED STOCK
The Company issued 1,411,000 shares of Series IV Redeemable Convertible
Preferred Stock (the "Series IV Preferred Stock") for net proceeds of $6,095,520
on May 17, 2000. In addition, on May 17, 2000, convertible notes in the
aggregate principal amount of $19,348,779 and accrued interest were converted
into 4,535,366 shares of Series IV Preferred Stock. The Series IV Preferred
Stock carries terms and conditions similar to the Company's Series I, Series II,
and Series III Redeemable Convertible Preferred Stock. The Series IV Preferred
Stock is convertible into common stock at a 1-for-0.73 conversion rate and
automatically converts upon the closing of the sale of shares of common stock in
an underwritten public offering. The Series IV Preferred Stock issued on May 17,
2000 contained a beneficial conversion feature based on the estimated fair
market value of common stock into which it is convertible. In accordance with
EITF 98-5, the total amount of such beneficial conversion is approximately
$25,450,000. The beneficial conversion is analogous to a dividend and was
recognized in the period of issuance. In addition, in conjunction with the sale
of the Series IV Preferred Stock, the Company received commitments of continued
financial support totaling $15,238,800 from substantially all of its existing
investors
4. SUBSEQUENT EVENTS
In its initial public offering (the "IPO"), which was completed on August 11,
2000, the Company sold 6,000,000 shares of its common stock at a price of $16.00
per share. In addition on September 8, 2000, the underwriters of the IPO
exercised their over-allotment option and purchased an additional 900,000 shares
of common stock at the IPO price of $16.00 per share. The Company received
approximately $101.4 million, net of underwriting discounts and commissions, and
estimated expenses relating to the offering. Simultaneously with the initial
closing of the IPO, 30,659,957 shares of Redeemable Convertible Preferred Stock
then outstanding (including accrued dividends for the period August 1, 2000 to
August 11, 2000) were converted into 22,381,735 shares of common stock. In
addition, commitments of continued financial support totaling $15,238,800
received from substantially all of our existing investors terminated as a result
of the closing of the IPO.
In conjunction with the IPO, a reverse stock split of 0.73 shares for every one
share of common stock then outstanding became effective. The accompanying
financial statements and footnotes have been restated to reflect the reverse
stock split.
In September, the Company announced the start of a 350 patient, randomized
clinical trial of its probiotic CTV-05 as an adjunct to standard antibiotic
treatment of bacterial vaginosis. The trial is funded by National Institutes of
Health, National Institute of Allergy and Infectious Disease ("NIH, NIAID") and
jointly managed by The Medicines Company and NIH, NIAID.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
We acquire, develop and commercialize biopharmaceutical products in late stages
of development. Our lead product, Angiomax(TM) (bivalirudin), directly blocks or
inhibits the actions of thrombin, a key component in the formation and growth of
blood clots. In May 2000, we received an approvable letter from the U.S. Food
and Drug Administration (the "FDA") for the use of Angiomax in the treatment of
patients with unstable angina undergoing coronary balloon angioplasty. Final
approval of the New Drug Application (the "NDA") for Angiomax is contingent upon
the satisfactory completion of conditions specified by the FDA. Development
programs are underway for additional potential applications of Angiomax for the
treatment of ischemic heart disease.
Since our inception, we have incurred significant losses and, as of June 30,
2000, had a deficit accumulated during the development stage of $163.3 million.
Most of our expenditures to date have been for research and development
activities and 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 generally outsource our clinical 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. General and administrative expenses consist primarily of salaries and
related expenses, general corporate activities and costs associated with initial
product marketing activities.
We expect to continue to incur operating losses during fiscal 2000 and for the
foreseeable future as a result of research and development activities
attributable to new and existing products, and costs associated with the
commercialization and launch of our products. We will need to generate
significant revenues to achieve and maintain profitability. To date, we have had
no revenues from any product sales, and we have not achieved profitability on a
quarterly or annual basis.
During the three and six months ended June 30, 2000, we recorded deferred stock
compensation on the grant of stock options of approximately $8.9 million and
$12.8 million, respectively, 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 initial public offering price of our common stock.
We amortize deferred stock compensation over the respective vesting periods of
the individual stock options. We recorded an amortization expense for deferred
compensation of approximately $457,000 and $607,000 for the three and six months
ended June 30, 2000, respectively. We expect to record an amortization expense
for deferred compensation as follows: approximately $3.0 million for the second
half of 2000, approximately $4.3 million for
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2001, approximately $4.0 million for 2002, approximately $3.9 million for 2003
and approximately $1.5 million for 2004.
In May 2000, we sold shares of Series IV Redeemable Convertible Preferred Stock.
The Series IV Redeemable Convertible Preferred Stock contained a beneficial
conversion feature based on the estimated fair market value common stock into
which it is convertible. The total amount of such beneficial conversion was
approximately $25.5 million and has been reflected as a dividend in the period
of issuance, the second quarter of 2000. Additionally, in the second quarter of
2000, we recorded approximately $11.7 million, the remaining discount associated
with our convertible notes, as interest expense.
We have not generated taxable income to date. At December 31, 1999, net
operating losses available to offset future taxable income for federal income
tax purposes were approximately $77.9 million. If not utilized, our federal net
operating losses carryforwards will expire at various dates beginning in 2011
and ending 2019. We have not recognized the potential tax benefit of our net
operating losses in our statements of operations. The future utilization of our
net operating losses carryforwards may be limited pursuant to regulations
promulgated under the Internal Revenue Code of 1986, as amended.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2000 and 1999
Research and Development Expenses. Research and development expenses decreased
38% to $6.2 million for the three months ended June 30, 2000 from $10.0 million
for the three months ended June 30, 1999. The decrease in research and
development expenses of $3.8 million was primarily due to reduced development
expenses resulting from our termination of the semilog manufacturing development
program with Lonza AG, and to a reduction in development activity for IS-159.
This reduction in costs was partly offset by development costs of CTV-05, a
biotherapeutic drug that we exclusively licensed from GyneLogix in August 1999
and to the increased enrollment rate of our Angiomax HERO-2 phase 3 clinical
trial for acute myocardial infraction during the period.
General and Administrative Expenses. General and administrative expenses
increased 47% to $2.5 million for the three months ended June 30, 2000 from $1.7
million for the three months ended June 30, 1999. The increase in general and
administrative expenses of $836,000 was primarily due to an increase in
marketing and selling expenses and corporate infrastructure costs arising from
an increase in activity relating to the planned commercial launch of Angiomax.
Interest Income and Interest Expense. Interest income decreased 47% to $182,000
for the three months ended June 30, 2000 from $345,000 for the three months
ended June 30, 1999. The decrease in interest income of $163,000 was primarily
due to the lower levels of cash and marketable securities available for
investment during the period.
Interest expense was $11.9 million for the three months ended June 30, 2000 and
related to interest charges and amortization of discount on our convertible
promissory notes issued in
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October 1999 and March 2000. The notes were converted into preferred stock in
May 2000 resulting in the acceleration of the remaining unamortized discount.
Six Months Ended June 30, 2000 and 1999
Research and Development Expenses. Research and development expenses decreased
2% to $16.8 million for the six months ended June 30, 2000 from $17.2 million
for the six months ended June 30, 1999. The decrease in research and development
expenses of approximately $410,000 was primarily due to reduced development
expenses from the termination of development of the semilog manufacturing
process with Lonza AG, and a reduction of development activity for IS-159. This
reduction in costs was partly offset by the completion of UCB Bioproduct's
manufacture of $6.5 million of Angiomax bulk drug substance in March, the
development costs of CTV-05, and to the increase enrollment rate of our Angiomax
HERO-2 phase 3 clinical trial for acute myocardial infarction during the period.
General and Administrative Expenses. General and administrative expenses
increased 23% to $3.7 for the six months ended June 30, 2000 from $3.0 million
for the six months ended June 30, 1999. The increase in general and
administrative expenses of $758,000 was primarily due to an increase in
marketing and selling expenses and corporate infrastructure costs arising from
an increase in activity relating to the planned commercial launch of Angiomax.
Interest Income and Interest Expense. Interest income decreased 62% to $286,000
for the six months ended June 30, 2000 from $691,000 for the six months ended
June 30, 1999. The decrease in interest income of $405,000 was primarily due to
the lower levels of cash and marketable securities available for investment
during the period.
Interest expense was $19.4 million for the six months ended June 30, 2000 and
related to interest charges and amortization of discount on our convertible
promissory notes issued in October 1999 and March 2000. The notes were converted
into preferred stock in May 2000 resulting in the acceleration of the remaining
unamortized discount.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations from inception through June 30, 2000 primarily
through the private placement of equity, convertible debt securities and
warrants. As of June 30, 2000, we had received net proceeds of $79.4 million
from the private placement of equity securities, primarily redeemable
convertible preferred stock, and $19.4 million from the issuance of convertible
notes and warrants.
As of June 30, 2000, we had $11.2 million in cash, cash equivalents and
marketable securities, as compared to $7.2 million as of December 31, 1999.
In August and September 2000, we received an additional $101.4 million in net
proceeds, including the exercise of underwriters' over-allotment option, from
the sale of our common stock in our initial public offering at a price of $16.00
per share.
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For the six months ended June 30, 2000, we used net cash of $15.6 million in
operating activities. This consisted of a net loss of $39.7 million, offset by
an increase in accounts payable and accrued expenses of $5.4 million and
non-cash amortization of discount on convertible notes of $19.0 million. We
spent $459,000 for investing activities, which consisted principally of
purchases of fixed assets, offset by proceeds from the maturity of marketable
securities. We received $19.6 million from financing activities primarily
relating to the issuance of convertible notes and preferred stock during the six
months ended June 30, 2000.
During 1999, we placed an order with UCB Bioproducts for the manufacture of
Angiomax bulk drug substance. Under the terms of this purchase order, we are
scheduled to receive material and make payments totaling $13.0 million in fiscal
2000. Manufacture of $6.5 million of this material was completed in the six
months ended June 30, 2000 and was expensed during that period. All costs
associated with the manufacture of Angiomax bulk drug substance and finished
products will be expensed until FDA approval of Angiomax.
We expect to devote substantial resources to continue our research and
development efforts and to expand our sales, marketing and manufacturing
programs associated with the commercialization and launch of our products. Our
funding requirements will depend on numerous factors, including the progress,
level and timing of our research and development activities, the cost, timing
and outcomes of regulatory reviews, the establishment, 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 that our current cash, cash equivalents and marketable securities,
together with the net proceeds of our initial public offering, will be
sufficient to fund our operations for at least 12 months. If our existing
resources and the proceeds of our initial public offering are insufficient to
satisfy our liquidity requirements, or if we acquire additional product
candidates, we may need to sell additional equity or debt securities. The sale
of additional equity and debt securities may result in additional dilution to
our stockholders, and we cannot be certain that additional 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 reduce the scope of
our planned research, development and commercialization activities, which could
harm our financial condition and operating results.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This quarterly report on Form 10-Q contains certain forward-looking statements.
For this purpose any statements herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates", "plans," "expects," "intends"
and similar expressions are intended to identify forward-looking statements.
There are a number of important factors that could cause our actual results to
differ materially from those indicated by such forward-looking statements. These
factors include, without limitation, those set forth under the caption "Risk
Factors" in our Prospectus filed with the Securities and Exchange Commission on
August 8, 2000, which Risk Factors are expressly incorporated by reference
herein.
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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk is confined to our cash, cash equivalents and
marketable securities. We place our investments in high-quality financial
instruments, primarily money market funds and corporate debt securities with
maturities or auction dates of less than one year, which we believe are subject
to limited credit risk. We currently do not hedge interest rate exposure. Due to
the short-term nature of our investments, we do not believe that we have any
material exposure to interest rate risk arising from our investments.
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 exchange rate undergoes a
change of 10%, we do not believe that it would have a material impact on our
results of operations or cash flows.
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PART II. OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
On August 11, 2000, the Company completed an initial public offering (the "IPO")
of 6,000,000 shares of its common stock at a price to the public of $16.00 per
share. The offer and sale of the shares in the offering were registered under
the Securities Act of 1933, as amended, pursuant to a registration statement on
Form S-1 (File No. 333-37404), which was declared effective on August 7, 2000.
J.P. Morgan Securities Inc., FleetBoston Robertson Stephens Inc., and CIBC World
Markets Corp. were the managing underwriters of the offering. Subsequently, the
underwriters exercised their over-allotment option to purchase an additional
900,000 shares of common stock at the IPO price of $16.00 per share. The Company
paid the underwriters approximately $7.7 million in underwriting discounts and
commissions and incurred approximately $1.3 million in other expenses related to
the offering. The net proceeds to the Company from the offering were
approximately $101.4 million. The Company has used, and continues to expect to
use, the proceeds from the sale of stock for general corporate purposes,
including the commercial launch of Angiomax for use in patients with unstable
angina undergoing angioplasty, product development activities and working
capital. A portion of the proceeds may also be used for the acquisition of
additional products.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
See the Exhibit Index on Page 14 for a list of exhibits filed as part
of this Quarterly Report on Form 10-Q, which Exhibit Index is
incorporated herein by reference.
b. Reports on Form 8-K
None.
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<PAGE> 15
SIGNATURE
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: September 19, 2000 By: /s/ Peyton J. Marshall
--------------------------------
Peyton J. Marshall
Chief Financial Officer
Page 13
<PAGE> 16
Exhibit Index
Exhibit Number Description
-------------- -----------
27 Financial Data Schedule
99.1 Pages 7 through 13 of the Prospectus filed pursuant to Rule
424(b)(3) with the Securities and Exchange Commission on
August 8, 2000.
Page 14
