<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 September 30, 2000
Commission File Number 000-22347
The Medicines Company
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<CAPTION>
<S> <C>
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)
</TABLE>
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 X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date: As of October 31, 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
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............................... 13
SIGNATURES................................................................. 14
EXHIBIT INDEX.............................................................. 15
<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>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 68,109,035 $ 6,643,266
Marketable securities 29,181,638 539,274
Accrued interest receivable 957,724 55,225
Prepaid expenses and other current assets 457,650 154,967
------------- -------------
Total current assets 98,706,047 7,392,732
Fixed assets, net 655,114 430,061
Other assets 302,502 168,605
------------- -------------
Total assets $ 99,663,663 $ 7,991,398
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 3,892,161 $ 7,815,028
Accrued expenses 6,753,414 3,680,293
------------- -------------
Total current liabilities 10,645,575 11,495,321
Convertible notes -- 5,776,319
Redeemable Convertible Preferred Stock, $1.00 par value; 5,000,000 and
31,550,000 shares authorized at September 30, 2000 and December 31, 1999,
respectively; 0 and 22,962,350 shares issued and outstanding at September
30, 2000 and December 31, 1999, respectively, at redemption value
[Liquidation value of $0 and $86,167,221 at September 30, 2000 and December
31, 1999, respectively]
-- 85,277,413
Stockholders' equity (deficit):
Common stock, $.001 par value, 75,000,000 and 36,000,000 shares authorized at
September 30, 2000 and December 31, 1999, respectively; 30,297,532 and
833,400 shares issued and outstanding at September 30, 2000 and December
31, 1999, respectively 30,298 834
Additional paid-in capital 279,133,225 339,144
Deferred compensation (15,740,140) --
Deficit accumulated during the development stage (174,377,144) (94,925,028)
Accumulated other comprehensive income (28,151) 27,395
------------- -------------
Total stockholders' equity (deficit) 89,018,088 (94,557,655)
------------- -------------
Total liabilities and stockholders' equity (deficit) $ 99,663,663 $ 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 SEPT. 30, NINE MONTHS ENDED SEPT. 30, JULY 31, 1996
---------------------------- --------------------------- (DATE OF INCEPTION)
2000 1999 2000 1999 TO SEPT. 30, 2000
------------- ------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Operating expenses:
Research and development $ 6,734,799 $ 7,869,573 $ 23,503,579 $ 25,116,175 $ 94,724,679
General and administrative 3,562,440 1,130,788 7,339,618 4,082,037 21,717,950
------------- ------------- ------------- ------------- -------------
Total operating expenses 10,297,239 9,000,361 30,843,197 29,198,212 116,442,629
Loss from operations (10,297,239) (9,000,361) (30,843,197) (29,198,212) (116,442,629)
Other income (expense):
Interest income 838,606 123,505 1,124,331 814,813 4,013,957
Interest expense -- -- (19,390,414) -- (19,617,104)
------------- ------------- ------------- ------------- -------------
Net loss (9,458,633) (8,876,856) (49,109,280) (28,383,399) (132,045,776)
Dividends and accretion to redemption
value of redeemable preferred stock (1,624,395) (1,498,542) (30,342,988) (4,370,770) (42,331,520)
------------- ------------- ------------- ------------- -------------
Net loss attributable to
common stockholders $ (11,083,028) $ (10,375,398) $ (79,452,268) $ (32,754,169) (174,377,296)
============= ============= ============= ============= =============
Basic and diluted net loss attributed
to common stockholders per
common share $ (0.67) $ (19.21) $ (13.32) $ (66.99)
Unaudited pro forma basic and
diluted net loss attributable to
common stockholders per common
share $ (0.34) $ (0.49) $ (1.28) $ (1.64)
Shares used in computing net loss
attributable to common stockholders
per common share:
Basic and diluted 16,467,030 540,046 5,964,852 488,973
Unaudited pro forma basic
and diluted 27,514,031 18,137,377 23,222,614 17,336,229
</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>
NINE MONTHS ENDED SEPT. 30, PERIOD JULY 31, 1996
----------------------------- (DATE OF INCEPTION)
2000 1999 TO SEPT. 30, 2000
------------- ------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (49,109,280) $ (28,383,399) $(132,045,776)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 178,385 151,147 519,907
Amortization of discount on convertible notes 19,013,486 -- 19,115,160
Amortization of deferred stock compensation 1,539,472 -- 1,539,472
Loss on sales of fixed assets 9,156 -- 9,156
Changes in operating assets and liabilities:
Accrued interest receivable (138,184) 679,606 (193,409)
Prepaid expenses and other current assets (304,611) 1,372 (459,132)
Other assets (135,164) (3,349) (303,402)
Accounts payable (3,916,349) 737,543 3,897,573
Accrued expenses 3,330,229 5,106,686 7,008,330
------------- ------------- -------------
Net cash used in operating activities (29,532,860) (21,710,394) (100,912,120)
Cash flows from investing activities:
Purchases of marketable securities (30,057,921) -- (90,103,208)
Maturities and sales of marketable securities 541,400 17,571,063 60,045,287
Purchase of fixed assets (420,879) (250,274) (1,190,945)
------------- ------------- -------------
Net cash provided by (used in) investing
activities (29,937,400) 17,320,789 (31,248,866)
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 6,095,338 -- 79,395,165
Proceeds from issuances of common stock, net 101,445,745 -- 101,460,593
Repurchases of common stock (30) (73) (255)
Dividends paid in cash (118) (73) (11,064)
------------- ------------- -------------
Net cash provided by (used in) financing
activities 120,889,714 (146) 200,193,218
Effect of exchange rate changes on cash 46,315 3,758 76,803
------------- ------------- -------------
Increase (decrease) in cash and cash equivalents 61,465,769 (4,385,993) 68,109,035
Cash and cash equivalents at beginning of period 6,643,266 8,997,522 --
------------- ------------- -------------
Cash and cash equivalents at end of period $ 68,109,035 $ 4,611,529 68,109,035
============= ============= =============
Non-cash transactions:
Dividends paid on preferred stock $ 31,894,474 $ 5,351,178 40,106,652
============= ============= =============
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 nine months ended September 30, 2000
are not necessarily indicative of the results that may be expected for the
entire fiscal year ending December 31, 2000. For further information, refer to
the consolidated financial statements and notes thereto included in our
Registration Statement on Form S-1, as filed with the Securities and Exchange
Commission on August 4, 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 nine
months ended September 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 SEPT. 30, NINE MONTHS ENDED SEPT. 30,
---------------------------- -----------------------------
2000 1999 2000 1999
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Basic and diluted
Net loss
$ (9,458,633) $ (8,876,856) $(49,109,280) $(28,383,399)
Dividends and accretion to redemption
value of redeemable preferred stock (1,624,395) (1,498,542) (30,342,988) (4,370,770)
------------ ------------ ------------ ------------
Net loss attributable to
common stockholders $(11,083,028) $(10,375,398) $(79,452,268) $(32,754,169)
============ ============ ============ ============
Weighted average common shares
outstanding 16,644,519 836,367 6,156,621 855,112
Less: unvested restricted common
shares outstanding (177,490) (296,322) (191,770) (366,140)
------------ ------------ ------------ ------------
Weighted average common shares
used to compute net loss per share 16,467,030 540,046 5,964,852 488,973
============ ============ ============ ============
Basic and diluted net loss per share $ (0.67) $ (19.21) $ (13.32) $ (66.99)
============ ============ ============ ============
</TABLE>
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THE MEDICINES COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Unaudited pro forma basic and diluted
Net loss $ (9,458,633) $ (8,876,856) $(49,109,280) $(28,383,399)
Interest expense on convertible notes
-- -- 19,390,414 --
Dividends and accretion to redemption
value of redeemable preferred stock -- -- -- --
------------ ------------ ------------ ------------
Net loss to compute pro forma
net loss per share $ (9,458,633) $ (8,876,856) $(29,718,866) $(28,383,399)
============ ============ ============ ============
Weighted average common shares
used to compute pro forma net loss
per share 16,467,030 540,046 5,964,852 488,973
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 11,047,001 17,597,331 17,257,763 16,847,256
------------ ------------ ------------ ------------
Weighted average common shares
used to compute pro forma net loss
per share 27,514,031 18,137,377 23,222,614 17,336,229
============ ============ ============ ============
Unaudited pro forma basic and
diluted pro forma net loss per share $ (0.34) $ (0.49) $ (1.28) $ (1.64)
============ ============ ============ ============
</TABLE>
Options to purchase 2,521,316 and 912,957 shares of common stock as of September
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
September 30, 2000 were excluded from the computation of diluted net loss per
share as their effect would have been antidilutive.
During the three and nine months ended September 30, 2000, the Company issued
options to purchase 636,286 and 2,247,615 shares of common stock, 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 (as of the
date of grant) of the Company's common stock in connection with the Company's
initial public offering (the "IPO"). Also during the three and nine months ended
September 30, 2000, options to purchase shares of 7,577 and 65,869 shares of
common stock were cancelled because employees left the Company before options
vested. The total deferred compensation associated with options granted during
the three and nine months ended September 30, 2000 was approximately $4.6
million and $17.3 million, respectively. Included in the results of operations
for the three and nine months ended September 30, 2000 is compensation expense
of approximately $932,000 and $1.5 million, 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 $6.1
million on May 17, 2000. In addition, on May 17, 2000, convertible notes in the
aggregate principal amount of $19.3 million and accrued interest were converted
into 4,535,366 shares of Series IV Preferred Stock. The Series IV Preferred
Stock carried terms and conditions similar to the Company's Series I, Series II,
and Series III Redeemable Convertible Preferred Stock. The Series IV Preferred
Stock was convertible into common stock at a 1-for-0.73 conversion rate and
automatically converted upon the closing of the IPO. 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 was convertible.
In accordance with EITF 98-5, the total amount of such beneficial conversion was
approximately $25.5 million. 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 $15.2 million from
substantially all of its existing investors. These commitments terminated upon
the closing of the IPO.
4. INITIAL PUBLIC OFFERING
In its 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 a price of
$16.00 per share. The Company received proceeds of approximately $101.4 million,
net of underwriting discounts and commissions, and estimated expenses relating
to the IPO. Simultaneously with the 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 $15.2 million 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.
5. COMPREHENSIVE INCOME (LOSS)
Comprehensive losses for the three and nine months ended September 30, 2000 were
$47,000 and $56,000, respectively.
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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 September
30, 2000, had a deficit accumulated during the development stage of $174.4
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. In the fourth quarter of 2000, we
expect increased cash outlays for research and development costs associated with
our ongoing clinical trials and manufacturing development activities. We also
expect increased outlays during the fourth quarter of 2000 for sales, general
and administrative costs related to the commercial launch in the United States
of Angiomax, the Company's lead product. 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 nine months ended September 30, 2000, we recorded deferred
stock compensation on the grant of stock options of approximately $4.6 million
and $17.3 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 IPO 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
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approximately $932,000 and $1.5 million for the three and nine months
ended September 30, 2000, respectively. We expect to record an amortization
expense for deferred compensation as follows: approximately $2.0 million for the
last quarter of 2000, approximately $4.3 million for 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 of common stock into
which it was 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, federal net
operating loss 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 loss carryforwards may be limited pursuant to regulations
promulgated under the Internal Revenue Code of 1986, as amended.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2000 and 1999
Research and Development Expenses. Research and development expenses decreased
14% to $6.7 million for the three months ended September 30, 2000, from $7.9
million for the three months ended September 30, 1999. The decrease in research
and development expenses of $1.2 million was primarily due to reduced
development expenses reflecting our termination of the semilog manufacturing
development program with Lonza AG in the fourth quarter of 1999 and to a
reduction in development activity for IS-159 in 2000. This reduction in costs
was partly offset by the development costs incurred for CTV-05, a biotherapeutic
drug that we exclusively licensed from GyneLogix in August 1999 for the
treatment of bacterial vaginosis, and to the increased enrollment rate of our
Angiomax HERO-2 phase 3 clinical trial for acute myocardial infraction during
the three months ended September 30, 2000.
General and Administrative Expenses. General and administrative expenses
increased 215% to $3.6 million for the three months ended September 30, 2000,
from $1.1 million for the three months ended September 30, 1999. The
increase in general and administrative expenses of $2.5 million 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. Interest income increased 579% to $839,000 for the three months
ended September 30, 2000, from $124,000 for the three months ended September 30,
1999. The
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increase in interest income of $715,000 was primarily due to interest
income arising from investment of the proceeds of the IPO during the three
months ended September 30, 2000.
Nine Months Ended September 30, 2000 and 1999
Research and Development Expenses. Research and development expenses decreased
6% to $23.5 million for the nine months ended September 30, 2000, from $25.1
million for the nine months ended September 30, 1999. The decrease in research
and development expenses of $1.6 million was primarily due to reduced
development expenses reflecting our termination of the semilog manufacturing
development program with Lonza AG in the fourth quarter of 1999 and to a
reduction in development activity for IS-159 in 2000. This reduction in costs
was partly offset by the recognition of $6.5 million of research and development
costs in connection with the completion of UCB Bioproduct's manufacture of
Angiomax bulk drug substance in March 2000, the increased development costs of
CTV-05, and the increased 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 80% to $7.3 million for the nine months ended September 30, 2000, from
$4.1 million for the nine months ended September 30, 1999. The increase in
general and administrative expenses of $3.2 million 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 increased 38% to $1.1
million for the nine months ended September 30, 2000, from $815,000 for the nine
months ended September 30, 1999. The increase in interest income of $309,000 was
primarily due to interest income arising from investment of the proceeds of the
IPO during the three months ended September 30, 2000.
Interest expense was $19.4 million for the nine months ended September 30, 2000
and related to interest charges and amortization of discount on our convertible
notes issued in October 1999 and March 2000. The notes were converted into
preferred stock in May 2000, accelerating the remaining unamortized discount.
LIQUIDITY AND CAPITAL RESOURCES
In August and September 2000, we received $101.4 million in net proceeds from
the sale of common stock in our IPO at a price of $16.00 per share. Prior to the
IPO, we had financed our operations primarily through the private placement of
equity, convertible debt securities and warrants. Until the IPO, 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 September 30, 2000, we had $97.3 million in cash, cash equivalents and
marketable securities, as compared to $7.2 million as of December 31, 1999.
For the nine months ended September 30, 2000, we used net cash of $29.5 million
in operating activities. This consisted of a net loss of $49.1 million, combined
with a decrease in accounts
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payable of $3.9 million, partly offset by an increase in accrued expenses of
$3.3 million, non-cash amortization of discount on convertible notes of $19.0
million and deferred compensation of $1.5 million. We spent $29.9 million for
investing activities, which consisted principally of purchases of marketable
securities with net proceeds from the IPO. We received $120.9 million from
financing activities, primarily from our IPO, which resulted in net proceeds of
$101.4 million, and from the issuance of convertible notes and preferred stock,
which resulted in proceeds of $19.4 million during the nine months ended
September 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 nine
months ended September 30, 2000 and was expensed during that period. We expect
the manufacture and delivery of the remaining material to be completed in the
fourth quarter of 2000. All costs associated with the manufacture of Angiomax
bulk drug substance and finished products will be expensed until FDA approval of
Angiomax. Should FDA approval of Angiomax come before we take delivery of the
Angiomax bulk drug substance, then such material will be treated as inventory,
reducing our research and development expenses in fiscal 2000, but increasing
our cost of sales in fiscal 2001 and possibly the following year.
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 timing of
regulatory approval of Angiomax and whether Angiomax is commercially successful,
the progress, level and timing of our research and development activities, the
cost 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
will be sufficient to fund our operations for at least 12 months. If our
existing resources 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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<PAGE> 14
PART II OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
To supplement the information previously reported, we are furnishing the
following information with respect to the use of proceeds from our IPO of common
stock in August 2000:
(1) The effective date and Commission file number of the
registration statement for the offering were August 7, 2000
and 333-37404, respectively.
(4)(i) The offering terminated on August 7, 2000 after all of the
shares were sold. On September 8, 2000, the underwriters
purchased an additional 900,000 shares pursuant to their
over-allotment option.
(4)(iv) All of the 6,900,000 shares sold in the offering were
registered for the account of the Company.
(4)(v) From August 6, 2000 through September 30, 2000, the actual
expenses incurred in connection with the offering are as
follows:
Underwriting discount $7,728,000
SEC registration fee $ 29,000
NASD filing fee $ 13,000
NASDAQ entry fee $ 94,000
Accounting fees and expenses $ 374,000
Legal fees and expenses $ 474,000
Printing and mailing expenses $ 234,000
Roadshow expenses $ 266,000
----------
Total $9,212,000
==========
Payments of expenses were to persons other than directors or
officers (or their associates), persons owning 10% or more of
the equity securities of the Company or affiliates of the
Company.
(4)(vi) The net offering proceeds to the Company after expenses were
approximately $101.4 million
(4)(vii) From August 7, 2000 through September 30, 2000, the Company
used approximately $3.8 million and $215,000 of the net
proceeds from the offering for operating activities, including
operating losses of $3.6 million and working capital, and the
purchase of fixed assets, respectively. The balance of the
offering proceeds ($97.4 million) was invested in cash
equivalents or other marketable securities. All payments from
the offering proceeds were to persons other than directors or
officers (or their associates), persons owning 10% or more of
the equity securities of the Company or affiliates of the
Company.
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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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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE MEDICINES COMPANY
Date: November 8, 2000 By: /s/ Peyton J. Marshall
---------------------------------
Peyton J. Marshall
Chief Financial Officer
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Exhibit Index
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
10 Amendment No. 1 dated as of August 8, 2000 to the Services
Agreement dated April 1, 2000 between the Company and
Stack Pharmaceuticals, Inc.
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.
</TABLE>
(1) Incorporated herein by reference to the Company's Form 10-Q for the quarter
ended June 30, 2000
Page 15
