<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 5, 2001
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________________
THE MEDICINES COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 2834 04-3324394
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE) IDENTIFICATION NUMBER)
</TABLE>
ONE CAMBRIDGE CENTER
CAMBRIDGE, MASSACHUSETTS 02142
(617) 225-9099
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
________________________
CLIVE A. MEANWELL
CHIEF EXECUTIVE OFFICER
THE MEDICINES COMPANY
ONE CAMBRIDGE CENTER
CAMBRIDGE, MASSACHUSETTS 02142
(617) 225-9099
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OR AGENT FOR SERVICE)
________________________
COPIES TO:
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STEVEN D. SINGER, ESQ. GERALD S. TANENBAUM, ESQ.
STUART M. FALBER, ESQ. MICHAEL E. WEISS, ESQ.
HALE AND DORR LLP CAHILL GORDON & REINDEL
60 STATE STREET 80 PINE STREET
BOSTON, MASSACHUSETTS 02109 NEW YORK, NEW YORK 10005-1702
(617) 526-6000 (212) 701-3000
</TABLE>
________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
________________________
CALCULATION OF REGISTRATION FEE
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<CAPTION>
================================================================================================================================
NUMBER OF PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES SHARES TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
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Common Stock ($0.001 par value per
share)................................... 4,600,000 $17.375 $79,925,000 $19,982
================================================================================================================================
</TABLE>
(1) Includes 600,000 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee. Based
on the average of the high and low sales price for the Common Stock on
January 4, 2001.
THE REGISTRATION HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SUCH SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE> 2
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is
not an offer to sell these securities, and it is not soliciting an offer
to buy these securities in any jurisdiction where the offer or sale is
not permitted.
SUBJECT TO COMPLETION
DATED JANUARY 5, 2001
PROSPECTUS
4,000,000 Shares
[THE MEDICINES COMPANY LOGO]
Common Stock
The Medicines Company is offering all of the shares of common stock. Our common
stock is listed on the Nasdaq National Market under the symbol "MDCO". On
January 2, 2001, the closing price of our common stock on the Nasdaq National
Market was $19.75 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. PLEASE READ "RISK FACTORS"
BEGINNING ON PAGE 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------------------------------------------------------------
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT THE MEDICINES COMPANY
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<S> <C> <C> <C>
Per Share $ $ $
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Total $ $ $
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</TABLE>
We have granted the underwriters the right to purchase up to an additional
600,000 shares of common stock to cover over-allotments.
J.P. MORGAN & CO. ROBERTSON STEPHENS
CIBC WORLD MARKETS U.S. BANCORP PIPER JAFFRAY
January , 2001
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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Prospectus Summary......................... 3
Risk Factors............................... 7
Special Note Regarding Forward-Looking
Statements............................... 14
Use of Proceeds............................ 15
Price Range of Common Stock and Dividend
Policy................................... 15
Capitalization............................. 16
Dilution................................... 17
Selected Consolidated Financial Data....... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 20
Business................................... 24
</TABLE>
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PAGE
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Management................................. 42
Transactions With Executive Officers,
Directors and Five Percent
Stockholders............................. 52
Principal Stockholders..................... 57
Description of Capital Stock............... 60
Shares Eligible for Future Sale............ 63
Underwriting............................... 64
Legal Matters.............................. 66
Experts.................................... 66
Where You Can Find More Information........ 66
Index to Financial Statements.............. F-1
</TABLE>
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. This
summary does not contain all of the information you should consider before
buying shares of our common stock. You should read the entire prospectus
carefully.
THE MEDICINES COMPANY
We acquire, develop and commercialize biopharmaceutical products that are in
late stages of development or have been approved for marketing. In December
2000, we received marketing approval from the U.S. Food and Drug Administration,
or FDA, for Angiomax, our lead product, for use as an anticoagulant in
combination with aspirin in patients with unstable angina undergoing coronary
balloon angioplasty. Coronary angioplasty is a procedure used to restore normal
blood flow in an obstructed artery in the heart. We plan to begin selling
Angiomax in the United States in January 2001.
We are also developing Angiomax for additional potential applications for use in
the treatment of ischemic heart disease, a condition which occurs when organs
receive an inadequate supply of oxygen as a result of decreased blood flow. To
date, clinical investigators have administered Angiomax to over 10,900 patients
in clinical trials for the treatment and prevention of blood clots in a wide
range of hospital applications. We believe that Angiomax will become the leading
replacement for heparin in hospital care. In the United States, heparin is the
most widely-used acute care anticoagulant, a type of drug used to prevent or
slow the formation of blood clots, and is used to treat approximately five
million hospitalized patients per year.
ANGIOMAX
Angiomax directly blocks or inhibits the actions of thrombin, a key component in
the formation and growth of blood clots. By blocking thrombin directly, rather
than indirectly like heparin, Angiomax inhibits the actions of thrombin both in
the clot and in the blood. Angiomax's inhibition of thrombin is reversible,
which means that its thrombin blocking effect wears off over time, allowing
thrombin to again work in the clotting process. This reversibility is associated
with a reduced risk of bleeding.
In the clinical trials in angioplasty, Angiomax has:
- reduced the frequency of life-threatening coronary events including heart
attack and the need for emergency coronary procedures;
- reduced the likelihood of major bleeding and the need for blood transfusion;
- demonstrated a predictable anticoagulant response to a specific Angiomax dose,
which enables simplified dosing; and
- been used in combination with GP IIb/IIIa inhibitors and demonstrated no
evidence of significant interactions.
Our development programs are designed to expand the applications of Angiomax for
the treatment of ischemic heart disease. We have:
- a randomized, open-label Phase 3b trial program in angioplasty underway
comparing Angiomax to heparin, with and without GP IIb/IIIa inhibitors;
- a 17,000 patient Phase 3 trial program underway studying the use of Angiomax
for the treatment of patients who have suffered a heart attack;
- a Phase 3 trial program underway studying the use of Angiomax for the
treatment of patients undergoing angioplasty who experience reduced platelet
count and clotting due to an allergic, or immunological, reaction to heparin;
- a Phase 2 trial program underway studying the use of Angiomax as an
anticoagulant in patients undergoing coronary artery bypass graft surgery
without the use of a bypass pump; and
- plans to commence a Phase 3 trial program to evaluate the use of Angiomax in
patients with unstable angina, a coronary condition in which patients
experience the new onset of severe chest pain, increasingly frequent chest
pain or chest pain that occurs while they are at rest.
STRATEGY
Our strategy is to build a commercial biopharmaceutical operation by acquiring,
developing and commercializing products in late-stage clinical development,
which we refer to as our product candidates, and approved products. We will
actively
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<PAGE> 5
manage the development and commercialization of these product candidates and
approved products. We expect our first product, Angiomax, to become the
cornerstone product of an acute hospital product franchise that we plan to
build. We intend to market Angiomax in the United States using a 52 person sales
force contracted from Innovex, Inc., which we will manage.
We are also focused on specialty anti-infectives and are developing a second
product candidate, CTV-05, a proprietary biotherapeutic agent with a potentially
broad range of applications in the treatment of gynecological and reproductive
infections. We are currently studying CTV-05 in a double-blind placebo
controlled Phase 2 trial program examining the safety and effectiveness of the
compound as an adjunct to antibiotic therapy in the treatment of bacterial
vaginosis, the most common gynecological infection in women of childbearing age.
We intend to market CTV-05 and our other products in the United States by
supplementing our existing commercial organization, contracting with external
organizations, which we would manage, or collaborating with other
biopharmaceutical companies.
Our principal objectives include:
- launching Angiomax for use in patients with unstable angina undergoing
angioplasty;
- developing and commercializing Angiomax as the leading replacement for heparin
for use in the treatment of ischemic heart disease;
- acquiring additional products with (1) existing clinical data which provides
reasonable evidence of safety and efficacy, (2) an anticipated time to market
of four years or less and (3) potential cost savings to payors or improved
efficiency of patient care; and
- making the best use of our resources through our relationships with contract
development, manufacturing and sales companies.
CORPORATE INFORMATION
The Medicines Company was incorporated in Delaware in July 1996. Our corporate
website is located at www.themedicinescompany.com. We do not intend for
information found on our website to be part of this prospectus. We own or have
rights to various trademarks and trade names used in our business, including The
Medicines Company name and logo and Angiomax(TM).
Our executive offices are located at One Cambridge Center, Cambridge,
Massachusetts 02142, and our telephone number is (617) 225-9099.
4
<PAGE> 6
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THE OFFERING
The following information reflects 30,320,450 shares of common stock outstanding
as of December 31, 2000. The number of outstanding shares of common stock does
not include:
- 3,212,112 shares of common stock issuable upon the exercise of stock options
outstanding as of December 31, 2000 at a weighted average exercise price of
$9.43 per share;
- 3,269,564 shares of common stock issuable upon the exercise of common stock
purchase warrants outstanding as of December 31, 2000 at an exercise price of
$5.92 per share; and
- an additional 1,432,083 shares of common stock that we could issue under our
stock plans.
Unless otherwise indicated, information in this prospectus gives effect to the
following:
- no exercise of the underwriters' over-allotment option; and
- an assumed public offering price of $19.75 per share.
COMMON STOCK OFFERED................... 4,000,000 shares
COMMON STOCK TO BE OUTSTANDING AFTER
THIS OFFERING.......................... 34,320,450 shares
USE OF PROCEEDS........................ We expect to use the net proceeds to:
- fund additional clinical trials of
Angiomax and other product
development activities;
- fund further commercialization
activities of Angiomax for use in
patients undergoing angioplasty;
- fund the acquisition of additional
product candidates and approved
products; and
- fund working capital, capital
expenditures and other general
corporate purposes.
Please read "Use of Proceeds".
NASDAQ NATIONAL MARKET SYMBOL.......... "MDCO"
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5
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
In the table below, we provide you with our summary consolidated financial data.
We have prepared this information using our audited consolidated financial
statements for the period July 31, 1996 (date of inception) to December 31, 1996
and for the years ended December 31, 1997, 1998 and 1999 and our unaudited
consolidated financial statements for the nine months ended September 30, 1999
and 2000. The pro forma net loss per share data reflects the conversion of our
convertible notes and accrued interest, and the conversion of our outstanding
convertible preferred stock and accrued dividends into common stock upon the
closing of our initial public offering in August 2000. The as adjusted balance
sheet data reflects the sale of 4,000,000 shares of common stock in this
offering at an assumed offering price of $19.75 per share after deducting
underwriting discounts and estimated offering expenses. The pro forma net loss
per share data and the as adjusted balance sheet data do not include the effect
of any options or warrants outstanding. The following data should be read in
conjunction with our consolidated financial statements, including the
accompanying notes, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus.
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<CAPTION>
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PERIOD FROM
INCEPTION
(JULY 31, 1996) NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------------------------- -------------------------
1996 1997 1998 1999 1999 2000
--------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
In thousands, except share and per share
data
STATEMENTS OF OPERATIONS DATA
Operating expenses
Research and development................ $ 827 $ 16,044 $ 24,005 $ 30,345 $ 25,116 $ 23,503
General and administrative.............. 702 2,421 6,248 5,008 4,082 7,340
------ ------- ------- ------- ------- -------
Total operating expenses.............. 1,529 18,465 30,253 35,353 29,198 30,843
------ ------- ------- ------- ------- -------
Loss from operations...................... (1,529) (18,465) (30,253) (35,353) (29,198) (30,843)
Interest income (expense), net............ 62 659 1,302 640 815 (18,266)
------ ------- ------- ------- ------- -------
Net loss.................................. (1,467) (17,806) (28,951) (34,713) (28,383) (49,109)
Dividends and accretion to redemption
value of redeemable convertible
preferred stock......................... (118) (2,018) (3,959) (5,893) (4,371) (30,343)
------ ------- ------- ------- ------- -------
Net loss attributable to common
stockholders............................ $(1,585) $(19,824) $(32,910) $(40,606) $(32,754) $(79,452)
------ ------- ------- ------- ------- -------
------ ------- ------- ------- ------- -------
Net loss attributable to common
stockholders per common share, basic and
diluted................................. $ (2.85) $ (4.06) $ (6.03) $ (80.08) $ (66.99) $ (13.32)
------ ------- ------- ------- ------- -------
------ ------- ------- ------- ------- -------
Shares used in computing net loss
attributable to common stockholders per
common share, basic and diluted......... 557,178 4,887,230 5,454,653 507,065 488,973 5,964,852
Unaudited pro forma net loss attributable
to common stockholders per common share,
basic and diluted....................... $ (1.94) $ (1.64) $ (1.28)
Shares used in computing unaudited pro
forma net loss attributable to common
stockholders per common share, basic and
diluted................................. 17,799,876 17,336,229 23,222,614
</TABLE>
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<CAPTION>
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AS OF SEPTEMBER 30, 2000
-------------------------
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
In thousands
BALANCE SHEET DATA
Cash, cash equivalents and marketable securities............ $ 97,291 $ 171,046
Working capital............................................. 88,060 161,815
Total assets................................................ 99,664 173,419
Deficit accumulated during the development stage............ (174,377) (174,377)
Total stockholders' equity.................................. 89,018 162,773
</TABLE>
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<PAGE> 8
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk and you may lose
all or part of your investment. Please read "Special Note Regarding
Forward-Looking Statements."
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF NET LOSSES, AND WE EXPECT TO CONTINUE TO INCUR NET LOSSES
AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY
We are a development stage company with no revenues to date. We have incurred
net losses since our inception, including net losses of approximately $34.7
million for the year ended December 31, 1999 and approximately $49.1 million for
the nine months ended September 30, 2000. As of September 30, 2000, we had an
accumulated deficit of approximately $174.4 million. We expect to make
substantial expenditures to further develop and commercialize our products and
expect that our rate of spending will accelerate as the result of costs and
expenses associated with increased clinical trials, regulatory approval and
commercialization of products. As a result, we are unsure when we will become
profitable, if at all.
OUR BUSINESS WILL BE VERY DEPENDENT ON THE COMMERCIAL SUCCESS OF ANGIOMAX
Other than Angiomax, our products are in clinical phases of development and,
even if approved by the FDA, are a number of years away from entering the
market. As a result, Angiomax will account for almost all of our revenues for
the foreseeable future. The commercial success of Angiomax will depend upon its
acceptance by physicians, patients and other key decision-makers as a
therapeutic and cost-effective alternative to heparin and other products used in
current practice. If Angiomax is not commercially successful, we will have to
find additional sources of revenues or curtail or cease operations.
FAILURE TO RAISE ADDITIONAL FUNDS IN THE FUTURE MAY AFFECT THE DEVELOPMENT,
MANUFACTURE AND SALE OF OUR PRODUCTS
Our operations to date have generated substantial and increasing needs for cash.
Our negative cash flow from operations is expected to continue into the
foreseeable future. The clinical development of Angiomax for additional
indications, the development of our other product candidates and the acquisition
and development of additional product candidates by us will require a commitment
of substantial funds. Our future capital requirements are dependent upon many
factors and may be significantly greater than we expect.
We anticipate that our existing capital resources, together with the net
proceeds from this offering, and interest earned on such proceeds, will enable
us to maintain our current operations for at least the next 18 months. If our
existing resources and the proceeds of this offering are insufficient to satisfy
our liquidity requirements, if this offering is not completed or if we acquire
any additional product candidates, we may be required to seek additional
financing prior to that time. We intend to seek additional funding through
collaborative arrangements and private or public financings, including equity
financings. Such additional funding may not be available on acceptable terms, if
at all. If additional funds are not available to us, we may need to delay or
significantly curtail our acquisition, development or commercialization
activities.
WE CANNOT EXPAND THE INDICATIONS FOR ANGIOMAX UNLESS WE RECEIVE FDA APPROVAL FOR
EACH ADDITIONAL INDICATION. FAILURE TO EXPAND THESE INDICATIONS WILL LIMIT THE
SIZE OF THE COMMERCIAL MARKET FOR ANGIOMAX
We received in December 2000 approval from the FDA of the use of Angiomax as an
anticoagulant in combination with aspirin in patients with unstable angina
undergoing coronary balloon angioplasty. One of our key objectives is to expand
the indications for which the FDA will approve Angiomax. In order to do this, we
will need to conduct additional clinical trials and obtain FDA approval for each
proposed indication. If we are unsuccessful in expanding the approved indication
for the use of Angiomax, the size of the commercial market for Angiomax will be
limited.
FAILURE TO OBTAIN REGULATORY APPROVAL IN FOREIGN JURISDICTIONS WILL PREVENT US
FROM MARKETING ANGIOMAX ABROAD
We intend to market our products in international markets, including Europe. In
order to market our products in the European Union and many other foreign
jurisdictions, we must obtain separate regulatory approvals. In February 1998,
we submitted a Marketing Authorization Application, or MAA, to the European
Agency for the Evaluation of Medicinal
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Products, or EMEA, for use in unstable angina patients undergoing angioplasty.
Following extended interaction with European regulatory authorities, the
Committee of Proprietary Medicinal Products, or CPMP, of the EMEA voted in
October 1999 not to recommend Angiomax for approval in angioplasty. The United
Kingdom and Ireland dissented from this decision. We have withdrawn our
application to the EMEA and are in active dialog with European regulators to
determine our course of action including seeking approval of Angiomax in Europe
on a country-by-country basis. We may not be able to obtain approval from any or
all of the jurisdictions in which we seek approval to market Angiomax. Obtaining
foreign approvals may require additional trials and additional expense.
THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS MAY BE TERMINATED OR
DELAYED, AND THE COSTS OF DEVELOPMENT AND COMMERCIALIZATION MAY INCREASE, IF
THIRD PARTIES WHO WE RELY ON TO MANUFACTURE AND SUPPORT THE DEVELOPMENT AND
COMMERCIALIZATION OF OUR PRODUCTS DO NOT FULFILL THEIR OBLIGATIONS
Our development and commercialization strategy entails entering into
arrangements with corporate and academic collaborators, contract research
organizations, contract sales organizations, distributors, third-party
manufacturers, licensors, licensees and others to conduct development work,
manage our clinical trials and manufacture, market and sell our products.
Although we manage these services, we do not have the expertise or the resources
to conduct such activities on our own and, as a result, are particularly
dependent on third parties in most areas.
We may not be able to maintain our existing arrangements with respect to the
commercialization of Angiomax or establish and maintain arrangements to develop
and commercialize any additional products on terms that are acceptable to us.
Any current or future arrangements for the development and commercialization of
our products may not be successful. If we are not able to establish or maintain
our agreements relating to Angiomax or any additional products on terms which we
deem favorable, our financial condition would be materially adversely effected.
Third parties may not perform their obligations as expected. The amount and
timing of resources that third parties devote to developing, manufacturing and
commercializing our products may not be within our control. Furthermore, our
interests may differ from those of third parties that manufacture or
commercialize our products. Disagreements that may arise with these third
parties could delay or lead to the termination of the development or
commercialization of our product candidates, or result in litigation or
arbitration, which would be time consuming and expensive. If any third party
that manufactures or supports the development or commercialization of our
products breaches or terminates its agreement with us, or fails to conduct its
activities in a timely manner, such breach, termination or failure could:
- delay the development or commercialization of Angiomax, our other product
candidates or any additional product candidates that we may acquire or
develop;
- require us to undertake unforeseen additional responsibilities or devote
unforeseen additional resources to the development or commercialization of our
products; or
- result in the termination of the development or commercialization of our
products.
WE ARE CURRENTLY DEPENDENT ON A SINGLE SUPPLIER FOR THE PRODUCTION OF ANGIOMAX
BULK DRUG SUBSTANCE AND A DIFFERENT SINGLE SUPPLIER TO CARRY OUT ALL FILL-FINISH
ACTIVITIES FOR ANGIOMAX
Currently, we obtain all of our Angiomax bulk drug substance from one
manufacturer, UCB Bioproducts S.A., and rely on another manufacturer, Ben Venue
Laboratories, Inc., to carry out all fill-finish activities for Angiomax, which
includes final formulation and transfer of the drug into vials where it is then
freeze-dried and sealed. The FDA requires that all manufacturers of
pharmaceuticals for sale in or from the United States achieve and maintain
compliance with the FDA's current Good Manufacturing Practice, or cGMP,
regulations and guidelines. There are a limited number of manufacturers that
operate under cGMP regulations capable of manufacturing Angiomax. The FDA has
inspected Ben Venue Laboratories for cGMP compliance for the manufacture of
Angiomax and UCB Bioproducts for cGMP compliance in the manufacture of
pharmaceutical ingredients generally. Ben Venue Laboratories and UCB Bioproducts
have informed us that they have no material deficiencies in cGMP compliance. We
do not currently have alternative sources for production of Angiomax bulk drug
substance or to carry out fill-finish activities. In the event that either of
our current manufacturers is unable to carry out its respective manufacturing
obligations to our satisfaction, we may be unable to obtain alternative
manufacturing, or obtain such manufacturing on commercially reasonable terms or
on a timely basis.
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.
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IF WE DO NOT SUCCEED IN DEVELOPING A SECOND GENERATION PROCESS FOR THE
PRODUCTION OF BULK ANGIOMAX DRUG SUBSTANCE, OUR GROSS MARGINS MAY BE BELOW
INDUSTRY AVERAGES
We are currently developing with UCB Bioproducts a second generation process for
the production of bulk Angiomax drug substance. This process involves limited
changes to the early manufacturing steps of our current process in order to
improve our gross margins on the future sales of Angiomax. If we cannot develop
the process successfully or regulatory approval of the process is not obtained
or is delayed, then our ability to improve our gross margins on future sales of
Angiomax may be limited.
CLINICAL TRIALS OF OUR PRODUCT CANDIDATES ARE EXPENSIVE AND TIME CONSUMING, AND
THE RESULTS OF THESE TRIALS ARE UNCERTAIN
Before we can obtain regulatory approvals for the commercial sale of any product
which we wish to develop, we will be required to complete pre-clinical studies
and extensive clinical trials in humans to demonstrate the safety and efficacy
of such product. We are currently conducting four clinical trials of Angiomax
for use in the treatment of ischemic heart disease. There are numerous factors
which could delay our clinical trials or prevent us from completing these trials
successfully. We or the FDA may suspend a clinical trial at any time on various
grounds, including a finding that patients are being exposed to unacceptable
health risks.
The rate of completion of clinical trials depends in part upon the rate of
enrollment of patients. Patient enrollment is a function of many factors,
including the size of the patient population, the proximity of patients to
clinical sites, the eligibility criteria for the trial, the existence of
competing clinical trials and the availability of alternative or new treatments.
In particular, the patient population targeted by some of our clinical trials
may be small. Delays in future planned patient enrollment may result in
increased costs and program delays.
In addition, clinical trials, if completed, may not show any potential product
to be safe or effective. Results obtained in pre-clinical studies or early
clinical trials are not always indicative of results that will be obtained in
later clinical trials. Moreover, data obtained from pre-clinical studies and
clinical trials may be subject to varying interpretations. As a result, the FDA
or other applicable regulatory authorities may not approve a product in a timely
fashion, or at all.
OUR FAILURE TO ACQUIRE AND DEVELOP ADDITIONAL PRODUCT CANDIDATES OR APPROVED
PRODUCTS WILL IMPAIR OUR ABILITY TO GROW
As part of our growth strategy, we intend to acquire and develop additional
pharmaceutical product candidates or approved products. The success of this
strategy depends upon our ability to identify, select and acquire pharmaceutical
products in late-stage development or that have been approved that meet the
criteria we have established. Because we do not 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.
Identifying suitable product candidates and approved products and proposing,
negotiating and implementing an economically viable acquisition is a lengthy and
complex process. In addition, other companies, including those with
substantially greater financial, marketing and sales resources, may compete with
us for the acquisition of product candidates and approved products. We may not
be able to acquire the rights to additional product candidates and approved
products on terms that we find acceptable, or at all.
IF WE BREACH ANY OF THE AGREEMENTS UNDER WHICH WE LICENSE COMMERCIALIZATION
RIGHTS TO PRODUCTS OR TECHNOLOGY FROM OTHERS, WE COULD LOSE LICENSE RIGHTS THAT
ARE IMPORTANT TO OUR BUSINESS
We license commercialization rights to products and technology that are
important to our business, and we expect to enter into additional licenses in
the future. For instance, we acquired our first three products through exclusive
licensing arrangements. See "Business -- License Agreements" for a description
of the terms of these licenses. Under these licenses we are subject to
commercialization and development, sublicensing, royalty, insurance and other
obligations. If we fail to comply with any of these requirements, or otherwise
breach these license agreements, the licensor may have the right to terminate
the license in whole or to terminate the exclusive nature of the license. In
addition, upon the termination of the license we may be required to license to
the licensor the intellectual property that we developed.
9
<PAGE> 11
OUR ABILITY TO MANAGE OUR BUSINESS EFFECTIVELY COULD BE HAMPERED IF WE ARE
UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL AND CONSULTANTS
The biopharmaceutical 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 chief executive officer, Dr.
Clive A. Meanwell, or other key employees or consultants, our business and
operating results could be seriously harmed. Our ability to replace these key
employees may be difficult and may take an extended period of time because of
the limited number of individuals in the biotechnology industry with the breadth
of skills and experience required to develop and commercialize products
successfully. Competition to hire from this limited pool is intense, and we may
be unable to hire, train, retain or motivate such additional personnel.
WE FACE SUBSTANTIAL COMPETITION, WHICH MAY RESULT IN OTHERS DISCOVERING,
DEVELOPING OR COMMERCIALIZING COMPETING PRODUCTS BEFORE OR MORE SUCCESSFULLY
THAN WE DO
The biopharmaceutical industry is highly competitive. Our success will depend on
our ability to develop products and apply technology and our ability to
establish and maintain a market for our products. Potential competitors in the
United States and other countries include major pharmaceutical and chemical
companies, specialized biotechnology firms, universities and other research
institutions. Many of our competitors have substantially greater research and
development capabilities and experience, and greater manufacturing, marketing
and financial resources than we do. Accordingly, our competitors may develop
products or other novel technologies that are more effective, safer or less
costly than any that have been competing or are being developed by us or may
obtain FDA approval for products more rapidly than we are able. Technological
development by others may render our products or product candidates
noncompetitive. We may not be successful in establishing or maintaining
technological competitiveness.
BECAUSE THE MARKET FOR THROMBIN INHIBITORS IS COMPETITIVE, OUR PRODUCT MAY NOT
OBTAIN WIDESPREAD USE
We plan to position Angiomax as a replacement to heparin, which is widely-used
and inexpensive, for use in patients with ischemic heart disease. Because
heparin is inexpensive and has been widely used for many years, medical
decision-makers may be hesitant to adopt our alternative treatment. In addition,
due to the high incidence and severity of cardiovascular diseases, the market
for thrombin inhibitors is large and competition is intense and growing. There
are a number of thrombin inhibitors currently on the market, awaiting regulatory
approval and in development, including orally administered agents.
THE LIMITED RESOURCES OF THIRD-PARTY PAYORS MAY LIMIT THE USE OF OUR PRODUCTS
In general, anticoagulant drugs may be classified in three groups: drugs that
directly or indirectly target and inhibit thrombin, drugs that target and
inhibit platelets and drugs that break down fibrin. Because each group of
anticoagulants acts on different components of the clotting process, we believe
that there will be continued clinical work to determine the best combination of
drugs for clinical use. We expect Angiomax to be used with aspirin alone or in
conjunction with other therapies. Although we do not plan to position Angiomax
as a direct competitor to platelet inhibitors or fibrinolytic drugs, platelet
inhibitors and fibrinolytic drugs may compete with Angiomax for the use of
hospital financial resources. Many U.S. hospitals receive a fixed reimbursement
amount per procedure for the angioplasties and other treatment therapies they
perform. Because this amount is not based on the actual expenses the hospital
incurs, U.S. hospitals may have to choose among Angiomax, platelet inhibitors
and fibrinolytic drugs.
FLUCTUATIONS IN OUR OPERATING RESULTS COULD AFFECT THE PRICE OF OUR COMMON STOCK
Our operating results may vary from period to period based on the amount and
timing of sales of Angiomax to customers in the United States, the availability
and timely delivery of a sufficient supply of Angiomax, the timing and expenses
of clinical trials, the availability and timing of third-party reimbursement and
the timing of approval for our product candidates. If our operating results do
not match the expectations of securities analysts and investors as a result of
these and other factors, the trading price of our common stock may fluctuate.
10
<PAGE> 12
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 and
New Zealand, we do not have a product approved for sale in the United States or
any foreign market. We must obtain approval from the FDA in order to sell our
product candidates in the United States and from foreign regulatory authorities
in order to sell our product candidates in other countries. We must successfully
complete our clinical trials and demonstrate manufacturing capability before we
can file with the FDA for approval to sell our products. The FDA could require
us to repeat clinical trials as part of the regulatory review process. Delays in
obtaining or failure to obtain regulatory approvals may:
- delay or prevent the successful commercialization of any of our product
candidates;
- diminish our competitive advantage; and
- defer or decrease our receipt of revenues or royalties.
The regulatory review and approval process is lengthy, expensive and uncertain.
Extensive pre-clinical data, clinical data and supporting information must be
submitted to the FDA for each additional indication to obtain such approvals,
and we cannot be certain when we will receive these regulatory approvals, if
ever.
In addition to initial regulatory approval, our products and product candidates
will be subject to extensive and rigorous ongoing domestic and foreign
government regulation, as we discuss in more detail in "Business--Government
Regulation." Any approvals, once obtained, may be withdrawn if compliance with
regulatory requirements is not maintained or safety problems are identified.
Failure to comply with these requirements may also subject us to stringent
penalties.
WE MAY NOT BE ABLE TO OBTAIN OR MAINTAIN PATENT PROTECTION FOR OUR PRODUCTS, AND
WE MAY INFRINGE THE PATENT RIGHTS OF OTHERS
The patent positions of pharmaceutical and biotechnology companies like us are
generally uncertain and involve complex legal, scientific and factual issues.
Our success depends significantly on our ability to:
- obtain patents;
- protect trade secrets;
- operate without infringing the proprietary rights of others; and
- prevent others from infringing our proprietary rights.
We may not have any patents issued from any patent applications that we own or
license. If patents are granted, the claims allowed may not be sufficiently
broad to protect our technology. In addition, issued patents that we own or
license may be challenged, invalidated or circumvented. Our patents also may not
afford us protection against competitors with similar technology. Because patent
applications in the United States are maintained in secrecy until patents issue,
others may have filed or maintained patent applications for technology used by
us or covered by our pending patent applications without our being aware of
these applications. In all, we exclusively license 10 issued United States
patents and a broadly filed portfolio of corresponding foreign patents and
patent applications. 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 and services 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.
11
<PAGE> 13
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 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 that 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. We are currently covered, with respect to
our commercial sales in the United States and New Zealand and our clinical
trials, by primary product liability insurance in the amount of $20.0 million
per occurrence and $20.0 million annually in the aggregate on a claims-made
basis. This coverage may not be adequate to cover any product liability claims.
As we commence commercial sales of our products, we may wish to increase our
product liability insurance, and we will need to extend the coverage of our
product liability insurance to cover our commercial sales of Angiomax in the
United States. Product liability coverage is expensive. In the future, we may
not be able to maintain or obtain such product liability insurance on reasonable
terms, at a reasonable cost or in sufficient amounts to protect us against
losses due to product liability claims.
RISKS RELATING TO THE OFFERING
OUR STOCK PRICE COULD BE VOLATILE, WHICH COULD CAUSE YOU TO LOSE PART OR ALL OF
YOUR INVESTMENT
The market price of our common stock, like that of the common stock of many
other biotechnology companies, has been and may continue to be highly volatile.
The stock market has experienced extreme price and volume fluctuations. This
volatility has significantly affected the market prices of securities of many
biotechnology and pharmaceutical companies for reasons frequently unrelated, or
disproportionate, to the operating performance of the specific companies. These
broad market fluctuations may adversely affect the market price of our common
stock. Factors that may have a significant effect on the market price of our
common stock include announcements of technological innovations or new
commercial products by us or our competitors, disclosure of results of clinical
testing or regulatory proceedings, developments in patent or other proprietary
rights, including as a result of any public policy concerns and public concern
as to the safety of products developed by us.
OUR OFFICERS AND DIRECTORS, AND ENTITIES WITH WHICH THEY ARE AFFILIATED, MAY BE
ABLE TO CONTROL THE OUTCOME OF MOST CORPORATE ACTIONS REQUIRING STOCKHOLDER
APPROVAL
After this offering, our directors and executive officers, and entities with
which they are affiliated, will beneficially own, in the aggregate,
approximately 53.5% of our outstanding common stock. Due to this concentration
of ownership, these stockholders as a group will be able to elect the directors
and officers of our company, control the management and affairs of our company
and control most matters requiring a stockholder vote, including:
- the amendment of our organizational documents; or
- the approval of any merger, consolidation, sale or assets or other major
corporate transaction.
WE HAVE ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT AN ACQUISITION AND
COULD ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK
Provisions of our certificate of incorporation and bylaws and of Delaware law
could have the effect of delaying, deferring or preventing an acquisition of our
company. For example, we have divided our board of directors into three classes
that serve staggered three-year terms, we may authorize the issuance of up to
5,000,000 shares of "blank check" preferred stock, our
12
<PAGE> 14
stockholders may not take actions by written consent and may not call special
meetings of stockholders, and our stockholders are limited in their ability to
introduce proposals at stockholder meetings.
THERE IS A LARGE NUMBER OF SHARES THAT MAY BE SOLD IN THE MARKET FOLLOWING THIS
OFFERING. THIS MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK
Sales of a substantial number of our common stock in the public market following
this offering could adversely effect the market price of our common stock by
causing the market price of our common stock to decline. This could impair our
ability to raise capital in the future through the issuance of common stock.
Current stockholders hold in the aggregate approximately 23,397,532 shares of
common stock acquired before our initial public offering. Of these shares, we
believe 2,958,655 shares will become eligible for sale in the public market on
February 3, 2001 upon expiration of lock-up agreements entered into in
connection with our initial public offering and 20,328,355 shares will become
eligible for sale 90 days from the date of this prospectus upon expiration of
lock-up agreements entered into with the underwriters of this offering, subject
to the restrictions of Rule 144.
13
<PAGE> 15
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate to
future events or our future financial performance. We have attempted to identify
these statements by terminology including "anticipate," "believe," "can,"
"continue," "could," "estimate," "expect," "intend," "may," "plan," "potential,"
"predict," "should" or "will" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks and uncertainties
outlined under "Risk Factors," that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in these statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements.
------------------------
You should rely on the information contained in this prospectus. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. We are offering to sell, and seeking offers to buy, shares
of common stock only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of its delivery or of any sale of our common
stock.
14
<PAGE> 16
USE OF PROCEEDS
Our net proceeds from the sale of the 4,000,000 shares of common stock we are
offering, at an assumed public offering price of $19.75 per share, will be
approximately $73.8 million after deducting underwriting discounts and estimated
offering expenses payable by us. If the underwriters' over-allotment option is
exercised in full, the net proceeds will be approximately $85.0 million. We
expect to use the net proceeds to:
- fund additional clinical trials of Angiomax and other product development
activities;
- fund further commercialization activities of Angiomax for use in patients
undergoing angioplasty;
- fund the acquisition of additional product candidates and approved products;
and
- fund working capital, capital expenditures and other general corporate
purposes.
The amounts and timing of our actual expenditures will depend upon numerous
factors, including the status of our product development and commercialization
efforts, the amount of proceeds actually raised in this offering, the amount of
cash generated by our operations, competition and sales and marketing
activities. We may also use a portion of the proceeds for the acquisition of, or
investment in, companies, technologies or assets that complement our business.
However, we have no present understandings, commitments or agreements to enter
into any potential acquisitions or investments. Further, we have not determined
the amounts we plan to spend on any of the areas listed above or the timing of
these expenditures. As a result, our management will have broad discretion to
allocate the net proceeds from this offering. Pending application of the net
proceeds as described above, we intend to invest the net proceeds of the
offering in short-term investment grade and U.S. government securities.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock has been quoted on the Nasdaq National Market under the symbol
"MDCO" since August 7, 2000. The following table sets forth, for the periods
indicated, the high and low intraday sales prices per share of our common stock
as reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
----------------
2000 HIGH LOW
---- ------ ------
<S> <C> <C>
Third Quarter (since August 7, 2000)........................ $35.38 $16.50
Fourth Quarter.............................................. $34.75 $17.13
2001
First Quarter (through January 2, 2001)..................... $20.48 $18.75
</TABLE>
On January 2, 2001, the last reported sale price of our common stock on the
Nasdaq National Market was $19.75 per share. As of the close of business on
January 2, 2001 we had 73 holders of record of our common stock.
We have never declared or paid cash dividends on our common stock. We anticipate
that we will retain all of our future earnings, if any, for use in the expansion
and operation of our business and do not anticipate paying cash dividends in the
foreseeable future. Payment of future dividends, if any, will be at the
discretion of our board of directors.
15
<PAGE> 17
CAPITALIZATION
The following table summarizes as of September 30, 2000 our cash, cash
equivalents and marketable securities and our capitalization:
- on an actual basis; and
- on an as adjusted basis to reflect the sale of 4,000,000 shares of common
stock in this offering at an assumed offering price of $19.75 per share, less
estimated underwriting discounts and estimated offering expenses.
This table does not include:
- 2,595,069 shares of common stock issuable upon the exercise of stock options
outstanding as of September 30, 2000 at a weighted average exercise price of
$4.71 per share or any stock options issued subsequent to September 30, 2000;
- 3,269,564 shares of common stock issuable upon exercise of common stock
purchase warrants outstanding as of September 30, 2000 at an exercise price of
$5.92 per share; or
- 2,072,043 additional shares of common stock that we could issue under our
stock plans as of September 30, 2000 or any additional shares available for
grants subsequent to September 30, 2000 under our stock plans.
This table should be read with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements and accompanying notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
-----------------------
SEPTEMBER 30, 2000
-----------------------
ACTUAL AS ADJUSTED
In thousands, except share data -------- -----------
<S> <C> <C>
Cash, cash equivalents and marketable securities............ $ 97,291 $ 171,046
======== =========
Preferred stock, $1.00 par value, 5,000,000 shares
authorized; none issued actual and as adjusted............ -- --
Stockholders' equity:
Common Stock, $0.001 par value, 75,000,000 shares
authorized, actual and as adjusted; 30,297,532 shares
issued and outstanding, actual and 34,297,532 shares
issued and outstanding, as adjusted....................... 30 34
Additional paid-in capital.................................. 279,133 352,884
Deferred stock compensation................................. (15,740) (15,740)
Deficit accumulated during the development stage............ (174,377) (174,377)
Accumulated other comprehensive income, principally foreign
currency translation...................................... (28) (28)
-------- ---------
Total stockholders' equity............................. 89,018 162,773
-------- ---------
Total capitalization................................... $ 89,018 $ 162,773
======== =========
</TABLE>
16
<PAGE> 18
DILUTION
The net tangible book value of our common stock on September 30, 2000 was $89.0
million. Net tangible book value per share was $2.94 and represents the amount
of our total tangible assets less total liabilities divided by the number of
shares of common stock outstanding. Dilution in net tangible book value per
share represents the difference between the amount per share paid by purchasers
of shares of common stock in this offering and the net tangible book value per
share of our common stock immediately afterwards. After giving effect to the
sale of 4,000,000 shares of our common stock offered by this prospectus at an
assumed public offering price of $19.75 per share, and after deducting estimated
underwriting discounts and estimated offering expenses, our adjusted net
tangible book value at September 30, 2000, would have been approximately $162.8
million or approximately $4.75 per share. This represents an immediate decrease
in net tangible book value of $15.00 per share to new investors purchasing
shares of common stock in this offering. The following table illustrates this
dilution on a per share basis.
<TABLE>
<CAPTION>
---------------
<S> <C> <C>
Public offering price per share............................. $19.75
Net tangible book value per share as of September 30,
2000................................................... $2.94
Increase per share attributable to new investors.......... 1.81
Adjusted net tangible book value per share after the
offering.................................................. 4.75
------
Dilution per share to new investors......................... $15.00
======
</TABLE>
The foregoing discussion and table assume no exercise of any outstanding stock
options or warrants. The exercise of all options and warrants outstanding as of
September 30, 2000 having an exercise price less than the public offering price
would decrease the dilutive effect to new investors to $14.96 per share.
The following table summarizes as of September 30, 2000, the differences between
the number of shares of common stock purchased from us, the total consideration
paid and the average price per share paid by existing stockholders and by the
new investors purchasing shares in this offering. We have assumed a public
offering price of $19.75 per share, and we have not deducted estimated
underwriting discounts and estimated offering expenses in our calculations.
<TABLE>
<CAPTION>
-------------------------------------------------------------
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......................... 30,297,532 88.3% $261,883,000 76.8% $ 8.64
New investors................................. 4,000,000 11.7% 79,000,000 23.2% $19.75
---------- ----- ------------ -----
Total......................................... 34,297,532 100.0% $340,883,000 100.0%
========== ===== ============ =====
</TABLE>
The number of shares of common stock outstanding in the table above is based on
the number of shares outstanding as of September 30, 2000 and excludes:
- 2,595,069 shares of common stock issuable upon exercise of options
outstanding as of September 30, 2000 at a weighted average exercise price of
$4.71 per share; and
- 3,269,564 shares of common stock issuable upon exercise of warrants at an
exercise price of $5.92 per share.
17
<PAGE> 19
SELECTED CONSOLIDATED FINANCIAL DATA
In the table below, we provide you with our selected consolidated financial
data. We have prepared this information using our audited consolidated financial
statements for the period July 31, 1996 (date of inception) to December 31, 1996
and for the years ended December 31, 1997, 1998 and 1999 and our unaudited
consolidated financial statements for the nine months ended September 30, 1999
and 2000. The consolidated financial statements for each of the three years in
the period ended December 31, 1999 which are included in this prospectus have
been audited by Ernst & Young LLP, independent auditors. The consolidated
financial statements for the period July 31, 1996 (date of inception) to
December 31, 1996 which are not included in this prospectus have been audited by
Ernst & Young LLP, independent auditors. The consolidated statements of
operations data for the nine months ended September 30, 1999 and 2000 and the
consolidated balance sheet data as of September 30, 2000 have been derived from
our unaudited consolidated financial statements that appear elsewhere in this
prospectus. The unaudited consolidated financial statements include all
adjustments, consisting of normal recurring accruals, which we consider
necessary for a fair presentation of the financial position and the results of
operations for these periods. Operating results for the nine months ended
September 30, 2000 are not necessarily indicative of the results that may be
expected for the full year.
The pro forma net loss per share data reflects the conversion of our convertible
notes and accrued interest and the conversion of our outstanding convertible
preferred stock and accrued dividends into common stock upon the closing of our
initial public offering in August 2000. The pro forma net loss per share data
does not include the effect of any options or warrants outstanding.
The following data should be read in conjunction with our consolidated financial
statements, including the accompanying notes, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
PERIOD FROM
INCEPTION
(JULY 31, 1996) NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------------------------- --------------------------
1996 1997 1998 1999 1999 2000
--------------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
In thousands, except share and per share data
STATEMENTS OF OPERATIONS DATA
Operating expenses
Research and development....... $ 827 $ 16,044 $ 24,005 $ 30,345 $ 25,116 $ 23,503
General and administrative..... 702 2,421 6,248 5,008 4,082 7,340
----------- -------- -------- -------- -------- --------
Total operating
expenses.............. 1,529 18,465 30,253 35,353 29,198 30,843
----------- -------- -------- -------- -------- --------
Loss from operations............. (1,529) (18,465) (30,253) (35,353) (29,198) (30,843)
Interest income (expense), net... 62 659 1,302 640 815 (18,266)
----------- -------- -------- -------- -------- --------
Net loss......................... (1,467) (17,806) (28,951) (34,713) (28,383) (49,109)
Dividends and accretion to
redemption value of redeemable
convertible preferred stock.... (118) (2,018) (3,959) (5,893) (4,371) (30,343)
----------- -------- -------- -------- -------- --------
Net loss attributable to common
stockholders................... $(1,585) $(19,824) $(32,910) $(40,606) $(32,754) $(79,452)
----------- -------- -------- -------- -------- --------
----------- -------- -------- -------- -------- --------
Net loss attributable to common
stockholders per common share,
basic and diluted.............. $ (2.85) $ (4.06) $ (6.03) $ (80.08) $ (66.99) $ (13.32)
----------- -------- -------- -------- -------- --------
----------- -------- -------- -------- -------- --------
Shares used in computing net loss
attributable to common
stockholders per common share,
basic and diluted.............. 557,178 4,887,230 5,454,653 507,065 488,973 5,964,852
Unaudited pro forma net loss
attributable to common
stockholders per common share,
basic and diluted.............. $ (1.94) $ (1.64) $ (1.28)
Shares used in computing
unaudited pro forma net loss
attributable to common
stockholders per common share,
basic and diluted.............. 17,799,876 17,336,229 23,222,614
</TABLE>
18
<PAGE> 20
<TABLE>
-----------------------------------------------------------
AS OF DECEMBER 31, AS OF
------------------------------------------- SEPTEMBER 30,
1996 1997 1998 1999 2000
------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
In thousands
BALANCE SHEET DATA
Cash, cash equivalents and marketable securities....... $ 3,421 $ 25,376 $ 28,341 $ 7,183 $ 97,291
Working capital (deficit).............................. 3,174 18,779 24,570 (4,103) 88,060
Total assets........................................... 3,473 25,595 29,831 7,991 99,664
Convertible notes...................................... -- -- -- 5,776 --
Redeemable convertible preferred stock................. 4,793 40,306 79,384 85,277 --
Deficit accumulated during the development stage....... (1,585) (21,409) (54,319) (94,925) (174,377)
Total stockholders' (deficit) equity................... (1,582) (21,387) (54,266) (94,558) 89,018
</TABLE>
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read with "Selected Consolidated
Financial Data" and our consolidated financial statements and notes included
elsewhere in this prospectus.
OVERVIEW
We acquire, develop and commercialize biopharmaceutical products that are in
late stages of development or have been approved for marketing. In December
2000, we received marketing approval from the FDA for Angiomax, our lead
product, for use as an anticoagulant in combination with aspirin in patients
with unstable angina undergoing coronary balloon angioplasty. Coronary
angioplasty is a procedure used to restore normal blood flow in an obstructed
artery in the heart. We plan to begin selling Angiomax in the United States in
January 2001. In August and September 2000, we consummated our initial public
offering resulting in $101.4 million in net proceeds.
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, general and administrative expenses and interest expense. 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. Interest expense consists of costs
associated with convertible notes which were issued to fund our business
activities.
We expect to continue to incur operating losses for the foreseeable future as a
result of research and development activities attributable to new and existing
products and costs associated with the 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. 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.
In March 1997, we acquired exclusive worldwide commercial rights from Biogen,
Inc. to the technology, patents, trademarks, inventories, know-how and all
regulatory and clinical information related to Angiomax. Under the Biogen
license, we paid $2.0 million upon execution of the license agreement and are
obligated to pay up to an additional $8.0 million upon reaching certain Angiomax
sales milestones, including the first sale of Angiomax for certain indications.
In addition, we will pay royalties on future sales of Angiomax and on any
sublicense royalties earned.
In August 1999, we acquired exclusive worldwide rights from GyneLogix, Inc. to
the patents and know-how related to the biotherapeutic agent CTV-05. Under the
GyneLogix license, we have paid $400,000 and are obligated to pay up to an
additional $100,000 upon reaching certain development and regulatory milestones
and to fund agreed-upon operational costs of GyneLogix related to the
development of CTV-05 on a monthly basis subject to a limitation of $50,000 per
month. In addition, we will pay royalties on future sales of CTV-05 and on any
sublicense royalties earned.
In July 1998, we acquired from Immunotech S.A., a wholly-owned subsidiary of
Beckman Coulter, Inc., exclusive worldwide rights to IS-159, which is under
clinical investigation for the treatment of acute migraine headache. Under the
Immunotech license, we paid $1.0 million upon execution of the license agreement
and are obligated to pay up to an additional $4.5 million upon reaching certain
development and regulatory milestones. In addition, we will pay royalties on
future sales of IS-159 and on any sublicense royalties earned. We are seeking a
collaborator to develop IS-159 and do not intend to initiate further studies of
IS-159 until we enter into a collaborative agreement.
During the nine months ended September 30, 2000, we recorded deferred stock
compensation on the grant of stock options of approximately $17.3 million,
representing the difference between the exercise price of such options and the
fair market value of our common stock at the date of grant of such options. The
exercise prices of these options were below the
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<PAGE> 22
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 amortization expense for deferred
compensation of approximately $1.5 million for the nine months ended September
30, 2000. 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 convertible preferred stock. These
shares contained a beneficial conversion feature based on the estimated fair
market value as of the date of such sale of the common stock into which such
shares were 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. In the nine months ended September 30,
2000, we also recorded approximately $19.4 million as interest expense,
including the discount on our convertible notes issued in October 1999 and March
2000.
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
Nine Months Ended September 30, 2000 and 1999
Research and Development Expenses. Research and development expenses decreased
6% from $25.1 million for the nine months ended September 30, 1999 to $23.5
million for the nine months ended September 30, 2000. The decrease 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 in AMI during the period.
General and Administrative Expenses. General and administrative expenses
increased 80% from $4.1 million for the nine months ended September 30, 1999 to
$7.3 million for the nine months ended September 30, 2000. The increase 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% from
$815,000 for the nine months ended September 30, 1999 to $1.1 million for the
nine months ended September 30, 2000. The increase of $309,000 was primarily due
to interest income arising from investment of the proceeds of our initial public
offering 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 the amortization of the discount on our
convertible notes issued in October 1999 and March 2000. The notes were
converted into series IV convertible preferred stock in May 2000, accelerating
the remaining unamortized discount.
Years Ended December 31, 1999 and 1998
Research and Development Expenses. Research and development expenses increased
26% from $24.0 million in 1998 to $30.3 million in 1999. The increase of $6.3
million was due to the expansion in 1999 of our clinical development programs,
primarily those relating to our Angiomax HERO-2 Phase 3 clinical trial in AMI
which commenced in late 1998, our IS-159 development program and our Angiomax
trials in angioplasty.
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<PAGE> 23
General and Administrative Expenses. General and administrative expenses
decreased 20% from $6.2 million in 1998 to $5.0 million in 1999. The decrease of
$1.2 million was primarily due to a decrease in Angiomax-related marketing
expenses.
Interest Income and Interest Expense. Interest income decreased 36% from $1.3
million in 1998 to $837,839 in 1999 due to a lower level of cash and marketable
securities available for investment during 1999 as compared to 1998. Interest
expense was $197,455 in 1999 and related to interest expense and amortization of
the discount on our convertible notes issued in the aggregate principal amount
of $6.0 million in October 1999.
Years Ended December 31, 1998 and 1997
Research and Development Expenses. Research and development expenses increased
50% from $16.0 million in 1997 to $24.0 million in 1998. The increase of $8.0
million was due to increased activity under our Angiomax manufacturing
development programs, the expansion of our clinical programs, primarily
resulting from the establishment and initiation of our Angiomax HERO-2 Phase 3
clinical trial in AMI which commenced in late 1998, and initiation of our IS-159
development program.
General and Administrative Expenses. General and administrative expenses
increased 158% from $2.4 million in 1997 to $6.2 million in 1998. The increase
of $3.8 million was due to the commencement of Angiomax-related marketing
activities.
Interest Income. Interest income increased 89% from $688,049 in 1997 to $1.3
million in 1998 due to a higher level of cash and marketable securities
available for investment during 1998 as compared to 1997.
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 initial public offering at a price of $16.00 per
share. Prior to our initial public offering, we had financed our operations
primarily through the private placement of equity, convertible debt securities
and warrants. Until our initial public offering, we had received net proceeds of
$79.4 million from the private placement of equity securities, primarily
redeemable convertible preferred stock, and $19.4 million from the issuance of
convertible notes and warrants.
As of September 30, 2000, we had $97.3 million in cash, cash equivalents and
marketable securities, as compared to $28.3 million and $7.2 million as of
December 31, 1998 and 1999, respectively.
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 for the period of $49.1
million, combined with a decrease in accounts 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 our
initial public offering. We received $120.9 million from financing activities,
primarily from our initial public offering, 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 take title to material and become obligated to 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. The manufacture and delivery of the remaining
material as well as some additional material was completed in the fourth quarter
of 2000. All costs associated with the manufacture of Angiomax bulk drug
substance and finished products to which title has transferred to us prior to
the date of FDA approval of Angiomax will be expensed as research and
development. We will record any Angiomax bulk drug substance to which we take
title after the date of FDA approval of Angiomax as inventory, which will
increase our cost of sales in fiscal 2001 and possibly the following year. In
November 2000, we placed additional orders with UCB Bioproducts for the
manufacture of Angiomax bulk drug substance. Under the terms of these purchase
orders, we are scheduled to take title to material and become obligated to make
payments totaling approximately $24.0 million in fiscal 2001 and early fiscal
2002.
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 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,
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<PAGE> 24
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 anticipate that our existing capital resources, together with the net
proceeds from this offering and interest earned on such proceeds, will enable us
to maintain our current operations for at least the next 18 months. If our
existing resources and the proceeds of this offering are insufficient to satisfy
our liquidity requirements, if this offering is not completed or if we acquire
additional product candidates or approved products, we may be required to seek
additional financing prior to that time. 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.
DISCLOSURE 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> 25
BUSINESS
OVERVIEW
We acquire, develop and commercialize biopharmaceutical products that are in
late stages of development or have been approved for marketing. In December
2000, we received marketing approval from the FDA for Angiomax, our lead
product, for use as an anticoagulant in combination with aspirin in patients
with unstable angina undergoing coronary balloon angioplasty. Coronary
angioplasty is a procedure used to restore normal blood flow in an obstructed
artery in the heart. We plan to begin selling Angiomax in the United States in
January 2001.
We are also developing Angiomax for additional potential applications for use in
the treatment of ischemic heart disease. To date, clinical investigators have
administered Angiomax to over 10,900 patients in clinical trials in the
treatment and prevention of blood clots in a wide range of hospital
applications. We believe that Angiomax will become the leading replacement for
heparin in hospital care. In the United States, heparin is the most widely-used
acute care anticoagulant and is used to treat approximately five million
hospitalized patients per year.
Angiomax directly blocks or inhibits the actions of thrombin, a key component in
the formation and growth of blood clots. By blocking thrombin directly, rather
than indirectly like heparin, Angiomax inhibits the actions of thrombin both in
the clot and in the blood. Angiomax's inhibition of thrombin is reversible,
which means that its thrombin-blocking effect wears off over time, allowing
thrombin to again work in the clotting process. This reversibility is associated
with a reduced risk of bleeding.
In the clinical trials in angioplasty, Angiomax has:
- reduced the frequency of life-threatening coronary events including heart
attack and the need for emergency coronary procedures;
- reduced the likelihood of major bleeding and the need for blood transfusion;
- demonstrated a predictable anticoagulant response to a specific Angiomax dose,
which enables simplified dosing; and
- been used in combination with GP IIb/IIIa inhibitors and demonstrated no
evidence of significant interactions.
Our strategy is to build a commercial biopharmaceutical operation by acquiring,
developing and commercializing product candidates. We will actively manage the
development and commercialization of these product candidates. Our principal
objectives include:
- launching Angiomax for use in patients with unstable angina undergoing
angioplasty;
- developing and commercializing Angiomax as the leading replacement for heparin
for use in the treatment of ischemic heart disease;
- acquiring additional products with (1) existing clinical data which provides
reasonable evidence of safety and efficacy, (2) an anticipated time to market
of four years or less and (3) potential cost savings to payors or improved
efficiency of patient care; and
- making the best use of our resources through our relationships with contract
development, manufacturing and sales companies.
We intend to market Angiomax in the United States using a 52 person sales force
contracted from Innovex, Inc., which we will manage. We intend to market our
other products in the United States by contracting with external organizations,
which we would manage, or by collaborating with other biopharmaceutical
companies.
ANGIOMAX
In December 2000, we received marketing approval from the FDA for Angiomax for
use as an anticoagulant in combination with aspirin in patients with unstable
angina undergoing coronary balloon angioplasty. We expect to begin selling
Angiomax in the United States in January 2001. In September 1999, Angiomax was
approved in New Zealand for use in the treatment of patients undergoing coronary
balloon angioplasty.
We believe Angiomax will be a valuable replacement to heparin, an anticoagulant
used in almost all angioplasty procedures performed in the United States and
administered to a majority of patients treated in hospitals in the United States
for acute
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<PAGE> 26
coronary syndromes, including heart attack. To date, clinical investigators have
administered Angiomax to over 10,700 patients in clinical trials for the
treatment and prevention of blood clots in a wide range of hospital
applications. In clinical trials in angioplasty, use of Angiomax has resulted in
fewer life-threatening coronary events and fewer bleeding events, including the
need for blood transfusion. The therapeutic effect of Angiomax is more
predictable than heparin, which enables simplified dosing. Angiomax's
therapeutic benefit is strongest in high-risk patients who have previously
experienced a heart attack or unstable angina.
We believe that Angiomax has additional potential applications for the treatment
of ischemic heart disease. We currently:
- have a randomized, open-label Phase 3b trial program in angioplasty underway
comparing Angiomax to heparin, with and without GP IIb/IIIa inhibitors;
- have a 17,000 patient Phase 3 trial program underway studying the use of
Angiomax for the treatment of patients who have suffered a heart attack,
otherwise known as AMI;
- have a Phase 3 trial program underway studying the use of Angiomax in the
treatment of patients undergoing angioplasty who experience reduced platelet
count and clotting due to an immunological reaction to heparin, known as
heparin-induced thrombocytopenia and heparin-induced thrombocytopenia and
thrombosis syndrome, or HIT/HITTS;
- have a Phase 2 trial program underway studying the use of Angiomax as an
anticoagulant in patients undergoing coronary artery bypass graft surgery, or
CABG, without the use of a bypass pump; and
- plan to commence a Phase 3 trial program to study the use of Angiomax in
patients with unstable angina, a condition in which patients experience the
new onset of severe chest pain, increasingly frequent chest pain or chest pain
that occurs while they are at rest.
Background
Clotting. Normally, blood loss at the site of an injury is limited by the
formation of blood clots. In general, clotting serves a life-saving function by
reducing bleeding, but sometimes unwanted clots in arteries can lead to heart
attack, stroke or organ failure. A blood clot is a collection of cross-linked
strands of a protein called fibrin that forms a mesh around activated platelets
and red blood cells. Blood clots are formed through precisely regulated
interactions among the blood vessel wall, plasma clotting factors, including
thrombin and fibrinogen, and platelets.
The trigger for the clotting process in an artery is typically a tearing or
spontaneous rupture which exposes cholesterol and fat deposited on a blood
vessel wall to the bloodstream. This may happen without an apparent cause or may
be caused as a direct result of, for example, an angioplasty procedure. In
parallel, the clotting factor, thrombin, is activated, and a thin protective
layer of platelets is deposited at the rupture site. Thrombin and platelets
interact, and thrombin formation, fibrin formation and platelet clumping take
place. A full-blown clot may form rapidly as clot blocks the blood vessel and
may then cut off blood supply to the heart muscle. If this occurs, the muscle
stops working either in part, which is a heart attack, or myocardial infarction,
or completely, which may lead to cardiac arrest as the heart stops beating. This
may result in irreversible damage to the heart or death.
During medical procedures such as coronary angioplasty, the blood clotting
process must be slowed to avoid unwanted clotting in the coronary artery, and
the potential growth or movement of a clot along blood vessels to new sites.
The trigger for clotting in veins is usually slower than that in arteries. In
general, venous clots are caused by slow blood flow, which typically occurs when
patients are immobilized, such as after surgery and during pregnancy, or when
patients experience changes in the blood as a result of diseases such as cancer.
When a clot develops in large, deep veins, which return blood to the heart by
way of the lungs, this condition is referred to as deep vein thrombosis. In some
cases of deep vein thrombosis, part of the clot may break off and move to the
lungs with potentially fatal results.
Anticoagulation Therapy. Anticoagulation therapy attempts to modify actions of
the components in the blood system that cause clot-forming factors leading to
blood clots. The most important approach to the prevention and management of
arterial and venous clots is diet and exercise. When the risks of clot formation
cannot be avoided, or when medical procedures such as angioplasty almost
guarantee some degree of increased risk of clots, anticoagulation therapy is
indicated. Anticoagulation therapy involves the use of drugs to inhibit one or
more components of the clotting process, thereby reducing the risk of clots.
Anticoagulation therapy is usually started immediately after a diagnosis of
blood clots or after risk factors for clotting are identified. Because
anticoagulation therapy reduces clotting, it also may cause excessive bleeding.
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<PAGE> 27
THE CLOTTING PROCESS AND TARGETS FOR ANTICOAGULATION THERAPY
[CHART SHOWING BLOOD CLOTTING MECHANISM]
To date, three principal components of the clotting process, thrombin, fibrin
and platelets, have been targeted for anticoagulation therapy:
- The actions of thrombin in the clotting process may be inhibited by indirect
thrombin inhibitors, such as heparin, which act to turn off coagulation
factors and turn on natural anti-clotting factors such as antithrombin-III, or
AT-III. The actions of thrombin in the clotting process also may be inhibited
by direct thrombin inhibitors, which act directly on thrombin.
- Fibrin may be dissolved after clotting has occurred by products called
fibrinolytics.
- The aggregation of platelets in the clotting process may be inhibited by
products called platelet inhibitors, which act on different pathways,
including specific enzyme pathways like the cyclo-oxygenase and the adenosine
diphosphate, or ADP, pathways and surface sites like the glycoprotein
IIb/IIIa, or GP IIb/IIIa, receptor.
Drugs are currently used alone or in combination with other anticoagulant drugs
to target one or more components of the clotting process. These drugs have
anticoagulant effects but also increase the patient's risk of bleeding. Excess
bleeding is often a risk associated with these drugs due to the high doses
needed to produce anticoagulant effects. In order to reduce this risk,
physicians increasingly use combinations of drugs targeted at different
components of the clotting process at lower doses, which reduce the risk of
thrombosis while minimizing the risk of bleeding.
Indirect Thrombin Inhibitors. In the hospital environment, most patients
undergoing anticoagulation therapy for the prevention and treatment of arterial
and venous thrombosis receive heparin or low molecular weight heparin. In the
United States, approximately five million patients annually receive heparin.
Heparin is a standard component of acute anticoagulation therapy because of the
central role of thrombin in clotting and heparin's rapid anticoagulant effect.
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Heparin's properties as an anticoagulant were discovered in 1916. It is prepared
from the intestines of pigs or cows. Heparin is a complex mixture of
animal-derived sugars with variable anticoagulant potencies. The anticoagulant
effects of heparin on any given patient are difficult to predict because heparin
binds non-specifically to human cells and circulating substances in the blood.
For these and other reasons, heparin, as a non-specific, indirect thrombin
inhibitor, presents a variety of clinical challenges including:
- Weak effect in clots. Because it is an indirect thrombin inhibitor, heparin
is ineffective on thrombin when clots have formed.
- Risk of bleeding. Patients who receive heparin have a high incidence of
bleeding. This is particularly the case with patients who are elderly, female
or underweight. Recent clinical trials have shown that bleeding risk may also
be increased when heparin is used in combination with intravenous platelet
inhibitors.
- Unpredictability. The anticoagulant effect of a given dose of heparin is
unpredictable and therefore requires close monitoring.
- Adverse reaction risk. Heparin can cause HIT/HITTS, a dangerous immunological
reaction.
- Diminished effect in sick patients. Heparin's effect may be reduced in the
presence of blood factors found in patients stressed by disease, such as heart
attack patients.
- Requires other factors for effect. Heparin can only bind to thrombin by first
binding to a blood factor called antithrombin-III, which may be absent or
present in insufficient amounts in some patients.
Physicians are increasingly using low molecular weight heparins as an
alternative to heparin, especially as chronic therapy. In contrast to heparin,
low molecular weight heparins tend to be more specific in their effect and may
be administered once or twice daily by subcutaneous injection on an outpatient
basis. Despite these advantages, low molecular weight heparins exhibit similar
clinical challenges to those of heparin, including a weak effect in clot that
has already formed and a comparable risk of bleeding. In addition, clinicians
are currently unable to monitor the anticoagulant effects of low molecular
weight heparins, making their use in angioplasty problematic.
Angiomax Potential Advantages
Angiomax is a peptide of 20 amino acids that is a quick-acting, direct and
specific inhibitor of thrombin and is administered by intravenous injection.
Angiomax is specific in that it only binds to thrombin and does not bind to any
other blood factors or cells.
Angiomax was engineered based on the biochemical structure of hirudin, a natural
65-amino acid protein anticoagulant. However, Angiomax is reversible while
hirudin is not. This reversibility is associated with a reduced risk of
bleeding.
Angiomax has numerous clinical advantages over heparin including:
- Effective in clots. Angiomax, as a direct thrombin inhibitor, is equally
effective on thrombin in the clot as well as thrombin circulating in the
blood;
- Reduced bleeding risk. As a reversible thrombin inhibitor, Angiomax has
consistently shown clinically meaningful reductions in bleeding as compared to
heparin;
- Predictability. A specified dose of Angiomax results in a predictable level
of anticoagulation;
- Diminished adverse reaction risk. To date, Angiomax has not caused dangerous
immunological reactions in clinical trials;
- Effective in sick patients. Angiomax is effective even in the presence of
blood factors found in patients stressed by disease, for example heart attack
patients; and
- Independent of other factors for effect. Unlike heparin, Angiomax's effect
does not require the presence of antithrombin-III or any other factors to act
on thrombin.
Angiomax Potential Applications
We believe that Angiomax will become the leading replacement for heparin in
acute cardiovascular care. We plan to commercialize Angiomax first for use in
patients undergoing coronary angioplasty. In addition, we are developing
Angiomax for use as an alternative to heparin for the treatment of acute
coronary syndromes, with a Phase 3b trial called REPLACE
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underway in angioplasty, a Phase 3 trial underway in AMI, a Phase 3 trial
underway in HIT/HITTS, a Phase 2 trial underway in CABG without the use of a
bypass pump and a Phase 3 trial planned in patients with unstable angina. Our
development plan is designed to highlight the clinical benefits of Angiomax
initially in broad patient populations treated with heparin at high risk of
clots or bleeding. We are also investigating other applications of Angiomax as
an acute care product.
ANGIOMAX DEVELOPMENT PROGRAMS
[GRAPH DEPICTING CLINICAL STATUS OF OUR PRODUCTS AND POTENTIAL INDICATIONS]
Use of Angiomax in Angioplasty
Angioplasty. Angioplasty is a procedure involving the inflation of a balloon or
deployment of a stent or other device inside an obstructed artery to restore
normal blood flow. The coronary angioplasty procedure itself increases the risk
of coronary clotting potentially leading to myocardial infarction, or MI, urgent
revascularization through repeat angioplasty or CABG, or death.
Based on the most recently available hospital discharge data, in the United
States, there were approximately 686,000 inpatient angioplasty procedures
performed in 1997 and approximately 55,000 outpatient angioplasty procedures
performed in 1996. We believe approximately one half of patients undergoing
angioplasty in an inpatient hospital setting were admitted through the emergency
room and may be categorized as high risk. Many of these high-risk patients have
previously experienced a heart attack or have unstable angina.
To prevent clotting, anticoagulation therapy is routinely administered to
patients undergoing angioplasty. Heparin is currently used as an anticoagulant
in virtually all patients undergoing angioplasty. In addition, platelet
inhibitors such as aspirin, an ADP inhibitor or a GP IIb/IIIa inhibitor are
often administered.
A segment of patients undergoing angioplasty and receiving anticoagulation
therapy are at risk of significant bleeding. For example, the risk is greater
for patients who are elderly, female or underweight.
Angiomax Clinical Experience in Angioplasty. To date, we and the licensor of
Angiomax, Biogen, have conducted clinical trials of Angiomax in over 5,000
patients undergoing angioplasty. These trials have shown that Angiomax is a
predictable anticoagulant, which can be used in combination with other therapies
and which results in fewer adverse clinical events when compared to heparin.
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<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
ANGIOPLASTY TRIALS OF ANGIOMAX
--------------------------------------------------------------------------------------------------------
LEAD INVESTIGATORS COMPLETED PATIENTS PHASE TRIAL/STUDY DESCRIPTION
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
E. Topol 1992 291 2 Angiomax dose-ranging trial
--------------------------------------------------------------------------------------------------------
J. Bittl 1994 4,312 3 Pivotal angioplasty trials comparing
Angiomax with high dose heparin in
unstable angina patients
--------------------------------------------------------------------------------------------------------
M. Abernathy, 1999 30 3 Interaction study of Angiomax with
P. Aylward Ticlid
--------------------------------------------------------------------------------------------------------
L. Wallentin 1999 40 3 Trial comparing Angiomax with heparin
in patients switched from low
molecular weight heparin
--------------------------------------------------------------------------------------------------------
H. White, P. Aylward 2000 26 3 Trial of Angiomax dosing in patients
with normal to moderately impaired
kidney function
--------------------------------------------------------------------------------------------------------
N. Kleiman 2000 42 3b Interaction study of Angiomax with
Integrilin
--------------------------------------------------------------------------------------------------------
E. Topol, N. Kleiman, 1999 60 3 CACHET-A trial comparing Angiomax with
A.M. Lincoff, heparin in full-dose ReoPro patients
R. Harrington
--------------------------------------------------------------------------------------------------------
E. Topol, N. Kleiman, 2000 210 3 CACHET-B/C trial comparing Angiomax
A.M. Lincoff, with ReoPro plus heparin in broad
R. Harrington patient group
--------------------------------------------------------------------------------------------------------
R. Califf, K. Mahaffey Ongoing 18 3 Study of Angiomax in HIT/HITTS
patients
--------------------------------------------------------------------------------------------------------
J. Ormiston 2000 49 3b Angiomax single intravenous dose trial
--------------------------------------------------------------------------------------------------------
J. Ormiston 2000 33 3b Interaction study of Angiomax with
Aggrastat
--------------------------------------------------------------------------------------------------------
A.M. Lincoff Ongoing 135 3b REPLACE trial comparing Angiomax to
heparin, with and without GP IIb/IIIa
inhibitors
--------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 31
Phase 3 Pivotal Trials in Angioplasty. Two similar, randomized double blind
clinical trials compared the use of Angiomax to heparin in a total of 4,312
patients with unstable angina undergoing coronary balloon angioplasty. High
doses of heparin were used in the trials. When measured seven days after
treatment in the hospital, in comparison to heparin-treated patients in the
trials, Angiomax-treated patients experienced:
- 43% fewer clinical events as measured by death, MI, revascularization
procedures or major bleeding;
- 22% fewer ischemic events as measured by death, revascularization or MI; and
- 62% or 65% less bleeding, as measured by a protocol-defined end point of major
bleeding or the transfusion of two or more units of blood, respectively.
The following table summarizes the combined clinical results for all unstable
angina patients in the pivotal Phase 3 angioplasty trials.
<TABLE>
<CAPTION>
--------------------------------------------------
PERCENTAGE
REDUCTION
IN ADVERSE
ANGIOMAX HEPARIN CLINICAL EVENTS P-VALUE*
-------- ------- --------------- --------
<S> <C> <C> <C> <C>
Number of patients......................................... 2,161 2,151
In hospital up to 7 days
Death, MI, revascularization or major bleeding........... 8.3% 14.5% 43% <0.001
Death, MI or revascularization........................... 6.2% 7.9% 22% 0.039
Major bleeding........................................... 3.5% 9.3% 62% <0.001
Transfusion.............................................. 2.0% 5.7% 65% <0.001
At 90 days
Death, MI or revascularization........................... 15.7% 18.5% 15% 0.012
</TABLE>
---------------
* The statistical significance of clinical results is determined by a
widely-used statistical method that establishes the p-value of clinical
results. For example, a p-value of less than 0.01 (p<0.01) means that the
chance of the clinical results occurring by accident is less than 1 in 100.
The trials included a prospectively defined and separately stratified group of
741 patients, who had experienced an MI during the two weeks prior to
angioplasty. The benefits of Angiomax as a direct thrombin inhibitor, compared
to heparin as an indirect thrombin inhibitor, were more pronounced for this
group of 741 patients who had experienced an MI during the two weeks prior to
angioplasty. When measured seven days after treatment in the hospital, the
Angiomax-treated patients experienced the following benefits:
- 64% fewer clinical events as measured by death, MI, revascularization
procedures or major bleeding;
- 51% fewer ischemic events as measured by death, revascularization or MI; and
- 76% or 80% less bleeding, as measured by a protocol-defined major bleeding or
as measured by a transfusion of two or more units of blood.
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<PAGE> 32
The following table summarizes the combined clinical results of the group of
patients who had experienced a heart attack or MI during the two weeks prior to
angioplasty in the pivotal Phase 3 angioplasty trials.
<TABLE>
<CAPTION>
-------------------------------------------------
PERCENTAGE
REDUCTION
IN ADVERSE
ANGIOMAX HEPARIN CLINICAL EVENTS P-VALUE
-------- ------- --------------- -------
<S> <C> <C> <C> <C>
Number of patients......................................... 369 372
In hospital up to 7 days
Death, MI, revascularization or major bleeding........... 6.5% 18.3% 64% <0.001
Death, MI or revascularization........................... 4.9% 9.9% 51% 0.009
Major bleeding........................................... 2.4% 11.8% 80% <0.001
Transfusion.............................................. 1.6% 6.7% 76% <0.001
At 90 days
Death, MI or revascularization........................... 11.7% 20.2% 42% <0.003
</TABLE>
Recent trends in interventional cardiology have resulted in heparin doses lower
than those used in the Angiomax pivotal Phase 3 trials in angioplasty. We
believe that this trend has been encouraged by the increasing combined use of
platelet inhibitors and heparin in angioplasty. In most recent major angioplasty
trials with GP IIb/IIIa inhibitors, lower heparin doses were used than in the
Angiomax pivotal Phase 3 trials.
Heparin Dosing in Pivotal Phase 3 Angioplasty Trial. Analyses of data from a
wide array of recent angioplasty trials show that the bleeding rates for the
heparin patients in our trials were not higher than the bleeding rates for other
trials where lower doses of heparin were used. Ischemic event rates for patients
in the Angiomax pivotal Phase 3 trials were lower than for patients receiving
lower doses of heparin without a GP IIb/IIIa inhibitor in other clinical
studies.
CACHET-B/C Trials in Angioplasty. In February 2000, we completed the CACHET-B/C
study, a 210 patient randomized, multicenter study, in angioplasty. The trial
analyzed the use of Angiomax versus low-dose heparin. All heparin patients also
received ReoPro. Although Angiomax patients could receive ReoPro under certain
circumstances, physicians in the trial opted not to use ReoPro in 76% of the
Angiomax patients.
The CACHET-B/C patient study population was broader than in earlier Angiomax
trials, targeting lower risk patients undergoing angioplasty with expected
stenting. Heparin and Angiomax doses were designed to achieve similar levels of
anticoagulation. Aspirin with Ticlid or Plavix was used in most patients. As in
previous trials, Angiomax provided predictable levels of dose response
anticoagulation.
The combined incidence of death, MI, revascularization or major bleeding
reported within seven days was 3.5% in Angiomax patients and 14.3% in heparin
and ReoPro patients with a p-value of 0.013.
Low platelet count, or thrombocytopenia, was significantly less frequent among
Angiomax patients than among heparin/ ReoPro patients with a p-value of 0.012.
Other adverse events occurred with similar frequency in both groups. Angiomax
showed no apparent pharmacological interaction with ReoPro.
The results of the CACHET-B/C study provides more support for the use of
Angiomax as a foundation anticoagulant for angioplasty. In this study, Angiomax
demonstrated predictable reversible anticoagulation and improved net clinical
benefit over heparin. In addition, by decreasing major bleeds and reducing the
need for revascularization and drug costs, we believe substantial cost savings
are possible for hospitals on average for patients treated with Angiomax.
Interaction Studies. Specific interaction studies of Angiomax with GP IIb/IIIa
inhibitors ReoPro, Integrilin and Aggrastat have not revealed any drug-drug
interactions.
REPLACE Trial in Angioplasty. In November 2000, we began a randomized,
open-label two-part Phase 3b trial of the use of Angiomax in angioplasty. We
expect that the trial will be conducted at approximately 200 sites in the United
States. The first part of the trial, which will include up to 1,000 patients, is
designed to assess the clinical outcomes and health economics of Angiomax
compared to heparin, with and without GP IIb/IIIa inhibitors. The second part of
the trial, which will include up to 6,000 patients who have been referred for
angioplasty, will include three randomized arms:
- heparin with a GP IIb/IIIa inhibitor;
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<PAGE> 33
- Angiomax with the provisional use of a GP IIb/IIIa inhibitor at the choice
of the physician; and
- Angiomax with a GP IIb/IIIa inhibitor.
Angiomax Commercialization Plans for Angioplasty. We plan to launch Angiomax in
the United States in January 2001 using a 52 person sales force contracted from
Innovex, Inc., which we will manage. In December 2000, we signed a master
services agreement and a work order with Innovex under which Innovex agreed to
provide the sales force, a sales territory management system and operational
support for the launch of Angiomax.
We plan to focus our Angiomax marketing efforts on interventional cardiologists
and other key clinical decision-makers for Angiomax. Our 52 person sales force
has been configured to target the relatively small number of cardiac
catheterization laboratories in which most of the angioplasty procedures in the
United States are performed.
We expect Angiomax to provide cost savings to medical decision-makers using
Angiomax as part of a safe and effective anticoagulant therapy. Many United
States hospitals receive a fixed reimbursement amount for the angioplasties they
perform. Because this amount is not based on the actual expenses the hospital
incurs, the use of Angiomax has the potential to reduce a hospital's cost of
treating an angioplasty patient by reducing bleeding and ischemic events and
reducing the need for other treatment therapies. From 1995 to 1997, the
incremental costs to a hospital averaged the following: approximately $12,000
for an angioplasty patient receiving a 2-unit transfusion; approximately $4,000
for revascularization in the form of a repeat angioplasty; and approximately
$17,000 for an angioplasty patient revascularized by means of coronary artery
bypass graft surgery. Our pricing structure for Angiomax is designed to provide
hospitals with cost savings based on reductions in clinical events and
reductions in drug costs.
If Angiomax is approved for use in other indications, such as AMI or unstable
angina, we intend to market Angiomax for these indications in the United States
by supplementing our commercial organization, or by collaborating with other
biopharmaceutical companies.
Acute Myocardial Infarction
Acute myocardial infarction is a leading cause of death. AMI occurs when
coronary arteries, which supply blood to the heart, become completely blocked
with clot. AMI patients are routinely treated with heparin, with and without
fibrinolytics. Heart attack patients are increasingly undergoing angioplasty as
a primary treatment to unblock clotted arteries.
Based on the most recently available hospital discharge data, in 1997, there
were approximately 871,000 AMI patients in the United States who were treated in
a hospital.
Angiomax Clinical Experience in AMI. To date, we and Biogen have conducted
clinical trials comparing Angiomax and heparin in over 14,000 AMI patients.
<TABLE>
<CAPTION>
LEAD INVESTIGATORS COMPLETED PATIENTS PHASE TRIAL DESCRIPTION
------------------ --------- -------- ----- ------------------------------------
<S> <C> <C> <C> <C>
P. Theroux.......................... 1992 45 2 Dose-ranging trial comparing
Angiomax with heparin administered
prior to a fibrinolytic
P. Theroux.......................... 1993 68 2 Dose-ranging trial comparing
Angiomax with heparin administered
prior to a fibrinolytic
H. White............................ 1996 412 2 HERO-1: Dose-ranging trial comparing
Angiomax with heparin administered
following a fibrinolytic
H. White, R. Califf,
F. Van de Werf,
P. Aylward.......................... Ongoing 13,800 3 HERO-2: Mortality trial comparing
Angiomax with heparin administered
prior to a fibrinolytic in up to
17,000 patients
</TABLE>
---------------
The first two trials compared the effect of two doses of Angiomax with heparin
as therapy administered in advance of streptokinase, a fibrinolytic, in heart
attack patients. The trials were designed to compare the difference in rates of
blood flow following therapy. The third trial, the Hirulog Early
Reperfusion/Occlusion-1 trial, or the HERO-1 trial, was a multi-center,
randomized, double blind comparison involving 412 patients. In this trial,
patients with AMI were administered heparin or one of two doses of Angiomax as
therapy following the administration of streptokinase and aspirin. Blood flow
rates after therapy were evaluated using a standard measure of coronary artery
blood flow.
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<PAGE> 34
The three Phase 2 trials demonstrated that use of Angiomax:
- resulted in normal blood flow in at least 34% more patients than heparin; and
- resulted in substantially less bleeding and the need for fewer transfusions
than heparin.
The following table summarizes the clinical results for AMI patients in the
Phase 2 clinical trials comparing Angiomax to heparin as combined with a
fibrinolytic:
<TABLE>
<CAPTION>
----------------------------------------------
ANGIOMAX HEPARIN PERCENTAGE
PATIENTS PATIENTS IMPROVEMENT P-VALUE
-------- -------- ----------- -------
<S> <C> <C> <C> <C>
Theroux Montreal Heart Institute Study 1 (45 patients)
Full blood flow at 90 minutes............................. 67% 40% 67% 0.08
Theroux Montreal Heart Institute Study 2 (68 patients)
Full blood flow at 90 minutes............................. 71% 31% 129% 0.006
Transfusion............................................... 5% 31% 84% <0.02
HERO-1 Trial (412 patients)
Full blood flow at 90 minutes............................. 47% 35% 34% 0.024
Major bleeding............................................ 17% 28% 39% <0.01
</TABLE>
---------------
Based on the results of these Phase 2 trials, we are conducting a worldwide
17,000 patient Phase 3 clinical trial in AMI. In this HERO-2 Phase 3 trial, AMI
patients receive Angiomax or heparin prior to treatment with a fibrinolytic. All
patients receive aspirin and Streptase, a fibrinolytic. This trial is designed
to demonstrate statistically significant improvement in 30-day cumulative
mortality among patients receiving Angiomax, thus establishing Angiomax as the
only direct thrombin inhibitor with mortality benefit compared to heparin in the
management of AMI.
We are coordinating the HERO-2 trial with the Virtual Coordinating Center for
Global Collaborative Cardiovascular Research Organization, commonly referred to
as VIGOUR, an academic consortium of leading cardiologists and their affiliated
institutions established to coordinate the efforts of large global clinical
trials in cardiology. The trial has been approved in 43 countries, has over 500
active sites and is enrolling approximately 800 patients per month. To date,
approximately 13,800 patients have been enrolled in the trial. We expect the
trial to complete enrollment by the first half of 2001.
Following enrollment of approximately 2,000, 5,000 and 8,000 patients, an
independent panel, the Drug Safety Monitoring Board, reviewed safety data from
the trial to determine whether there were safety issues that would warrant
modification or early termination of the trial. The Board completed the third
planned review in August 2000, and the trial is proceeding without modification.
In contrast, two previous trials using high doses of hirudin in patients
including heart attack patients were stopped early because of excessive bleeding
in the hirudin patients.
Acute Coronary Syndromes/Unstable Angina
Unstable angina is a condition in which patients experience the new onset of
severe chest pain, increasingly frequent chest pain or chest pain that occurs
while they are resting. Unstable angina is caused most often by a rupture of
plaque on an arterial wall that ultimately decreases coronary blood flow but
does not cause complete blockage of the artery. There are approximately 948,000
cases of unstable angina in the United States reported each year. Unstable
angina is often treated in hospitals with anticoagulation therapy that may
include aspirin, indirect thrombin inhibitors such as heparin or low molecular
weight heparin and GP IIb/IIIa inhibitors. Many unstable angina patients undergo
angioplasty or CABG.
Angiomax Clinical Experience in Unstable Angina. To date, we and Biogen have
completed five Phase 2 trials of Angiomax in patients with unstable angina or
who had experienced a less serious form of MI known as non Q-wave MI. These
trials enrolled a total of 630 patients, of whom 553 received various doses of
Angiomax. These studies have demonstrated that Angiomax is an anticoagulant
which can be administered safely in patients with unstable angina.
The largest of these Phase 2 trials was a multicenter, double blind,
placebo-controlled and randomized study in 410 patients with unstable angina or
who had experienced non Q-wave MI. The trial compared the effect of three active
dose levels and one placebo dose level of Angiomax with respect to death, MI,
recurrent angina and major bleeding. Angiomax demonstrated a significant
correlation between dose and anticoagulant effect.
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In comparison to 160 patients treated with placebo doses in the trial, 250
patients treated with active doses of Angiomax experienced:
- a 68% reduction in death or MI in hospital with a p-value equal to 0.009; and
- a 59% reduction in death or MI after six weeks with a p-value equal to 0.014.
Other Indications
We and Biogen have conducted a number of additional clinical trials of Angiomax
for other indications.
HIT/HITTS. Approximately one to three percent of patients who have received
heparin for seven to 14 days experience a condition known as HIT/HITTS. The
underlying mechanism for the condition appears to be an immunological response
to a complex formed by heparin and another factor, resulting in the lowering of
platelet counts, commonly referred to as thrombocytopenia, and in some cases in
arterial or venous clotting, which may result in the need for limb amputation,
or death. Because further administration of heparin is not possible, an
alternative anticoagulant is necessary.
Prior to 1997, Angiomax was administered to a total of 39 HIT/HITTS patients
undergoing angioplasty requiring anticoagulation for invasive coronary
procedures or treatment of thrombosis. For those patients undergoing angioplasty
and other procedures, Angiomax provided adequate anticoagulation, was
well-tolerated and rarely resulted in bleeding complications.
Based upon the encouraging data in 39 patients, we are currently enrolling
patients in a trial designed to evaluate the use of Angiomax for treatment of
HIT/HITTS patients undergoing angioplasty. The trial has enrolled 18 patients to
date and plans to enroll 50 patients in total.
Deep Venous Thrombosis. Thirty-one patients with clots in the veins in their
legs and 222 patients undergoing orthopedic surgical procedures were treated
with Angiomax in two open-label, dose-ranging Phase 2 trials in 1990. Both
studies established that Angiomax was an active and well-tolerated anticoagulant
and that the anticoagulant effects correlated with the dose of Angiomax.
CABG. We have initiated a 100 patient Phase 2 trial of Angiomax comparing
Angiomax to heparin in patients undergoing off pump CABG. The trial was
initiated in November 2000 and 6 patients have been enrolled in the trial to
date.
We are actively considering further development plans to expand the uses of
Angiomax in venous thrombosis and other indications.
Regulatory Status
In December 2000, we received approval from the FDA for the use of Angiomax in
combination with aspirin in patients with unstable angina undergoing coronary
balloon angioplasty. In connection with this approval, the FDA has required us
to complete our ongoing trial evaluating the use of Angiomax for the treatment
of HIT/HITTS patients undergoing angioplasty. Angiomax is intended for use with
aspirin and has been studied only in patients also receiving aspirin.
In February 1998, we submitted a Marketing Authorization Application, or MAA, to
the European Agency for the Evaluation of Medicinal Products, or EMEA, for use
in unstable angina patients undergoing angioplasty. Following extended
interaction with European regulatory authorities, the Committee of Proprietary
Medicinal Products, or CPMP, of the EMEA voted in October 1999 not to recommend
Angiomax for approval in angioplasty. The United Kingdom and Ireland dissented
from this decision. We have withdrawn our application to the EMEA and are in
active dialogue with European regulators to determine our alternative courses of
action.
Angiomax was approved in New Zealand in September 1999 for use as an
anticoagulant in patients undergoing coronary balloon angioplasty, and we began
selling Angiomax in New Zealand in June 2000. We have submitted an application
in Canada to market Angiomax for use in unstable angina patients undergoing
angioplasty and are in active dialogue with Canadian regulators.
CTV-05
In 1999, we acquired from GyneLogix, Inc. exclusive worldwide rights to CTV-05,
a strain of bacteria under clinical investigation for a broad range of
applications in the areas of gynecological and reproductive health. We have
entered into a clinical trial agreement with the National Institutes of Allergy
and Infectious Diseases, a division of the National Institutes
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<PAGE> 36
of Health, commonly referred to as NIH, to conduct a Phase 2 trial of CTV-05, a
proprietary biotherapeutic agent for the treatment of bacterial vaginosis, or
BV. BV, the most common gynecological infection in women of childbearing age, is
an imbalance of naturally occurring organisms in the vagina.
Bacterial Vaginosis
BV develops when certain bacteria normally present in the vagina in low levels
multiply to infectious levels. BV is associated with serious health risks such
as pelvic inflammatory disease, pre-term birth, post-surgical infection and an
increased susceptibility to sexually transmitted diseases, including AIDS. The
standard treatments currently prescribed for BV are oral or topical antibiotics
including metronidazole and clindamycin. These treatments are not optimal,
having significant recurrence rates. Moreover, antibiotic use depletes a
beneficial bacteria called lactobacilli.
CTV-05: Rationale, Product Profile and Clinical Studies
A healthy vagina is principally populated by lactobacilli. The presence of
lactobacilli in the vagina, particularly those that produce hydrogen peroxide,
has been linked to decreased incidence of BV and other urinary tract and
gynecological infections. However, many women lack sufficient populations of
hydrogen peroxide-producing lactobacilli to maintain vaginal health, making them
more susceptible to infection.
Studies have shown that the CTV-05 strain of lactobacillus is able to restore
the natural balance of the bacteria in the vagina and produce both hydrogen
peroxide and lactic acid, substances which are active against disease-causing
bacteria and serve a protective role. Because of this, CTV-05 has the potential
to improve cure rates when used in conjunction with approved antibiotics, to
prevent BV recurrence and thus to reduce serious health risks.
In the Phase 2 safety and efficacy trial, funded by NIH, CTV-05 is administered
topically to BV patients. The study is primarily designed to show whether CTV-05
improves cure rates of BV at 30 days. The study is the first large trial to look
at recurrence rates of BV at 90 days. To date, we have enrolled over 100
patients in a 400 patient trial at three sites and expect to conclude the trial
in 2001.
Other Indications
Recently completed studies by GyneLogix under a Center for Disease Control and
Prevention grant, have shown that CTV-05 is active against the organisms which
cause yeast infections and gonorrhea. We plan to conduct pilot clinical studies
in these indications.
IS-159
In 1998, we acquired from Immunotech S.A. exclusive worldwide rights to IS-159,
a selective chemical that reacts with receptors found on cerebral blood vessels
and nerve terminals. We are seeking a collaborator to develop IS-159 and do not
intend to initiate further studies of IS-159 until we enter into a collaborative
arrangement.
PRODUCT ACQUISITION STRATEGY
We plan to continue to acquire, develop and commercialize late-stage product
candidates or approved products that make a clinical difference to patients
managed by focused groups of medical decision-makers. Our strategy is to acquire
late-stage development product candidates with an anticipated time to market of
four years or less and existing clinical data which provides reasonable evidence
of safety and efficacy. In addition, we aim to acquire approved products that
can be marketed by our commercial organization. In making our acquisition
decisions we attempt to select products that meet these criteria and achieve
high investment returns by:
- understanding the market opportunity for initially-targeted uses of the drug;
- assessing the investment and development programs that will be necessary to
achieve a marketable product profile in these initial uses; and
- attempting to structure the design of our development programs to obtain
critical information relating to the clinical and economic performance of the
product early in the development process, so that we can make key development
decisions.
To date, we have implemented this strategy with Angiomax, CTV-05 and IS-159.
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<PAGE> 37
We intend to acquire products and product candidates with possible uses and
markets beyond those on which our initial investment program will be focused. We
plan to acquire other products that will enhance the acute hospital product
franchise we are building around Angiomax. We are also seeking other specialty
anti-infective products and product candidates that will fit into the franchise
we expect to build around CTV-05.
We have assembled a management team with significant experience in drug
development and in drug product launches and commercialization.
MANUFACTURING
We do not intend to build or operate manufacturing facilities but instead intend
to enter into contracts for manufacturing development and/or commercial supply.
Angiomax
All Angiomax bulk drug substance used in non-clinical and clinical work
performed to date has been produced by UCB Bioproducts by means of a chemical
synthesis process. We have ordered, and for the foreseeable future will order,
Angiomax bulk drug substance from UCB Bioproducts under the validated
manufacturing process. Using this process, UCB Bioproducts has successfully
completed the manufacture of bulk drug substance to meet anticipated commercial
supply requirements in 2001.
Together with UCB Bioproducts, we have developed a second generation chemical
synthesis process to improve the economics of the manufacturing of Angiomax bulk
drug substance. This process, which must be approved by the FDA before it can be
used, is known as the Chemilog process and involves limited changes to the early
manufacturing steps of our current process in order to improve process
economics. We expect the Chemilog process to produce material that is chemically
equivalent to that produced using the current process. UCB Bioproducts has
completed initial development of the process and is currently manufacturing
validation batches.
We have entered into a commercial development and supply agreement with UCB
Bioproducts for production of Angiomax bulk drug substance utilizing the
Chemilog process. Under terms of the agreement, UCB Bioproducts will prepare and
file the necessary drug master file for regulatory approval of the Chemilog
process. If the Chemilog process is successfully developed and regulatory
approval is obtained, we expect this process will result in a reduced cost of
manufacturing.
We have developed reproducible analytical methods and processes for the
manufacture of Angiomax drug product by Ben Venue Laboratories. Ben Venue
Laboratories has carried out all of our Angiomax fill-finish activities and has
released product for clinical trials and commercial sale.
CTV-05
To date, GyneLogix has manufactured all CTV-05 material used in clinical trials.
In order to scale up production to produce sufficient materials for later phase
clinical trials, we have entered into a manufacturing arrangement with The Dow
Chemical Company. We are currently in the process of transferring the CTV-05
manufacturing technology to Dow.
STRATEGIC RELATIONSHIPS
In order to develop and commercialize our products, we leverage our resources by
utilizing contract product development, manufacturing and sales companies.
UCB Bioproducts
In December 1999, we entered into a commercial development and supply agreement
with UCB Bioproducts for the development and supply of Angiomax bulk drug
substance. Under the terms of the agreement, UCB Bioproducts is also responsible
for developing the Chemilog process in coordination with us and obtaining
regulatory approval for use of the process. We have agreed to partially fund UCB
Bioproducts' development activities. This funding is due upon the completion by
UCB Bioproducts of development milestones. If UCB Bioproducts successfully
completes each of these development milestones, we anticipate that total
development funding paid by us will equal approximately $9.1 million. Of this
$9.1 million, $7.7 million will be paid to UCB Bioproducts for validation
batches of Angiomax manufactured using the Chemilog process, which we may use
for commercial sale following regulatory approval of the Chemilog process. In
addition, following successful development and regulatory approval of the
Chemilog process, we have agreed to purchase Angiomax bulk drug substance
exclusively from UCB Bioproducts at agreed upon prices for a period of seven
years from the date of the first commercial sale of Angiomax produced under the
Chemilog process. Following the expiration of the agreement, or if we terminate
the agreement prior to its expiration, UCB Bioproducts will transfer the
development technology to us. If we
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<PAGE> 38
engage a third party to manufacture Angiomax for us using this technology, we
will be obligated to pay UCB Bioproducts a royalty based on the amount paid by
us to the third-party manufacturer.
PharmaBio/Quintiles
In August 1996, we entered into a strategic alliance with PharmaBio Development,
Inc., a wholly owned subsidiary of Quintiles Transnational Corp. Under the terms
of the strategic alliance agreement, PharmaBio and any of its affiliates who
work on our projects will, at no cost to us, review and evaluate, jointly with
us, development programs we design related to potential or actual product
acquisitions. The purpose of this collaboration is to optimize the duration,
cost, specifications and quality aspects of such programs. PharmaBio and its
affiliates have also agreed to perform certain other services with respect to
our products, including clinical and non-clinical development services, project
management, project implementation, pharmacoeconomic services, regulatory
affairs and post-marketing surveillance services and statistical, statistical
programming, data processing and data management services. We have agreed to pay
PharmaBio its standard fee for these other services, with certain exceptions for
exceptional performance by PharmaBio. For more information regarding this
alliance, please see "Transactions with Executive Officers, Directors and Five
Percent Stockholders."
Innovex
In January 1997, we entered into a consulting agreement with Innovex, Inc., a
subsidiary of Quintiles, which was subsequently superseded by a consulting
agreement we executed with Innovex in December 1998. Pursuant to the terms of
these agreements, Innovex has provided us with consulting services with respect
to pharmaceutical marketing and sales.
In December 2000, we signed a master services agreement and a work order with
Innovex to promote Angiomax. Under the agreement and work order, Innovex will
provide a sales force of up to 52 sales representatives, a sales territory
management system and operational support for the launch of Angiomax. Under the
terms of the agreement and work order, we have paid Innovex a total of
approximately $1.1 million for its services through December 31, 2000.
COMPETITION
The development and commercialization of new drugs is competitive and we will
face competition from major pharmaceutical companies, specialty pharmaceutical
companies and biotechnology companies worldwide. Our competitors may develop
products or other novel technologies that are more effective, safer or less
costly than any that have been or are being developed by us, or may obtain FDA
approval for their products more rapidly than we may obtain approval for ours.
Due to the incidence and severity of cardiovascular diseases, the market for
anticoagulant therapies is large and competition is intense and growing. We are
developing Angiomax as an anticoagulant therapy for the treatment of ischemic
heart disease. There are a number of anticoagulant therapies currently on the
market, awaiting regulatory approval or in development.
In general, anticoagulant drugs may be classified in three groups: drugs that
directly or indirectly target and inhibit thrombin or its formation, drugs that
target and inhibit platelets activation and aggregation and drugs that break
down fibrin. Indirect thrombin inhibitors include heparin, low molecular weight
heparins such as Lovenox, Fragmin and pentasaccharide. Direct thrombin
inhibitors include Angiomax, Argatroban, Melagatran and hirudins such as
Refludan. Platelet inhibitors include aspirin, Ticlid, Plavix, ReoPro,
Integrilin and Aggrastat. Fibrinolytics include Streptase, Activase, Retevase
and TNKase.
Because each group of anticoagulants acts on different clotting factors, we
believe that there will be continued clinical work to determine the best
combination of drugs for clinical use. We plan to position Angiomax as an
alternative to heparin as baseline anticoagulation therapy for use in patients
with ischemic heart disease. We expect Angiomax to be used with aspirin alone or
in conjunction with other fibrinolytic drugs or platelet inhibitors. We will
compete with indirect and direct thrombin inhibitors on the basis of efficacy
and safety, ease of administration and economic value. Heparin's widespread use
and low cost to hospitals will provide a selling challenge.
We do not plan to position Angiomax as a direct competitor to platelet
inhibitors such as ReoPro from Centocor, Inc. and Eli Lilly and Company,
Aggrastat from Merck, Inc. or Integrilin from Cor Therapeutics, Inc. and
Schering-Plough Corporation. Similarly, we do not plan to position Angiomax as a
competitor to fibrinolytic drugs such as Streptase from Aventis S.A., Retevase
from Centocor, Inc., and Activase and TNKase from Genentech Inc. Platelet
inhibitors and fibrinolytic drugs may, however, compete with Angiomax for the
use of hospital financial resources. Many U.S. hospitals receive a fixed
reimbursement amount per procedure for the angioplasties and other treatment
therapies they perform.
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Because this amount is not based on the actual expenses the hospital incurs,
U.S. hospitals may be forced to use either Angiomax or a platelet inhibitor or
fibrinolytic drugs but not both.
The acquisition or licensing of pharmaceutical products is a competitive area,
and a number of more established companies, which have acknowledged strategies
to license or acquire products, may have competitive advantages as may other
emerging companies taking similar or different approaches to product
acquisition. In addition, a number of established research-based pharmaceutical
and biotechnology companies may have acquired products in late stages of
development to augment their internal product lines. These established companies
may have a competitive advantage over us due to their size, cash flows and
institutional experience.
Many of our competitors will have substantially greater financial, technical and
human resources than we have. Additional mergers and acquisitions in the
pharmaceutical industry may result in even more resources being concentrated in
our competitors. Competition may increase further as a result of advances made
in the commercial applicability of technologies and greater availability of
capital for investment in these fields. Our success will be based in part on our
ability to build and actively manage a portfolio of drugs that address unmet
medical needs and create value in patient therapy.
PATENTS, PROPRIETARY RIGHTS AND LICENSES
Our success will depend in part on our ability to protect the products we
acquire or license by obtaining and maintaining patent protection both in the
United States and in other countries. We also rely upon trade secrets, know-how,
continuing technological innovations and licensing opportunities to develop and
maintain our competitive position. We plan to prosecute and defend any patents
or patent applications we acquire or license, as well as any proprietary
technology.
We have exclusively licensed from Biogen patents and applications for patents
covering Angiomax and Angiomax analogs and other novel anticoagulants as
compositions of matter, and processes for using Angiomax and Angiomax analogs
and other novel anticoagulants. We have exclusively licensed from GyneLogix a
patent and patent applications covering formulations and uses of the
biotherapeutic agent CTV-05 for the treatment of urogenital and reproductive
health. We have also exclusively licensed from Immunotech a patent and patent
applications covering the pharmaceutical IS-159 and its use for the treatment of
acute migraine headache. In each case, we are responsible for prosecuting and
maintaining such patents and patent applications. In all, we exclusively license
10 issued United States patents and a broadly filed portfolio of corresponding
foreign patents and patent applications. We have not yet filed any independent
patent applications.
The patent positions of pharmaceutical and biotechnology firms like us are
generally uncertain and involve complex legal, scientific and factual questions.
In addition, the coverage claimed in a patent application can be significantly
reduced before the patent is issued. Consequently, we do not know whether any of
the applications we acquire or license will result in the issuance of patents
or, if any patents are issued, whether they will provide significant proprietary
protection or will be challenged, circumvented or invalidated. Because patent
applications in the United States are maintained in secrecy until patents issue,
and since publication of discoveries in the scientific or patent literature
often lags behind actual discoveries, we cannot be certain of the priority of
inventions covered by pending patent applications. Moreover, we may have to
participate in interference proceedings declared by the United States Patent and
Trademark Office to determine priority of invention, or in opposition
proceedings in a foreign patent office, either of which could result in
substantial cost to us, even if the eventual outcome is favorable to us. There
can be no assurance that the patents, if issued, would be held valid by a court
of competent jurisdiction. An adverse outcome could subject us to significant
liabilities to third parties, require disputed rights to be licensed from third
parties or require us to cease using such technology.
The development of anticoagulants is intensely competitive. A number of
pharmaceutical companies, biotechnology companies, universities and research
institutions have filed patent applications or received patents in this field.
Some of these applications are competitive with applications we have acquired or
licensed, or conflict in certain respects with claims made under such
applications. Such conflict could result in a significant reduction of the
coverage of the patents we have acquired or licensed, if issued, which would
have a material adverse effect on our business, financial condition and results
of operations. In addition, if patents are issued to other companies that
contain competitive or conflicting claims and such claims are ultimately
determined to be valid, no assurance can be given that we would be able to
obtain licenses to these patents at a reasonable cost, or develop or obtain
alternative technology.
We also rely on trade secret protection for our confidential and proprietary
information. No assurance can be given that others will not independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets or disclose such technology, or that
we can meaningfully protect our trade secrets.
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It is our policy to require our employees, consultants, outside scientific
collaborators, sponsored researchers and other advisors to execute
confidentiality agreements upon the commencement of employment or consulting
relationships with us. These agreements provide that all confidential
information developed or made known to the individual during the course of the
individual's relationship with us is to be kept confidential and not disclosed
to third parties except in specific circumstances. In the case of employees, the
agreements provide that all inventions conceived by the individual shall be our
exclusive property. There can be no assurance, however, that these agreements
will provide meaningful protection or adequate remedies for the our trade
secrets in the event of unauthorized use or disclosure of such information.
LICENSE AGREEMENTS
Biogen, Inc.
In March 1997, we entered into an agreement with Biogen for the license of the
anticoagulant pharmaceutical bivalirudin, which we have developed as Angiomax.
Under the terms of the agreement, we acquired exclusive worldwide rights to the
technology, patents, trademarks, inventories and know-how related to Angiomax.
In exchange for the license, we paid $2.0 million on the closing date and are
obligated to pay up to an additional $8.0 million upon reaching certain Angiomax
sales milestones, including the first commercial sale of Angiomax for the
treatment of AMI in the United States and Europe. In addition, we are obligated
to pay royalties on future sales of Angiomax and on any sublicense royalties
earned until the later of (1) 12 years after the date of the first commercial
sale of the product in a country or (2) the date in which the product or its
manufacture, use or sale is no longer covered by a valid claim of the licensed
patent rights in such country. The agreement also stipulates that we use
commercially reasonable efforts to meet certain milestones related to the
development and commercialization of Angiomax, including expending at least
$20.0 million for certain development and commercialization activities, which we
met in 1998. The licenses and rights under the agreement remain in force until
our obligation to pay royalties ceases. Either party may terminate the agreement
for material breach, and we may terminate the agreement for any reason upon 90
days prior written notice.
GyneLogix, Inc.
In August 1999, we entered into an agreement with GyneLogix for the license of
the biotherapeutic agent CTV-05, a strain of human lactobacillus currently under
clinical investigation for applications in the areas of urogenital and
reproductive health. Under the terms of the agreement, we acquired exclusive
worldwide rights to the patents and know-how related to CTV-05. In exchange for
the license, we have paid GyneLogix $400,000 and are obligated to pay up to an
additional $100,000 upon reaching certain development and regulatory milestones
and to fund agreed-upon operational costs of GyneLogix related to the
development of CTV-05 on a monthly basis subject to a limitation of $50,000 per
month. In addition, we are obligated to pay royalties on future sales of CTV-05
and on any sublicense royalties earned until the date on which the product is no
longer covered by a valid claim of the licensed patent rights in a country. The
agreement also stipulates that we must use commercially reasonable efforts in
pursuing the development, commercialization and marketing of CTV-05 to maintain
the license. The licenses and rights under the agreement remain in force until
our obligation to pay royalties ceases. Either party may terminate the agreement
for material breach, and we may terminate the agreement for any reason upon 60
days prior written notice.
Immunotech S.A.
In July 1998, we entered into an agreement with Immunotech for the license of
the pharmaceutical IS-159 for the treatment of acute migraine headache. Under
the terms of the agreement, we acquired exclusive worldwide rights to the
patents and know-how related to IS-159. In exchange for the license, we paid
$1.0 million on the closing date and are obligated to pay up to an additional
$4.5 million upon reaching certain development and regulatory milestones. In
addition, we are obligated to pay royalties on future sales of IS-159 and on any
sublicense royalties earned until the date on which the product is no longer
covered by a valid claim of the licensed patent rights in a country. The
agreement also stipulates that we must use commercially reasonable efforts in
pursuing the development, commercialization and marketing of IS-159 and meet
certain development and regulatory milestones to maintain the license. The
licenses and rights under the agreement remain in force until our obligation to
pay royalties ceases. Either party may terminate the agreement for material
breach, and we may terminate the agreement for any reason upon 60 days prior
written notice.
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GOVERNMENT REGULATION
Government authorities in the United States and other countries extensively
regulate, among other things, the research, development, testing, manufacture,
labeling, promotion, advertising, distribution, and marketing of our products.
In the United States, the FDA regulates drugs under the Federal Food, Drug, and
Cosmetic Act, and, in the case of biologics, also under the Public Health
Service Act, and implementing regulations. Failure to comply with the applicable
U.S. requirements may subject us to administrative or judicial sanctions, such
as the FDA refusal to approve pending applications, warning letters, product
recalls, product seizures, total or partial suspension of production or
distribution, injunctions, and/or criminal prosecution.
The steps required before a drug may be marketed in the United States include:
- pre-clinical laboratory tests, animal studies and formulation studies;
- submission to the FDA of an investigational new drug exemption, or IND, for
human clinical testing, which must become effective before human clinical
trials may begin;
- adequate and well-controlled clinical trials to establish the safety and
efficacy of the drug for each indication;
- submission to the FDA of an NDA or biologics license application, or BLA;
- satisfactory completion of an FDA inspection of the manufacturing facility or
facilities at which the drug is produced to assess compliance with cGMP; and
- FDA review and approval of the NDA or BLA.
Pre-clinical tests include laboratory evaluations of product chemistry,
toxicity, and formulation, as well as animal studies. The results of the
pre-clinical tests, together with manufacturing information and analytical data,
are submitted to the FDA as part of an IND, which must become effective before
human clinical trials may begin. An IND will automatically become effective 30
days after receipt by the FDA, unless before that time the FDA raises concerns
or questions about issues such as the conduct of the trials as outlined in the
IND. In such a case, the IND sponsor and the FDA must resolve any outstanding
FDA concerns or questions before clinical trials can proceed. Submission of an
IND may not result in the FDA allowing clinical trials to commence.
Clinical trials involve the administration of the investigational drug to human
subjects under the supervision of qualified investigators. Clinical trials are
conducted under protocols detailing the objectives of the study, the parameters
to be used in monitoring safety, and the effectiveness criteria to be evaluated.
Each protocol must be submitted to the FDA as part of the investigational new
drug exemption.
Clinical trials typically are conducted in three sequential Phases, but the
phases may overlap or be combined. Each trial must be reviewed and approved by
an independent Institutional Review Board before it can begin. Phase 1 usually
involves the initial introduction of the investigational drug into people to
evaluate its safety, dosage tolerance, phamacodynamics, and, if possible, to
gain an early indication of its effectiveness. Phase 2 usually involves trials
in a limited patient population to:
- evaluate dosage tolerance and appropriate dosage;
- identify possible adverse effects and safety risks; and
- evaluate preliminarily the efficacy of the drug for specific indications.
Phase 3 trials usually further evaluate clinical efficacy and test further for
safety by using the drug in its final form in an expanded patient population. We
cannot guarantee that Phase 1, Phase 2 or Phase 3 testing will be completed
successfully within any specified period of time, if at all. Furthermore, we or
the FDA may suspend clinical trials at any time on various grounds, including a
finding that the subjects or patients are being exposed to an unacceptable
health risk.
Assuming successful completion of the required clinical testing, the results of
the preclinical studies and of the clinical studies, together with other
detailed information, including information on the manufacture and composition
of the drug, are submitted to the FDA in the form of an NDA or BLA requesting
approval to market the product for one or more indications. Before approving an
application, the FDA usually will inspect the facility or the facilities at
which the drug is manufactured, and will not approve the product unless cGMP
compliance is satisfactory. If the FDA determines the application and the
manufacturing facilities are acceptable, the FDA will issue an approval letter.
If the FDA determines the application or manufacturing facilities are not
acceptable, the FDA will outline the deficiencies in the submission and often
will request
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additional testing or information. Notwithstanding the submission of any
requested additional information, the FDA ultimately may decide that the
application does not satisfy the regulatory criteria for approval. The testing
and approval process requires substantial time, effort, and financial resources,
and we cannot be sure that any approval will be granted on a timely basis, if at
all. After approval, certain changes to the approved product, such as adding new
indications, manufacturing changes, or additional labeling claims are subject to
further FDA review and approval.
In December 2000, we received marketing approval from the FDA for Angiomax for
use as an anticoagulant in combination with aspirin in patients with unstable
angina undergoing coronary balloon angioplasty.
After regulatory approval of a product is obtained, we are required to comply
with a number of post-approval requirements. For example, as a condition of
approval of an application, the FDA may require postmarketing testing and
surveillance to monitor the drug's safety or efficacy. In the case of Angiomax,
the FDA has required us to complete an ongoing 50 patient trial in which we are
treating patients with HIT/HITTS who need coronary balloon angioplasty.
In addition, holders of an approved NDA or BLA are required to report certain
adverse reactions and production problems, if any, to the FDA, and to comply
with certain requirements concerning advertising and promotional labeling for
their products. Also, quality control and manufacturing procedures must continue
to conform to cGMP after approval, and the FDA periodically inspects
manufacturing facilities to assess compliance with cGMP. Accordingly,
manufacturers must continue to expend time, money, and effort in the area of
production and quality control to maintain compliance with current good
manufacturing practices and other aspects of regulatory compliance.
We use and will continue to use third-party manufacturers to produce our
products in clinical and commercial quantities, and we cannot be sure that
future FDA inspections will not identify compliance issues at our facilities or
at the facilities of our contract manufacturers that may disrupt production or
distribution, or require substantial resources to correct. In addition,
discovery of problems with a product may result in restrictions on a product,
manufacturer, or holder of an approved NDA or BLA, including withdrawal of the
product from the market. Also, new government requirements may be established
that could delay or prevent regulatory approval of our products under
development.
FACILITIES
We currently lease approximately 9,000 square feet of office space in Cambridge,
Massachusetts and approximately 6,660 square feet of office space in Parsippany,
New Jersey. We believe our current facilities will be sufficient to meet our
needs for the foreseeable future, but that additional space will be available on
commercially reasonable terms to meet space requirements if they arise. We also
have offices in Oxford, United Kingdom and Parnell, Auckland, New Zealand.
LEGAL PROCEEDINGS
From time to time we have been and expect to continue to be subject to legal
proceedings and claims in the ordinary course of business. We currently are not
a party to any material legal proceeding.
EMPLOYEES
We believe that our success will depend greatly on our ability to identify,
attract and retain capable employees. We have assembled a management team with
significant experience in drug development and commercialization.
As of December 31, 2000, we employed 67 persons, of whom 10 hold M.D. and/or
Ph.D. degrees and 15 hold other advanced degrees. Our employees are not
represented by any collective bargaining unit, and we believe our relations with
our employees are good.
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MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
NAME AGE POSITION
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Clive A. Meanwell, M.D., Ph.D.*................ 43 Chief Executive Officer, President and Director
Peyton J. Marshall, Ph.D.*..................... 45 Senior Vice President and Chief Financial
Officer
Glenn P. Sblendorio, M.B.A.*................... 44 Senior Vice President
David M. Stack*................................ 49 Senior Vice President
John M. Nystrom, Ph.D.*........................ 55 Vice President and Chief Technical Officer
David C. Mitchell.............................. 47 Vice President
Frederick K. Paster, M.Sc., M.B.A. ............ 35 Vice President
Thomas P. Quinn*............................... 42 Vice President
John D. Richards, D.Phil.*..................... 44 Vice President
Fred M. Ryan, M.B.A. .......................... 48 Vice President
John W. Villiger, Ph.D.*....................... 46 Vice President
Leonard Bell, M.D.............................. 42 Director
Dennis B. Gillings, Ph.D. ..................... 56 Director
Anders D. Hove, M.D., M.Sc., M.B.A.(1)......... 35 Director
M. Fazle Husain(1)............................. 36 Director
T. Scott Johnson, M.D.(1)...................... 53 Director
Armin M. Kessler, Dh.c.(2)..................... 62 Director
Nicholas J. Lowcock, M.B.A.(2)................. 36 Director
James E. Thomas, M.Sc.(2)...................... 40 Director
</TABLE>
---------------
* Executive Officer
(1) Member of Audit Committee
(2) Member of the Compensation Committee
Set forth below is certain information regarding the business experience during
the past five years for each of the above-named persons.
Clive A. Meanwell, M.D., Ph.D. has been our Chief Executive Officer and
President and a director since the inception of our company in July 1996. From
1995 to 1996, Dr. Meanwell was a Partner and Managing Director at MPM Capital
L.P., a venture capital firm. From 1986 to 1995, Dr. Meanwell held various
positions at Hoffmann-La Roche, Inc., a pharmaceutical company, including Senior
Vice President, from 1992 to 1995, Vice President from 1991 to 1992 and Director
of Product Development from 1986 to 1991. Dr. Meanwell was also a member of
Hoffmann-La Roche's pharmaceutical division operating board, its research and
development board and its portfolio management committee. During his tenure as
Director of Product Development, Dr. Meanwell had responsibility at Hoffmann-La
Roche for the development and launch of Neupogen. During his tenure as Vice
President, Worldwide Drug Regulatory Affairs, he had management responsibility
for the regulatory approval of eight new products and nine significant line
extensions of products. Dr. Meanwell also led an initiative at Hoffmann-La Roche
to reengineer the drug development process with the goal of cutting the time and
cost of drug development. Dr. Meanwell received his M.D. and Ph.D. from the
University of Birmingham, United Kingdom.
Peyton J. Marshall, Ph.D. has been a Senior Vice President since January 2000
and our Chief Financial Officer since joining us in October 1997. From 1995 to
October 1997, Dr. Marshall was based in London as a Managing Director and head
of European Corporate Financing and Risk Management Origination at Union Bank of
Switzerland, an investment banking firm. From 1986 to 1995, Dr. Marshall held
various investment banking positions at Goldman Sachs and Company, an investment
banking firm, including head of European product development from 1987 to 1993
and Executive Director, Derivatives Origination from 1993 to 1995. From 1981 to
1986, Dr. Marshall held several product development positions at
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The First Boston Corporation, an investment banking firm, and was an Assistant
Professor of Economics at Vanderbilt University. Dr. Marshall received his Ph.D.
in economics from the Massachusetts Institute of Technology.
Glenn P. Sblendorio has been a Senior Vice President since July 2000, with
primary responsibility for business development. From 1998 to July 2000, Mr.
Sblendorio was the Chief Executive Officer and Managing Director of MPM Capital
Advisors, LLC, an investment bank specializing in healthcare related
transactions. From 1997 to 1998, Mr. Sblendorio served as Managing Director at
Millennium Venture Management, LLC, a strategic consulting firm. From 1996 to
1997, Mr. Sblendorio was the Executive Vice President, Chief Financial Officer
and Treasurer at PlayNet Technologies, a publicly traded internet company that
develops entertainment systems. From 1993 to 1996, Mr. Sblendorio was the Senior
Vice President and Chief Financial Officer for Sony Interactive Entertainment
Inc. From 1981 to 1993, Mr. Sblendorio held several positions at Hoffmann-La
Roche, Inc., including Vice President of Finance & Administration for Roche
Molecular Systems and Controller Europe for the Amgen/Roche venture. Mr.
Sblendorio received his B.A. in accounting from Pace University and his M.B.A.
from Fairleigh Dickinson University. Mr. Sblendorio is also a CPA.
David M. Stack has been a Senior Vice President since April 2000. Under Mr.
Stack's employment agreement with us, Mr. Stack has agreed to devote at least 24
hours per week to our business. Since January 2000, Mr. Stack has also served as
President and General Partner of Stack Pharmaceuticals, Inc., a
commercialization, marketing and strategy consulting firm serving pharmaceutical
companies, and as a Senior Advisor to the Chief Executive Officer of Innovex
Inc., a contract pharmaceutical organization. Mr. Stack served as President and
General Manager of Innovex Inc. from May 1995 to December 1999. From April 1993
to May 1995, Mr. Stack served as Vice President, Business Development and
Marketing at Immunomedics, Inc., a biotechnology company specializing in
monoclonal antibodies in diagnostics and therapeutics. From September 1981 to
March 1993, Mr. Stack was employed by Roche Laboratories, a division of
Hoffmann-La Roche, where he was the Rocephin Product Director from June 1989 to
December 1992 and Director, Business Development and Planning, Infectious
Disease, Oncology and Virology from May 1992 to March 1993. Mr. Stack currently
serves as director of Bio Imaging Laboratories, Inc. Mr. Stack received his B.S.
in biology from Siena College and his B.S. in pharmacy from Albany College of
Pharmacy.
John M. Nystrom, Ph.D. has been a Vice President since October 1998 and our
Chief Technical Officer since December 1999. From July 1979 to October 1998, Dr.
Nystrom was employed by the Arthur D. Little, an international technology and
management consulting firm. During his 19 years with the firm he held numerous
positions consulting to the fine chemical, biotechnology and pharmaceutical
industries. In 1994 he was elected a Vice President of the firm, and his last
position was that of Vice President and Director. Dr. Nystrom currently serves
as a director of Cangene Corp. Dr. Nystrom received his B.S. and Ph.D. in
chemical engineering from the University of Rhode Island.
David C. Mitchell has been a Vice President since December 2000 with a focus on
information technology and information systems. His responsibilities include
planning and implementing worldwide information systems. From February 1999 to
December 2000, Mr. Mitchell was a Vice President of Information Technology for
Innovex Americas. From July 1997 to February 1999, Mr. Mitchell was Director of
Information Technology at NBC. Prior to joining NBC, Mr. Mitchell served as the
Director of Programming and Technology at Walt Disney Pictures and Television
for twelve years. Mr. Mitchell received his Bachelor of Music from Arizona State
University.
Frederick K. Paster, M.Sc., M.B.A. has been a Vice President since September
1999, with a focus on worldwide product partnering, product development strategy
and market/pricing analysis. Mr. Paster is also involved in new product
acquisitions and corporate partnerships. From 1994 until he joined us in
September 1998, Mr. Paster was a Manager with The Boston Consulting Group, a
management consulting firm. From 1990 to 1992, Mr. Paster was located in Germany
and Belgium as European Programs Manager for ESI, a computer software and
services firm. Mr. Paster received his B.S. and M.Sc. degrees in engineering
from the Massachusetts Institute of Technology and received his M.B.A. from the
Harvard Business School.
Thomas P. Quinn has been a Vice President since April 2000, with a focus on the
launch of Angiomax, business development and product in-licensing. Mr. Quinn has
served as a Partner of Stack Pharmaceuticals, Inc. since January 2000 and served
as the Vice President of Marketing of Stack Pharmaceuticals, Inc. from January
2000 through May 2000. From November 1997 to January 2000, Mr. Quinn was Senior
Vice President, Business Development at Innovex. From January 1996 to July 1997,
Mr. Quinn was employed by the Strategic Planning/New Business Development
Department of Bristol-Myers Squibb Inc., a pharmaceutical company, where his
responsibilities included domestic and global portfolio management and franchise
development. From April 1992 to December 1995, Mr. Quinn was involved in the
commercial start-up of the U.S. Therapeutics Division of Boehringer Mannheim
Corporation, a pharmaceutical company.
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John D. Richards, D.Phil. joined us in October 1997 and has been a Vice
President since 1999, with a focus on product manufacturing and quality. From
1993 until he joined us in October 1997, Dr. Richards was Director of Process
Development and Manufacturing at Immulogic Pharmaceutical Corporation, a
pharmaceutical company. From 1989 to 1993, Dr. Richards was a Technical Manager
at Zeneca PLC, a pharmaceutical company, where he developed and implemented
processes for the manufacture of peptides as pharmaceutical active
intermediates. In 1986, Dr. Richards helped establish Cambridge Research
Biochemicals, a manufacturer of peptide-based products for pharmaceutical and
academic customers. Dr. Richards received his M.A. and D.Phil. in organic
chemistry from the University of Oxford, United Kingdom, and has carried out
post-doctoral research work at the Medical Research Councils Laboratory of
Molecular Biology in Cambridge, United Kingdom.
Fred M. Ryan, M.B.A. has been a Vice President since April 2000, with a focus on
corporate strategic development, new product acquisitions and Angiomax
commercial development. Under Mr. Ryan's employment agreement with us, Mr. Ryan
has agreed to devote at least 24 hours per week to our business. Since April
2000, Mr. Ryan has also served as a Partner and the Vice President of Business
Development of Stack Pharmaceuticals, Inc. From July 1991 to April 2000, he held
senior management positions with Novartis Pharmaceuticals, Inc. in the United
States in both the Consumer Pharmaceuticals and Prescription Pharmaceuticals
businesses in the areas of Finance, Strategic Planning, Business Development and
Marketing, serving from 1998 to April 2000 as Executive Director Mature Products
responsible for managing sales and marketing activities for a portfolio of
products having annual sales in excess of $500 million. From 1989 to 1991, he
served as Assistant Controller for Alusuisse-Lonza in the United States. From
1985 to 1988, he served as Senior Financial Manager for Ciba Consumer
Pharmaceuticals (Ciba). He received his B.S. and B.A. degrees from Bryant
College and his M.B.A. from Fairleigh Dickinson University.
John W. Villiger, Ph.D. has been a Vice President since March 1997, with a focus
on cardiovascular product development. From December 1986 until he joined us in
March 1997, Dr. Villiger held various positions in product development at
Hoffmann-La Roche, including Head of Global Project Management from 1995 to 1996
and International Project Director from 1991 to 1995. As Head of Global Project
Management, Dr. Villiger was responsible for overseeing the development of
Hoffmann-LaRoche's pharmaceutical portfolio, with management responsibility for
over 50 development programs. As International Project Director, Dr. Villiger
was responsible for the global development of Tolcapone also known as tasmar.
Dr. Villiger received his Ph.D. in neuropharmacology from the University of
Otago.
Leonard Bell, M.D. has been a director since May 2000. Dr. Bell currently serves
as the President and Chief Executive Officer, Secretary and Treasurer of Alexion
Pharmaceuticals, Inc., a pharmaceutical company, which positions he has held
since January 1992. From 1991 to 1992, Dr. Bell was an Assistant Professor of
Medicine and Pathology and co-Director of the Program in Vascular Biology at the
Yale University School of Medicine. From 1990 to 1992, Dr. Bell was an attending
physician at the Yale-New Haven Hospital and an Assistant Professor in the
Department of Internal Medicine at the Yale University School of Medicine. Dr.
Bell was the recipient of the Physician Scientist Award from the National
Institutes of Health and Grant-in-Aid from the American Heart Association as
well as various honors and awards from academic and professional organizations.
His work has resulted in more than 20 scientific publications and three patent
applications. Dr. Bell is a director of the Connecticut Technology Council and
Connecticut United For Research Excellence, Inc. He also served as a director of
the Biotechnology Research and Development Corporation from 1993 to 1997. Dr.
Bell received his A.B. from Brown University and M.D. from the Yale University
School of Medicine. Dr. Bell is currently an Adjunct Assistant Professor of
Medicine and Pathology at the Yale University School of Medicine. Dr. Bell also
serves as a director of Alexion Pharmaceuticals, Inc.
Dennis B. Gillings, Ph.D. has been a director since September 1996. Dr. Gillings
has served as Chairman and Chief Executive Officer of Quintiles Transnational
Corp., since its founding by him in 1982. Quintiles provides integrated product
development, commercial development and other services to the pharmaceutical,
biotechnology, medical device and healthcare industries. From 1972 to 1988, Dr.
Gillings was a Professor of Biostatistics at the University of North Carolina at
Chapel Hill. Dr. Gillings serves as a director of ICAgen, Inc. and Triangle
Pharmaceuticals, Inc. Dr. Gillings received his diploma in mathematical
statistics from Cambridge University and his Ph.D. in mathematics from the
University of Exeter, United Kingdom.
Anders Hove, M.D., M.Sc., M.B.A. has been a director since December 1998. Dr.
Hove has been a member of the Bellevue Group since 1996, which focuses on
investing in public and private biotechnology companies in the United States and
in Europe. From 1991 to 1996, Dr. Hove held various positions at Ciba-Geigy
Pharmaceuticals Division in clinical development, international marketing and
business development. Dr. Hove currently serves as a director of Virologic,
Inc., a biotechnology company. Dr. Hove received his M.B.A. from INSEAD and his
M.D. from the University of Copenhagen.
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M. Fazle Husain has been a director since September 1998. Since 1991, Mr. Husain
has been a General Partner of Morgan Stanley Venture Partners, L.P., a private
partnership affiliated with Morgan Stanley Dean Witter. Mr. Husain focuses
primarily on investments in the health care industry, including health care
services, medical technology and health care information technology. He
currently serves on the board of directors of IntegraMed America, Inc.,
Allscripts, Inc., Healthstream, Inc. and Cardiac Pathways Corporation. Mr.
Husain received his Sc.B. degree in chemical engineering from Brown University
and his M.B.A. from the Harvard Graduate School of Business Administration.
T. Scott Johnson, M.D. has been a director since September 1996. In July 1999,
Dr. Johnson founded JSB Partners, L.P., an investment bank focusing on mergers
and acquisitions, private financings and corporate alliances within the health
care sector. From July 1991 to June 1999, Dr. Johnson served as a founder and
managing director of MPM Capital, L.P. Dr. Johnson held academic positions at
the Harvard Medical School from 1978 to 1996 and was actively involved in both
basic science and clinical research at the Beth Israel Hospital and the Brigham
and Women's Hospital. Dr. Johnson received both his B.A. and M.D. from the
University of Alabama.
Armin M. Kessler, Dh.c. has been a director since October 1998. Dr. Kessler
joined us after a 35-year career in the pharmaceutical industry, which included
senior management positions at Sandoz Pharma Ltd., Basel, United States and
Japan (now Novartis Pharma A.G.) and, most recently, at Hoffmann-La Roche, Basel
where he was Chief Operating Officer and Head of the Pharmaceutical Division
until 1995. Dr. Kessler has served as a director of Hoffmann-La Roche, Syntex
Corporation and Genentech, Inc., and Dr. Kessler currently serves as a director
of Neutherapeutics, Inc., a biopharmaceutical company. Dr. Kessler received his
degrees in physics and chemistry from the University of Pretoria, his degree in
chemical engineering from the University of Cape Town, his law degree from Seton
Hall and his honorary doctorate in business administration from the University
of Pretoria.
Nicholas J. Lowcock, M.B.A. has been a director since December 2000. He
previously served as a director of the Company from September 1996 until
December 1998. Mr. Lowcock has been with Warburg, Pincus since 1994. Prior to
joining Warburg, Pincus he was with the Boston Consulting Group and previously
worked in the pharmaceutical industry in the United Kingdom. Mr. Lowcock serves
as a director of Eurand Pharmaceutical Holdings, B.V., Leciva Pharmaceutical
Holdings B.V., Wright Medical Group Inc., Craegmoor Healthcare Ltd., PharmaIdea
B.V. and Aspect Educational Holdings Ltd. Mr. Lowcock is also a director of
Project Hope U.K., a charity devoted to improving healthcare in developing
nations. Mr. Lowcock received an M.B.A. from the Wharton School of the
University of Pennsylvania and a B.A. in Experimental Psychology from Oxford
University.
James E. Thomas, M.Sc. has been a director since September 1996. From 1989 to
May 2000, Mr. Thomas served as Managing Director of E.M. Warburg, Pincus & Co.,
LLC. From 1984 to 1989, Mr. Thomas was a Vice President at Goldman Sachs
International in London. Mr. Thomas currently serves as a director of
Transkaryotic Therapies, Inc. Mr. Thomas received his B.Sc. in finance and
economics from the Wharton School at the University of Pennsylvania and his
M.Sc. in economics from the London School of Economics.
BOARD COMPOSITION
We currently have nine directors. Pursuant to the terms of a stockholders'
voting agreement that we entered with certain of our stockholders in connection
with the sale of our shares of preferred stock, Messrs. Bell, Gillings, Hove,
Husain, Johnson, Lowcock and Thomas were elected to our board of directors. This
agreement terminated by its terms upon the completion of our initial public
offering. However, so long as any of the investors who were party to that
agreement, excluding Biotech Growth, S.A., own 20% percent of our outstanding
common stock, they will be entitled to nominate two individuals to serve as
directors, and so long as they own 10% of our outstanding common stock, they
will be able to nominate one individual to serve as a director. Warburg, Pincus
is entitled to nominate two individuals to serve as directors. Mr. Lowcock
serves on our board of directors as a representative of Warburg, Pincus and
Warburg, Pincus has the right to nominate a second director.
Our board of directors is divided into three classes, each of whose members
serve for a staggered three-year term. The division of the three classes, the
directors and their respective election dates are as follows:
- the class 1 directors are Drs. Gillings, Hove and Johnson, and their term will
expire at the annual meeting of stockholders to be held in 2001;
- the class 2 directors are Dr. Meanwell and Messrs. Lowcock and Husain, and
their term will expire at the annual meeting of stockholders to be held in
2002; and
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<PAGE> 47
- the class 3 directors are Drs. Kessler and Bell and Mr. Thomas, and their term
will expire at the annual meeting of stockholders to be held in 2003.
At each annual meeting of stockholders, the successors to directors whose terms
are to expire will be elected to serve from the time of election and
qualification until the third annual meeting following their election. The
authorized number of directors may be changed only by resolution of the board of
directors. Any additional directorships resulting from an increase in the number
of directors will be distributed among the three classes so that, as nearly as
possible, each class will consist of one-third of the directors. This
classification of the board of directors may have the effect of delaying or
preventing changes in control or management of our company.
BOARD COMMITTEES
Audit Committee. Our audit committee reviews our internal accounting procedures
and consults with, and reviews the services provided by, our independent public
accountants. Current members of our audit committee are Drs. Hove and Johnson
and Mr. Husain.
Compensation Committee. Our compensation committee reviews and recommends to
the board the compensation and benefits of all of our officers and reviews
general policies relating to the compensation and benefits of our employees. The
compensation committee also administers the issuance of stock options and other
awards under our stock plans. Current members of the compensation committee are
Dr. Kessler and Messrs. Lowcock and Thomas.
DIRECTOR COMPENSATION
Generally, our non-employee directors receive $2,500 from us for each meeting of
the board of directors which they attend in person and $500 for each meeting in
which they participate by telephone. The chairmen of our audit and compensation
committees receive $1,000 from us for each committee meeting he or she attends
in person and $500 for each committee meeting in which he or she participates by
telephone. Directors are reimbursed for expenses in connection with their
attendance at board meetings.
In addition, we may, in our discretion, grant stock options and other equity
awards to our non-employee directors under our 1998 stock incentive plan. In
1998, Dr. Kessler was granted an option to purchase 14,600 shares of common
stock at an exercise price of $1.23 per share. In May 2000, Dr. Bell and Mr.
Thomas were each granted an option to purchase 14,600 shares of common stock at
an exercise price of $4.79 per share. These options vest in 48 equal monthly
installments commencing one month after the date of grant.
2000 OUTSIDE DIRECTOR STOCK OPTION PLAN
Our 2000 Outside Director Stock Option Plan was adopted by our board of
directors on May 15, 2000. Under the plan, our non-employee directors will be
eligible to receive non-statutory options to purchase shares of our common
stock. A total of 250,000 shares of our common stock may be issued upon the
exercise of options granted under the director stock option plan.
Under the terms of the director stock option plan, each non-employee director
will be granted an option to purchase 20,000 shares of our common stock on the
date of his or her initial election to the board of directors. In addition, each
non-employee director will receive an option to purchase 7,500 shares of our
common stock on the date of each annual meeting of our stockholders commencing
with the 2001 annual meeting of stockholders, other than a director who was
initially elected to the board of directors at any such annual meeting. All
options granted under the plan vest in 48 equal monthly installments commencing
one month after the date of grant. The exercise price per share of all options
will equal the fair market value per share of our common stock on the option
grant date. Each grant under the director stock option plan will have a maximum
term of ten years, subject to earlier termination following the optionee's
cessation of service. In December 2000, Mr. Lowcock was granted an option to
purchase 20,000 shares of common stock at an exercise price of $26.00 per share.
CARDIOLOGY ADVISORY BOARD
We have established a cardiology advisory board to guide and counsel us on all
aspects of interventional cardiology practice. The entire cardiology advisory
board meets twice a year, and we contact individual members as needed. Members
of this board provide input on product research and development strategy,
education and publication plans. We do not employ any of the members of the
cardiology advisory board, and members may have other consulting or advisory
contracts. Accordingly, members devote only a small portion of their time to us.
In addition to the cardiology advisory board, we have consulting
46
<PAGE> 48
relationships with a number of scientific and medical experts who advise us on a
project-specific basis. The members of the cardiology advisory board are:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
NAME AFFILIATION TITLE
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Eric J. Topol, M.D., Chair...... The Cleveland Clinic Foundation Chairman and Professor,
Department of Cardiology
Eric R. Bates, M.D.............. University of Michigan Medical Professor, Internal Medicine
Center
John A. Bittl, M.D.............. Ocala Heart Institute Interventional Cardiologist
Robert M. Califf, M.D........... Duke University Clinical Associate Vice Chancellor,
Research Institute Clinical Research, Professor of
Medicine, CEO
Frederick Feit, M.D............. New York University Medical Director, Cardiac
Center/ Tisch Hospital Catheterization Laboratory
Bernard J. Gersh, M.B., Ch.B.,
D.Phil........................ Mayo Clinic Professor of Medicine
Neal S. Kleiman, M.D............ The Methodist Hospital Assistant Director, Cardiac
Catheterization Laboratories
A. Michael Lincoff, M.D......... The Cleveland Clinic Foundation Director, Experimental
Interventional Laboratory
Jeffrey J. Popma, M.D........... Cardiology Research Foundation Executive Director
Jeffrey I. Weitz, M.D........... McMaster University, Canada Professor of Medicine and
Director, Experimental
Thrombosis and Atherosclerosis
Group
Harvey White, D.Sc.............. Green Lane Hospital, New Zealand Director of Cardiovascular
Research and Coronary Care
</TABLE>
EXECUTIVE COMPENSATION
The following table presents summary information for the years ended December
31, 1999 and 2000, regarding the compensation of each of our most highly
compensated executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
---------------------------------------
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
----------------------- UNDERLYING
NAME AND POSITION YEAR SALARY BONUS OPTIONS
----------------- ---- ------------ ------- ------------
<S> <C> <C> <C> <C>
Clive A. Meanwell, M.D., Ph.D............................ 2000 $250,000 $85,000 424,781
President and Chief Executive Officer 1999 $200,000 -- --
Peyton J. Marshall, Ph.D................................. 2000 $200,000 $70,000 271,446
Senior Vice President and Chief Financial Officer 1999 $150,000 -- --
John W. Villiger, Ph.D................................... 2000 $195,000 $60,000 188,591
Vice President 1999 $195,000 -- --
John M. Nystrom, Ph.D.................................... 2000 $165,000 $50,000 121,101
Vice President and Chief Technical Officer 1999 $165,000 -- --
John D. Richards, D. Phil................................ 2000 $143,654 $42,100 51,591
Vice President 1999 $130,000 -- --
</TABLE>
Option Grants in 2000
The following table summarizes information regarding options granted to each of
the individuals listed in the summary compensation table as of December 31,
2000.
Amounts in the following table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option term.
The 0%, 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the Securities and Exchange Commission and do not
represent an estimate or projection of our future common stock prices. These
amounts represent certain assumed rates of appreciation in the value of our
common
47
<PAGE> 49
stock from the fair market value on the date of grant. Actual gains, if any, on
stock option exercises are dependent on the future performance of the common
stock and overall stock market conditions. The amounts reflected in the
following table may not necessarily be achieved.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS(1)
----------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER MARKET PRICE EXPIRATION ------------------------------------------
NAME GRANTED 2000 SHARE PER SHARE DATE 0% 5% 10%
---- ---------- ------------ --------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Clive A. Meanwell,
M.D., Ph.D. ....... 70,445(2) 2.3% $ 1.23 $ 7.00(3) 1/11/10 $ 406,265 $ 716,382 $1,192,163
2,336(4) 0.1% $ 1.23 $11.20(3) 3/1/10 $ 23,283 $ 39,737 $ 64,981
292,000(5) 9.5% $ 4.79 $12.60(3) 5/15/10 $2,279,200 $4,593,029 $8,142,897
30,000(5) 1.0% $ 26.00 $26.00 12/12/10 -- $ 490,538 $1,243,119
30,000(5) 1.0% $ 24.25 $24.25 12/15/10 -- $ 457,521 $1,159,448
Peyton J. Marshall,
Ph.D. ............. 34,310(2) 1.1% $ 1.23 $ 7.00(3) 1/11/10 $ 197,870 $ 348,912 $ 580,639
2,336(4) 0.1% $ 1.23 $11.20(3) 3/1/10 $ 23,283 $ 39,737 $ 64,981
189,800(5) 6.2% $ 4.79 $12.60(3) 5/15/10 $1,481,480 $2,985,469 $5,292,883
22,500(5) 0.7% $ 26.00 $26.00 12/12/10 -- $ 367,903 $ 932,339
22,500(5) 0.7% $ 24.25 $24.25 12/15/10 -- $ 343,141 $ 869,586
John W. Villiger,
Ph.D. ............. 31,755(2) 1.0% $ 1.23 $ 7.00(3) 1/11/10 $ 183,135 $ 322,929 $ 537,400
2,336(4) 0.1% $ 1.23 $11.20(3) 3/1/10 $ 23,283 $ 39,737 $ 64,981
109,500(5) 3.6% $ 4.79 $14.00(3) 6/6/10 $1,008,000 $1,972,095 $3,451,207
22,500(5) 0.7% $ 26.00 $26.00 12/12/10 -- $ 367,903 $ 932,339
22,500(5) 0.7% $ 24.25 $24.25 12/15/10 -- $ 343,141 $ 869,586
John M. Nystrom,
Ph.D. ............. 40,515(2) 1.3% $ 1.23 $ 7.00(3) 1/11/10 $ 233,655 $ 412,013 $ 685,648
2,336(4) 0.1% $ 1.23 $11.20(3) 3/1/10 $ 23,283 $ 39,737 $ 64,981
18,250(5) 0.6% $ 3.08 $12.60(3) 3/23/10 $ 173,700 $ 318,314 $ 540,181
30,000(5) 1.0% $ 26.00 $26.00 12/12/10 -- $ 490,538 $1,243,119
30,000(5) 1.0% $ 24.25 $24.25 12/15/10 -- $ 457,521 $1,159,448
John D. Richards,
D. Phil ........... 14,783(2) 0.5% $ 1.23 $ 7.00(3) 1/11/10 $ 85,250 $ 150,324 $ 250,161
7,008(4) 0.2% $ 1.23 $11.20(3) 3/1/10 $ 69,850 $ 119,211 $ 194,942
14,600(5) 0.5% $ 3.08 $12.60(3) 3/23/10 $ 138,960 $ 254,651 $ 432,145
7,600(5) 0.2% $ 26.00 $26.00 12/12/10 -- $ 124,270 $ 314,924
7,600(5) 0.2% $ 24.25 $24.25 12/15/10 -- $ 115,905 $ 293,727
</TABLE>
---------------
(1) Our 1998 stock incentive plan provides that stock options which are
otherwise unvested may be exercised for restricted stock which is subject to
vesting and a repurchase option.
(2) Eighty percent of the shares underlying the option will vest in 48 equal
monthly installments ending January 11, 2004. Twenty percent of the shares
underlying the option vested upon FDA approval of Angiomax.
(3) For all options granted prior to our initial public offering in August 2000,
the market price per share was determined based on the estimated initial
public offering price of our common stock as used to determine compensation
expense as required by the SEC.
(4) Two-thirds of the shares underlying the option vested upon FDA approval of
Angiomax. One-third of the shares underlying the option will vest six months
following FDA approval of Angiomax.
(5) The option will vest in 48 equal monthly installments commencing one month
following the date of grant.
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<PAGE> 50
Option Values at December 31, 2000
The following table presents the number and value of securities underlying
unexercised options that are held by each of the individuals listed in the
summary compensation table as of December 31, 2000. No shares were acquired upon
the exercise of stock options by these individuals during the year ended
December 31, 2000.
Amounts shown under the column "Value of Unexercised In-the-Money Options at
December 31, 2000" are based on the closing sale price on December 29, 2000 of
$20.50 per share, without taking into account any taxes that may be payable in
connection with the transaction, multiplied by the number of shares underlying
the option, less the exercise price payable for these shares.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 2000 DECEMBER 31, 2000
ON VALUE --------------------------- ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
---- ----------- -------- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Clive A. Meanwell, M.D.,
Ph.D. ......................... -- -- 96,145 369,516 $1,709,272 $5,078,649
Peyton J. Marshall, Ph.D. ....... -- -- 51,878 238,548 $ 900,957 $3,151,696
John W. Villiger, Ph.D. ......... 61,648 $793,068 13,687 140,813 $ 214,961 $1,504,789
John M. Nystrom, Ph.D. .......... 29,200 $347,670 32,826 135,725 $ 633,136 $1,450,830
John D. Richards, D. Phil ....... -- -- 15,812 41,253 $ 299,590 $ 480,028
</TABLE>
---------------
(1) Our 1998 stock incentive plan provides that stock options which are
otherwise unvested may be exercised for restricted stock which is subject to
vesting and a repurchase option.
EMPLOYMENT AGREEMENTS
Dr. Meanwell serves as our President and Chief Executive Officer pursuant to the
terms of an employment agreement dated September 5, 1996. This agreement renews
automatically on a yearly basis unless either party provides written notice of
non-renewal. Pursuant to the terms of the agreement, Dr. Meanwell's annual
compensation is determined by the board of directors. If Dr. Meanwell terminates
his employment for good reason, as defined in the agreement, or if we elect to
voluntarily terminate his employment, Dr. Meanwell will be entitled to three
months salary and the same health, disability and other benefits as were
provided during his employment for a period of three months after the date of
his termination. Dr. Meanwell has agreed not to compete with us during the term
of his employment and for a period of one year after his termination.
Dr. Marshall serves as our Chief Financial Officer pursuant to the terms of an
employment agreement dated October 20, 1997. This agreement renews automatically
on a yearly basis unless either party provides written notice of non-renewal.
Pursuant to the terms of the agreement, Dr. Marshall's annual compensation is
determined by the board of directors. If Dr. Marshall terminates his employment
for good reason, as defined in the agreement, or if we elect to voluntarily
terminate his employment, Dr. Marshall will be entitled to three months salary
and the same health, disability and other benefits as were provided during his
employment for a period of three months after the date of his termination. Dr.
Marshall has agreed not to compete with us during the term of his employment and
for a period of one year after his termination.
Dr. Villiger serves as one of our vice presidents pursuant to the terms of an
employment agreement dated March 10, 1997. This agreement renews automatically
on a yearly basis unless either party provides written notice of non-renewal.
Pursuant to the terms of the agreement, Dr. Villiger's annual compensation is
determined by the board of directors. If Dr. Villiger terminates his employment
for good reason, as defined in the agreement, or if we elect to voluntarily
terminate his employment, Dr. Villiger will be entitled to three months salary
and the same health, disability and other benefits as were provided during his
employment for a period of three months after the date of his termination. Dr.
Villiger has agreed not to compete with us during the term of his employment and
for a period of one year after his termination.
Dr. Nystrom serves as our Chief Technical Officer pursuant to the terms of an
employment agreement dated September 29, 1998. This agreement renews
automatically on a yearly basis unless either party provides written notice of
non-renewal. Pursuant to the terms of the agreement, Dr. Nystrom's annual
compensation is determined by the board of directors. If Dr. Nystrom terminates
his employment for good reason, as defined in the agreement, Dr. Nystrom will be
entitled to up to six months salary and the same health, disability and other
benefits as were provided during his employment for a period of six months after
the date of his termination. If we elect to voluntarily terminate his
employment, Dr. Nystrom will be entitled
49
<PAGE> 51
to up to three months salary and the same health, disability and other benefits
as were provided during his employment for a period of three months after the
date of his termination. Dr. Nystrom has agreed not to compete with us during
the term of his employment and for a period of one year after his termination.
Dr. Richards serves as one of our vice presidents pursuant to the terms of an
employment agreement dated October 16, 1997. This agreement renews automatically
on a yearly basis unless either party provides written notice of non-renewal.
Pursuant to the terms of the agreement, Dr. Richards' annual compensation is
determined by the board of directors. If Dr. Richards terminates his employment
for good reason, as defined in the agreement, or if we elect to voluntarily
terminate his employment, Dr. Richards will be entitled to three months salary
and the same health, disability and other benefits as were provided during his
employment for a period of three months after the date of his termination. Dr.
Richards has agreed not to compete with us during the term of his employment and
for a period of one year after his termination.
EMPLOYEE BENEFIT PLANS
1998 Stock Incentive Plan
We adopted our 1998 stock incentive plan in April 1998 and have reserved
4,368,259 shares of our common stock for issuance under the 1998 plan. As of
December 31, 2000, options to purchase 3,192,112 shares of our common stock were
outstanding and 227,527 shares of common stock have been issued upon the
exercise of stock options.
Our 1998 plan provides for the grant of incentive stock options, nonstatutory
stock options, restricted stock and other stock-based awards. Our officers,
employees, directors, consultants and advisors, and those of our subsidiaries,
are eligible to receive awards under the 1998 plan, however, incentive stock
options may only be granted to our employees.
Our board of directors administers the 1998 plan, although it may delegate its
authority to one or more of its committees and, in limited circumstances, to one
or more of our executive officers. Our board of directors has authorized the
compensation committee to administer the plan, including the granting of options
to our executive officers. In accordance with the provisions of the 1998 plan,
our compensation committee selects the recipients of awards and determines the:
- number of shares of common stock covered by options and the dates upon which
such options become exercisable;
- exercise price of options;
- duration of options; and
- number of shares of common stock subject to any restricted stock or other
stock-based awards and the terms and conditions of such awards, including the
conditions for repurchase, issue price and repurchase price.
In the event of a merger or other acquisition event, our board of directors must
provide for all outstanding awards under the 1998 plan to be assumed or
substituted for by the acquiror. If the acquiror does not assume or substitute
for outstanding awards, our board of directors may provide that all unexercised
options will become exercisable in full prior to the completion of the event and
that these options will terminate upon completion of the event if not previously
exercised. If our stockholders will receive cash in the acquisition event, any
options that would become exercisable will be converted into cash. If any of
these events constitutes a change in control, the assumed or substituted options
will be immediately exercisable in full if the holder of the options is
terminated by the acquiror within one year of the change in control.
No award may be granted under the 1998 plan after April 13, 2008 but the vesting
and effectiveness of awards granted before April 13, 2008 may extend beyond
those dates. Our board of directors may at any time amend, suspend or terminate
the 1998 plan except that no award granted after an amendment of the plan and
designated as subject to Section 162(m) of the Internal Revenue Code by our
board of directors shall become exercisable, realizable or vested, to the extent
such amendment was required to grant such award, unless and until such amendment
is approved by our stockholders.
2000 Employee Stock Purchase Plan
Our 2000 Employee Stock Purchase Plan was adopted by our board of directors on
May 15, 2000. The purchase plan became effective upon the completion of our
initial public offering. The purchase plan authorizes the issuance of up to a
total of 255,500 shares of our common stock to participating employees.
All of our employees, including our directors who are employees and all
employees of any participating subsidiaries, whose customary employment is for
more than five months in any calendar year, are eligible to participate in the
purchase plan. Employees who would, immediately after an option grant, own 5% or
more of the total combined voting power or value of
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<PAGE> 52
our stock or the stock of any of our subsidiaries are not eligible to
participate in the purchase plan. As of December 31, 2000, 21 of our employees
participate in the purchase plan.
We will make one or more offerings to our employees to purchase stock under the
purchase plan. Offerings will begin on dates established by our board of
directors, and each offering commencement date will begin a six-month period
during which payroll deductions will be made and held for the purchase of our
common stock at the end of the purchase plan period. The first offering period
under the purchase plan commenced on September 1, 2000 and will end on February
28, 2001.
On the first day of a designated payroll deduction period, or offering period,
we will grant to each eligible employee who has elected to participate in the
purchase plan an option to purchase shares of our common stock as follows: the
employee may authorize between 1% and 10% of his or her base pay to be deducted
by us during the offering period. On the last day of the offering period, the
employee is deemed to have exercised the option, at the option exercise price,
to the extent of accumulated payroll deductions. Under the terms of the purchase
plan, the option exercise price is an amount equal to 85% of the closing price,
as defined in the purchase plan, per share of our common stock on either the
first day or the last day of the offering period, whichever is lower. In no
event may an employee purchase in any one offering period a number of shares
which exceeds the number of shares determined by dividing (a) the product of
$2,083 and the number or fraction of months in the offering period by (b) the
closing price of a share of our common stock on the commencement date of the
offering period. Our board of directors may, in its discretion, choose an
offering period of 12 months or less for each offering and may choose a
different offering period for each offering.
An employee who is not a participant on the last day of the offering period is
not entitled to exercise any option, and the employee's accumulated payroll
deductions will be refunded. An employee's rights under the purchase plan
terminate upon voluntary withdrawal from the purchase plan at any time, or when
the employee ceases employment for any reason, except that upon termination of
employment because of death, the employee's beneficiary has certain rights to
elect to exercise the option to purchase the shares that the accumulated payroll
deductions in the employee's account would purchase at the date of death.
Because participation in the purchase plan is voluntary, we cannot now determine
the number of shares of our common stock to be purchased by any particular
current executive officer, by all current executive officers as a group or by
non-executive employees as a group.
401(k) Plan
Our employee savings and retirement plan is qualified under Section 401 of the
Internal Revenue Code. Our employees may elect to reduce their current
compensation by up to the statutorily prescribed annual limit and have the
amount of such reduction contributed to the 401(k) plan. We may make matching or
additional contributions to the 401(k) plan in amounts to be determined annually
by our board of directors.
CHANGE IN CONTROL ARRANGEMENTS
The terms of restricted stock agreements between us and certain of our
employees, as well as the option agreements evidencing the grant of options
under the 1998 plan, provide that in the event that we consummate an
acquisition, as defined in the agreements, and the employee or optionholder,
within a period of one year after the acquisition:
(1) is terminated without cause;
(2) is terminated as the result of death, severe physical or mental disability;
or
(3) terminates his or her employment for good reason in accordance with the
terms of the agreements, the shares covered by such agreements shall vest in
full.
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<PAGE> 53
TRANSACTIONS WITH EXECUTIVE OFFICERS, DIRECTORS AND
FIVE PERCENT STOCKHOLDERS
Since our incorporation in July 1996, we have engaged in the following
transactions with our directors, officers and holders of more than five percent
of our voting securities and affiliates of our directors, officers and five
percent stockholders:
ISSUANCE OF SERIES A PREFERRED STOCK
In September 1996, we issued 4,675 units, each unit consisting of one share of
our series A preferred stock and 365 shares of our common stock, at price per
unit of $1,000 for a total purchase price of $4.7 million. Of the 4,675 units
sold, 4,009 units were sold to the following directors, officers and five
percent stockholders and their affiliates:
<TABLE>
<CAPTION>
-------------------------------------------------
SERIES A
NAME PREFERRED STOCK COMMON STOCK PURCHASE PRICE
---- --------------- ------------ --------------
<S> <C> <C> <C>
Warburg, Pincus Venture Partners, L.P.............. 2,000 730,000 $2,000,000
PharmaBio Development, Inc......................... 1,425 520,125 1,425,000
MPM Capital L.P.................................... 250 91,250 250,000
Clive A. Meanwell.................................. 167 60,955 167,000
T. Scott Johnson................................... 167 60,955 167,000
</TABLE>
In June and December 1997, we issued an aggregate of 34,456 units, each unit
consisted of one share of our series A preferred stock and 208.571 shares of
common stock, at price per unit of $1,000 for a total purchase price of $34.6
million. Of the 34,456 units sold, 32,670 units were sold to the following
directors, officers and five percent stockholders and their affiliates:
<TABLE>
<CAPTION>
-------------------------------------------------
SERIES A
NAME PREFERRED STOCK COMMON STOCK PURCHASE PRICE
---- --------------- ------------ --------------
<S> <C> <C> <C>
Biotech Growth S.A................................. 15,000 3,128,571 $15,000,000
Warburg, Pincus Venture Partners, L.P.............. 14,000 2,920,000 14,000,000
PharmaBio Development, Inc......................... 2,670 556,880 2,670,000
Clive A. Meanwell.................................. 550 114,714 550,000
Peyton J. Marshall................................. 350 73,000 350,000
John W. Villiger................................... 100 20,856 100,000
</TABLE>
In April, 1997, we issued three promissory notes in the principal amounts of
$1.2 million and $610,000 to Warburg, Pincus and Biotech Target, an affiliate of
Biotech Growth, respectively. The outstanding principal amount of these notes
was converted into units in the June 1997 financing.
52
<PAGE> 54
EXCHANGE
In August 1998, the holders of the units issued in 1996 and 1997 exchanged these
units, as well as shares of our series A preferred stock issued as stock
dividends in December 1997 and August 1998, into shares of our series I and II
convertible preferred stock. Stockholders who purchased units in 1996 received
shares of our series I convertible preferred stock and those who purchased units
in 1997 received shares of series II convertible preferred stock. The following
directors, officers and five percent stockholders and their affiliates received
shares in the exchange:
<TABLE>
<CAPTION>
------------------------------------
SERIES I SERIES II
NAME PREFERRED STOCK PREFERRED STOCK
---- ----------------- ---------------
<S> <C> <C>
Biotech Growth S.A.......................................... -- 4,621,143
Warburg, Pincus Venture Partners, L.P....................... 1,071,000 4,283,143
PharmaBio Development, Inc.................................. 764,500 818,286
Clive A. Meanwell........................................... 87,500 165,143
MPM Capital L.P............................................. 135,000 --
Peyton J. Marshall.......................................... -- 104,000
T. Scott Johnson............................................ 90,000 --
John W. Villiger............................................ -- 29,714
</TABLE>
All shares of series I and series II convertible preferred stock, including
accrued dividends on such stock from August 1, 2000 through August 11, 2000, the
closing of our initial public offering, automatically converted into an
aggregate of 10,932,334 shares of common stock upon the closing of our initial
public offering.
ISSUANCE OF SERIES III CONVERTIBLE PREFERRED STOCK
In August 1998, we issued an aggregate of 8,399,593 shares of series III
preferred stock at a price per share of $4.32 for a total purchase price of
$36.3 million. Of the 8,399,593 shares, 6,643,519 shares were sold to the
following directors, officers and five percent stockholders and their
affiliates:
<TABLE>
<CAPTION>
------------------------------
SERIES III
CONVERTIBLE PURCHASE
NAME PREFERRED STOCK PRICE
---- --------------- -----------
<S> <C> <C>
Warburg, Pincus Venture Partners, L.P....................... 2,546,296 $10,999,999
Morgan Stanley Venture Partners III, L.L.C.................. 1,851,852 8,000,001
Alta Partners............................................... 1,736,112 7,500,004
Biotech Growth S.A.......................................... 462,963 2,000,000
Clive A. Meanwell........................................... 23,148 99,999
Peyton J. Marshall.......................................... 23,148 99,999
</TABLE>
All shares of our series III convertible preferred stock, including accrued
dividends on such stock from August 1, 2000 through August 11, 2000, the closing
of our initial public offering, automatically converted into an aggregate of
7,038,398 shares of our common stock upon the closing of our initial public
offering.
1999 DIVIDEND
In July 1999, we issued a stock dividend on all outstanding shares of series I
convertible preferred stock, series II convertible preferred stock and series
III convertible preferred stock. In connection with the dividend, we issued
172,005 shares of series I convertible preferred stock, 725,214 shares of series
II convertible preferred stock and 571,510 shares of series III convertible
preferred stock. The dividend covered the period from August 8, 1998 to July 31,
1999 with respect to series I and II convertible preferred stock and August 12,
1998 to July 31, 1999 with respect to the series III convertible preferred
stock.
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<PAGE> 55
NOTE FINANCINGS
In October 1999, we issued convertible promissory notes in the aggregate
principal amount of $6.0 million. The notes bore interest at a rate of 8% per
year and were redeemable on January 15, 2001. In connection with the issuance of
the notes, we issued common stock purchase warrants to purchase an aggregate of
1,013,877 shares of common stock with an exercise price of $5.92 per share. The
warrants must be exercised by October 19, 2004. The following directors,
officers and five percent stockholders and their affiliates purchased notes and
warrants:
<TABLE>
<CAPTION>
------------------------
WARRANTS TO
PURCHASE
NAME NOTES COMMON STOCK
---- ---------- ------------
<S> <C> <C>
Warburg, Pincus Venture Partners, L.P....................... $2,750,000 464,699
Morgan Stanley Venture Partners III, L.L.C.................. 643,959 108,877
Alta Partners............................................... 604,048 102,072
PharmaBio Development, Inc.................................. 551,103 93,126
Biotech Growth S.A.......................................... 500,000 84,490
Clive A. Meanwell........................................... 150,000 25,347
Peyton J. Marshall.......................................... 60,175 10,168
T. Scott Johnson............................................ 31,357 5,295
John M. Nystrom............................................. 20,000 3,379
John W. Villiger............................................ 10,000 1,689
</TABLE>
In March 2000, we issued convertible promissory notes in the aggregate principal
amount of $13.3 million. The notes bore interest at a rate of 8% per year and
were redeemable on January 15, 2001. In connection with the issuance of the
notes, we issued common stock purchase warrants to purchase an aggregate of
2,255,687 shares of common stock with an exercise price of $5.92 per share. The
warrants must be exercised by March 2, 2005. The following directors, officers
and five percent stockholders and their affiliates purchased notes and warrants:
<TABLE>
<CAPTION>
------------------------
WARRANTS TO
PURCHASE
NAME NOTES COMMON STOCK
---- ---------- ------------
<S> <C> <C>
Warburg, Pincus Venture Partners, L.P....................... $4,800,000 811,111
Biotech Growth S.A.......................................... 3,500,000 591,435
PharmaBio Development, Inc.................................. 1,120,000 189,259
Morgan Stanley Venture Partners III, L.L.C.................. 1,132,279 191,333
Alta Partners............................................... 1,100,000 185,879
Armin M. Kessler............................................ 200,000 33,796
Clive A. Meanwell........................................... 200,000 33,796
T. Scott Johnson............................................ 50,000 8,449
Peyton J. Marshall.......................................... 50,000 8,449
John M. Nystrom............................................. 10,000 1,689
John W. Villiger............................................ 10,000 1,689
</TABLE>
54
<PAGE> 56
On May 17, 2000, the outstanding aggregate principal amount of the notes issued
in October 1999 and March 2000, and accrued interest thereon, were converted
into an aggregate of 4,535,366 shares of our series IV convertible preferred
stock. The following directors, executive officers and five percent stockholders
and their affiliates received 4,100,748 shares of our series IV preferred stock
in the conversion:
<TABLE>
<CAPTION>
------------------------------
SERIES IV
NAME NOTES PREFERRED STOCK
---- ---------- ----------------
<S> <C> <C>
Warburg, Pincus Venture Partners, L.P....................... $7,639,901 1,768,495
Biotech Growth S.A.......................................... 4,060,110 939,840
Morgan Stanley Venture Partners III, L.L.C.................. 1,797,789 416,153
Alta Partners............................................... 1,724,556 399,201
PharmaBio Development, Inc.................................. 1,691,752 391,609
Clive A. Meanwell........................................... 353,874 81,915
Armin M. Kessler............................................ 203,332 47,067
Peyton J. Marshall.......................................... 111,225 25,746
T. Scott Johnson............................................ 82,283 19,047
John M. Nystrom............................................. 30,239 6,999
John W. Villiger............................................ 20,203 4,676
</TABLE>
ISSUANCE OF SERIES IV CONVERTIBLE PREFERRED STOCK
In May 2000, we issued an aggregate of 1,411,000 shares of our series IV
convertible preferred stock at a price per share of $4.32 for a total purchase
price of $6.1 million. Of the 1,411,000 shares, 1,275,000 shares were sold to
the following directors, officers and five percent stockholders and their
affiliates:
<TABLE>
<CAPTION>
---------------------------------
SERIES IV
PREFERRED
NAME STOCK PURCHASE PRICE
---- --------------- --------------
<S> <C> <C>
Warburg, Pincus Venture Partners, L.P....................... 555,000 $2,397,600
Biotech Growth S.A.......................................... 345,000 1,490,400
Morgan Stanley Venture Investors III, L.L.C................. 130,000 561,600
Alta Partners............................................... 130,000 561,600
PharmaBio Development, Inc.................................. 115,000 496,800
</TABLE>
All shares of our series IV convertible preferred stock, including the shares
issued upon the conversion of the notes, including accrued dividends on such
stock from August 1, 2000 through August 11, 2000, the closing of our initial
public offering, automatically converted into an aggregate of 4,411,003 shares
of common stock upon the consummation of our initial public offering.
2000 DIVIDEND
In July 2000, we issued a stock dividend on all outstanding shares of series I
convertible preferred stock, series II convertible preferred stock, series III
convertible preferred stock and series IV convertible preferred stock. In
connection with the dividend we issued 187,458 shares of series I convertible
preferred stock, 790,358 shares of series II convertible preferred stock,
629,530 shares series III convertible preferred stock and 84,394 shares of
series IV convertible preferred stock. The dividend covered the period from
August 1, 1999 to July 31, 2000 with respect to the series I, II and III
convertible preferred stock and May 17, 2000 to July 31, 2000 with respect to
the series IV convertible preferred stock.
CERTAIN RELATIONSHIPS
PharmaBio/Quintiles
In August 1996, we entered into a strategic alliance with PharmaBio Development,
Inc., a wholly owned subsidiary of Quintiles Transnational Corp. Under the terms
of the strategic alliance agreement, PharmaBio and any of its affiliates who
work on our projects will, at no cost to us, review and evaluate, jointly with
us, development programs we design related to potential or actual product
acquisitions. The purpose of this collaboration is to optimize the duration,
cost, specifications and quality aspects of such programs. PharmaBio and its
affiliates have also agreed to perform other services with respect to our
55
<PAGE> 57
products, including clinical and non-clinical development services, project
management, project implementation, pharmacoeconomic services, regulatory
affairs and post-marketing surveillance services and statistical, statistical
programming, data processing and data management services pursuant to work
orders agreed to by us and PharmaBio from time to time. Through December 31,
2000, we had entered into approximately 40 work orders with PharmaBio and had
paid PharmaBio a total of $10.87 million. We have outstanding obligations to
PharmaBio of an additional $462,574 under outstanding work orders.
In addition, under the strategic alliance agreement, if PharmaBio and its
affiliates exceed performance milestones agreed upon prior to the initiation of
services under any work order, we will pay certain bonuses (not to exceed 10% of
the net revenues PharmaBio and its affiliates received for such services) which,
at the option of PharmaBio, may be paid in shares of our common stock. To date,
performance milestones have been requested and agreed upon for one work order
out of the work orders completed or outstanding, and no such agreed upon
milestones remain outstanding.
Innovex
In January 1997, we entered into a consulting agreement with Innovex, Inc., a
subsidiary of Quintiles, which was subsequently superseded by a consulting
agreement we executed with Innovex in December 1998. Pursuant to the terms of
these agreements, Innovex has provided us with consulting services with respect
to pharmaceutical marketing and sales. Since December 1997, we have also entered
into various clinical services agreements with Innovex pursuant to which Innovex
has provided project management, clinical monitoring, site management, medical
monitoring, regulatory affairs, data management and quality assurance services
with respect to clinical trials of Angiomax. None of the clinical services
agreements is currently outstanding. Through December 31, 2000, we had paid
Innovex $1.77 million under all of these agreements.
In July 2000, we signed a letter of intent with Innovex to enter into a sales
agreement under which Innovex would provide sales and marketing services in
connection with Angiomax. Although the letter of intent contemplated the
negotiation and execution of a binding sales agreement and could be terminated
at any time by either party if no binding sales agreement was reached, we agreed
in the letter of intent that Innovex would begin performing its services
immediately. These services included recruiting and training up to 50 sales
representatives and engaging in other agreed-upon activities.
In December 2000, we signed a master services agreement and a work order with
Innovex under which Innovex agreed to provide contract sales, marketing and
commercialization services relating to Angiomax. Under the master services
agreement, Innovex may provide additional services unrelated to Angiomax
pursuant to work orders entered into from time-to-time. Under the master
services agreement and the Angiomax work order, Innovex will provide the
Angiomax sales force of 52 representatives, a sales territory management system
and operational support for the launch of Angiomax. We will provide the
marketing plan and marketing materials for the sales force and other sales and
marketing support and direction for the sales force. For Innovex's services, we
have agreed to pay a daily fee for each day worked by the members of the sales
force. We will reimburse Innovex for expenses incurred in providing the services
and for the incentive compensation paid to the sales force by Innovex. We have
the right to terminate the work order and the master services agreement at any
time upon 90 days written notice. We may hire members of the sales force,
although we may incur additional fees to Innovex. Through December 31, 2000, we
had paid Innovex $1.1 million for its services under the letter of intent and
master services agreement and work order.
Stack Pharmaceuticals
In April 2000, we entered into an agreement with Stack Pharmaceuticals, Inc.,
which is an entity controlled by David Stack, one of our senior vice presidents,
which we amended in August 2000. Pursuant to the terms of this agreement, as
amended, Stack Pharmaceuticals will perform infrastructure services for us,
which includes providing office facilities, equipment and supplies for our
employees based in New Jersey, and such consulting, advisory and related
services for us as we may agree from time to time. For the infrastructure
services, we have agreed to pay Stack Pharmaceuticals a services fee of $20,100
per month. The fees for any additional services to be provided to us will be
agreed upon with Stack Pharmaceuticals prior to the delivery of such services.
The term of this agreement continues until April 1, 2001, but either party may
terminate it earlier upon 90 days prior written notice. From January 2000
through March 2000, Stack Pharmaceuticals provided us with consulting services
under a consulting agreement which expired on March 31, 2000. Through December
31, 2000, we had paid Stack Pharmaceuticals a total of $406,614 under these
agreements.
56
<PAGE> 58
PRINCIPAL STOCKHOLDERS
The following table presents information regarding the beneficial ownership of
our common stock as of December 31, 2000, and as adjusted to reflect the sale of
our common stock offered by this prospectus, by:
- each of the individuals listed in the "Summary Compensation Table" above;
- each of our directors;
- each person, or group of affiliated persons, who is known by us to
beneficially own five percent or more of our common stock; and
- all current directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the SEC and
generally includes shares of capital stock held by that person as of December
31, 2000 as set forth under the heading "Number of Shares Beneficially Owned"
below and shares of common stock under options held by that person that are
currently exercisable or exercisable within 60 days of December 31, 2000 as set
forth under the heading "Shares Issuable Pursuant to Options and Warrants
Exercisable within 60 days of December 31, 2000" below. These shares, however,
are not considered outstanding when computing the percentage ownership of each
other person.
Except as indicated in the footnotes to this table and pursuant to state
community property laws, each stockholder named in the table has sole voting and
investment power for the shares shown as beneficially owned by them. Percentage
of ownership is based on 30,320,450 shares of common stock outstanding on
December 31, 2000 and 34,320,450 shares of common stock outstanding after
completion of this offering. Unless otherwise indicated in the footnotes, the
address of each of the individuals named below is: c/o The Medicines Company,
One Cambridge Center, Cambridge, Massachusetts 02142.
<TABLE>
<CAPTION>
-----------------------------------------------------------
BENEFICIAL OWNERSHIP
PRIOR TO OFFERING
-----------------------------------
SHARES ISSUABLE
PURSUANT TO OPTIONS PERCENTAGE
AND WARRANTS BENEFICIALLY
NUMBER OF EXERCISABLE OWNED
SHARES WITHIN 60 DAYS --------------------
BENEFICIALLY OF DECEMBER 31, BEFORE AFTER
OWNED 2000 OFFERING OFFERING
------------ ------------------- -------- --------
<S> <C> <C> <C> <C>
5% STOCKHOLDERS:
Warburg, Pincus Ventures, L.P.(1).................... 8,329,446 1,275,810 30.4% 27.0%
Biotech Growth S.A.(2)............................... 5,204,837 675,925 19.0% 16.8%
Morgan Stanley Venture Partners(3)................... 1,952,777 300,210 7.4% 6.5%
Alta Partners(4)..................................... 1,843,474 287,951 7.0% 6.2%
PharmaBio Development, Inc.(5)....................... 1,699,544 282,385 6.5% 5.7%
</TABLE>
57
<PAGE> 59
<TABLE>
<CAPTION>
-----------------------------------------------------------
BENEFICIAL OWNERSHIP
PRIOR TO OFFERING
-----------------------------------
SHARES ISSUABLE
PURSUANT TO OPTIONS PERCENTAGE
AND WARRANTS BENEFICIALLY
NUMBER OF EXERCISABLE OWNED
SHARES WITHIN 60 DAYS --------------------
BENEFICIALLY OF DECEMBER 31, BEFORE AFTER
OWNED 2000 OFFERING OFFERING
------------ ------------------- -------- --------
<S> <C> <C> <C> <C>
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
Clive A. Meanwell.................................... 510,400 174,005 2.2% 2.0%
Peyton J. Marshall(6)................................ 271,420 82,208 1.2% 1.0%
John W. Villiger(7).................................. 209,465 23,502 * *
John M. Nystrom(8)................................... 36,925 47,295 * *
John D. Richards..................................... 37,100 17,776 * *
Leonard Bell......................................... -- 2,727 * *
Dennis B. Gillings(9)................................ -- -- * *
Anders D. Hove(10)................................... -- -- * *
M. Fazle Husain(11).................................. 1,952,777 300,210 7.4% 6.5%
T. Scott Johnson(12)................................. 89,396 13,744 * *
Armin M. Kessler(13)................................. 37,914 42,312 * *
Nicholas J. Lowcock(14).............................. 8,329,446 1,276,643 30.4% 27.0%
James E. Thomas...................................... -- 2,727 * *
All directors and executive officers as a group (16
persons)........................................... 11,474,843 3,293,907 43.9% 39.3%
</TABLE>
---------------
* Represents beneficial ownership of less than 1 percent.
(1) Warburg, Pincus Ventures, L.P. is the stockholder. Warburg, Pincus & Co. is
the sole general partner of Warburg, Pincus Ventures. Warburg, Pincus
Ventures is managed by E.M. Warburg, Pincus & Co., LLC. Lionel I. Pincus is
the managing partner of Warburg, Pincus & Co. and the managing member of
E.M. Warburg, Pincus & Co., LLC and may be deemed to control both entities.
The address of the Warburg Pincus entities is 466 Lexington Avenue, New
York, New York 10017.
(2) Pablo Javier Espino, Aida May Biggs and Adelina M. De Estribi, members of
the board of directors of Biotech Growth S.A., share ultimate voting and
dispositive power over the shares held of record by Biotech Growth S.A. The
address of each person and Biotech Growth S.A. is c/o Morgan & Morgan, 53
Street Urbainazcion Obarrio, Torre Swiss Bank, 16th Floor, Republic of
Panama.
(3) Includes 1,713,322 shares of common stock and warrants to purchase 263,399
shares of common stock held by Morgan Stanley Venture Partners III, L.P.,
164,501 shares of common stock and warrants to purchase 25,288 shares of
common stock held by Morgan Stanley Venture Investors III, L.P. and 74,954
shares of common stock and warrants to purchase 11,523 shares of common
stock held by The Morgan Stanley Venture Partners Entrepreneur Fund, L.P.
Morgan Stanley Dean Witter & Co. is the sole stockholder of Morgan Stanley
Venture Capital III, Inc., which is the managing member of Morgan Stanley
Venture Partners III, L.L.C., which is the general partner of each of
Morgan Stanley Venture Capital III, L.P., Morgan Stanley Venture Investors
III, L.P. and The Morgan Stanley Venture Partners Entrepreneur Fund, L.P.
The address for Morgan Stanley Venture Partners is 1221 Avenue of the
Americas, 33rd Floor, New York, New York 10020.
(4) Includes 1,145,880 shares of common stock and warrants for 178,987 shares
of common stock held by Alta BioPharma Partners, L.P. The Medicines Company
Chase Partners (Alta Bio), LLC beneficially owns 654,406 shares of common
stock and warrants for 102,218 shares of common stock. Alta Embarcadero
BioPharma Partners, LLC beneficially owns 43,188 shares of common stock and
warrants for 6,746 shares of common stock. Alta Partners provides
investment advisory services to several venture capital funds, including
Alta BioPharma Partners L.P., The Medicines Company Chase Partners (Alta
Bio), LLC and Alta Embarcadero BioPharma Partners, LLC. The respective
general partners and managing members of Alta BioPharma Partners, L.P., The
Medicines Company Chase Partners (Alta Bio), LLC and Alta Embarcadero
BioPharma Partners, LLC exercise sole voting and investment power with
respect to the shares owned by such funds.
58
<PAGE> 60
The principals of Alta Partners are members of Alta BioPharma Management,
LLC (which is the general partner of Alta BioPharma Partners, L.P.), and
Alta/Chase BioPharma Management, LLC (which is the managing member of The
Medicines Company Chase Partners (Alta Bio), LLC and Alta Embarcadero
BioPharma Partners, LLC. As general partners and managing members of such
entities, they may be deemed to share voting and investment powers for the
shares held by the funds. The principals of Alta Partners disclaim
beneficial ownership of all such shares held by the foregoing funds, except
to the extent of their proportionate pecuniary interests therein.
Alta Partners is a venture capital company with an office in San Francisco.
Alta Partners is a California Corporation. Alta BioPharma Partners, L.P. is
a Delaware Limited Partnership, The Medicines Company Chase Partners (Alta
Bio), LLC is a Delaware Limited Liability Company, and Alta Embarcadero
BioPharma Partners, LLC is a California Limited Liability Company.
(5) Pharma Bio Development, Inc. is a wholly owned subsidiary of Quintiles
Transnational Corp., a publicly held company. The address for PharmaBio
Development, Inc. is c/o Quintiles Transnational Corp., 4709 Creekstone
Drive, Riverbirch Building, Durham, North Carolina 27703-8411.
(6) Includes 58,400 shares of common stock held in custody for the benefit of
his minor children.
(7) Includes 209,465 shares of common stock and warrants to purchase 3,378
shares of common stock held in trust for the benefit of the Villiger
Family.
(8) Includes 10,820 shares of common stock held by Dr. Nystrom's children. Dr.
Nystrom disclaims beneficial ownership of these shares.
(9) Does not include 1,699,544 shares of common stock or warrants to purchase
282,385 shares of common stock held by PharmaBio Development, Inc., a
wholly owned subsidiary of Quintiles Transnational Corp. Mr. Gillings is
the Chairman and Chief Executive Officer of Quintiles Transnational Corp.
Mr. Gillings disclaims beneficial ownership of these shares.
(10) Does not include 5,204,837 shares of common stock or warrants to purchase
675,925 shares of common stock held by Biotech Growth S.A. Dr. Hove is
affiliated with Bellevue Group which serves as the non-discretionary
investment manager of Biotech Growth S.A. Dr. Hove disclaims beneficial
ownership of these shares.
(11) Consists solely of shares of common stock and warrants to purchase common
stock held by Morgan Stanley Venture Partners III, L.P., Morgan Stanley
Venture Investors III, L.P. and The Morgan Stanley Venture Partners
Enterpreneur Fund, L.P. Mr. Husain is a vice president of Morgan Stanley
Venture Partners III, Inc. which is the sole member of Morgan Stanley
Venture Partners III, L.L.C., which is a general partner of each of Morgan
Stanley Venture Partners III, L.P., Morgan Stanley Venture Investors III,
L.P. and The Morgan Stanley Venture Partners Entrepreneur Fund, L.P. Mr.
Husain disclaims beneficial ownership of these shares.
(12) Includes 16,726 shares of common stock held in trust for the benefit of his
minor children.
(13) Includes 3,000 shares of common stock held by Dr. Kessler's wife.
(14) Includes 8,329,446 shares of common stock and warrants to purchase
1,275,810 shares of common stock held by Warburg, Pincus Ventures, L.P. Mr.
Lowcock, a director of the Company, is a Managing Director of E.M. Warburg,
Pincus & Co., LLC. All shares indicated as owned by Mr. Lowcock are
included because of his affiliation with the Warburg Pincus entities.
59
<PAGE> 61
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 75,000,000 shares of common stock,
$0.001 par value per share, and 5,000,000 shares of undesignated preferred
stock, $1.00 par value per share.
The following summary of our capital stock, and some of the provisions of our
certificate of incorporation and other agreements to which we and our
stockholders are parties, is not intended to be complete and is qualified by
reference to our certificate of incorporation and any other agreements included
as exhibits to the registration statement of which this prospectus is a part.
See "Where You Can Find More Information."
COMMON STOCK
As of December 31, 2000, there were 30,320,450 shares of our common stock
outstanding held by 73 stockholders of record.
The holders of our common stock are entitled to one vote for each share held on
all matters submitted to a vote of the stockholders and do not have any
cumulative voting rights. Accordingly, holders of a majority of the shares of
common stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of our common stock are entitled to
receive proportionally any dividends declared by our board of directors, subject
to any preferential dividend rights of outstanding preferred stock.
In the event of our liquidation, dissolution or winding up, holders of our
common stock are entitled to share ratably in all assets remaining after payment
of all debts and other liabilities, subject to the prior rights of any
outstanding preferred stock. Holders of our common stock have no preemptive,
subscription, redemption or conversion rights. All outstanding shares of our
common stock are validly issued, fully paid and nonassessable. The shares to be
issued by us in this offering will be, when issued and paid for, validly issued,
fully paid and nonassessable. The rights, preferences and privileges of holders
of our common stock are subject to, and may be adversely affected by, the rights
of holders of shares of any series of preferred stock that we may designate and
issue in the future.
PREFERRED STOCK
Under the terms of our certificate of incorporation, our board of directors is
authorized to issue shares of preferred stock in one or more series without
stockholder approval. The board has discretion to determine the rights,
preferences, privileges and restrictions, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation preferences of
each series of preferred stock. There are currently no shares of preferred stock
outstanding.
The purpose of authorizing our board of directors to issue preferred stock and
determine its rights and preferences is to eliminate delays associated with a
stockholder vote on specific issuances. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could make it more difficult for a third party to
acquire, or could discourage a third-party from acquiring, a majority of our
outstanding voting stock.
WARRANTS
As of December 31, 2000, we had outstanding common stock purchase warrants
entitling their holders to purchase an aggregate of 3,269,564 shares of common
stock at an exercise price of $5.92 per share. In October 1999, we issued
warrants exercisable at any time prior to October 19, 2004 for 1,013,877 shares
of our common stock in connection with the sale of 8% convertible promissory
notes in the aggregate principal amount of $6.0 million. In March 2000, we
issued warrants exercisable at any time prior to March 2, 2005 for 2,255,687
shares of our common stock in connection with the sale of 8% convertible
promissory notes in the aggregate principal amount of $13.3 million.
REGISTRATION RIGHTS
The holders of 22,381,735 shares of common stock and warrants exercisable for
3,269,564 shares of common stock are entitled to require us to register their
shares under the Securities Act as provided in a registration rights agreement
between us and such holders. Under this agreement, if we propose to register any
of our securities under the Securities Act, either for our account or for the
account of other security holders exercising registration rights, the holders
are entitled to notice of the registration and to include their shares of common
stock in the registration. Additionally, such holders may, on up to two
occasions, require us to register their shares of common stock under the
Securities Act. In addition, we are required to use our best efforts to effect
any such registration. We are responsible for paying the expense of any such
registration. Further,
60
<PAGE> 62
such holders may require us to file nine additional registration statements on
form S-3 at our expense. These registration rights are subject to conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares included in such registration and our right not to effect a
requested registration within 180 days following an offering of our securities
pursuant to a Form S-1, including this offering.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW AND CHARTER AND BY-LAW PROVISIONS
Delaware Law
We are subject to the provisions of Section 203 of the Delaware General
Corporate Law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that the stockholder
became an interested stockholder unless:
- prior to the date, the board of directors of the corporation approved either
the business combination or the transaction that resulted in the stockholder
becoming an interested stockholder;
- upon consummation of the transaction that resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of
the voting stock of the corporation outstanding at the time the transaction
commenced, excluding those shares owned by persons who are directors and also
officers, and employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held under the plan will
be tendered in a tender or exchange offer; or
- on or subsequent to the date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
two-thirds of the outstanding voting stock that is not owned by the interested
stockholder.
Section 203 defines "business combination" to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- in general, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as an entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
Charter and By-law Provisions
Our charter and our amended and restated by-laws provide for the division of our
board of directors into three classes as nearly equal in size as possible with
staggered three-year terms. See "Management -- Board Composition." Under our
charter and by-laws, any vacancy on the board of directors, including a vacancy
resulting from an enlargement of the board of directors, may only be filled by
vote of a majority of the directors then in office. The classification of the
board of directors and the limitation on and filling of vacancies could make it
more difficult for a third party to acquire, or discourage a third party from
acquiring, control of our company.
Our charter and by-laws also provide that any action required or permitted to be
taken by our stockholders at an annual or special meeting of stockholders may
only be taken if it is properly brought before such meeting and may not be taken
by written action in lieu of a meeting. Our by-laws further provide that special
meetings of the stockholders may only be called by the chairman of our board of
directors, our president or a majority of our board. In order for any matter to
be considered "properly brought" before a meeting, a stockholder must comply
with certain requirements regarding advance notice and provide us with certain
information. These provisions could have the effect of delaying until the next
stockholders meeting stockholder actions which are favored by the holders of a
majority of our outstanding voting securities.
The General Corporation Law of Delaware provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or by-laws, unless a
corporation's
61
<PAGE> 63
certificate of incorporation or by-laws, as the case may be, requires a greater
percentage. Our charter and our by-laws require the affirmative vote of holders
of at least 50% of the votes which all the stockholders would be entitled to
cast in any annual election of directors or class of directors to amend or
repeal any of the provisions described in the prior two paragraphs.
Our certificate of incorporation contains certain provisions permitted under the
General Corporation Law of Delaware relating to the liability of directors.
These provisions eliminate a director's liability for monetary damages for a
breach of fiduciary duty, except in certain circumstances involving wrongful
acts, such as the breach of a director's duty of loyalty or acts or omissions
which involve intentional misconduct or a knowing violation of law. Further, our
certificate of incorporation contains provisions to indemnify our directors and
officers to the fullest extent permitted by the General Corporation Law of
Delaware. We believe that these provisions will assist us in attracting and
retaining qualified individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
Mellon Investor Services, LLC has been appointed as the transfer agent and
registrar for our common stock.
NASDAQ NATIONAL MARKET LISTING
Our shares of common stock are listed on the Nasdaq National Market under the
symbol "MDCO".
62
<PAGE> 64
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of this offering, we will have outstanding an aggregate of
34,320,450 shares of common stock. Of these shares, the 6,900,000 shares sold in
our initial public offering and all of the 4,000,000 shares sold in this
offering will be freely tradable without restriction or further registration
under the Securities Act, unless these shares are purchased by affiliates.
Generally, the balance of the outstanding shares of common stock are "restricted
securities." Restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration under the
Securities Act.
In connection with our initial public offering, our executive officers,
directors and stockholders agreed pursuant to "lock-up" agreements that, with
limited exceptions, for a period of 180 days from the date of the prospectus for
our initial public offering, they would not sell any shares of common stock
without the prior written consent of J.P. Morgan Securities Inc. These
agreements expire on February 3, 2001. In connection with this offering, we
believe that our executive officers, directors and other stockholders holding a
total of approximately 20,328,355 shares of common stock will agree pursuant to
new "lock-up" agreements that, with limited exceptions, prior to February 15,
2001 and for a period of 90 days from the date of this prospectus, they will not
sell any shares of common stock without the prior written consent of J.P. Morgan
Securities Inc.
As a result of these "lock-up" agreements and the rules under the Securities
Act, the restricted shares subject to these "lock-up" agreements will be
available for sale in the public market, subject, to certain volume and other
restrictions, as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
NUMBER OF SHARES
DATE ELIGIBLE FOR SALE COMMENT
---------------- ----------------- ------------------------------------------------------------
<S> <C> <C>
February 3, 2001 2,958,655 180-day lock-up released; shares eligible for sale under
Rules 144 and 701
90 days from the 20,328,355 90-day lock-up released; shares eligible for sale under
date of this Rules 144 and 701
prospectus
</TABLE>
We have filed a registration statement under the Securities Act covering
approximately 4,873,759 shares of common stock reserved for issuance under our
stock plans. Accordingly, shares registered under such registration statement
are available for sale in the open market unless they are held by persons that
have signed a "lock-up" agreement. Of the 3,212,112 shares that may be issued
upon the exercise of options outstanding as of December 31, 2000, we believe
approximately 59,044 shares will be subject to options which will be vested and
exercisable and not subject to lock-up on February 3, 2001 and 568,254 shares
will be subject to options which will be vested and exercisable and not subject
to lock-up 90 days after the date of this prospectus.
Registration Rights
As of December 31, 2000, the holders of 22,381,735 shares of our common stock
and warrants exercisable for 3,269,564 additional shares of common stock had
rights to require us to register their shares under the Securities Act. Upon the
effectiveness of a registration statement covering these shares, the shares
would become freely tradable.
63
<PAGE> 65
UNDERWRITING
J.P. Morgan Securities Inc. is acting as sole book running manager for this
offering. We and the underwriters named below have entered into an underwriting
agreement covering the common stock to be offered in this offering. J.P. Morgan
Securities Inc., Robertson Stephens, Inc., CIBC World Markets Corp. and U.S.
Bancorp Piper Jaffray Inc. are acting as representatives of the underwriters.
Each underwriter has agreed to purchase the number of shares of common stock set
forth opposite its name in the following table.
<TABLE>
<CAPTION>
----------------
NUMBER OF SHARES
----------------
<S> <C>
UNDERWRITERS
J.P. Morgan Securities Inc. ..............................
Robertson Stephens, Inc. .................................
CIBC World Markets Corp. .................................
U.S. Bancorp Piper Jaffray Inc. ..........................
----------
Total.................................................. 4,000,000
==========
</TABLE>
The underwriting agreement provides that if the underwriters take any of the
shares presented in the table above, then they must take all of these shares. No
underwriter is obligated to take any shares allocated to a defaulting
underwriter except under limited circumstances.
The underwriters are offering the shares of common stock, subject to the prior
sale of shares, and when, as and if such shares are delivered to and accepted by
them. The underwriters will initially offer to sell shares to the public at the
public offering price shown on the cover page of this prospectus. The
underwriters may sell shares to securities dealers at a discount of up to $
per share from the public offering price. Any such securities dealers may resell
shares to certain other brokers or dealers at a discount of up to $ per
share from the public offering price.
If the underwriters sell more shares than the total number shown in the table
above, the underwriters have the option to buy up to an additional 600,000
shares of common stock from us to cover such sales. They may exercise this
option during the 30-day period from the date of this prospectus. If any shares
are purchased with this option, the underwriters will purchase shares in
approximately the same proportion as shown in the table above.
The following table shows the per share and total underwriting discounts and
commissions that we will pay to the underwriters. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
----------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share................................................... $ $
Total..................................................... $ $
</TABLE>
The representatives have advised us that, on behalf of the underwriters, they
may make short sales of our common stock in connection with this offering,
resulting in the sale by the underwriters of a greater number of shares than
they are required to purchase pursuant to the underwriting agreement. The short
position resulting from those short sales will be deemed a "covered" short
position to the extent that it does not exceed the 600,000 shares subject to the
underwriters' over-allotment option and will be deemed a "naked" short position
to the extent that it exceeds that number. A naked short position is more likely
to be created if the underwriters are concerned that there may be downward
pressure on the trading price of the common stock in the open market that could
adversely affect investors who purchase shares in this offering. The
underwriters may reduce or close out their covered short position either by
exercising the over-allotment option or by purchasing shares in the open market.
In determining which of these alternatives to pursue, the underwriters will
consider the price at which shares are available for purchase in the open market
as compared to the price at which they may purchase shares through the
over-allotment option. Any "naked" short position will be closed out by
purchasing shares in the open market. Similar to the other stabilizing
transactions described below, open market purchases made by the underwriters to
cover all or a portion of their short position may have the effect of preventing
or retarding a decline in the market price of our common stock following this
offering. As a result, our common stock may trade at a price that is higher than
the price that otherwise might prevail in the open market.
The representatives have advised us that, pursuant to Regulation M under the
Securities Act of 1933, they may engage in transactions, including stabilizing
bids or the imposition of penalty bids, that may have the effect of stabilizing
or
64
<PAGE> 66
maintaining the market price of the shares of common stock at a level above that
which might otherwise prevail in the open market. A "stabilizing bid" is a bid
for or the purchase of shares of common stock on behalf of the underwriters for
the purpose of fixing or maintaining the price of the common stock. A "penalty
bid" is an arrangement permitting the representatives to claim the selling
concession otherwise accruing to an underwriter or syndicate member in
connection with the offering if the common stock originally sold by that
underwriter or syndicate member is purchased by the representatives in the open
market pursuant to a stabilizing bid or to cover all or part of a syndicate
short position. The representatives have advised us that stabilizing bids and
open market purchases may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise and, if commenced, may be discontinued at
any time.
One or more of the underwriters may facilitate the marketing of this offering
online directly or through one of its affiliates. In those cases, prospective
investors may view offering terms and a prospectus online and, depending upon
the particular underwriter, place orders online or through their financial
advisor.
We estimate that the total expenses of this offering, excluding underwriting
discounts, will be $900,000.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
It is expected that delivery of the shares will be made to investors on or about
January , 2001.
We have agreed and expect that our executive officers, directors and other
stockholders holding a total of approximately 20,328,355 shares of common stock
will agree that, prior to February 15, 2001 and during the period beginning from
the date of this prospectus and continuing to and including the date 90 days
after the date of this prospectus, none of us will, directly or indirectly,
offer, sell, offer to sell, contract to sell or otherwise dispose of any shares
of common stock or any of our securities which are substantially similar to the
common stock, including but not limited to any securities that are convertible
into or exchangeable for, or that represent the right to receive, common stock
or any substantially similar securities or enter into any swap, option, future,
forward or other agreement that transfers, in whole or in part, the economic
consequence of ownership of common stock or any securities substantially similar
to the common stock, other than pursuant to employee stock option plans existing
on the date of this prospectus, without the prior written consent of J.P. Morgan
Securities Inc.
From time to time in the ordinary course of their respective businesses, certain
of the underwriters and their affiliates have engaged in and may in the future
engage in commercial banking and/or investment banking transactions with us and
our affiliates. In addition, Robertson Stephens, Inc. and its affiliates own
84,196 shares of common stock, which will represent less than 1% of our
outstanding common stock assuming completion of this offering.
65
<PAGE> 67
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of common stock
offered hereby will be passed upon us by Hale and Dorr LLP, Boston,
Massachusetts. Legal matters in connection with the offering will be passed upon
for the underwriters by Cahill Gordon & Reindel, New York, New York. Partners of
Hale and Dorr LLP beneficially own an aggregate of 23,681 shares of our common
stock and warrants exercisable for 1,554 additional shares of common stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated financial
statements as of December 31, 1998 and 1999 and for each of the three years in
the period ended December 31, 1999, as set forth in their report. We have
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act of 1933 regarding the shares of common stock offered by this
prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information contained in the registration
statement, some items of which are contained in exhibits to the registration
statement as permitted by the rules and regulations of the SEC. For further
information on us and our common stock, please see the registration statement,
including the exhibits, and the financial statements and notes filed as a part
of the registration statement. We are also required to file annual, quarterly
and special reports, proxy statements and other information with the SEC. A copy
of the registration statement, including the exhibits and the financial
statements and notes filed as a part of it, or any reports, statements or other
information we have filed or file, may be inspected without charge at the public
reference facilities maintained by the SEC in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies of all or any part of these documents may be
obtained from the SEC upon the payment of fees prescribed by it. The SEC also
maintains a website at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding companies that file
electronically with it.
66
<PAGE> 68
INDEX TO THE
CONSOLIDATED FINANCIAL STATEMENTS OF
THE MEDICINES COMPANY
(a company in the development stage)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Redeemable Preferred Stock and
Stockholders' Deficit..................................... F-5
Consolidated Statements of Cash Flows....................... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>
F-1
<PAGE> 69
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
The Medicines Company
We have audited the accompanying consolidated balance sheets of The Medicines
Company (a company in the development stage) as of December 31, 1998 and 1999,
and the related consolidated statements of operations, redeemable preferred
stock and stockholders' deficit, and cash flows, for each of the three years in
the period ended December 31, 1999, and the statement of redeemable preferred
stock and stockholders' deficit for the period July 31, 1996 (date of inception)
to December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Medicines Company at December 31, 1998 and 1999, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
April 17, 2000, except for the first and
second paragraphs of Note 14
as to which the date is May 17, 2000 and
the third paragraph of Note 14, as to
which the date is August 4, 2000.
F-2
<PAGE> 70
THE MEDICINES COMPANY
(a company in the development stage)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
---------------------------------------------
AS OF DECEMBER 31,
---------------------------- SEPTEMBER 30,
1998 1999 2000
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 8,997,522 $ 6,643,266 $ 68,109,035
Marketable securities.................................... 19,343,183 539,274 29,181,638
Accrued interest receivable.............................. 745,515 55,225 957,724
Prepaid expenses and other current assets................ 195,475 154,967 457,650
------------ ------------ -------------
Total current assets............................. 29,281,695 7,392,732 98,706,047
Fixed assets, net.......................................... 382,692 430,061 655,114
Other assets............................................... 166,479 168,605 302,502
------------ ------------ -------------
Total assets..................................... $ 29,830,866 $ 7,991,398 $ 99,663,663
============ ============ =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable......................................... $ 2,287,048 $ 7,815,028 $ 3,892,161
Accrued expenses......................................... 2,425,107 3,680,293 6,753,414
------------ ------------ -------------
Total current liabilities........................ 4,712,155 11,495,321 10,645,575
Convertible notes.......................................... -- 5,776,319 --
Commitments and contingencies
Redeemable Convertible Preferred Stock, $1 par value;
31,550,000 and 5,000,000 shares authorized at December
31, 1999 and September 30, 2000, respectively; shares
issued and outstanding: 21,493,621 at December 31, 1998,
22,962,350 at December 31, 1999 and 0 at September 30,
2000, at redemption value (Liquidation value of
$86,167,821 at December 31, 1999 and $0 at September 30,
2000).................................................... 79,384,470 85,277,413 --
Stockholders' equity (deficit):
Common stock, $.001 par value, 36,000,000 shares
authorized at December 31, 1998 and 1999 and
75,000,000 shares authorized at September 30, 2000,
respectively; shares issued and outstanding: 889,778
and 833,400 at December 31, 1998 and 1999,
respectively, and 30,297,532 at September 30, 2000.... 890 834 30,298
Additional paid-in capital............................... 13,810 339,144 279,133,225
Deferred stock compensation.............................. -- -- (15,740,140)
Deficit accumulated during the development stage......... (54,319,117) (94,925,028) (174,377,144)
Accumulated other comprehensive income................... 38,658 27,395 (28,151)
------------ ------------ -------------
Total stockholders' equity (deficit)............. (54,265,759) (94,557,655) 89,018,088
------------ ------------ -------------
Total liabilities and stockholders' equity (deficit)....... $ 29,830,866 $ 7,991,398 $ 99,663,663
============ ============ =============
</TABLE>
See accompanying notes.
F-3
<PAGE> 71
THE MEDICINES COMPANY
(a company in the development stage)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, PERIOD JULY 31, 1996
------------------------------------------ --------------------------- (DATE OF INCEPTION)
1997 1998 1999 1999 2000 TO SEPTEMBER 30, 2000
------------ ------------ ------------ ------------ ------------ -----------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Operating expenses:
Research and
development..... $ 16,044,367 $ 24,004,606 $ 30,344,892 $ 25,116,175 $ 23,503,579 $ 94,724,679
General and
administrative... 2,420,373 6,248,265 5,008,387 4,082,037 7,339,618 21,717,950
------------ ------------ ------------ ------------ ------------ -------------
Total
operating
expenses... 18,464,740 30,252,871 35,353,279 29,198,212 30,843,197 116,442,629
------------ ------------ ------------ ------------ ------------ -------------
Loss from
operations......... (18,464,740) (30,252,871) (35,353,279) (29,198,212) (30,843,197) (116,442,629)
Other income
(expense):
Interest income.... 688,049 1,302,073 837,839 814,813 1,124,331 4,013,957
Interest expense... (29,235) -- (197,455) -- (19,390,414) (19,617,104)
------------ ------------ ------------ ------------ ------------ -------------
Net loss............. (17,805,926) (28,950,798) (34,712,895) (28,383,399) (49,109,280) (132,045,776)
Dividends and
accretion to
redemption value of
redeemable
preferred stock.... (2,018,265) (3,958,903) (5,893,016) (4,370,770) (30,342,988) (42,331,520)
------------ ------------ ------------ ------------ ------------ -------------
Net loss attributable
to common
stockholders....... $(19,824,191) $(32,909,701) $(40,605,911) $(32,754,169) $(79,452,268) $(174,377,296)
============ ============ ============ ============ ============ =============
Basic and diluted net
loss attributable
to common
stockholders per
common share....... $ (4.06) $ (6.03) $ (80.08) $ (66.99) $ (13.32)
Unaudited pro forma
basic and diluted
net loss
attributable to
common stockholders
per common share... $ -- $ -- $ (1.94) $ (1.64) $ (1.28)
Shares used in
computing net loss
attributable to
common stockholders
per common share:
Basic and
diluted......... 4,887,230 5,454,653 507,065 488,973 5,964,852
Unaudited pro forma
basic and
diluted......... 17,799,876 17,336,229 23,222,614
</TABLE>
See accompanying notes.
F-4
<PAGE> 72
THE MEDICINES COMPANY
(a company in the development stage)
CONSOLIDATED STATEMENTS OF REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD JULY 31, 1996 (DATE OF INCEPTION) TO SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
REDEEMABLE REDEEMABLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------------- ------------------------ ---------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
------- ------------ ---------- ----------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock....... $ 2,042,175 $ 2,042 $ 755
Issuance of redeemable
preferred stock.............. 4,675 $ 4,675,000
Accretion of preferred stock to
redemption value............. 118,348
Net loss.......................
------- ------------ ---------- ----------- ----------- -------- -----------
Balance at December 31,
1996....................... 4,675 4,793,348 -- -- 2,042,175 2,042 755
Employee stock purchases....... 627,070 627 232
Issuance of common stock....... 7,186,537 7,187 2,658
Issuance of redeemable
preferred stock.............. 34,456 33,498,408
Dividends on preferred stock... 1,175 1,056,652
Accretion of preferred stock to
redemption value............. 957,592
Net loss.......................
Currency translation
adjustment...................
Unrealized gain on marketable
securities...................
Comprehensive loss.............
------- ------------ ---------- ----------- ----------- -------- -----------
Balance at December 31,
1997....................... 40,306 40,306,000 -- -- 9,855,782 9,856 3,645
Employee stock purchases....... 34,887 35 1,312
Repurchase of common stock..... (107,979) (108) (40)
Exchange of redeemable
preferred stock for
redeemable convertible
preferred stock.............. (41,992) (41,992,000) 13,071,714 41,992,000 (8,892,912) (8,893) 8,893
Issuance of redeemable
convertible preferred
stock........................ 8,421,907 35,126,419
Dividends on preferred stock... 1,686 1,686,000
Accretion of preferred stock to
redemption value............. 2,266,051
Net loss.......................
Currency translation
adjustment...................
Unrealized loss on marketable
securities...................
Comprehensive loss.............
------- ------------ ---------- ----------- ----------- -------- -----------
Balance at December 31,
1998....................... -- -- 21,493,621 79,384,470 889,778 890 13,810
<CAPTION>
----------------------------------------------
DEFICIT
ACCUMULATED
DURING THE COMPREHENSIVE TOTAL
DEFERRED STOCK DEVELOPMENT INCOME STOCKHOLDERS'
COMPENSATION STAGE (LOSS) DEFICIT
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Issuance of common stock....... $ $ $ $ 2,797
Issuance of redeemable
preferred stock..............
Accretion of preferred stock to
redemption value............. (118,348) (118,348)
Net loss....................... (1,466,877) (1,466,877)
-------------- ------------- ------------- -------------
Balance at December 31,
1996....................... -- (1,585,225) -- (1,582,428)
Employee stock purchases....... 859
Issuance of common stock....... 9,845
Issuance of redeemable
preferred stock..............
Dividends on preferred stock... (1,060,673) (1,060,673)
Accretion of preferred stock to
redemption value............. (957,592) (957,592)
Net loss....................... (17,805,926) (17,805,926)
Currency translation
adjustment................... 1,806 1,806
Unrealized gain on marketable
securities................... 7,274 7,274
-------------
Comprehensive loss............. (17,796,846)
-------------- ------------- ------------- -------------
Balance at December 31,
1997....................... -- (21,409,416) 9,080 (21,386,835)
Employee stock purchases....... 1,347
Repurchase of common stock..... (148)
Exchange of redeemable
preferred stock for
redeemable convertible
preferred stock.............. --
Issuance of redeemable
convertible preferred
stock........................
Dividends on preferred stock... (1,692,852) (1,692,852)
Accretion of preferred stock to
redemption value............. (2,266,051) (2,266,051)
Net loss....................... (28,950,798) (28,950,798)
Currency translation
adjustment................... 31,562 31,562
Unrealized loss on marketable
securities................... (1,984) (1,984)
-------------
Comprehensive loss............. (28,921,220)
-------------- ------------- ------------- -------------
Balance at December 31,
1998....................... -- (54,319,117) 38,658 (54,265,759)
</TABLE>
See accompanying notes.
F-5
<PAGE> 73
THE MEDICINES COMPANY
(a company in the development stage)
CONSOLIDATED STATEMENTS OF REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)--(CONTINUED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
REDEEMABLE REDEEMABLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------------- --------------------------- ---------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
------- ------------ ----------- ------------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Repurchase of common stock........... (56,378) (56) (21)
Dividends on preferred stock......... 1,468,729 5,351,178
Accretion of preferred stock to
redemption value.................... 541,765
Issuance of warrants associated with
convertible notes................... 325,355
Net loss.............................
Currency translation adjustment......
Unrealized loss on marketable
securities..........................
Comprehensive loss...................
------- ------------ ----------- ------------- ----------- -------- ------------
Balance at December 31, 1999......... -- -- 22,962,350 85,277,413 833,400 834 339,144
Repurchase of common stock
(unaudited)......................... (22,213) $ (22) (8)
Employee stock purchases
(unaudited)......................... 204,610 204 257,846
Issuance of redeemable convertible
preferred stock (unaudited)......... 5,946,366 25,688,284
Accretion and Dividend on preferred
stock (unaudited)................... 1,751,241 4,898,537
Beneficial conversion of redeemable
convertible preferred stock
(unaudited)......................... 25,444,299
Issuance of warrants associated with
convertible notes (unaudited)....... 18,789,805
Issuance of common stock through
initial public offering
(unaudited)......................... 6,900,000 6,900 101,180,795
Conversion of preferred stock to
common stock (unaudited)............ (30,659,957) (115,864,234) 22,381,735 22,382 115,841,732
Deferred compensation expense
associated with stock options
(unaudited)......................... 17,279,612
Amortization of deferred compensation
(unaudited).........................
Net loss (unaudited).................
Currency translation adjustment
(unaudited).........................
Unrealized loss on marketable
securities (unaudited)..............
Comprehensive loss (unaudited).......
------- ------------ ----------- ------------- ----------- -------- ------------
Balance at September 30, 2000
(unaudited)....................... -- $ -- -- $ -- 30,297,532 $ 30,298 $279,133,225
======= ============ =========== ============= =========== ======== ============
<CAPTION>
----------------------------------------------
DEFICIT
ACCUMULATED
DURING THE COMPREHENSIVE TOTAL
DEFERRED STOCK DEVELOPMENT INCOME STOCKHOLDERS'
COMPENSATION STAGE (LOSS) DEFICIT
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Repurchase of common stock........... (77)
Dividends on preferred stock......... (5,351,251) (5,351,251)
Accretion of preferred stock to
redemption value.................... (541,765) (541,765)
Issuance of warrants associated with
convertible notes................... 325,355
Net loss............................. (34,712,895) (34,712,895)
Currency translation adjustment...... (3,847) (3,847)
Unrealized loss on marketable
securities.......................... (7,416) (7,416)
-------------
Comprehensive loss................... (34,724,158)
------------ ------------- -------- -------------
Balance at December 31, 1999......... -- (94,925,028) 27,395 (94,557,655)
Repurchase of common stock
(unaudited)......................... (30)
Employee stock purchases
(unaudited)......................... 258,050
Issuance of redeemable convertible
preferred stock (unaudited)......... --
Accretion and Dividend on preferred
stock (unaudited)................... (4,898,537) (4,898,537)
Beneficial conversion of redeemable
convertible preferred stock
(unaudited)......................... (25,444,299) --
Issuance of warrants associated with
convertible notes (unaudited)....... 18,789,805
Issuance of common stock through
initial public offering
(unaudited)......................... 101,187,695
Conversion of preferred stock to
common stock (unaudited)............ 115,864,114
Deferred compensation expense
associated with stock options
(unaudited)......................... (17,279,612) --
Amortization of deferred compensation
(unaudited)......................... 1,539,472 1,539,472
Net loss (unaudited)................. (49,109,280) (49,109,280)
Currency translation adjustment
(unaudited)......................... 56,421 56,421
Unrealized loss on marketable
securities (unaudited).............. (111,967) (111,967)
-------------
Comprehensive loss (unaudited)....... (49,164,826)
------------ ------------- -------- -------------
Balance at September 30, 2000
(unaudited)....................... $(15,740,140) $(174,377,144) $(28,151) $ 89,018,088
============ ============= ======== =============
</TABLE>
See accompanying notes.
F-6
<PAGE> 74
THE MEDICINES COMPANY
(a company in the development stage)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, PERIOD JULY 31, 1996
------------------------------------------ --------------------------- (DATE OF INCEPTION) TO
1997 1998 1999 1999 2000 SEPTEMBER 30, 2000
------------ ------------ ------------ ------------ ------------ ----------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss.................... $(17,805,926) $(28,950,798) $(34,712,895) $(28,383,399) $(49,109,280) $(132,045,776)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization............ 26,411 98,413 207,663 151,147 178,385 519,907
Amortization of discount
on convertible notes.... -- -- 101,674 -- 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................ (40,000) (705,515) 690,290 679,606 (138,184) (193,409)
Prepaid expenses and other
current assets............ (24,958) (156,812) 39,141 1,372 (304,611) (459,131)
Other assets................ (14,356) (152,165) (3,349) (3,349) (135,164) (303,402)
Accounts payable............ 2,226,904 (31,864) 5,528,544 737,543 (3,916,349) 3,897,573
Accrued expenses............ 4,187,395 (1,928,001) 1,258,366 5,106,686 3,330,229 7,008,330
------------ ------------ ------------ ------------ ------------ -------------
Net cash used in operating
activities.................. (11,444,530) (31,826,742) (26,890,566 (21,710,394) (29,532,860) (100,912,120)
------------ ------------ ------------ ------------ ------------ -------------
Cash flows from investing
activities:
Purchases of marketable
securities................ (30,184,125) (29,861,162) -- -- (30,057,921) (90,103,208)
Maturities and sales of
marketable securities..... 11,984,911 28,722,483 18,796,493 17,571,063 541,400 60,045,287
Purchase of fixed assets.... (114,534) (357,103) (258,788) (250,274) (420,879) (1,190,945)
------------ ------------ ------------ ------------ ------------ -------------
Net cash provided by (used in)
investing activities........ (18,313,748) (1,495,782) 18,537,705 17,320,789 (29,937,400) (31,248,866)
------------ ------------ ------------ ------------ ------------ -------------
Cash flows from financing
activities:
Proceeds from issuance of
convertible notes and
warrants.................. -- -- 6,000,000 -- 13,348,779 19,348,779
Proceeds from issuances of
preferred stock, net...... 33,498,408 35,126,419 -- -- 6,095,338 79,395,165
Proceeds from issuances of
common stock.............. 10,704 1,347 -- -- 101,445,745 101,460,593
Repurchases of common
stock..................... -- (148) (77) (73) (30) (255)
Dividends paid in cash...... (4,021) (6,852) (73) (73) (118) (11,064)
------------ ------------ ------------ ------------ ------------ -------------
Net cash provided by financing
activities.................. 33,505,091 35,120,766 5,999,850 (146) 120,889,714 200,193,218
Effect of exchange rate
changes on cash............. 1,806 29,928 (1,245) 3,758 46,315 76,803
------------ ------------ ------------ ------------ ------------ -------------
Increase (decrease) in cash
and cash equivalents........ 3,748,619 1,828,170 (2,354,256) (4,385,993) 61,465,769 68,109,035
Cash and cash equivalents at
beginning of period......... 3,420,733 7,169,352 8,997,522 8,997,522 6,643,266 --
------------ ------------ ------------ ------------ ------------ -------------
Cash and cash equivalents at
end of period............... $ 7,169,352 $ 8,997,522 $ 6,643,266 $ 4,611,529 $ 68,109,035 $ 68,109,035
============ ============ ============ ============ ============ =============
Non-cash transactions:
Dividends on preferred
stock..................... $ 1,175,000 $ 1,686,000 $ 5,351,178 $ 5,351,178 $ 31,894,474 $ 40,106,652
============ ============ ============ ============ ============ =============
Supplemental disclosure of
cash flow information:
Interest paid............... $ 29,235 $ -- $ -- -- $ 255,781 $ 285,016
============ ============ ============ ============ ============ =============
</TABLE>
See accompanying notes.
F-7
<PAGE> 75
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. NATURE OF BUSINESS
The Medicines Company (the Company) was incorporated in Delaware on July 31,
1996. The Company is a pharmaceutical company engaged in the acquisition,
development and commercialization of late-stage development drugs. The Company
is a development-stage enterprise, as defined in Statement of Financial
Accounting Standards No. 7, and has, since inception, been developing business
plans, acquiring product rights, conducting initial commercialization
activities, obtaining financing, performing research and development, conducting
regulatory activities and recruiting and training personnel.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of expenses during the reporting period. Actual results could differ from those
estimates.
Risks and Uncertainties
The Company is subject to risks common to companies in the pharmaceutical
industry including, but not limited to, uncertainties related to regulatory
approvals, dependence on key products, and protection of proprietary rights.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentration of
credit risk include cash, cash equivalents and marketable securities. The
Company believes it minimizes its exposure to potential concentrations of credit
risk by placing investments in high-quality financial instruments.
Cash, Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Cash equivalents
consist of investments in money market funds, corporate bonds and taxable
auction securities. These investments are carried at cost, which approximates
fair value.
Marketable securities consist of securities with original maturities of greater
than three months, but less than one year. The Company considers its marketable
securities as available-for-sale. Securities under this classification are
recorded at fair market value and unrealized gains and losses are recorded as a
separate component of stockholders' equity.
At December 31, 1998 and 1999, marketable securities consisted of investments in
corporate bonds with maturities of less than one year and are summarized as
follows:
<TABLE>
<CAPTION>
--------------------------------------------
UNREALIZED
AMORTIZED COST GAIN (LOSS) FAIR VALUE
-------------- ----------- -----------
<S> <C> <C> <C>
December 31, 1998...................................... $19,337,893 $ 5,290 $19,343,183
December 31, 1999...................................... $ 541,400 $(2,126) $ 539,274
</TABLE>
There were no sales of available-for-sale securities during the years ended
December 31, 1998 and 1999, although there were maturities of such securities as
disclosed in the accompanying consolidated statements of cash flows. Proceeds
from
F-8
<PAGE> 76
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
sales of available-for-sale securities during the year ended December 31, 1997
were approximately $4,000,000. Gross gains or losses on these sales were
immaterial.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs were
approximately $583,000, $1,491,000 and $484,000 for the years ended December 31,
1997, 1998 and 1999, respectively.
Fixed Assets
Fixed assets are stated at cost. Depreciation is provided using the
straight-line method based on estimated useful lives or, in the case of
leasehold improvements, over the lesser of the useful lives or the lease terms.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value. 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" ("APB 25").
Translation of Foreign Currencies
The functional currencies of the Company's foreign subsidiaries are the local
currencies, British pound sterling, Swiss franc and New Zealand dollar. The
Company translates its foreign operations using a current exchange rate. In
accordance with Statement of Financial Accounting Standards No. 52, assets and
liabilities are exchanged using the current exchange rate as of the balance
sheet date. Expenses and items of income are exchanged using a weighted average
exchange rate over the period ended on the balance sheet date. Adjustments
resulting from the translation of the financial statements of the Company's
foreign subsidiaries into U.S. dollars using current exchange rates are excluded
from the determination of net loss and are accumulated in a separate component
of stockholders' deficit. Foreign exchange transaction gains and losses are
included in the results of operations and are not material to the Company's
consolidated financial statements.
Income Taxes
Deferred tax assets and liabilities are determined based on differences between
financial reporting and income tax bases of assets and liabilities, as well as
net operating loss carryforwards, and are measured using the enacted tax rates
and laws that will be in effect when the differences reverse. Deferred tax
assets are reduced by a valuation allowance to reflect the uncertainty
associated with ultimate realization.
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements" (SAB
101), which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC. SAB 101, as amended, is
effective beginning the fourth quarter of calendar years beginning after
December 15, 1999 and requires companies to report any changes in revenue
recognition as a cumulative change in accounting principle at the time of
implementation. Adoption of SAB 101 is not expected to have a material impact on
the Company's financial position or results of operations, since the Company has
no revenues to date.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The effective
date of this statement was deferred to fiscal years beginning after June 15,
2000 by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of SFAS No. 133." The adoption of
this new standard is not expected to have a material impact on the Company's
financial condition or results of operations.
F-9
<PAGE> 77
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net Loss Per Share
Basic net loss per share is computed using the weighted average number of shares
of common stock outstanding during the period reduced, where applicable, for
outstanding, yet unvested, shares. Diluted net loss per share includes the
effect of stock options, warrants and redeemable convertible preferred stock and
convertible notes outstanding during the period, if dilutive. Since the Company
has a net loss for all periods presented, the effect of all potentially dilutive
securities is antidilutive. Accordingly, basic and diluted net loss per share is
the same.
Unaudited Pro Forma Net Loss Per Share
Unaudited pro forma net loss per share is computed using the weighted average
number of common shares outstanding, including the pro forma effects of
automatic conversion of all outstanding redeemable convertible preferred stock
and accrued dividends and the convertible notes and accrued interest through
each balance sheet date into shares of the Company's common stock effective upon
the assumed closing of the Company's proposed initial public offering, as if
such conversion had occurred at the date of original issuance.
Segments
The Company is a development stage company focused on the acquisition,
development and commercialization of late-stage development drugs. The Company
has license rights to three potential products, Angiomax, CTV-05 and IS-159. The
Company manages its business and operations as one segment. There are no
revenues to date for any potential products and the Company's assets are not
identifiable to its three potential products.
Unaudited Interim Financial Statements
The consolidated financial statements as of September 30, 2000 and for the nine
months ended September 30, 1999 and 2000 and the period July 31, 1996 (date of
inception) to September 30, 2000 have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring accruals, considered necessary
for a fair presentation of the results of these interim periods have been
included. The results of operations for the nine months ended September 30, 2000
are not necessarily indicative of the results that may be expected for the full
year.
3. MANAGEMENT'S PLANS AND FINANCING
The Company is a development stage company and has incurred substantial losses
since inception. To date, the Company has funded its operations through the
issuance of debt and equity. The Company expects to continue to expend
substantial amounts for continued product research, development and initial
commercialization activities for the foreseeable future and management's plans
with respect to funding this development are to secure additional equity, if
possible, and to secure collaborative partnering arrangements that will provide
available cash funding for operations.
Should additional equity financing or collaborative partnering arrangements be
unavailable to the Company, management will restrict certain of the Company's
planned activities and operations, as necessary, to sustain operations and
conserve cash resources.
F-10
<PAGE> 78
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
--------------------------------------
DECEMBER 31,
ESTIMATED ----------------------
LIFE (YEARS) 1998 1999
------------ --------- ---------
<S> <C> <C> <C>
Furniture, fixtures and equipment.......................... 3 $ 278,550 $ 323,685
Computer hardware and software............................. 3 177,433 213,376
Leasehold improvements..................................... 5 49,945 216,064
--------- ---------
505,928 753,125
Less: Accumulated depreciation............................. (123,236) (323,064)
--------- ---------
$ 382,692 $ 430,061
========= =========
</TABLE>
5. ACCRUED EXPENSES
Accrued expenses consist of the following at:
<TABLE>
<CAPTION>
-----------------------------------------
DECEMBER 31,
------------------------ SEPTEMBER 30,
1998 1999 2000
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Development services................................... $2,002,625 $3,283,767 $5,413,123
Other.................................................. 422,482 396,526 1,340,291
---------- ---------- ----------
$2,425,107 $3,680,293 $6,753,414
========== ========== ==========
</TABLE>
6. CONVERTIBLE NOTES
In October 1999, the Company issued $6,000,000 of 8% Convertible Notes ("the
Notes") and 1,013,877 Common Stock Purchase Warrants ("the Warrants") to
existing investors, raising proceeds of $6,000,000. The Notes are redeemable on
January 15, 2001 and accrue interest semi-annually at a rate of 8% per annum.
The Notes are convertible into shares of stock of the Company upon a subsequent
sale of stock of the Company provided that such sale results in aggregate gross
proceeds of at least $6,000,000. The Notes are convertible into a number of
shares of stock determined by dividing the outstanding principal and interest on
the date of the subsequent sale by the price per share of such sale. Each
Warrant provides the holder with the right to purchase one share of common stock
of the Company at a price of $5.92 per share at any time prior to October 19,
2004. The exercise price and the number of shares underlying the Warrants could
be adjusted in certain circumstances related to future issuances of capital
stock. The Company has recorded $325,355 as the fair value of the Warrants using
the Black-Scholes method and $5,674,645 as the value of the Notes on the
issuance date. The discount on the Notes is being amortized to interest expense
over the expected term of the Notes, which the Company anticipates to be to June
2000. Since the Notes were issued in October 1999, the carrying amount
approximates fair value at December 31, 1999.
In March 2000, the Company issued $13,348,779 of 8% Convertible Notes ("the
Notes") and 2,255,687 Common Stock Purchase Warrants ("the Warrants") to current
stockholders, raising proceeds of $13,348,779. The Notes are redeemable on
January 15, 2001 and accrue interest semi-annually at a rate of 8% per annum.
The Notes are convertible into shares of stock of the Company upon a subsequent
private sale of stock of the Company provided that such sale results in
aggregate gross proceeds of at least $6,000,000. The Notes are convertible into
a number of shares of stock determined by dividing the outstanding principal and
interest on the date of the subsequent sale by the price per share of such sale.
Each Warrant provides the holder with the right to purchase one share of Common
Stock of the Company at a price of $5.92 per share at any time prior to March
2005. The exercise price and the number of shares underlying the Warrants could
be adjusted in certain circumstances related to future issuances of common
stock. The Company has recorded approximately $18,800,000
F-11
<PAGE> 79
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
as the value of the Warrants using the Black-Scholes method and the estimated
fair market value of the Company's common stock on the date of the issuance of
the warrants. The discount on the Notes was amortized over the expected term of
the Notes, which the Company anticipated to be to June 2000. In the nine months
ended September, 2000, amortization of the discount was approximately
$18,800,000 and is included with interest expense in the accompanying financial
statements.
7. REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Series I, Series II and Series III Redeemable Convertible Preferred Stock
The Company has designated three series of redeemable convertible preferred
stock as of December 31, 1998 and 1999. A summary of the Series I, Series II and
Series III Redeemable Convertible Preferred Stock is as follows.
<TABLE>
<CAPTION>
DECEMBER 31,
==========================
1998 1999
----------- -----------
<S> <C> <C>
Series I, $1 par value, 3,550,000 shares authorized,
2,506,000 and 2,678,005 shares issued and outstanding at
December 31, 1998 and 1999, respectively (Liquidation
value of $5,512,225 at December 31, 1999)................. $ 5,153,297 $ 5,512,225
Series II, $1 par value, 15,850,000 shares authorized,
10,565,714 and 11,290,928 shares issued and outstanding at
December 31, 1998 and 1999, respectively (Liquidation
value of $40,670,864 at December 31, 1999)................ 38,022,532 40,670,864
Series III, $1 par value, 12,150,000 shares authorized,
8,421,907 and 8,993,417 shares issued and outstanding at
December 31, 1998 and 1999, respectively (Liquidation
value of $39,984,732 at December 31, 1999)................ 36,208,641 39,094,324
----------- -----------
Total............................................. $79,384,470 $85,277,413
=========== ===========
</TABLE>
In August 1998, the Company executed an agreement (the "Exchange Agreement")
under which 8,892,912 shares of common stock and 41,992 shares of Series A
Redeemable Preferred Stock were exchanged for 2,506,000 shares of Series I
Redeemable Convertible Preferred Stock and 10,565,714 shares of Series II
Redeemable Convertible Preferred Stock. Holders of Series A Redeemable Preferred
Stock were entitled to receive preferential cumulative annual dividends payable
in additional shares of Series A Redeemable Preferred Stock at the rate of 7%
per annum of the stated value. Prior to the Exchange Agreement, dividends earned
from January 1, 1998 through the date of the Exchange Agreement were paid to the
holders of Series A Redeemable Preferred Stock. During 1997, certain preferred
shareholders waived their right to a portion of earned dividends and the Company
paid agreed-upon amounts through December 31, 1997. To the extent that all or
any part of the Stock would have resulted in the issuance of a fractional share
of the Series A Preferred stock, the amount of such fraction, multiplied by the
stated value, was paid in cash.
A summary of the rights, preferences and privileges of the Series I, Series II
and Series III Redeemable Convertible Preferred Stock ("Series Preferred Stock")
is as follows:
Dividends. The holders of each series of Series Preferred Stock are entitled to
receive, prior to any distribution to the holders of Common Stock, preferential
cumulative dividends payable in additional shares of such series of Series
Preferred Stock at a rate of 7% per share per annum of the liquidation value of
such series of Series Preferred Stock. Such dividends are paid annually
commencing on July 31, 1999 in additional preferred stock.
Liquidation. In the event of any liquidation, dissolution or winding up of the
Company (either voluntary or involuntary), the holders of Series Preferred Stock
are entitled to receive, out of the assets of the Company available for
distribution to its stockholders, a per share amount equal to $2.00 per share in
the case of the Series I Preferred Stock, $3.50 per share in the case of the
Series II Preferred Stock and $4.32 in the case of the Series III Preferred
Stock, plus any accrued but unpaid dividends (the liquidation value). These
distributions will be made prior to any distributions to other stockholders. Any
amounts remaining after making such distributions will be distributed to the
holders of Common Stock and Series Preferred Stock on parity with each other. If
the remaining assets of the Company available for distribution to its
stockholders are
F-12
<PAGE> 80
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
insufficient to pay all of the holders of Series Preferred Stock, distributions
will be made first to the Series III Preferred Stockholders and then to the
Series I and II Preferred Stockholders on a pro-rata basis.
Conversion. Holders of shares of Series Preferred Stock have the right to
convert their shares at any time into shares of Common Stock. The conversion
rate for each series of Series Preferred Stock is 0.73 for 1. The conversion
rate for each series of Series Preferred Stock is subject (i) to proportional
adjustments for splits, reverse splits, recapitalizations, etc., and (ii) to
formula-weighted average adjustments in the event that the Company issues
additional shares of Common Stock or securities convertible into or exercisable
for Common Stock at a purchase price less than the applicable conversion price
then in effect, other than the issuance of shares to directors, officers,
employees and consultants pursuant to stock plans approved by the Board of
Directors and certain other exceptions. Each share of Series Preferred Stock
will be automatically converted into shares of Common Stock upon the closing of
the sale of shares of Common Stock at a price of at least $8.90 per share
(subject to appropriate adjustment for stock dividends, stock splits,
combinations and other similar recapitalizations affecting such shares) in an
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, resulting in at least $15,000,000 of gross
proceeds to the Company. In addition, all shares of Series Preferred Stock will
be automatically converted into shares of Common Stock upon conversion of at
least two-thirds of the aggregate shares of Series I and II Preferred Stock or
conversion of at least 80% of the shares of Series III Preferred Stock then
outstanding.
Redemption. The Company will redeem the outstanding shares of Series Preferred
Stock in three equal annual installments commencing July 31, 2002 at a price
equal to the liquidation value of such shares. The redemption of Series
Preferred Stock outstanding at December 31, 1999 will require payments of
$28,722,607 in 2002, 2003 and 2004, respectively, based on the redemption value
at December 31, 1999.
Voting. Generally, holders of shares of Series Preferred Stock vote on all
matters, including the election of directors, with the holders of shares of
Common Stock on an as-converted basis, except where a class vote is required by
law.
Accretion. Series Preferred Stock is accreted to its redemption value to
recognize issuance costs over the period from issuance to redemption using the
interest method and to reflect accrued but unpaid dividends.
Common Stock
Common Stockholders are entitled to one vote per share and dividends when
declared by the Board of Directors, subject to the preferential rights of
preferred stockholders.
During 1996, 1997 and 1998, certain employees of the Company purchased 335,800,
627,070 and 32,850 shares of common stock, respectively, for $0.001 per share.
These shares are subject to restriction and vesting agreements that limit
transferability and allow the Company to repurchase unvested shares at the
original purchase price. The shares vest ratably over a four-year period that
generally begins on each employee's hire date. During 1998 and 1999, the Company
repurchased 107,979 and 56,378 shares, respectively, of unvested common stock
for $0.001 per share. There were 228,869 shares of common stock unvested at
December 31, 1999.
1998 Stock Incentive Plan
In April 1998, the Company adopted the 1998 Stock Incentive Plan (the "Plan")
which provides for the grant of stock options, restricted stock and other
stock-based awards to employees, directors and consultants. The plan allows for
the issuance of up to 1,083,259 shares of common stock through April 2008. The
Board of Directors determines the term of each option, the option price, the
number of shares for which each option is granted and the rate at which each
option is exercisable. During 1999, the Board of Directors amended all
outstanding grants to allow holders the opportunity to exercise options prior to
vesting. Exercised options that are unvested are subject to repurchase by the
Company at the original exercise price. Options granted under the plan generally
vest in increments over four years.
In January 2000, the Board of Directors approved an amendment to the Plan to
increase the number of shares available under the Plan to 1,448,259.
F-13
<PAGE> 81
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Board of Directors of the Company has determined the fair value of the
Company's common stock in its good faith judgment at each option grant date for
grants under the Plan considering a number of factors including the financial
and operating performance of the Company, recent transactions in the Company's
common and preferred stock, if any, the values of similarly situated companies
and the lack of marketability of the Company's common stock.
The Company has elected to follow APB 25 in accounting for its stock options
granted to employees because the alternative fair value accounting provided for
under SFAS 123, requires the use of option valuation models that were not
developed for use in valuing employee stock options. Because the exercise price
of the Company's stock options generally equals the market price of the
underlying stock on the date of grant, no compensation is recognized under APB
25. Had compensation costs for the Plan been determined based on the fair value
at the grant dates as calculated in accordance with SFAS 123, the Company's net
loss for the years ended December 31, 1998 and 1999 would have been increased to
the pro forma amounts indicated below. The Company had no options outstanding
during the year ended December 31, 1997 and, accordingly, no pro forma net loss
per share has been calculated.
<TABLE>
<CAPTION>
--------------------------
YEAR ENDED DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
Net loss attributable to common stockholders--As reported... $32,909,701 $40,605,911
Net loss attributable to common stockholders--Pro forma..... $32,965,764 $40,771,828
Net loss per share attributable to common stockholders--As
reported.................................................. $ (6.03) $ (80.08)
Net loss per share attributable to common stockholders--Pro
forma..................................................... $ (6.04) $ (80.41)
</TABLE>
The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
------------------------
YEAR ENDED DECEMBER 31,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
Expected dividend yield..................................... 0% 0%
Expected stock price volatility............................. 70% 70%
Risk-free interest rate..................................... 4.70% 5.45%
Expected option term........................................ 3.38 years 3.30 years
</TABLE>
F-14
<PAGE> 82
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of stock option activity under the Plan is as follows:
<TABLE>
<CAPTION>
-----------------------------
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding, December 31, 1997.............................. -- $ --
Granted..................................................... 734,745 1.11
Exercised................................................... (2,037) 0.64
Canceled.................................................... (27,437) 0.88
--------- ----------------
Outstanding, December 31, 1998.............................. 705,271 1.12
Granted..................................................... 239,075 1.23
Canceled.................................................... (175,380) 1.05
--------- ----------------
Outstanding, December 31, 1999.............................. 768,966 1.16
Granted (Unaudited)......................................... 2,352,874 5.08
Exercised (Unaudited)....................................... (204,610) 1.26
Canceled (Unaudited)........................................ (322,161) 1.16
--------- ----------------
Outstanding, September 30, 2000 (Unaudited)................. 2,595,069 $ 4.71
========= ================
Available for future grant at September 30, 2000
(Unaudited)............................................... 2,072,043
=========
</TABLE>
The weighted average fair value of options granted during 1998 and 1999 was
$0.55 and $0.62, respectively.
The following table summarizes information about stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
OPTIONS VESTED
OPTIONS OUTSTANDING -------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE AVERAGE NUMBER AVERAGE
EXERCISE OUTSTANDING REMAINING EXERCISE OUTSTANDING EXERCISE
PRICES AT 12/31/99 CONTRACTUAL LIFE PRICE AT 12/31/99 PRICE
-------- -------------- ---------------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$ 0.68 91,462 8.18 years $ 0.68 63,319 $ 0.68
$ 1.23 677,504 9.01 years $ 1.23 206,636 $ 1.23
-------------- ---------------- -------- -------------- --------
768,966 8.91 years $ 1.16 269,955 $ 1.11
============== ================ ======== ============== ========
</TABLE>
Common Stock Reserved for Future Issuance
At December 31, 1999, there were 20,376,606 shares of common stock reserved for
future issuance for conversion of the Series Preferred Stock, Convertible Notes,
Common Stock Warrants and for grants made under the 1998 Stock Incentive Plan.
F-15
<PAGE> 83
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. 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 respective
periods. The unaudited pro forma basic and diluted net loss per share gives
effect to the conversion of the redeemable convertible preferred stock and the
convertible notes and accrued interest as if converted at the date of original
issuance.
<TABLE>
<CAPTION>
--------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Basic and Diluted
Net loss.................................................... $(17,805,926) $(28,950,798) $(34,712,895)
Dividends and accretion on redeemable convertible preferred
stock..................................................... (2,018,265) (3,958,903) (5,893,016)
------------ ------------ ------------
Net loss attributable to common stockholders................ $(19,824,191) $(32,909,701) $(40,605,911)
============ ============ ============
Weighted average common shares outstanding.................. 5,355,804 6,075,948 850,238
Less: unvested restricted common shares outstanding......... (468,574) (621,295) (343,173)
------------ ------------ ------------
Weighted average common shares used to compute net loss per
share..................................................... 4,887,230 5,454,653 507,065
============ ============ ============
Basic and diluted net loss per share........................ $ (4.06) $ (6.03) $ (80.08)
============ ============ ============
Unaudited pro forma basic and diluted
Net loss.................................................... $(34,712,895)
Interest expense on convertible notes....................... 197,455
------------
Net loss used to compute pro forma net loss per share....... $(34,515,440)
============
Weighted average common shares used to compute net loss per
share..................................................... 507,065
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......................................... 17,292,811
------------
Weighted average common shares used to compute pro forma net
loss per share............................................ 17,799,876
============
Unaudited pro forma basic and diluted net loss per share.... $ (1.94)
============
</TABLE>
<TABLE>
<CAPTION>
--------------------------------
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1999 2000
-------------- --------------
(UNAUDITED)
<S> <C> <C>
Basic and Diluted
Net loss.................................................... $(28,383,399) $(49,109,280)
Dividends and accretion on redeemable convertible preferred
stock..................................................... (4,370,770) (30,342,988)
------------ ------------
Net loss attributable to common stockholders................ $(32,754,169) $(79,452,268)
============ ============
Weighted average common shares outstanding.................. 855,113 6,156,622
Less: unvested restricted common shares outstanding......... (366,140) (191,770)
------------ ------------
Weighted average common shares used to compute net loss per
share..................................................... 488,973 5,964,852
============ ============
Basic and diluted net loss per share........................ $ (66.99) $ (13.32)
============ ============
</TABLE>
F-16
<PAGE> 84
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
-------------------------------
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 2000
------------- -------------
<S> <C> <C>
Unaudited pro forma basic and diluted
Net loss.................................................... $(28,383,399) $(49,109,280)
Interest expense on convertible notes -- 19,390,414
------------ ------------
Net loss used to compute pro forma net loss per share....... $(28,383,399) $(29,718,866)
============ ============
Weighted average common shares used to compute net loss per
share..................................................... 488,973 5,964,852
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......................................... 16,847,256 17,257,762
------------ ------------
Weighted average common shares used to compute pro forma net
loss per share............................................ 17,336,229 23,222,614
============ ============
Unaudited pro forma basic and diluted net loss per share.... $ (1.64) $ (1.28)
============ ============
</TABLE>
Options to purchase 705,271 and 768,966 shares of common stock for the years
ended December 31, 1998 and 1999, respectively, and 912,957 and 2,595,069 shares
of common stock for the nine months ended September 30, 1999 and 2000,
respectively, have not been included in the computation of diluted net loss per
share as their effects would have been antidilutive. Warrants to purchase
1,013,877 and 3,269,564 shares of common stock for the year ended December 31,
1999 and for the nine months ended September 30, 2000, respectively, were
excluded from the computation of diluted net loss per share as their effect
would have been antidilutive.
During the period January 1, 2000 to September 30, 2000, the Company issued
2,273,624 options at exercise prices below the estimated fair value of the
Company's common stock as of the date of grant of such options based on the
estimated price of the Company's common stock in connection with the Company's
planned initial public offering. The total deferred compensation associated with
these options is approximately $17.3 million. Included in the results of
operations for the nine months ended September 30, 2000 is compensation expense
of approximately $1.5 million associated with such options.
9. INCOME TAXES
The significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
----------------------------
DECEMBER 31,
----------------------------
1998 1999
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 17,626,000 $ 30,864,000
Research and development credit........................... 983,000 2,074,000
Intangible assets......................................... 1,188,000 1,139,000
Accrued expenses.......................................... 22,000 36,000
------------ ------------
19,819,000 34,113,000
Valuation allowance......................................... (19,819,000) (34,113,000)
------------ ------------
Net deferred tax assets..................................... $ -- $ --
============ ============
</TABLE>
The Company has increased its valuation allowance by $14,294,000 in 1999 to
provide a full valuation allowance for deferred tax assets since the realization
of these future benefits is not considered more likely than not. The amount of
the deferred tax asset considered realizable is subject to change based on
estimates of future taxable income during the carryforward period. If the
Company achieves profitability, these deferred tax assets would be available to
offset future income taxes. The future utilization of net operating losses and
credits may be subject to limitation based upon changes in company ownership,
under the rules of the Internal Revenue Code. The Company will assess the need
for the valuation allowance at each balance sheet date based on all available
evidence.
F-17
<PAGE> 85
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1999, the Company had federal net operating loss carryforwards
available to reduce taxable income, and federal research and development tax
credit carryforwards available to reduce future tax liabilities, which expire as
follows:
<TABLE>
<CAPTION>
----------------------------------
FEDERAL RESEARCH
FEDERAL NET AND DEVELOPMENT
YEAR OF OPERATING LOSS TAX CREDIT
EXPIRATION CARRYFORWARDS CARRYFORWARDS
---------- -------------- ----------------
<S> <C> <C>
2011........................................................ $ 930,000 $ 22,000
2012........................................................ 15,260,000 526,000
2018........................................................ 27,876,000 425,000
2019........................................................ 33,813,000 1,002,000
----------- ----------
$77,879,000 $1,975,000
=========== ==========
</TABLE>
For state purposes, net operating loss carryforwards of approximately
$73,086,000 expire in the years 2001 through 2004. State research and
development tax credit carryforwards of approximately $99,000 expire in the year
2004.
10. LICENSE AGREEMENTS
Angiomax
In March 1997, the Company entered into an agreement with Biogen, Inc. for the
license of the anticoagulant pharmaceutical, bivalirudin (now known as
Angiomax). Under the terms of the agreement, the Company acquired exclusive
worldwide rights to the technology, patents, trademarks, inventories and
know-how related to Angiomax. In exchange for the license, the Company paid $2
million on the closing date and is obligated to pay up to an additional $8
million upon reaching certain Angiomax sales milestones. In addition, the
Company shall pay royalties on future sales of Angiomax and on any sublicense
royalties earned. The agreement also stipulates that the Company must use
commercially reasonable efforts to meet certain milestones related to the
development and commercialization of Angiomax, including expending at least $20
million for certain development and commercialization activities. During 1998,
the Company met the $20 million obligation.
CTV-05
In August 1999, the Company entered into an agreement with GyneLogix, Inc. for
the license of the biotherapeutic agent CTV-05, a strain of human Lactobacillus
currently under clinical investigation for applications in the areas of
urogenital and reproductive health. Under the terms of the agreement, the
Company acquired exclusive worldwide rights to the patents and know-how related
to CTV-05. In exchange for the license, the Company has paid $100,000 and is
obligated to pay up to an additional $400,000 upon reaching certain milestones
and to fund certain operational costs of GyneLogix, Inc. subject to a monthly
limit of approximately $50,000 related to the development of CTV-05. In
addition, the Company shall pay royalties on future sales of CTV-05 and on any
sublicense royalties earned. The agreement also stipulates that the Company must
use commercially reasonable efforts in pursuing the development,
commercialization and marketing of CTV-05 to maintain the license. All amounts
related to CTV-05 have been expensed as incurred in the accompanying financial
statements.
IS-159
In July 1998, the Company entered into an agreement with Immunotech, SA, a
wholly-owned subsidiary of Beckman Coulter, Inc. for the license of the
pharmaceutical IS-159, a 5-hydroxytriptamine receptor agonist, for the treatment
of acute migraine headache. Under the terms of the agreement, the Company
acquired exclusive worldwide rights to the patents and know-how related to
IS-159. In exchange for the license, the Company paid $1 million on the closing
date and is obligated to pay up to an additional $4.5 million upon reaching
certain development and regulatory milestones. In addition, the Company shall
pay royalties on future sales of IS-159 and on any sublicense royalties earned.
The agreement also stipulates that the Company must use commercially reasonable
efforts in pursuing the development, commercialization and marketing
F-18
<PAGE> 86
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of IS-159 and meet certain development and regulatory milestones to maintain the
license. All amounts related to IS-159 have been expensed as incurred in the
accompanying financial statements.
11. STRATEGIC ALLIANCES
UCB
In December 1999, the Company entered into a commercial supply agreement with
UCB-Bioproducts S.A. ("UCB") to develop and commercialize an improved process
(the Chemilog process) for the manufacture of Angiomax bulk drug substance.
Under the terms of the agreement, the Company is responsible for funding certain
development and manufacturing activities performed by UCB. At December 31, 1999,
the Company has obligations which could total up to $8,240,000 pursuant to the
agreement for future development services of UCB. The agreement also specifies
terms for future purchases of Angiomax bulk drug substance manufactured using
the Chemilog process.
During 1999, the Company placed an order with UCB for the manufacture of
Angiomax bulk drug substance under the existing manufacturing process and
methods. Under the terms of this order, the Company is scheduled to receive
material and make payments of approximately $13.0 million in fiscal 2000.
Manufacture of approximately $6.5 million of this material was completed in
March 2000.
Lonza
In September 1997, the Company entered into an agreement with Lonza AG ("Lonza")
for the development of a new commercial manufacturing process for an advanced
intermediate compound used in the manufacturing of Angiomax ("Angiomax
intermediate"). At December 31, 1999, the services to be performed under the
agreement were substantially complete and the Company recorded a liability of
$1,026,000 for the estimated remaining amounts due under the contract.
In November 1998, the Company entered into an additional agreement with Lonza
for the engineering, procurement and installation of equipment for the initial
manufacturing of the Angiomax intermediate using the new process. The agreement
also contemplated the purchase of the Angiomax intermediate from Lonza at
specified prices for an anticipated two-year period following initial production
and stipulated the basic principles of a long-term commercial supply contract.
In January 2000, the Company notified Lonza of its intention to terminate the
agreement and in March 2000, the Company and Lonza reached termination
arrangements. As a result of the termination, the Company retains certain
ownership rights to intellectual property and is responsible for reimbursement
of all costs incurred under the terms of the agreement through the date of
notice. The estimated remaining obligation to Lonza of $1,572,000 is recorded as
a liability at December 31, 1999.
PharmaBio
In August 1996, the Company entered into a strategic alliance with one of its
stockholders, PharmaBio Development Inc. ("PharmaBio"), a wholly-owned
subsidiary of Quintiles Transnational Corp. ("Quintiles"). Under the terms of
the strategic alliance agreement, PharmaBio, or where appropriate, one or more
of PharmaBio's affiliates, which are also direct or indirect subsidiaries of
Quintiles (collectively, the "PharmaBio Affiliates") will, at no cost to the
Company, review and evaluate jointly with the Company, development programs
designed by the Company related to potential or actual product acquisitions. The
purpose of this collaboration is to optimize the duration, cost, specifications
and quality aspects of such programs. The alliance agreement provides that with
respect to Angiomax, IS-159 and CTV-05, the PharmaBio Affiliates will be offered
the opportunity to perform all services which fall within the customary scope of
their business, including without limitation, clinical and non-clinical
development services, project management, project implementation,
pharmacoeconomic services, regulatory affairs, post marketing surveillance
services, statistical, statistical programming, data processing and data
management services. The PharmaBio Affiliates will not be required to provide
services if such services cause a conflict of interest with other clients of the
PharmaBio Affiliates or to the extent services are beyond the capacity of the
PharmaBio Affiliates. In exchange for such services, the Company will pay the
PharmaBio Affiliates their then standard rates for services rendered. In
addition, if the PharmaBio Affiliates exceed certain performance milestones, the
Company has agreed to pay certain bonuses (not to exceed 10% of the net revenues
that the PharmaBio Affiliates receive for such services) which, at the PharmaBio
Affiliates' option, may be paid in shares of common stock of the Company. To
date, of the 35 work
F-19
<PAGE> 87
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
orders agreed, performance milestones have been requested and agreed on one work
order. No bonuses earned under that work order were paid in shares of common
stock. No agreed performance milestones remain outstanding. There are no
arrangements outstanding at December 31, 1999 for such bonuses. This agreement
will terminate when the PharmaBio Affiliates complete services with respect to
Angiomax, IS-159 and CTV-05. During 1997, 1998 and 1999, expenses incurred for
such services were approximately $3.7 million, $1.7 million and $3.7 million,
respectively, of which approximately $0.8 million and $1.2 million was recorded
in accounts payable and accrued expenses at December 31, 1998 and 1999,
respectively. At December 31, 1999, the Company had open orders with PharmaBio
for such services that specify estimated aggregate future payments of
approximately $3.1 million.
Innovex
In January 1997, the Company entered into a consulting agreement with Innovex,
Inc. ("Innovex"), a subsidiary of Quintiles, which was subsequently superseded
by a consulting agreement we executed with Innovex in December 1998. Pursuant to
the terms of these agreements, Innovex has provided the Company with consulting
services with respect to pharmaceutical marketing and sales. The Company has
agreed to pay Innovex its standard consulting rates for such services.
The Company has also entered into various Clinical Services Agreements with
Innovex pursuant to which Innovex provides project management, clinical
monitoring, site management, medical monitoring, regulatory affairs, data
management and quality assurance services with respect to the development of
Angiomax. Such fees and expenses will be paid in installments upon completion of
identified project goals. These agreements can be terminated with 30 days
written notice. Upon any such termination, the Company would be responsible to
pay Innovex for all services performed under the terms of the respective
agreement through the date of notice.
During 1997, 1998 and 1999, expenses incurred for services provided by Innovex
were approximately $234,000, $943,000 and $616,000 respectively, of which
approximately $102,000 and $280,000 were recorded in accounts payable and
accrued expenses at December 31, 1998 and 1999, respectively.
12. RELATED PARTY TRANSACTIONS
In 1996, the Company entered into a letter agreement with MPM Capital L.P.
("MPM"), a stockholder of the Company, and in 1998, amended the terms. Pursuant
to the terms of the amended letter agreement, MPM provided the Company with
services in support of locating and acquiring the rights to Angiomax and IS-159.
The Company recorded fees for these and other services totaling approximately
$730,000, $769,000 and $445,000 in 1996, 1997 and 1998, respectively. Under the
terms of the amended letter agreement, MPM shall also receive a fee of $125,000
upon the first sale of Angiomax in Europe or the United States and a fee of
$50,000 if the Company enters into an agreement with certain specified
companies.
Additionally, in 1998, the Company paid $52,000 to MPM for rental of office
space and in June 1997, the Company paid $890,000 to MPM for services provided
in connection with the preferred stock offering.
13. COMMITMENTS AND CONTINGENCIES
The Company leases its facilities and certain office furniture and equipment
under operating leases. The Company's main facilities lease expires in August
2003. Future annual minimum payments under all non-cancelable operating leases
are $489,000, $379,000, $315,000 and $184,000 in 2000, 2001, 2002 and 2003,
respectively. Rent expense was approximately $142,000, $326,000 and $442,000 for
the years ended December 31, 1997, 1998 and 1999, respectively.
The Company has entered into various agreements with a number of companies to
provide services related to clinical trials and other activities. Generally,
these agreements are cancelable with 30 days notice. Assuming all of these
agreements are carried out to completion, they would require aggregate future
payments of approximately $15.7 million.
F-20
<PAGE> 88
THE MEDICINES COMPANY
(a company in the development stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSEQUENT EVENTS
On May 17, 2000, the Company issued 1,411,000 shares of Series IV Redeemable
Convertible Preferred Stock for net proceeds of $6,095,520. In addition, on May
17, 2000, the convertible notes and accrued interest were converted into
4,535,366 shares of Series IV Redeemable Convertible Preferred Stock. The Series
IV preferred stock carries terms and conditions similar to the Series I, II, III
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 Redeemable Convertible Preferred Stock issued on May 17, 2000
contained a beneficial conversion feature based on the estimated fair market
value of the 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 will be
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. Such commitments terminate in the event of a financing or
collaboration agreement or combination thereof of $15,238,800 or more including
an initial public offering of the Company, if any.
In May 2000, the Board of Directors approved an amendment to the 1998 Stock
Incentive Plan to increase the number of shares available under the Plan to
4,368,259. In addition, the Board of Directors also approved the 2000 Employee
Stock Purchase Plan which provides for the issuance of up to 255,500 shares of
common stock to participating employees and the 2000 Director Stock Option Plan
which provides for the issuance of up to 250,000 shares of common stock to the
Company's directors. Both the 2000 Employee Stock Purchase Plan and the 2000
Director Stock Option Plan have received stockholder approval.
On June 29, 2000, the Company's Board of Directors approved a reverse stock
split of 0.73 shares for every one share of common stock then outstanding. The
reverse stock split became effective on August 4, 2000. The accompanying
financial statements and footnotes have been restated to reflect the reverse
stock split. In the period April 1, 2000 to July 31, 2000, the Company granted
1,541,315 stock options, with exercise prices ranging from $3.08 to $5.92, which
were below the estimated fair market value of the common stock as of the date of
the grant based on the estimated price of the Company's common stock in
connection with the Company's planned initial public offering. The total
deferred compensation associated with these options is approximately $13.4
million. The Company has recorded amortization expense for all deferred
compensation of approximately $1.5 million for the nine months ended September
30, 2000. The Company expects to record amortization expense of approximately
$2.0 million for the fourth quarter of fiscal 2000 and approximately $4.3
million, $4.0 million, $3.9 million and $1.5 million for the years ended 2001
through 2004, respectively.
F-21
<PAGE> 89
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 90
[THE MEDICINES COMPANY LOGO]
<PAGE> 91
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
Common Stock being registered. All amounts are estimated except the SEC
registration fee and the NASD filing fees.
<TABLE>
<CAPTION>
---------
AMOUNT TO
BE PAID
---------
<S> <C>
SEC registration fee........................................ $ 19,982
NASD filing fee............................................. 8,493
Printing and engraving...................................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue sky fees and expenses (including legal fees)........... *
Transfer agent fees......................................... *
Miscellaneous............................................... *
--------
Total............................................. $900,000
========
</TABLE>
---------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation (the "Certificate") provides that,
except to the extent prohibited by the Delaware General Corporation Law (the
"DGCL"), the Registrant's directors shall not be personally liable to the
Registrant or its stockholders for monetary damages for any breach of fiduciary
duty as directors of the Registrant. Under the DGCL, the directors have a
fiduciary duty to the Registrant which is not eliminated by this provision of
the Certificate and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of nonmonetary relief will remain available. In
addition, each director will continue to be subject to liability under the DGCL
for breach of the director's duty of loyalty to the Registrant, for acts or
omissions which are found by a court of competent jurisdiction to be not in good
faith or involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are prohibited by
DGCL. This provision also does not affect the directors' responsibilities under
any other laws, such as the Federal securities laws or state or Federal
environmental laws. The Registrant has obtained liability insurance for its
officers and directors.
Section 145 of the DGCL empowers and corporation to indemnify its directors and
officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) arising under Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit. The DGCL provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under the corporation's bylaws, nay agreement, a vote
of stockholders or otherwise. The Certificate eliminates the personal liability
of directors to the fullest extent permitted by Section 102(b)(7) of the DGCL
and provides that the Registrant shall fully indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that such person is or was a director or
officer of the Registrant, or is or was serving at the request of the Registrant
as a director or officer of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding.
At present, there is no pending litigation or proceeding involving any director,
officer, employee or agent as to which indemnification will be required or
permitted under the Certificate. The Registrant is not aware of any threatened
litigation or proceeding that may result in a claim for such indemnification.
II-1
<PAGE> 92
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below in chronological order is a description of the Registrant's
sales of unregistered securities since January 1, 1998. The sales made to
investors were made in accordance with Section 4(2) or Regulation D of the
Securities Act. Sales to all of our employees, directors and officers were
deemed to be exempt from registration under the Securities Act in reliance on
Rule 701 promulgated under Section 3(b) of the Securities Act as transactions
under compensatory benefit plans and contracts relating to compensation provided
under Rule 701.
In August 1998, we declared a stock dividend on all outstanding shares series A
preferred stock and issued an additional 1,686 shares of series A preferred
stock. The dividend covered the period from June 1, 1998 through August 31,
1998.
In August 1998, the holders of our series A preferred stock exchanged the shares
of series A preferred stock and common stock issued to them as part of the
transaction which occurred in 1996 and 1997 and the shares of series A preferred
stock issued to them in connection with the dividends declared in 1997 and 1998
for shares of series I convertible preferred stock and series II convertible
preferred stock. In connection with the exchanges, we issued an aggregate of
2,506,000 shares of series I preferred stock and 10,565,714 shares of series II
preferred stock.
In August 1998, we issued an aggregate of 8,399,593 shares of series III
convertible preferred stock for an aggregate purchase price of $36,286,241, or
$4.32 per share, to investors, including Warburg, Pincus, Morgan Stanley,
Hanseatic, Biotech Growth S.A., Alta Partners, Clive Meanwell and Peyton
Marshall.
In July 1999, we issued a stock dividend on all outstanding shares of series I
preferred stock, series II preferred stock and series III preferred stock. In
connection with the dividend we issued 172,005 shares of series I preferred
stock, 725,214 shares of series II preferred stock and 571,510 shares of series
III preferred stock. The dividend covered the period from August 8, 1998 with
respect to the series I and II preferred stock and August 12, 1998 with respect
to the series III preferred stock, to July 31, 1999.
In October 1999, we issued 8% convertible promissory notes in the aggregate
original principal amount of $6,000,000 to existing investors. In connection
with the issuance of these notes, we also issued common stock purchase warrants
to purchase 1,013,877 shares of common stock at a price of $5.92 per share at
any time prior to October 19, 2004.
In March 2000, we issued 8% convertible promissory notes in the aggregate
original principal amount of $13,348,779 to existing investors. In connection
with the issuance of these notes, we also issued common stock purchase warrants
to purchase 2,255,687 shares of common stock at a price of $5.92 per share at
any time prior to March 2, 2005.
In May 2000, the outstanding principal amount of the notes issued in October
1999 and March 2000 and the accrued interest thereon were converted into an
aggregate of 4,535,366 shares of our series IV convertible preferred stock.
In May 2000, we issued an aggregate of 1,411,000 shares of series IV convertible
preferred stock for an aggregate purchase price of $6,095,520 to Warburg,
Pincus, Biotech Growth S.A., Morgan Stanley, Alta Partners, PharmaBio and
Hanseatic.
In July 2000, we issued a stock dividend on all outstanding shares of series I
preferred stock, series II preferred stock, series III preferred stock and
series IV preferred stock. In connection with the dividend we issued 136,844
shares of series I preferred stock, 576,961 shares of series II preferred stock,
459,556 shares of series III preferred stock and 61,609 shares of series IV
preferred stock. The dividend covered the period from August 1, 1999 to July 31,
2000 with respect to the series I, II and III preferred stock and May 17, 2000
to July 31, 2000 with respect to the series IV preferred stock.
As of December 31, 2000, we had issued 798,512 shares of restricted common stock
to employees. The shares were purchased for $0.001 per share. We have issued
229,565 shares of common stock upon the exercise of stock options at a weighted
average exercise price of $1.25. In addition, options to purchase 3,212,112
shares of common stock were outstanding under our 1998 stock incentive plan and
our 2000 outside director stock option plan.
II-2
<PAGE> 93
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
---------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1** Third Amended and Restated Certificate of Incorporation of
the registrant
3.2** Amended and Restated By-laws of the registrant
4.1** Specimen certificate representing the Common Stock
5.1* Opinion of Hale and Dorr LLP
10.1** 1998 Stock Incentive Plan
10.2** Form of 2000 Employee Stock Purchase Plan
10.3** Amended and Restated Registration Rights Agreement, dated as
of August 12, 1998, as amended to date, by and among the
registrant and the other parties set forth on the signature
pages thereto
10.4** Third Amended and Restated Stockholders' Agreement, dated as
of August 12, 1998, as amended to date, by and among the
registrant and the other parties set forth on the signature
pages thereto
+10.5** Chemilog Development and Supply Agreement, dated as of
December 20, 1999, by and between the registrant and UCB
Bioproducts S.A.
+10.6** License Agreement, dated as of June 6, 1990, by and between
Biogen, Inc. and Health Research, Inc., as assigned to the
registrant
+10.7** License Agreement dated March 21, 1997, by and between the
registrant and Biogen, Inc.
+10.8** Development and Commercialization Agreement, dated August
16, 1999, by and between the registrant and GyneLogix, Inc.
10.9** Consulting Agreement, dated December 1, 1998, by and between
Innovex Inc. and the registrant
10.10** Alliance Agreement, dated August 1996, by and between the
registrant and PharmaBio Development Inc., as amended
10.11** Services Agreement dated April 1, 2000 by and between the
registrant and Stack Pharmaceuticals, Inc.
10.12** Employment agreement dated September 5, 1996 by and between
the registrant and Clive Meanwell
10.13** Employment agreement dated March 10, 1997 by and between the
registrant and John Villiger
10.14** Employment agreement dated September 29, 1998 by and between
the registrant and John Nystrom
10.15** Employment agreement dated October 27, 1997 by and between
the registrant and Dermot Liddy
10.16** Employment agreement dated October 20, 1997 by and between
the registrant and Peyton Marshall
10.17** Employment agreement dated March 30, 2000 by and between the
registrant and David Stack
10.18** Lease for One Cambridge Center dated March 15, 1997 by and
between Boston Properties, Inc. and the registrant, as
amended
10.19** Form of Common Stock Purchase Warrant dated October 19, 1999
10.20** Form of Common Stock Purchase Warrant dated March 2, 2000
10.21** Form of 2000 Outside Director Stock Option Plan
10.22** Letter of Intent dated July 20, 2000 by and between Innovex
Inc. and the registrant
++10.23 Master Services Agreement effective as of November 17, 2000
between Innovex Inc. and the registrant
++10.24 Sales Force Work Order #8475 effective as of November 17,
2000 between Innovex Inc. and the registrant
10.25*** Amendment No. 1 dated as of August 8, 2000 to the Services
Agreement between the registrant and Stack Pharmaceuticals,
Inc.
10.26 Employment Agreement dated as of April 1, 2000 by and
between the registrant and Thomas P. Quinn, as amended
10.27 Employment Agreement dated October 16, 1997 by and between
the registrant and John D. Richards
10.28 Lease for 5 Sylvan Way dated August 15, 2000 by and between
the registrant and Mack-Cali Morris Realty L.L.C.
21.1 Subsidiaries of the registrant
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Hale and Dorr LLP (included in Exhibit 5.1)
24.1 Powers of Attorney (included on page II-5)
</TABLE>
---------------
+ Confidential treatment was granted for certain portions of this Exhibit
pursuant to Rule 406 promulgated under the Securities Act.
II-3
<PAGE> 94
++ Confidential treatment requested for certain portions of this Exhibit
pursuant to Rule 406 promulgated under the Securities Act.
* To be filed by amendment.
** Incorporated by reference from the exhibits to the registration statement on
Form S-1 (registration no. 333-37404).
*** Incorporated by reference from the exhibits to the registrant's quarterly
report on Form 10-Q for the quarter ended September 30, 2000.
(b) Financial Statement Schedules.
None.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriter at
the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification to liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation of the Registrant, the Underwriting Agreement, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant will,
unless in the opinion of counsel the matter has been settled by the controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-4
<PAGE> 95
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Cambridge, Commonwealth of
Massachusetts, on this 4th day of January, 2001.
THE MEDICINES COMPANY
By: /s/ CLIVE A. MEANWELL
--------------------------------------
Clive A. Meanwell
Chief Executive Officer and President
POWER OF ATTORNEY
We, the undersigned directors and/or officers of The Medicines Company (the
"Company"), hereby severally constitute and appoint Clive A. Meanwell, Chief
Executive Officer, and Peyton J. Marshall, Chief Financial Officer, and each of
them individually, with full powers of substitution and resubstitution, our true
and lawful attorneys, with full powers to them and each of them to sign for us,
in our names and in the capacities indicated below, the Registration Statement
on Form S-1 filed with the Securities and Exchange Commission, and any and all
amendments to said Registration Statement (including post-effective amendments),
and any registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, in connection with the registration under
the Securities Act of 1933, as amended, of equity securities of the Company, and
to file or cause to be filed the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as each of them might
or could do in person, and hereby ratifying and confirming all that said
attorneys, and each of them, or their substitute or substitutes, shall do or
cause to be done by virtue of this Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on January 4, 2001:
SIGNATURE TITLE(S)
--------- --------
/s/ CLIVE A. MEANWELL Chief Executive Officer and President
------------------------------ (Principal Executive Officer)
Clive A. Meanwell
/s/ PEYTON J. MARSHALL Chief Financial Officer (Principal
------------------------------ Financial and Accounting Officer)
Peyton J. Marshall
/s/ LEONARD BELL Director
------------------------------
Leonard Bell
/s/ DENNIS B. GILLINGS Director
------------------------------
Dennis B. Gillings
Director
------------------------------
Anders D. Hove
/s/ M. FAZLE HUSAIN Director
------------------------------
M. Fazle Husain
II-5
<PAGE> 96
SIGNATURE TITLE(S)
--------- --------
/s/ T. SCOTT JOHNSON Director
------------------------------------
T. Scott Johnson
/s/ ARMIN M. KESSLER Director
------------------------------------
Armin M. Kessler
/s/ NICHOLAS J. LOWCOCK Director
------------------------------------
Nicholas J. Lowcock
/s/ JAMES E. THOMAS Director
------------------------------------
James E. Thomas
II-6
<PAGE> 97
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
---------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1** Third Amended and Restated Certificate of Incorporation of
the registrant
3.2** Amended and Restated By-laws of the registrant
4.1** Specimen certificate representing the Common Stock
5.1* Opinion of Hale and Dorr LLP
10.1** 1998 Stock Incentive Plan
10.2** Form of 2000 Employee Stock Purchase Plan
10.3** Amended and Restated Registration Rights Agreement, dated as
of August 12, 1998, as amended to date, by and among the
registrant and the other parties set forth on the signature
pages thereto
10.4** Third Amended and Restated Stockholders' Agreement, dated as
of August 12, 1998, as amended to date, by and among the
registrant and the other parties set forth on the signature
pages thereto
+10.5** Chemilog Development and Supply Agreement, dated as of
December 20, 1999, by and between the registrant and UCB
Bioproducts S.A.
+10.6** License Agreement, dated as of June 6, 1990, by and between
Biogen, Inc. and Health Research, Inc., as assigned to the
registrant
+10.7** License Agreement dated March 21, 1997, by and between the
registrant and Biogen, Inc.
+10.8** Development and Commercialization Agreement, dated August
16, 1999, by and between the registrant and GyneLogix, Inc.
10.9** Consulting Agreement, dated December 1, 1998, by and between
Innovex Inc. and the registrant
10.10** Alliance Agreement, dated August 1996, by and between the
registrant and PharmaBio Development Inc., as amended
10.11** Services Agreement dated April 1, 2000 by and between the
registrant and Stack Pharmaceuticals, Inc.
10.12** Employment agreement dated September 5, 1996 by and between
the registrant and Clive Meanwell
10.13** Employment agreement dated March 10, 1997 by and between the
registrant and John Villiger
10.14** Employment agreement dated September 29, 1998 by and between
the registrant and John Nystrom
10.15** Employment agreement dated October 27, 1997 by and between
the registrant and Dermot Liddy
10.16** Employment agreement dated October 20, 1997 by and between
the registrant and Peyton Marshall
10.17** Employment agreement dated March 30, 2000 by and between the
registrant and David Stack
10.18** Lease for One Cambridge Center dated March 15, 1997 by and
between Boston Properties, Inc. and the registrant, as
amended
10.19** Form of Common Stock Purchase Warrant dated October 19, 1999
10.20** Form of Common Stock Purchase Warrant dated March 2, 2000
10.21** Form of 2000 Outside Director Stock Option Plan
10.22** Letter of Intent dated July 20, 2000 by and between Innovex
Inc. and the registrant
++10.23 Master Services Agreement effective as of November 17, 2000
between Innovex Inc. and the registrant
++10.24 Sales Force Work Order #8475 effective as of November 17,
2000 between Innovex Inc. and the registrant
10.25*** Amendment No. 1 dated as of August 8, 2000 to the Services
Agreement between the registrant and Stack Pharmaceuticals,
Inc.
10.26 Employment Agreement dated as of April 1, 2000 by and
between the registrant and Thomas P. Quinn, as amended
10.27 Employment Agreement dated October 16, 1997 by and between
the registrant and John D. Richards
10.28 Lease for 5 Sylvan Way dated August 15, 2000, by and between
the registrant and Mack-Cali Morris Realty L.L.C.
21.1 Subsidiaries of the registrant
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Hale and Dorr LLP (included in Exhibit 5.1)
24.1 Powers of Attorney (included on page II-5)
</TABLE>
---------------
+ Confidential treatment was granted for certain portions of this Exhibit
pursuant to Rule 406 promulgated under the Securities Act.
++ Confidential treatment requested for certain portions of this Exhibit
pursuant to Rule 406 promulgated under the Securities Act.
* To be filed by amendment.
** Incorporated by reference from the exhibits to the registration statement on
Form S-1 (registration no. 333-37404).
*** Incorporated by reference from the exhibits to the registrant's quarterly
report on Form 10-Q for the quarter ended September 30, 2000.
