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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
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{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
Commission File No. 0-19131
MedImmune, Inc.
(Exact name of registrant as specified in its charter)
Delaware 52-1555759
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
35 West Watkins Mill Road, Gaithersburg, MD 20878
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301)417-0770
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of June 30, 1999, 56,626,419 shares of Common Stock, par value $0.01 per
share, were outstanding.
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MEDIMMUNE, INC.
Index to Form 10-Q
<S> <C>
Part I Financial Information Page
Item 1. Financial Statements
Balance Sheets 3
Statements of Operations 4
Condensed Statements of Cash Flows 5
Notes to Financial Statements 6-8
Item 2. Management's Discussion and Analysis of FinancialCondition
and Results of Operations 14
Part II Other Information 15-16
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
CytoGam, RespiGam, and Synagis are registered trademarks of the Company.
</TABLE>
2
<PAGE>
ITEM 1.
FINANCIAL STATEMENTS
MEDIMMUNE, INC.
BALANCE SHEETS
(in thousands, except share data)
June 30, December 31,
1999 1998
--------- ---------
ASSETS: (Unaudited)
Cash and cash equivalents $ 6,347 $ 37,959
Marketable securities 177,885 96,923
Trade receivables, net -- 31,682
Contract receivables, net 2,274 3,155
Inventory, net 15,887 19,760
Deferred tax assets 12,183 22,595
Other current assets 7,054 4,292
--------- ---------
Total Current Assets 221,630 216,366
Property and equipment, net 77,265 74,822
Inventory, noncurrent 5,096 4,949
Deferred tax assets 83,618 54,923
Other assets 8,227 2,060
--------- ---------
Total Assets $ 395,836 $ 353,120
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 2,072 $ 4,052
Accrued expenses 20,954 33,397
Product royalties payable 12,249 14,948
Accrued interest 2,559 2,580
Other current liabilities 3,014 2,993
--------- ---------
Total Current Liabilities 40,848 57,970
Long-term debt 80,236 83,195
Other liabilities 2,131 2,122
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Total Liabilities 123,215 143,287
--------- ---------
Commitments and Contingencies
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized
5,524,525 shares; none issued or outstanding -- --
Common stock, $.01 par value; authorized
120,000,000 shares; issued and outstanding
56,626,419 at June 30, 1999 and
54,654,842 at December 31, 1998 566 547
Paid-in capital 333,613 289,318
Accumulated deficit (61,558) (80,032)
--------- ---------
Total Shareholders' Equity 272,621 209,833
--------- ---------
Total Liabilities and Shareholders' Equity $ 395,836 $ 353,120
========= =========
The accompanying notes are an integral part of these financial statements.
3
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MEDIMMUNE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands except per share data)
<TABLE>
<S> <C> <C> <C> <C>
For the For the
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
-------- -------- --------- --------
Revenues:
Product sales $ 8,200 $ 8,150 $ 135,196 $ 51,043
Other 2,039 16,441 3,764 32,886
-------- -------- --------- --------
Total revenues 10,239 24,591 138,960 83,929
-------- -------- --------- --------
Costs and Expenses:
Cost of sales 4,554 14,483 35,821 36,758
Research and development 8,852 7,327 17,635 12,995
Selling, administrative and general 9,866 3,218 46,915 16,144
Other operating expenses 6,016 19,136 11,884 24,938
-------- -------- --------- --------
Total expenses 29,288 44,164 112,255 90,835
-------- -------- --------- --------
Operating (loss) income (19,049) (19,573) 26,705 (6,906)
Interest income 2,576 1,861 4,763 3,561
Interest expense (905) (856) (1,833) (2,018)
-------- -------- --------- --------
(Loss) income before income taxes (17,378) (18,568) 29,635 (5,363)
(Benefit) provision for income taxes (7,017) -- 11,161 --
-------- -------- --------- --------
Net (loss) earnings ($10,361) ($18,568) $ 18,474 ($ 5,363)
======== ======== ========= ========
Basic (loss) earnings per share ($ 0.19) ($ 0.35) $ 0.33 ($ 0.10)
======== ======== ========= ========
Shares used in calculation of basic (loss)
earnings per share 55,972 53,054 55,570 52,469
======== ======== ========= ========
Diluted (loss) earnings per share ($ 0.19) ($ 0.35) $ 0.29 ($ 0.10)
======== ======== ========= ========
Shares used in calculation of
diluted (loss) earnings per share 55,972 53,054 65,682 52,469
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
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MEDIMMUNE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<S> <C> <C>
For the
six months ended
June 30,
1999 1998
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 18,474 ($ 5,363)
Noncash items:
Deferred taxes 10,762 --
Depreciation and amortization 1,842 1,422
Amortization of discount on marketable securities (467) (853)
Inventory reserve (1,597) 10,557
Other 179 (1,236)
Other changes in assets and liabilities 18,027 3,097
-------- --------
Net cash provided by operating activities 47,220 7,624
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in marketable securities (80,495) (74,248)
Capital expenditures (4,267) (2,039)
Investment in strategic alliance (6,350) --
-------- --------
Net cash used in investing activities (91,112) (76,287)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock
and exercise of stock options 15,269 74,617
Decrease in long-term debt (2,989) (414)
-------- --------
Net cash provided by financing activities 12,280 74,203
-------- --------
Net (decrease) increase in cash and cash equivalents (31,612) 5,540
Cash and cash equivalents at beginning of period 37,959 29,984
-------- --------
Cash and cash equivalents at end of period $ 6,347 $ 35,524
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
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MEDIMMUNE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
General
The financial information presented as of June 30, 1999, and for the periods
ended June 30, 1999 and 1998, is unaudited. In the opinion of the Company's
management, the financial information contains all adjustments (which consist
only of normal recurring adjustments) necessary for a fair presentation of such
financial information.
Accounts Receivable
Due to the cyclical nature of the Company's products, a significant decrease in
sales and trade accounts receivable occurred in the second quarter of 1999. In
addition, reserve balances exist for RespiGam returns that are still expected to
occur and Synagis government rebate allowances relating to sales during the
1998/1999 season are higher than the offsetting receivables balances due to the
later processing cycle by certain states for these rebates. As a result of these
factors, trade accounts receivable at June 30, 1999 carries a net credit
balance. This net credit balance has been reclassified to accrued expenses for
financial statement presentation.
Inventory
Inventory, net of reserves, is comprised of the following (in thousands):
June 30, December 31,
1999 1998
-------- --------
Raw Materials $ 6,934 $ 9,794
Work in Process 9,147 9,188
Finished Goods 4,902 5,727
-------- --------
20,983 24,709
Less noncurrent (5,096) (4,949)
-------- --------
$ 15,887 $ 19,760
======== ========
As a result of the June 1998 FDA approval and the subsequent market acceptance
of Synagis, the Company reserved approximately $9.2 million against its RespiGam
inventory in the second quarter of 1998, as no further significant product sales
were expected to result from this inventory. The reserve balances were $6.5
million and $8.1 million as of June 30, 1999 and December 31, 1998,
respectively. Raw materials include RespiGam raw plasma of $0.9 million, which
reflects the amount the Company expects to recover upon sale to third parties.
Should the Company be unable to sell the remaining raw plasma at its net book
value, a further charge in a subsequent quarter may be necessary.
The Company also continues to purchase plasma and other raw materials for use in
production in the Company's Frederick, Maryland manufacturing facility, which is
subject to FDA licensure and approval. During the second quarter, the Company
submitted to the FDA an amendment to its Biologic License Application requesting
authorization to begin marketing Synagis produced at the Frederick facility. Due
to the uncertainty surrounding the likelihood and timing of FDA approval, all
inventory for this facility has been classified as non-current in the
accompanying balance sheet.
6
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Finished goods at June 30, 1999 and December 31, 1998 include approximately $1.6
million of by-products that result from the production of the Company's
principal products at one of its contract manufacturers and are held for resale.
As of June 30, 1999, minimal sales of these by-products have occurred. The June
30, 1999 and December 31, 1998 balances are net of a reserve of $1.6 million.
Property and Equipment
Property and equipment, stated at cost, is comprised of the following (in
thousands):
<TABLE>
<S> <C> <C>
June 30, December 31,
1999 1998
-------- --------
Land $ 2,147 $ 2,147
Buildings and building improvements 8,338 7,085
Leasehold improvements 13,820 12,736
Laboratory, manufacturing and facilities equipment 11,911 10,841
Office furniture, computers, and equipment 6,537 5,739
Construction in progress 48,147 48,067
-------- --------
90,900 86,615
Less accumulated depreciation and amortization (13,635) (11,793)
-------- --------
$ 77,265 $ 74,822
======== ========
</TABLE>
Construction in progress at June 30, 1999 and December 31, 1998 includes $6.7
million and $5.3 million, respectively, of capitalized interest related to the
design and construction of the Company's manufacturing facility in Frederick,
Maryland. Construction of the manufacturing facility is substantially complete
and validation activities are ongoing. The Company will continue to capitalize
costs, primarily capitalized interest, related to the facility until placed in
service. The portions of the facility that are subject to inspection and
approval by the FDA will be placed in service and depreciation will commence if
and when such approval is received.
Long-term Debt
Subsequent to June 30, 1999, $60 million of the Company's 7% convertible
subordinated notes were converted into common stock. The transaction resulted in
the issuance of 6,097,545 shares of common stock and increased shareholders'
equity by $58.7 million, the carrying amount of the converted debt on the date
of the conversion.
Earnings per Share
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." Basic
earnings per share is computed based on the weighted average number of common
shares outstanding during the period. Diluted earnings per share is computed
based on the weighted average shares outstanding and the dilutive common stock
equivalents outstanding during the period. The dilutive effect of convertible
debt is measured using the "if converted" method. The dilutive effect of stock
options is measured using the treasury stock method. Common stock equivalents
are not included in periods where there is a loss as they are anti-dilutive. The
following is a reconciliation of the numerator and denominator of the diluted
EPS computation for the six-month period ended June 30, 1999.
Numerator:
Net earnings $18,474
Interest on 7% convertible notes, net of
amounts capitalized and related taxes 720
-------
Numerator for diluted EPS $19,194
=======
Denominator:
Weighted average shares outstanding 55,570
Effect of dilutive securities:
Stock options 4,014
7% convertible notes 6,098
-------
Denominator for diluted EPS 65,682
=======
7
<PAGE>
Options to purchase 118,700 shares of common stock with prices ranging from
$58.88 to $71.25 per share were outstanding in the first half of 1999, but were
not included in the computation of diluted earnings per share because they were
anti-dilutive. No reconciliation of the numerator and denominator is necessary
for the six-month period ending June 30, 1998, as a loss was reported and
inclusion of potential common shares would be anti-dilutive.
Income Tax Provision
In the fourth quarter of 1998, the Company concluded that it is more likely than
not that it will realize a portion of the benefit of previously reserved
deferred tax assets. Accordingly, the Company reduced the valuation allowance
against the asset and recorded a tax benefit of $59.8 million in December 1998.
Due to the recognition of the Company's tax benefit in 1998, the Company's
effective tax rate for 1999 is expected to approximate the applicable federal
and state statutory rates. The recognition of these deferred tax assets under
SFAS No. 109 has no impact on the Company's cash flows for income taxes despite
the change in the Company's effective tax rate. A provision for income taxes of
$11.2 million was recorded for the six months ended June 30, 1999 as compared to
no provision recorded for the six months ended June 30, 1998. The income tax
provision for the six month period ending June 30, 1999 has been computed using
an effective combined federal and state tax rate of 37.7%. The tax benefit of
stock option exercise deductions has been recorded directly to shareholders'
equity.
Restatements
Prior year share and per share amounts have been restated to give effect to the
two-for-one stock split on December 31, 1998.
New Accounting Pronouncement
Derivative Instruments and Hedging Activities
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities.
SFAS No. 133 requires companies to recognize all derivatives as either assets or
liabilities, with the instruments measured at fair value. The accounting for
changes in fair value, gains or losses, depends on the intended use of the
derivative and its resulting designation. The statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. The Company will
adopt SFAS No. 133 by January 1, 2001. Because of the Company's minimal use of
derivatives, management does not anticipate that the adoption of SFAS No. 133
will have a material effect on the earnings or financial position of the
Company.
8
<PAGE>
ITEM 2.
MEDIMMUNE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
Product sales were $8.2 million in second quarter 1999 and 1998. Synagis sales
of $1.3 million for the second quarter of 1999 included $0.7 million of
international sales to Abbott Laboratries, the Company's exclusive distributor
of Synagis, outside of the United States. CytoGam sales decreased 28% to $5.5
million from $7.6 million in the second quarter of 1999 versus the second
quarter of 1998, reflecting a 20% decrease in total units sold, a change in the
sales mix to include a greater percentage of international units which have a
lower unit selling price, and an increase in government rebate allowances. The
decrease in units sold reflects the variability in sales that may occur from the
use of CytoGam as a substitute for standard intravenous immune globulin ("IVIG")
products, for which there is currently a worldwide shortage. RespiGam sales
increased 172% from $0.5 million in second quarter 1998 to $1.2 million in
second quarter 1999. The Company believes that a significant portion of the
RespiGam sales that occurred were as a result of product substitution occurring
because of the worldwide shortage of standard IVIG products. The duration of
this shortage and continued impact, if any, on product sales cannot be
determined at this time. Future sales of RespiGam for the RSV market are
expected to be minimal. Other revenues in the 1999 second quarter of $2.0
million consist primarily of funding from SmithKline Beecham ("SKB") for
development of a human papillomavirus vaccine. The 1998 quarter included
research funding from SKB and a $15 million milestone payment from Abbott
Laboratories upon FDA approval of Synagis.
Cost of sales in second quarter 1999 decreased to $4.6 million from $14.5
million in second quarter 1998, a decrease of 69%. Cost of sales in 1998
includes the write-down of RespiGam inventories of approximately $9.2 million as
a result of the FDA approval of Synagis, a charge of $1.3 million for RSV plasma
contract termination costs, a charge of $1.3 million for the write-down of
certain by-product inventories and a credit for amounts previously recorded for
additional royalties expected to be due to Massachusetts Health Research
Institute (`MHRI'). Excluding the effects of these one-time adjustments, gross
margins were 44% in the 1999 quarter compared to 40% in the 1998 quarter.
Research, development and clinical spending increased 21% to $8.9 million in the
second quarter of 1999 from $7.3 million in the second quarter of 1998,
primarily due to increased clinical trial spending for MEDI-507, the Company's
HPV program and additional Synagis trials. Clinical spending is expected to
increase in the coming quarters as the Company moves more of its product
candidates into the clinic and expands trials on products already in the clinic.
Selling, administrative and general expenses increased to $9.9 million in this
year's quarter from $3.2 million in the 1998 quarter, an increase of 207%.
Expenses in 1998 are net of $4.2 million due from American Home Products ("AHP")
for its share of RespiGam product line loss as computed under the terms of the
Company's alliance with AHP. Expenses in second quarter 1999 include increased
wage and related expenses as well as increased marketing and selling expenses
related to the continued promotion of Synagis.
9
<PAGE>
Other operating expenses of $6.0 million in the 1999 period decreased from $19.1
million in the 1998 period. Charges in both periods include start-up costs at
the Company's manufacturing facility in Frederick, Maryland. Other operating
expenses in 1999 include a charge of $1.4 million to reserve for certain
equipment purchased for use in the Frederick Manufacturing Center (`FMC") as it
was determined that the equipment ultimately will not be used in that facility.
Other operating expenses in the 1998 period include a $10.3 million charge
incurred prior to FDA approval of Synagis related to the buy-down of certain
Synagis royalty obligations, costs related to scale-up of Synagis production at
a third-party manufacturer and at the Company's Gaithersburg Manufacturing and
Development Facility ("GMDF").
Interest income of $2.6 million was earned in the 1999 second quarter, compared
to $1.9 million in the second quarter of 1998, reflecting higher cash balances
available for investment, partially offset by a decrease in interest rates which
lowered the overall portfolio yield. Interest expense of $0.9 million was
incurred in both the 1999 and 1998 quarters, reflecting primarily interest due
on the Company's convertible debt, net of capitalized interest.
The Company recorded a tax benefit for income taxes of $7.0 million in the 1999
quarter to bring the year to date tax provision to an effective rate of 37.7%.
No income tax benefit was recorded in the 1998 period as the Company incurred a
loss and still had a full valuation allowance against its deferred taxes. In
December 1998, the Company concluded that it was more likely than not it will
realize a portion of the benefit of previously deferred tax assets. Accordingly,
the Company reduced the valuation allowance against the asset and recorded a tax
benefit of $59.8 million. Due to the recognition of the Company's tax benefit in
1998, the Company estimates that its effective tax rate will approximate the
applicable federal and state statutory rate for 1999 and the near term.
The net loss in the 1999 second quarter was $10.4 million, or $0.19 basic and
diluted net loss per share. Shares used in computing basic and diluted net loss
per share were 56.0 million. The net loss for the second quarter of 1998 was
$18.6 million, or $0.35 basic and diluted net loss per share. Shares used in
computing the second quarter 1998 net loss per share were 53.1 million.
Quarterly financial results may vary significantly due to seasonality of Synagis
product sales, fluctuation in sales of CytoGam, milestone payments, research
funding and expenditures for research, development and marketing programs.
Synagis sales are expected to occur primarily during, and in proximity to, the
RSV season, which typically occurs between November and April in the United
States. No assurances can be given that adequate product supply will be
available to meet demand. In addition, no assurance can be given that the FDA
will approve the Company's supplement to its BLA for marketing of Synagis
produced at the FMC.
10
<PAGE>
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Product sales increased 165% to $135.2 million in the 1999 six months from $51.0
million in the 1998 six months. Net sales of Synagis, which was approved by the
FDA in June 1998, were $117.5 million for the first half of 1999, which includes
$2.2 million of international sales to Abbott Laboratories, the Company's
exclusive distributor of Synagis, outside the United States. Most of the sales
were recorded in the first quarter of 1999, reflecting the seasonality of
Synagis CytoGam sales for the six months ended June 30, 1999 decreased 17% to
$15.2 million from $18.4 million in the six months ended June 30, 1998. The
decrease primarily reflects a change in the sales mix to include a greater
percentage of international units which have a lower selling price, a 3%
decrease in total units sold, and an increase in government rebate allowances.
The decrease in units sold reflects the variability in the sales that may occur
as a result of the use of CytoGam as an IVIG substitute. RespiGam sales
decreased 95% from $32.6 million in the first half of 1998 to $1.6 million in
the first half of 1999, reflecting the shift in customer demand from RespiGam to
Synagis for prevention of RSV disease. Other revenues in both the 1999 and 1998
periods include funding from SKB for development of a human papillomavirus
vaccine. Other revenues in 1998 also include a $15 million payment from SKB
following the signing of the agreement for development of a human papillomavirus
vaccine and a $15 million milestone payment from Abbott Laboratories upon FDA
approval of Synagis.
Cost of sales for the 1999 six months decreased 3% to $35.8 million from $36.8
million in the 1998 six months. Cost of sales in 1998 includes approximately
$11.8 million related to the writedown of RespiGam inventory and by-product
inventory and a credit for previously recorded royalties expected to be due to
MHRI. Excluding the effects of these one time adjustments, gross margins would
have been 74% for the 1999 period versus 47% for the 1998 period. This increase
primarily reflects favorable margins on Synagis, which was not sold in the first
half of 1998 and has lower production costs than CytoGam and RespiGam.
Research and development expenses of $17.6 million in the 1999 six months
increased 36% from $13.0 million in the 1998 six months, primarily due to
increased clinical spending for MEDI-507 and additional Synagis trials. Selling,
general and administrative expenses were $46.9 million and $16.1 million for the
1999 and 1998 periods, respectively, an increase of 191%. Expenses in 1999
include increased marketing and selling expenses as well as commission charges
and co-promotion expenses to the Ross Products Division of Abbott Laboratories
in connection with the launch and continued promotion of Synagis. Expenses in
1998 were net of $4.2 million in reimbursement from AHP due under the terms of
the RespiGam co-promotion agreement.
11
<PAGE>
Other operating expenses, which reflects manufacturing start-up costs, decreased
in the 1999 period to $11.9 million from $24.9 million in the 1998 period.
Expenses in 1999 include a charge of $1.4 million to reserve for certain
equipment purchased for use in the FMC, as it was determined that the equipment
ultimately will not be used in that facility. Expenses in 1998 include a $10.3
million charge for the buy-down of certain Synagis royalty obligations prior to
FDA approval, as well as start-up costs for the Company's FMC and costs related
to scale-up of production of Synagis at a third-party manufacturer and at the
Company's GMDF.
Income tax expense of $11.2 million was recorded for the six months ended June
30, 1999, at an overall effective tax rate of 37.7%, which approximates the
statutory rate. An income tax benefit was not recorded in 1998 due to the
uncertainty of utilization of deferred tax assets at that time.
Interest income of $4.8 million and $3.6 million was recorded in the 1999 and
1998 six months, respectively. The increase reflects higher cash balances
available for investment partially offset by lower interest rates, which
decreased the overall portfolio yield.
Interest expense of $1.8 million in the 1999 period versus $2.0 million in the
1998 period reflects primarily interest on the Company's convertible debt, net
of capitalized interest, as well as interest on equipment financing.
Net income in the 1999 six months was $18.5 million, or $0.33 basic and $0.29
diluted earnings per share, versus a net loss of $5.4 million, or $0.10 basic
and diluted net loss per share for the six months ended June 30, 1998. Shares
used in computing basic and diluted net loss per share in 1999 were 55.6 million
and 65.7 million, respectively. Shares used in computing basic and diluted net
loss per share in 1998 were 52.5 million.
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities at June 30, 1999 were $184.2 million compared to
$134.9 million at 1998 year end. Net cash provided by operating activities in
the six months ended June 30, 1999 was $47.2 million, reflecting net income for
the period and a decrease in accounts receivable offset by a decrease in accrued
expenses, primarily as a result of payments made to Abbott Laboratories in
conjunction with the Synagis co-promotion agreement. Capital expenditures of
$4.3 million, net of capitalized interest, for the 1999 six months were
primarily for equipment and facilities improvements at the Company's FMC. The
Company receives cash from the exercise of employee stock options. During the
six months ended June 30, 1999, stock option exercises provided $15.3 million of
cash compared with $3.3 million for the same period in 1998. In addition, the
Company received $71.3 million in 1998 from the issuance of common stock in
private placement transactions.
12
<PAGE>
The Company's existing funds at June 30, 1999, together with funds expected to
be generated from product sales and investment income, are expected to provide
sufficient liquidity to meet the anticipated needs of the business for the
foreseeable future, absent the occurrence of any unforeseen events.
Year 2000 READINESS
The Company has established a Year 2000 Project Team comprised of
representatives from key functional areas to complete a review of its internal
and external systems for Year 2000 readiness. The Year 2000 issue is expected to
affect the systems of the Company and various entities with which the Company
interacts, including the Company's marketing partners, suppliers and various
vendors. The Year 2000 Project is designed to address three major areas: (1)
information technology systems, (2) hardware, equipment and instrumentation,
including embedded systems, and (3) third party relationships. The Company's
plan involves inventorying, assessing and prioritizing those items which have
Year 2000 implications; remediating (repairing, replacing or upgrading)
non-compliant items; testing items with major exposure to ensure compliance; and
developing contingency plans to minimize potential business interruption. The
inventory, assessment and prioritization phase of the project is substantially
complete.
With regard to the Company's information technology systems, hardware, equipment
and instrumentation, the Company has identified mission critical and
non-critical items and is in the process of updating and/or replacing items that
are non-compliant. The Company believes that it should be able to substantially
complete implementation of critical aspects of its Year 2000 plan prior to the
commencement of the year 2000. Because the Company has relied primarily on
off-the-shelf software for its information technology needs and because much of
the hardware, equipment and instrumentation is currently compliant, the Company
does not anticipate that the costs for internal remediation efforts will be
significant. The Company does not separately track the internal costs of its
Year 2000 compliance efforts and therefore these costs are unknown. As of June
30, 1999, the Company estimates that it has spent no more than $250,000
replacing, upgrading or repairing the systems and/or equipment that are
non-compliant and expects the cost to complete these efforts should not exceed
$300,000. The Company presently anticipates that its testing and remediation
efforts will be substantially complete by September 30, 1999.
In addition to the risks associated with the Company's own computer systems and
equipment, the Company has relationships with, and is in varying degrees
dependent upon, a large number of third parties that provide information, goods
and services to the Company. These include, but are not limited to, third party
manufacturers, suppliers, customers, and distributors. The Company has
identified and visited the facilities of third parties with which the Company
has material relationships to assess their Year 2000 readiness. Critical systems
and Year 2000 plans were reviewed. The Company may also be affected by the
failure of other third parties to be Year 2000 compliant even if they do not do
business directly with the Company. For example, the failure of state, federal
and private payers or reimbursers to be Year 2000 compliant and thus unable to
make timely, proper or complete payments to sellers and users of the Company's
products, could have a material adverse effect on the Company.
The Company is currently in the process of formalizing its Year 2000 contingency
plan. The Company expects to have finalized a contingency plan that will address
the most likely worst case Year 2000 scenario by the end of third quarter 1999.
The Company believes that its most likely worst case scenario would be a break
in the cold chain of its finished goods inventory due to a power failure or
failed monitoring equipment. To mitigate this risk, the Company plans, among
other things, to ensure that third party warehouses have appropriate contingency
plans in place to react promptly to maintain the cold chain (for example, by
having a generator on hand).
13
<PAGE>
With regard to the Company's Year 2000 readiness plan, there can be no
assurances: 1) that the Company will be able to identify all aspects of its
business that are subject to Year 2000 problems, including issues of its
customers or suppliers, 2) that the Company's software vendors, third parties
and others will be correct in their assertions that they are Year 2000 ready, 3)
that the Company's estimate of the cost of Year 2000 readiness will prove
ultimately to be accurate, 4) that the Company will be able to successfully
address its Year 2000 issues and that this could result in interruptions in, or
failures of, certain normal business activities or operations that may have a
material adverse effect on the Company's business, results of operations and
financial condition.
--------------------
THE STATEMENTS IN THIS QUARTERLY REPORT THAT ARE NOT DESCRIPTIONS OF HISTORICAL
FACTS ARE FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REFLECT MANAGEMENT'S
CURRENT VIEWS, ARE BASED ON CERTAIN ASSUMPTIONS AND ARE SUBJECT TO RISKS AND
UNCERTAINTIES, INCLUDING BUT NOT LIMITED TO, regulatory approval timing, PRODUCT
DEMAND AND MARKET ACCEPTANCE RISKS, PATENT AND INTELLECTUAL PROPERTY RISKS, YEAR
2000 RISKS, THE EARLY STAGE OF PRODUCT DEVELOPMENT AND RELIANCE ON THIRD-PARTY
MANUFACTURERS INCLUDING, BUT NOT LIMITED TO, CAPACITY AND SUPPLY CONSTRAINTS,
PRODUCTION yields, REGULATORY APPROVAL TIMING AND FOREIGN EXCHANGE RISKS, AS
WELL AS OTHER RISKS DETAILED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION. THE FDA IS CURRENTLY REVIEWING A SUPPLEMENT TO THE
COMPANY'S BIOLOGIC LICENSE APPLICATION TO ALLOW PRODUCTION OF SYNAGIS AT THE
COMPANY'S FREDERICK MANUFACTURING CENTER. THERE CAN BE NO ASSURANCE THAT THE
COMPANY WILL RECEIVE THE REQUESTED APPROVAL THAT WOULD ALLOW IT TO MARKET
PRODUCTS MADE AT THE FREDERICK MANUFACTURING CENTER. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE CURRENTLY ANTICIPATED AS A RESULT OF THE FOREGOING OR
OTHER FACTORS.
14
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders -
On May 20, 1999 the Company held its Annual Meeting of Stockholders. By vote of
the Company's stockholders at such meeting, all of the director nominees were
re-elected to one year terms. In addition, a new director was elected to a one
year term. A proposal to adopt the Company's 1999 Stock Option Plan and the
appointment of PricewaterhouseCoopers LLP as the Company's independent auditors
were also approved. The results of the voting were as follows:
Election of Directors
<TABLE>
<S> <C> <C> <C> <C>
Abstain/
For Against Withheld Non-vote
Wayne T. Hockmeyer 51,816,406 160,327 -- --
Melvin D. Booth 51,816,406 160,327 -- --
David M. Mott 51,816,386 160,347 -- --
Franklin H. Top, Jr. 51,816,406 160,327 -- --
M. James Barrett 51,816,406 160,327 -- --
James H. Cavanaugh 51,816,406 160,327 -- --
Barbara Hackman Franklin 51,816,386 160,347 -- --
Lawrence C. Hoff 51,816,406 160,327 -- --
Gordon S. Macklin 51,816,406 160,327 -- --
Proposal to adopt the MedImmune 1999 Stock
Option Plan 34,818,773 17,109,588 -- 48,372
Appointment of
PricewaterhouseCoopers LLP 51,925,907 31,239 -- 19,587
Item 5. Other Information - None
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
Report Date Event Reported
----------- --------------
5/19/99 MedImmune First Quarter Product Sales Nearly Triple
5/19/99 MedImmune Announces Presentation of Pharmacoeconomic Data for
Synagis
5/19/99 MedImmune and BioTransplant Announce Clinical Results At American
Society of Transplantation Meeting
5/25/99 European Committee for Proprietary Medical Products Adopts Positive
Opinion on Synagis for Prevention of RSV
5/25/99 MedImmune to Redeem $60 Million of 7 Percent Convertible
Subordinated Notes Due 2003
6/24/99 MedImmune Announces New Executive Appointments
</TABLE>
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MEDIMMUNE, INC.
(Registrant)
/s/David Mott
------------------------------------
Date: August ____, 1999 David M. Mott
Vice Chairman and Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MEDIMMUNE,
INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FILING.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 6,347
<SECURITIES> 177,885
<RECEIVABLES> 2,274
<ALLOWANCES> 0
<INVENTORY> 20,983
<CURRENT-ASSETS> 221,630
<PP&E> 77,265
<DEPRECIATION> 0
<TOTAL-ASSETS> 395,836
<CURRENT-LIABILITIES> 40,848
<BONDS> 80,236
0
0
<COMMON> 566
<OTHER-SE> 272,055
<TOTAL-LIABILITY-AND-EQUITY> 395,836
<SALES> 135,196
<TOTAL-REVENUES> 138,960
<CGS> 35,821
<TOTAL-COSTS> 112,255
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,833
<INCOME-PRETAX> 29,635
<INCOME-TAX> 11,161
<INCOME-CONTINUING> 18,474
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,474
<EPS-BASIC> 0.33
<EPS-DILUTED> 0.29
</TABLE>
