SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission File 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, 2000, 209,822,930 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 1
Statements of Operations 3
Condensed Statements of Cash Flows 4
Notes to Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-13
Part II Other Information 13-15
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
Synagis, CytoGam, Ethyol, RespiGam, NeuTrexin, and Hexalen are
registered trademarks of the Company.
</TABLE>
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<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
MEDIMMUNE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, December 31,
<S> <C> <C>
2000 1999
-------- --------
ASSETS: (Unaudited)
Cash and cash equivalents $ 118,159 $ 36,570
Marketable securities 313,217 214,750
Trade receivables, net 840 86,894
Inventory, net 25,361 31,777
Deferred tax assets 21,266 23,132
Other current assets 9,906 8,715
-------- --------
Total Current Assets 488,749 401,838
Property and equipment, net 89,101 87,452
Deferred tax assets 189,315 128,990
Marketable securities 17,072 19,074
Other assets 16,924 11,070
-------- --------
Total Assets $801,161 $648,424
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable, trade $ 2,269 $ 2,995
Accrued expenses 38,079 65,300
Product royalties payable 18,413 28,527
Other current liabilities 2,607 2,130
-------- --------
Total Current Liabilities 61,368 98,952
Long-term debt 10,012 10,366
Other liabilities 1,982 2,027
-------- --------
Total Liabilities 73,362 111,345
-------- --------
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
320,000,000 shares; issued and outstanding
209,822,930 at June 30, 2000 and
203,840,334 at December 31, 1999 2,098 679
Paid-in capital 795,129 656,244
Accumulated deficit (69,089) (118,241)
Accumulated other comprehensive loss (339) (1,603)
-------- --------
Total Shareholders' Equity 727,799 537,079
-------- --------
Total Liabilities and Shareholders' Equity $801,161 $648,424
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
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<TABLE>
<CAPTION>
MEDIMMUNE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands except per share data)
For the For the
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
------- ------- -------- --------
Revenues:
Product sales $25,387 $13,311 $221,163 $146,725
Other revenue 4,116 5,258 6,681 7,297
------- ------- -------- --------
Total revenues 29,503 18,569 227,844 154,022
------- ------- -------- --------
Costs and Expenses:
Cost of sales 12,014 5,614 57,042 38,496
Research and development 18,371 14,341 33,864 28,107
Selling, administrative and general 23,338 14,175 74,011 55,100
Other operating expenses 692 6,016 2,984 11,884
------- ------- -------- --------
Total expenses 54,415 40,146 167,901 133,587
------- ------- -------- --------
Operating (loss) income (24,912) (21,577) 59,943 20,435
Interest income 7,935 3,309 13,117 6,146
Interest expense (120) (929) (243) (1,887)
------- ------- -------- --------
(Loss) income before income taxes (17,097) (19,197) 72,817 24,694
(Benefit) provision for income taxes (8,262) (49,916) 23,665 (31,738)
------- ------- -------- --------
Net (loss) earnings ($8,835) $ 30,719 $ 49,152 $ 56,432
======= ======= ======== ========
Basic (loss) earnings per share ($0.04) $ 0.17 $ 0.24 $ 0.32
======= ======= ======== ========
Shares used in calculation of basic (loss) earnings
per share 209,139 180,184 207,529 178,721
======= ======= ======== ========
Diluted (loss) earnings per share ($0.04) $ 0.15 $ 0.22 $ 0.27
======= ======= ======== ========
Shares used in calculation of
diluted (loss) earnings per share 209,139 210,280 219,666 209,393
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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MEDIMMUNE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the
Six months ended
June 30,
2000 1999
<S> <C> <C>
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 49,152 $ 56,432
Noncash items:
Deferred taxes 23,605 (32,093)
Depreciation and amortization 3,632 2,325
Amortization of discount on marketable securities (538) (460)
Change in allowance for trade accounts receivable (8,706) (11,482)
Other (335) (1,472)
Other changes in assets and liabilities 57,899 28,929
-------- --------
Net cash provided by operating activities 124,709 42,179
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in marketable securities (94,321) (87,482)
Capital expenditures (5,462) (4,898)
Investment in strategic alliance -- (6,350)
-------- --------
Net cash used in investing activities (99,783) (98,730)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock
and exercise of stock options 58,241 36,442
Decrease in long-term debt (1,082) (3,360)
-------- --------
Net cash provided by financing activities 57,159 33,082
-------- --------
Effect of exchange rate changes on cash (496) (174)
Net increase (decrease) in cash and cash equivalents 81,589 (23,643)
Cash and cash equivalents at beginning of period 36,570 44,730
-------- --------
Cash and cash equivalents at end of period $118,159 $ 21,087
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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MEDIMMUNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
General
The financial information presented as of June 30, 2000, and for the periods
ended June 30, 2000 and 1999, 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
results for the interim periods presented. Interim results are not necessarily
indicative of results for an entire year or for any subsequent interim period.
These consolidated financial statements should be read in conjunction with the
Company's annual report on Form 10-K for the year ended December 31, 1999.
Inventory
Inventory, net of reserves, is comprised of the following (in thousands):
June 30, December 31,
2000 1999
-------- -------
Raw Materials $11,330 $11,502
Work in Process 19,966 15,129
Finished Goods 4,176 9,365
-------- -------
35,472 35,996
Less noncurrent (10,111) (4,219)
-------- -------
$25,361 $31,777
======== =======
The Company has purchased plasma and other raw materials for use in production
of CytoGam in the Company's Frederick manufacturing facility ("FMC"), which is
subject to U.S. Food and Drug Administration ("FDA") licensure and approval. The
Company filed an application in March 2000 for FDA approval relating to a
portion of production of CytoGam at the FMC. Due to the uncertainty surrounding
the likelihood and timing of FDA approval, this inventory has been classified as
noncurrent in the accompanying balance sheet.
Finished goods at June 30, 2000 and December 31, 1999 include approximately $2.1
million and $1.8 million, respectively, of by-products that result from the
production of the Company's principal products and are held for resale. As of
June 30, 2000, minimal sales of these by-products have occurred. The June 30,
2000 and December 31, 1999 finished goods balances are net of reserves of $1.5
million and $1.7 million, respectively.
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 impact of
common stock equivalents outstanding during the period. 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 three and six-month periods
ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
------- ------- ------- -------
Numerator:
Net (loss) earnings $(8,835) $30,719 $49,152 $56,432
Interest on 7% convertible notes, net of
amounts capitalized and related taxes -- 361 -- 720
------- ------- ------- -------
Numerator for diluted EPS $(8,835) $31,080 $49,152 $57,152
======= ======= ======= =======
Denominator:
Weighted average shares outstanding 209,139 180,184 207,529 178,721
Effect of dilutive securities:
Stock options -- 11,803 12,137 12,379
7% convertible notes -- 18,293 -- 18,293
------- ------- ------- -------
Denominator for diluted EPS 209,139 210,280 219,666 209,393
======= ======= ======= =======
</TABLE>
4
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The following table shows the number of shares and related price ranges of those
shares that were excluded from the EPS computation from above. These options to
purchase shares of common stock were outstanding in the periods reported, but
were not included in the computation of diluted earnings per share as the
exercise prices of the options were in excess of the average stock price during
the periods reported, and thus would be anti-dilutive.
<TABLE>
<CAPTION>
Three months ended Six months ended Six months ended
June 30, 1999 June 30, 2000 June 30, 1999
<S> <C> <C> <C>
---------------------------- ---------------------------- ----------------------------
Price range of stock options:
$20.42 to $67.11 1,536,066
$57.50 to $77.31 4,663,075
$19.44 to $67.11 1,851,441
</TABLE>
On February 17, 2000 the Company's Board of Directors declared a three-for-one
stock split to be effected in the form of a 200% stock dividend. The stock
dividend was paid on June 2, 2000 to shareholders of record at the close of
business on May 18, 2000. All references to number of shares and per share
amounts for the periods presented in the financial statements have been restated
to give effect for the stock split.
Income Tax Provision
Income tax benefit as a percentage of pre-tax income for the six months ended
June 30, 2000 was 32.5%. During the quarter ended June 30, 2000, the Company
recognized increased credits for research and development expenditures and
credits earned for Orphan Drug status of certain research and development
expenses. The Company realized a tax benefit of $31.7 million for the six months
ended June 30, 1999, which included $41.0 million related to the reversal of
valuation allowances of deferred tax assets for U.S. Bioscience.
Comprehensive Income
Comprehensive income is comprised of net income and other comprehensive income.
Other comprehensive income includes certain changes in equity that are excluded
from net income, such as translation adjustments and unrealized holding gains
and losses on available-for-sale marketable securities. Comprehensive income
(loss) for the three months ended June 30, 2000 and 1999 was ($9.3) million and
$30.4 million, respectively. Comprehensive income for the six months ended June
30, 2000 and June 30, 1999 was $50.4 million and $55.9 million, respectively.
Legal Proceedings
In 1998, MediGene AG initiated a legal action against Loyola University of
Chicago and the Company in the U.S. District Court for the Northern District of
Illinois alleging, among other things, breach of contract and tortious
interference by the Company with an alleged prospective business relationship
between MediGene and Loyola. The claims relate to human papillomavirus vaccine
technology allegedly covered by contracts between MediGene and the Company and
by a license agreement from Loyola to the Company, under which the Company
granted a sublicense to SmithKline Beecham. MediGene claims monetary damages
from the Company and ownership of the patents in question, as well as rescission
of the Company's license agreement from Loyola or rights as a third-party
beneficiary thereof.
5
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New Accounting Pronouncements
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued. 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 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.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 101. SAB 101 summarizes certain of the SEC's
views in applying generally accepted accounting principles to certain revenue
transactions in financial statements. The SAB addresses the revenue recognition
for nonrefundable fees received upon entering into contractual arrangements and
milestone fees received upon the occurrence of certain events. In June 2000 the
SEC delayed the required implementation date of the SAB to the fourth calendar
quarter of 2000. The Company is still evaluating the impact of the SAB on its
financial statements, and expects that the accounting for certain of its
agreements may be impacted by the SAB.
Restatements
In November 1999, the Company completed a merger with U.S. Bioscience, Inc.,
which was accounted for as a pooling-of-interests. Accordingly, the financial
statements and related notes presented herein have been restated for all periods
to include the accounts and operations of U.S. Bioscience, Inc. In addition, all
share and per share amounts have been restated to give effect for the
three-for-one stock split on June 2, 2000.
6
<PAGE>
ITEM 2.
MEDIMMUNE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
MedImmune, Inc. (together with its subsidiaries, "the Company"), is a
biotechnology company headquartered in Gaithersburg, Maryland with six products
currently on the market and a diverse product development portfolio. The Company
is focused on using advances in immunology and other biological sciences to
develop important new products that address significant medical needs in areas
such as infectious diseases, immune regulation and oncology. The Company derives
its revenues through sales of its products currently on the market, licensing of
its products and corporate funding agreements to create and develop new
products.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
Product sales (in millions) 2000 1999
Synagis $7.3 $1.3
CytoGam 9.5 5.5
Ethyol 6.4 3.8
Other products 2.2 2.7
----- -----
Total $25.4 $13.3
===== =====
Second quarter 2000 product sales grew 91% over the prior year, reflecting
increased sales in all major product lines. Sales of Synagis, the Company's
primary product, increased 464% from $1.3 million in the quarter ended June 30,
1999 to $7.3 million in the quarter ended June 30, 2000. The increase results
from higher demand in both the domestic and international markets and reflects
growth in unit sales of 722% and 47%, respectively. International sales to
Abbott Laboratories, the Company's exclusive distributor of Synagis outside of
the United States, were $2.6 million in the 2000 quarter versus $0.7 million in
the 1999 quarter. The terms of the Company's agreement with Abbott provide for
the Company to receive 40 to 50 percent of end-user sales. The Company initially
recognizes sales to Abbott when Synagis is shipped to Abbott based on a
contractual, guaranteed transfer price; this amount approximates 60 to 75
percent of the total sales revenue to be expected for each vial. Following the
end of each quarter, Abbott remits to the Company a report detailing end-user
sales by Abbott for the quarter and the Company recognizes revenue for the
additional amount due in excess of the transfer price and up to 40 to 50 percent
of the end-user selling price.
Greater demand and a 7% domestic price increase in April 2000 caused CytoGam
sales to grow 73% to $9.5 million in the second quarter of 2000 from $5.5
million in the second quarter of 1999. An 85% increase in domestic units sold
was offset by a decrease in international units sold of 34%. International units
are sold at a lower price than domestic units. The Company believes that a
portion of the CytoGam sales that occurred in both periods 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. In addition, the Company is
aware that certain Medicaid agencies have begun to limit or discontinue
reimbursement of CytoGam as a substitute for IVIG products. This could adversely
impact the Company's sales of CytoGam.
Sales of Ethyol to the Company's domestic and international distribution
partners grew 69% in the second quarter of 2000 to $6.4 million, as compared to
$3.8 million in the 1999 quarter. The increase results from a 105% increase in
vials sold, offset by a lower net average per vial price paid to the Company
primarily as a result of higher sales allowances.
Other product sales for the 2000 quarter were $2.2 million versus $2.7 million
for the 1999 quarter. Other revenues in the 2000 second quarter of $4.1 million
consist primarily of research funding from SmithKline Beecham ("SKB") for
development of a human papillomavirus vaccine and royalty income due from Alza
Corporation ("Alza") in accordance with the terms of the Ethyol distribution
agreement. Other revenues in the 1999 second quarter of $5.3 million include
research funding from SKB as well as a $3.0 million milestone payment from
Schering-Plough Corporation relating to achievement of a European milestone for
Ethyol.
7
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Cost of sales in the second quarter of 2000 increased 114% to $12.0 million from
$5.6 million in the second quarter of 1999. Gross margin was 53% for the 2000
quarter, as compared to 58% for the 1999 quarter. The decrease in margins for
2000 is primarily due to the write-off of several lots of Synagis, as a result
of a contamination in the manufacturing process at the FMC. The Company received
FDA approval to manufacture Synagis at the FMC in December 1999.
Research, development and clinical spending increased 28% to $18.4 million in
the second quarter of 2000 from $14.3 in the second quarter of 1999. This
increase is a result of higher expenditures on the Company's clinical trials.
The Company is currently administering multiple trials for its products,
primarily including: Synagis in infants with congenital heart disease, human
papillomavirus vaccine trials, and several trials using MEDI-507. In addition,
the Company has experienced increased infrastructure costs needed to support the
growing number of ongoing clinical 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 ("SG&A") expenses grew to $23.3 million in
this year's quarter from $14.2 million in the 1999 quarter, an increase of 65%.
Expenses in the second quarter of 2000 include increased wage and related
expenses to expand marketing and sales activities, as well as increased
co-promotion expense to the Ross Products Division of Abbott Laboratories
("Ross") for the promotion of Synagis in the United States. Co-promotion
expenses increase as net domestic Synagis sales increase. Sales and marketing
expenses are expected to increase in the coming quarters, as the Company
recently expanded its sales force in an effort to continue to increase product
sales. In the second quarter of 2000, the Company expensed $1.0 million of
preliminary engineering and design costs relating to a proposed expansion of the
FMC. The proposed expansion has been put on hold pending results of the
Company's efforts to improve Synagis manufacturing yields. Also contributing to
the increase in SG&A expenses were one-time legal costs, including the
previously disclosed matter with MediGene AG.
Other operating expenses of $0.7 million in the 2000 period decreased from $6.0
million in the 1999 period. Charges in both periods include start-up costs for
the FMC. Charges in the 2000 period reflect manufacturing start-up costs for the
portion of the FMC relating to the production of CytoGam, while the 1999 period
reflects start-up costs at the FMC for Synagis and CytoGam. The Company received
FDA approval in December 1999 for the production of Synagis at the FMC and in
March 2000, the Company filed an application for FDA approval relating to a
portion of production of CytoGam at the FMC.
There can be no assurances that the necessary approval will be obtained in a
timely fashion or at all. Other operating expenses are expected to continue for
the foreseeable future, until the FMC is being fully utilized for its intended
purpose.
Interest income of $7.9 million was earned in the 2000 second quarter, compared
to $3.3 million in the 1999 second quarter, reflecting higher cash balances
available for investment, and an increase in interest rates which improved the
overall portfolio yield. Interest expense of $0.9 million in 1999 primarily
reflects interest due on the Company's convertible debt, net of capitalized
interest. The debt was converted to common stock during 1999.
The Company recorded an income tax benefit of $8.3 million for the second
quarter of 2000, resulting in an effective rate of 32.5% for the six month
period. The 2000 quarter includes a tax benefit for the quarter-to-date net loss
and increased credits taken for research and development expenditures and
credits earned for Orphan Drug status of certain research and development
expenses. The second quarter 2000 tax benefit compares to a tax benefit of $50.0
million for the second quarter of 1999. The tax benefit for 1999 includes the
reversal of $41.0 million of valuation allowances of deferred tax assets for
U.S. Bioscience.
Net loss for the second quarter of 2000 was $8.8 million, or $0.04 per share.
Shares used in computing net loss per share were 209.1 million. Net earnings for
the second quarter of 1999 were $30.7 million, or $0.17 basic and $0.15 diluted
net earnings per share. Shares used in computing the 1999 second quarter basic
and diluted earnings per share were 180.2 million and 210.3 million,
respectively.
8
<PAGE>
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 October and April in the United
States. No assurances can be given that adequate product supply will be
available to meet demand.
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Product sales (in millions) 2000 1999
Synagis $183.6 $117.5
CytoGam 19.6 15.2
Ethyol 11.4 8.6
Other products 6.6 5.4
------ ------
Total $221.2 $146.7
====== ======
Product sales grew 51% to $221.2 million in the six months ended June 30, 2000
from $146.7 million in the comparable 1999 period. The increase is mainly due to
higher sales of Synagis, the Company's primary product. Additionally, CytoGam
and Ethyol also achieved increases in sales. Sales of Synagis increased 56% from
$117.5 million in the six months ended June 30, 1999 to $183.6 million in the
six months ended June 30, 2000, reflecting growth in both domestic and
international unit sales of 45% and 201%, respectively, and a 5.3% domestic
price increase effective in the third quarter of 1999. The Company obtained
marketing authorization for Synagis from the Centralized European Agency for the
Evaluation of Medicine Products ("EMEA") in August 1999. Prior to the marketing
authorization, Synagis was sold in the E.U. and other countries on a "named
patient" basis. As of June 30, 2000, the Company and Abbott International had
filed international registrations for the approval of Synagis in 54 countries,
35 of which have granted approvals . There can be no assurance that approvals by
the appropriate regulatory authorities will continue to be granted.
Additionally, the Company may not receive pricing and reimbursement approvals in
countries for which regulatory approvals have been obtained. Abbott
International acts as the Company's exclusive distributor for Synagis sales
outside of the U.S. The terms of the Company's agreement with Abbott provide for
the Company to receive 40 to 50 percent of end-user sales. The Company initially
recognizes sales to Abbott when Synagis is shipped to Abbott based on a
contractual, guaranteed transfer price; this amount approximates 60 to 75
percent of the total sales revenue expected to be received for each vial.
Following the end of each quarter, Abbott remits to the Company a report
detailing end-user sales by Abbott for the quarter and the Company recognizes
revenue for the additional amount due in excess of the transfer price and up to
40 to 50 percent of the end-user selling price.
CytoGam sales for the six months ended June 30, 2000 grew 29% from the
comparable 1999 period. Domestic unit sales increased 65% and international unit
sales decreased 81% during the six month period ended June 30, 2000 as compared
to the period ended June 30, 1999. International units are sold at a lower
selling price than domestic units. The Company believes that a portion of the
CytoGam sales that occurred in both periods 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. In addition, the Company is aware that
certain Medicaid agencies have begun to limit or discontinue reimbursement of
CytoGam as a substitute for IVIG products. This could adversely impact the
Company's sales of CytoGam.
Sales of Ethyol to the Company's domestic and international distribution
partners grew 32% in the six months ended June 30, 2000 to $11.4 million, as
compared to $8.6 million in the six months ended June 30, 1999. The increase
results from a 33% and 41% increase in domestic and international vials sold,
respectively, offset by lower net per unit prices paid to the Company by both
the international and domestic partners as a result of higher sales allowances.
Other revenues in the six months ended June 30, 2000 of $6.7 million consist
primarily of research funding from SKB for development of a human papillomavirus
vaccine and royalty income due from Alza in accordance with the terms of the
Ethyol distribution agreement. Other revenues in the six month period ended June
30, 1999 of $7.3 million include research funding from SKB as well as a $3.0
million milestone payment from Schering-Plough relating to achievement of a
European milestone for Ethyol.
9
<PAGE>
Cost of sales for the 2000 six months increased 48% to $57.0 million from $38.5
million in the 1999 six months. Gross margins for the six month period ended
June 30, 2000 have remained consistent with the 1999 period at 74%, reflecting
primarily Synagis margins.
Research and development expenses of $33.9 million in the 2000 six months
increased 20% from $28.1 million in the 1999 six months, primarily due to higher
expenditures on the Company's clinical trials. The Company is currently
administering multiple trials for its products, primarily including: Synagis in
infants with congenital heart disease, human papillomavirus vaccine trials and
several trials using MEDI- 507. In addition, the Company has experienced
increased infrastructure costs needed to support the growing number of ongoing
clinical 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, general and administrative expenses were $74.0 million and $55.1
million for the 2000 and 1999 periods, respectively, an increase of 34%. As a
percentage of product sales, SG&A expense decreased to 33% in the 2000 period
from 38% in the 1999 period. Expenses in the 2000 period include increased wage
and related expenses to expand marketing and sales activities, as well as
increased co-promotion expense to Ross for the promotion of Synagis in the
United States. Co-promotion expenses increase as net domestic Synagis sales
increase. Sales and marketing expenses are expected to increase in the coming
quarters, as the Company has expanded its sales force in an effort to continue
to increase product sales. Also contributing to the increase in SG&A expenses
are one-time legal costs, including those related to the previously disclosed
MediGene AG matter.
Other operating expenses, which reflect manufacturing start-up costs, decreased
in the six months ended June 30, 2000 to $3.0 million from $11.9 million in the
six months ended June 30, 1999. Charges in the 2000 period include start-up
costs at the FMC relating to the production of CytoGam, while the 1999 period
reflects charges at the FMC relating to the manufacture of Synagis and CytoGam.
The 1999 expense also included 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 would not be used in that facility. The Company received FDA approval
in December 1999 for the production of Synagis at the FMC, and in March 2000,
the Company filed an application for FDA approval relating to a portion of
production of CytoGam at the FMC. There can be no assurances that the necessary
approval will be obtained in a timely fashion or at all.
Interest income of $13.1 million was earned to date in the 2000 period ,
compared to $6.1 million in the comparable 1999 period, reflecting higher cash
balances available for investment, and an increase in interest rates which
improved the overall portfolio yield. Interest expense of $1.9 million in the
1999 period primarily reflects interest due on the Company's convertible debt,
net of capitalized interest. The debt was converted to common stock during 1999.
The Company recorded income tax expense of $23.7 million for the six months
ended June 30, 2000, resulting in an effective rate of 32.5%. The variation from
the statutory rate is principally due to increased credits taken for research
and development expenditures and credits earned for Orphan Drug status of
certain research and development expenses. The Company's tax expense for the six
months ended June 30, 2000 compares to a tax benefit of $31.7 million for the
six months ended June 30, 1999. The tax benefit for 1999 included a $41.0
million reversal of valuation allowances of deferred tax assets for U.S.
Bioscience. Excluding the reversal of the valuation allowance, the Company's
effective tax rate for the 1999 period was 37.7%.
Net earnings for the six months ended June 30, 2000 were $49.2 million, or $0.24
basic and $0.22 diluted net earnings per share. Shares used in computing basic
and diluted earnings per share were 207.5 million and 219.7 million,
respectively. Net earnings for the six months ended June 30, 1999 were $56.4
million, or $0.32 basic and $0.27 diluted net earnings per share. Shares used in
computing basic and diluted earnings per share were 178.7 million and 209.4
million, respectively.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities at June 30, 2000 were $448.4 million compared to
$270.4 million at December 31, 1999. Working capital increased to $427.4 million
at June 30, 2000 versus $302.9 million at December 31, 1999. Cash inflows
included $124.7 million in cash generated by operations, reflecting net income
for the period and decreases in accounts receivable, partially offset by
decreases in accrued expenses, primarily as a result of amounts paid to Abbott
for co-promotion of Synagis. Cash outflows for investing activities included an
increase of $94.3 million in marketable securities and $5.5 million in capital
expenditures. Cash of $1.1 million was used to pay down debt. In the six months
ended June 30, 2000 the Company received $58.2 for stock option exercises, as
compared to $16.4 received for stock option exercises for the comparable 1999
period. Also in 1999, the Company received net proceeds of $20.0 million from a
private placement transaction of 1.2 million shares of common stock.
The Company is obligated to provide research funding and pay various milestone
payments to its collaborative partners relating to its research and development
agreements. The Company's existing funds at June 30, 2000, 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.
--------------------
THIS QUARTERLY REPORT MAY CONTAIN, IN ADDITION TO HISTORICAL INFORMATION,
CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH
STATEMENTS REFLECT MANAGEMENT'S CURRENT VIEWS, AND ARE BASED ON CERTAIN
ASSUMPTIONS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE CURRENTLY
ANTICIPATED AS A RESULT OF A NUMBER OF FACTORS, INCLUDING RISK AND UNCERTAINTIES
DISCUSSED IN THE COMPANY'S OTHER FILINGS WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION. MEDIMMUNE CAUTIONS THAT RSV DISEASE OCCURS PRIMARILY DURING THE
WINTER MONTHS; THE COMPANY BELIEVES ITS OPERATING RESULTS WILL REFLECT THAT
SEASONALITY FOR THE FORSEEABLE FUTURE. THE COMPANY IS ALSO DEVELOPING SEVERAL
PRODUCTS FOR POTENTIAL FUTURE MARKETING. THERE CAN BE NO ASSURANCE THAT SUCH
DEVELOPMENT EFFORTS WILL SUCCEED, THAT SUCH PRODUCTS WILL RECEIVE REQUIRED
REGULATORY CLEARANCE OR THAT, EVEN IF SUCH REGULATORY CLEARANCE WERE RECEIVED,
SUCH PRODUCTS WOULD ULTIMATELY ACHIEVE COMMERICAL SUCCESS.
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 -
11
<PAGE>
On May 18, 2000 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. A proposal to amend the Restated Certificate of
Incorporation to increase the authorized number of shares of common stock to 320
million, to increase the number of shares authorized under the Company's 1999
Stock Option Plan to 14.25 million, 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 59,897,947 -- 166,685 --
Melvin D. Booth 59,897,970 -- 166,662 --
David M. Mott 59,870,960 -- 166,672 --
Franklin H. Top, Jr. 59,897,948 -- 166,684 --
M. James Barrett 59,897,947 -- 166,685 --
James H. Cavanaugh 59,897,928 -- 166,704 --
Barbara Hackman Franklin 59,897,925 -- 166,707 --
Lawrence C. Hoff 59,897,894 -- 166,738 --
Gordon S. Macklin 59,897,887 -- 166,745 --
To approve an amendment to the Restated
Certificate of Incorporation
59,844,858 113,264 -- 106,510
To approve an amendment to the 1999 Stock Option
Plan 57,849,433 2,075,598 -- 139,601
Appointment of
PricewaterhouseCoopers LLP 59,778,133 245,459 -- 41,040
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.120 Amendment to Employment Agreement for Wayne Hockmeyer.
(b) Reports on Form 8-K:
Report Date Event Reported
6/2/00 MedImmune Shareholders Clear the Way for Three-for-One Stock Split
6/8/00 MedImmune to Promote David Mott to Chief Executive Officer; Wayne
Hockmeyer to Continue as Chairman of the Board
6/16/00 MedImmune and Medarex Enter Broad Antibody Agreement
6/16/00 MedImmune and Alkermes Sign Agreement to Develop Pulmonary Delivery
System for Monoclonal Antibody Against Respiratory Syncytial Virus
</TABLE>
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)
By: /s/ David M. Mott
----------------------------------
Date: August 10, 2000 David M. Mott
Vice Chairman and Chief Financial Officer
12
<PAGE>
