e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: June 30, 2010
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-31191
THE MEDICINES COMPANY
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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04-3324394
(I.R.S. Employer
Identification No.) |
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8 Sylvan Way
Parsippany, New Jersey
(Address of principal executive offices)
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07054
(Zip Code) |
Registrants telephone number, including area code: (973) 290-6000
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
As of August 5, 2010, there were 53,341,594 shares of Common Stock, $0.001 par value per share,
outstanding.
THE MEDICINES COMPANY
TABLE OF CONTENTS
2
Item 1. Financial Statements
THE MEDICINES COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
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June 30, |
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December 31, |
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2010 |
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2009 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
101,696 |
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$ |
72,225 |
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Available for sale securities |
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117,107 |
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103,966 |
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Accrued interest receivable |
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1,256 |
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922 |
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Accounts receivable, net of allowances of
approximately $19.1 million and $6.4 million
at June 30, 2010 and December 31, 2009,
respectively |
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20,719 |
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29,789 |
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Inventory |
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28,423 |
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25,836 |
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Prepaid expenses and other current assets |
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6,029 |
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9,984 |
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Total current assets |
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275,230 |
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242,722 |
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Fixed assets, net |
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22,166 |
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25,072 |
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Intangible assets, net |
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83,802 |
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84,678 |
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Goodwill |
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14,671 |
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14,934 |
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Restricted cash |
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7,049 |
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7,049 |
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Other assets |
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257 |
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321 |
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Total assets |
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$ |
403,175 |
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$ |
374,776 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
7,945 |
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$ |
8,431 |
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Accrued expenses |
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71,680 |
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77,088 |
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Deferred revenue |
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505 |
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1,100 |
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Total current liabilities |
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80,130 |
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86,619 |
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Contingent purchase price |
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25,145 |
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23,667 |
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Deferred tax liabilities |
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19,252 |
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18,395 |
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Other liabilities |
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5,784 |
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5,706 |
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Total liabilities |
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130,311 |
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134,387 |
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Stockholders equity: |
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Preferred stock, $1.00 par value per share,
5,000,000 shares authorized; no shares issued
and outstanding |
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Common stock, $0.001 par value per share,
125,000,000 shares authorized; 53,347,132 and
52,830,376 issued and outstanding at June 30,
2010 and December 31, 2009, respectively |
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53 |
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53 |
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Additional paid-in capital |
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592,267 |
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584,678 |
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Accumulated deficit |
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(319,319 |
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(344,177 |
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Accumulated other comprehensive loss |
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(137 |
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(165 |
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Total stockholders equity |
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272,864 |
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240,389 |
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Total liabilities and stockholders equity |
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$ |
403,175 |
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$ |
374,776 |
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See accompanying notes to unaudited condensed consolidated financial statements.
1
THE MEDICINES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2010 |
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2009 |
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2010 |
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2009 |
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Net revenue |
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$ |
110,135 |
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$ |
104,175 |
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$ |
212,223 |
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$ |
203,392 |
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Operating expenses: |
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Cost of revenue |
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33,568 |
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30,353 |
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62,337 |
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58,650 |
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Research and development |
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20,575 |
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21,784 |
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37,452 |
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46,221 |
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Selling, general and administrative |
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39,409 |
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45,910 |
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85,530 |
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99,504 |
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Total operating expenses |
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93,552 |
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98,047 |
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185,319 |
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204,375 |
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Income (loss) from operations |
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16,583 |
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6,128 |
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26,904 |
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(983 |
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Other (expense) income |
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(117 |
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734 |
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(428 |
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1,903 |
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Income before income taxes |
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16,466 |
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6,862 |
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26,476 |
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920 |
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Provision for income taxes |
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(1,040 |
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(3,051 |
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(1,618 |
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(458 |
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Net income |
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$ |
15,426 |
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$ |
3,811 |
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$ |
24,858 |
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$ |
462 |
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Basic earnings per common share |
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$ |
0.29 |
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$ |
0.07 |
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$ |
0.47 |
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$ |
0.01 |
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Diluted earnings per common share |
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$ |
0.29 |
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$ |
0.07 |
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$ |
0.47 |
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$ |
0.01 |
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Weighted average number of common shares outstanding: |
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Basic |
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52,819 |
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52,232 |
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52,658 |
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52,187 |
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Diluted |
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52,924 |
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52,532 |
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52,823 |
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52,534 |
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See accompanying notes to unaudited condensed consolidated financial statements.
2
THE MEDICINES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Six Months Ended |
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June 30, |
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2010 |
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2009 |
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Cash flows from operating activities: |
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Net income |
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$ |
24,858 |
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$ |
462 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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3,725 |
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2,767 |
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Amortization of net premiums and discounts on available for sale securities |
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1,596 |
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867 |
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Unrealized foreign currency transaction (gains) losses, net |
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(785 |
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318 |
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Non-cash stock compensation expense |
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5,080 |
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10,888 |
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Loss on disposal of fixed assets |
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6 |
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11 |
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Deferred tax provision |
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857 |
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234 |
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Tax effect of option exercises |
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(83 |
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Adjustment to contingent purchase price |
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1,478 |
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481 |
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Changes in operating assets and liabilities: |
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Accrued interest receivable |
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(335 |
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404 |
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Accounts receivable |
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8,741 |
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3,546 |
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Inventory |
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(2,629 |
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2,657 |
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Prepaid expenses and other current assets |
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3,654 |
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(891 |
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Accounts payable |
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(427 |
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(4,432 |
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Accrued expenses |
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(4,698 |
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(255 |
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Deferred revenue |
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(577 |
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(5,085 |
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Other liabilities |
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78 |
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(121 |
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Net cash provided by operating activities |
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40,622 |
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11,768 |
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Cash flows from investing activities: |
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Purchases of available for sale securities |
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(65,855 |
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(64,372 |
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Proceeds from maturities and sales of available for sale securities |
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51,100 |
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83,786 |
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Purchases of fixed assets |
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(119 |
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(34 |
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Adjustment to goodwill |
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263 |
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Acquisition of business, net of cash acquired |
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(38,223 |
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Increase in restricted cash |
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(3,000 |
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Net cash used in investing activities |
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(14,611 |
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(21,843 |
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Cash flows from financing activities: |
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Proceeds from issuances of common stock, net |
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2,510 |
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890 |
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Net cash provided by financing activities |
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2,510 |
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890 |
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Effect of exchange rate changes on cash |
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950 |
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(680 |
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Increase (decrease) in cash and cash equivalents |
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29,471 |
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(9,865 |
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Cash and cash equivalents at beginning of period |
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72,225 |
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81,018 |
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Cash and cash equivalents at end of period |
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$ |
101,696 |
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$ |
71,153 |
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Supplemental disclosure of cash flow information: |
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Taxes paid |
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$ |
200 |
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$ |
125 |
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3
THE MEDICINES COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Medicines Company® name and logo, Angiomax®, Angiox® and Cleviprex® are either registered
trademarks or trademarks of The Medicines Company in the United States and/or other countries. All
other trademarks, service marks or other tradenames appearing in this quarterly report on Form 10-Q
are the property of their respective owners. Except where otherwise indicated, or where the
context may otherwise require, references to Angiomax in this quarterly report on Form 10-Q mean
Angiomax and Angiox collectively. References to the Company, we, us or our mean The
Medicines Company, a Delaware corporation, and its subsidiaries.
1. Nature of Business
The Medicines Company (the Company) is a global pharmaceutical company focused on advancing
the treatment of intensive and critical care patients through the delivery of innovative,
cost-effective medicines to the worldwide hospital marketplace. The Company has two marketed
products, Angiomax® (bivalirudin) and Cleviprex®
(clevidipine butyrate) injectable emulsion, and a pipeline of critical care hospital products in
development, including two late-stage development product candidates, cangrelor and oritavancin,
two early stage development product candidates, CU2010 (which the Company has re-designated
MDCO-2010) and ApoA-I Milano (which the Company has re-designated MDCO-216), and marketing rights
in the United States and Canada to a ready-to-use formulation of Argatroban for which a new drug
application (NDA) has been submitted to the U.S. Food and Drug Administration (FDA). The Company
believes that Angiomax, Cleviprex and its products in development possess favorable attributes that
competitive products do not provide, can satisfy unmet medical needs in the critical care hospital
product market and offer, or, in the case of the Companys products in development, have the
potential to offer, improved performance to patients and hospital businesses.
2. Significant Accounting Policies
The Companys significant accounting policies are described in note 2 of the notes to the
consolidated financial statements included in the Annual Report on Form 10-K for the year ended
December 31, 2009 filed with the Securities and Exchange Commission (SEC).
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance
with U.S. generally accepted accounting principles (GAAP) for interim financial information and
with the instructions to Form 10-Q. Accordingly, they do not include all the information and
footnotes required by GAAP for complete financial statements. In the opinion of management, the
accompanying financial statements include all adjustments, consisting of normal recurring accruals,
considered necessary for a fair presentation of the Companys financial position, results of
operations, and cash flows for the periods presented.
The condensed consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation. The Company has no unconsolidated subsidiaries or investments accounted for under
the equity method.
The results of operations for the three months and six months ended June 30, 2010 are not
necessarily indicative of the results that may be expected for the entire fiscal year or any other
quarter of the fiscal year ending December 31, 2010. These condensed consolidated financial
statements should be read in conjunction with the audited financial statements included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs,
expenses and accumulated other comprehensive income/(loss) that are reported in the consolidated
financial statements and accompanying disclosures. Actual results may be different. See note 2 of
the notes to the consolidated financial statements in the Companys Annual Report on Form 10-K for
the year ended December 31, 2009 for a discussion of the Companys critical accounting estimates.
4
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Recent Accounting Pronouncements
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R),
which was later superseded by the FASB Codification and included in ASC topic 810-10 (ASC 810-10),
which modifies how a company determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. ASC 810-10 clarifies that the
determination of whether a company is required to consolidate an entity is based on, among other
things, an entitys purpose and design and a companys ability to direct the activities of the
entity that most significantly impact the entitys economic performance. ASC 810-10 requires an
ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity.
ASC 810-10 also requires additional disclosures about a companys involvement in variable interest
entities and any significant changes in risk exposure due to that involvement. This guidance is
effective for fiscal years beginning after November 15, 2009 and was effective for the Company on
January 1, 2010. The Company adopted this accounting pronouncement as of January 1, 2010 and it did
not have a material impact on its consolidated financial statements.
3. Stock-Based Compensation
The Company recorded approximately $2.3 million and $5.1 million of stock-based compensation
expense for the three and six months ended June 30, 2010, respectively. For the three and six
months ended June 30, 2009, the Company recorded approximately $5.4 million and $10.9 million of
stock-based compensation expense, respectively As of June 30, 2010, there was approximately $10.1
million of total unrecognized compensation costs related to non-vested share-based employee
compensation arrangements granted under the Companys equity compensation plans. This cost is
expected to be recognized over a weighted average period of 1.24 years.
During the six months ended June 30, 2010, the Company issued a total of 594,743 shares of its
common stock upon the exercise of stock options, pursuant to restricted stock grants and pursuant
to purchases under its employee stock purchase plan (the ESPP). During the six months ended June
30, 2009, the Company issued a total of 496,731 shares of its common stock upon the exercise of
stock options, pursuant to restricted stock grants and pursuant to purchases under the ESPP. Cash
received from exercise of stock options and purchases through the ESPP during the six months ended
June 30, 2010 and 2009 was approximately $2.5 million and $0.9 million, respectively, and is
included within the financing activities section of the consolidated statements of cash flows.
At June 30, 2010, there were a total of 6,185,711 shares of common stock reserved for future
issuance under the ESPP and for future grants under the Companys amended and restated 2004 stock
incentive plan.
4. Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share for the
three and six months ended June 30, 2010 and 2009:
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2010 |
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2009 |
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2010 |
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2009 |
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(in thousands, except per share amounts) |
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Basic and diluted |
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Net income |
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$ |
15,426 |
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$ |
3,811 |
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$ |
24,858 |
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$ |
462 |
|
Weighted average common shares outstanding, basic |
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52,819 |
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52,232 |
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52,658 |
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52,187 |
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Plus: net effect of dilutive stock options and
restricted common shares |
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105 |
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300 |
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165 |
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347 |
|
Weighted average common shares outstanding, diluted |
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52,924 |
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52,532 |
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|
52,823 |
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52,534 |
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Earnings per share, basic |
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$ |
0.29 |
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$ |
0.07 |
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$ |
0.47 |
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$ |
0.01 |
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Earnings per share, diluted |
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$ |
0.29 |
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$ |
0.07 |
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$ |
0.47 |
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$ |
0.01 |
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Basic earnings 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
of restricted common stock. The number of dilutive common stock equivalents was calculated using
the treasury stock method. For the three months ended June 30, 2010 and 2009, options to purchase
9,046,877 shares and 11,148,791 shares, respectively, of common stock that could potentially dilute
basic earnings per share in the future were excluded from the calculation of diluted earnings per
share as their effect would have been anti-dilutive because
5
their exercise price was in excess of the closing price of the common stock during the period.
For the six months ended June 30, 2010 and 2009, options to purchase 9,451,165 shares and
11,105,565 shares, respectively, of common stock that could potentially dilute basic earnings per
share in the future were excluded from the calculation of diluted earnings per share as their
effect would have been anti-dilutive.
For the three months ended June 30, 2010 and 2009, 18,750 and 348,272 shares, respectively, of
unvested restricted stock that could potentially dilute basic earnings per share in the future were
excluded from the calculation of diluted earnings per common share as their effect would have been
anti-dilutive. For the six months ended June 30, 2010 and 2009, 9,375 and 175,306 shares,
respectively, of unvested restricted stock that could potentially dilute basic earnings per share
in the future were excluded from the calculation of diluted earnings per common share as their
effect would have been anti-dilutive.
5. Comprehensive Income (Loss)
Comprehensive income (loss) includes net income (loss), unrealized gain (loss) on available
for sale securities and currency translation adjustments. Comprehensive income (loss) for the three
and six months ended June 30, 2010 and June 30, 2009 is detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
Comprehensive Income (Loss) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
(in thousands) |
|
|
|
Net income |
|
$ |
15,426 |
|
|
$ |
3,811 |
|
|
$ |
24,858 |
|
|
$ |
462 |
|
Unrealized loss on available for sale securities |
|
|
(12 |
) |
|
|
(157 |
) |
|
|
(19 |
) |
|
|
(761 |
) |
Foreign currency translation adjustment |
|
|
(10 |
) |
|
|
(1 |
) |
|
|
47 |
|
|
|
(300 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
15,404 |
|
|
$ |
3,653 |
|
|
$ |
24,886 |
|
|
$ |
(599 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Income Taxes
For the three months ended June 30, 2010 and 2009, the Company recorded a provision for income
taxes of $1.0 million and $3.1 million, respectively, based upon its estimated tax liability for
the year. The Companys effective tax rate for the three months ended June 30, 2010 and 2009 was
approximately 6% and 44%, respectively. For the six months ended June 30, 2010 and 2009, the
Company recorded a provision for income taxes of $1.6 million and $0.5 million, respectively, based
upon its estimated tax liability for the year. The Companys effective tax rate for the six months
ended June 30, 2010 and 2009 was approximately 6% and 50%, respectively. The provision for income
taxes is based on federal, state and foreign income taxes.
In the fourth quarter of 2009, the Company established a full valuation allowance against its
deferred tax assets. It continues to evaluate their future realizability on a periodic basis in
light of changing facts and circumstances, including but not limited to projections of future
taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax
audits, the regulatory approval of products currently under development, extension of the patent
rights relating to Angiomax and the ability to achieve future anticipated revenues. If the Company
reduces the valuation allowance on deferred tax assets in future periods, the Company would
recognize an income tax benefit.
7. Acquisitions
Targanta Therapeutics Corporation
In February 2009, the Company acquired Targanta Therapeutics Corporation (Targanta), a
biopharmaceutical company focused on developing and commercializing innovative antibiotics to treat
serious infections in the hospital and other institutional settings.
Under the terms of the Companys agreement with Targanta, it paid Targanta shareholders an
aggregate of approximately $42.0 million at closing, and agreed to pay contingent cash payments up
to an additional $90.4 million in the aggregate, as described below:
|
|
|
Upon approval from the European Agency for the Evaluation of Medical Products (EMEA) for
a Marketing Authorization Application (MAA) for oritavancin for the treatment of serious
gram-positive bacterial infections, including acute bacterial skin and skin structure
infections (ABSSSI) (which were formerly referred to as complicated skin and skin structure
infections, or |
6
|
|
|
cSSSI) on or before December 31, 2013, approximately $10.5 million if such approval is granted
between July 1, 2010 and December 31, 2013. As of June 30, 2010, the Company has not filed an
application with the EMEA for oritavancin for the treatment of ABSSSI. |
|
|
|
Upon final approval from the FDA for a new drug application, or NDA, for oritavancin for
the treatment of ABSSSI (1) within 40 months after the date the first patient is enrolled in
a Phase 3 clinical trial of ABSSSI that is initiated by the Company and (2) on or before
December 31, 2013, approximately $10.5 million in the aggregate. |
|
|
|
Upon final FDA approval for an NDA for the use of oritavancin for the treatment of ABSSSI
administered by a single dose intravenous infusion (1) within 40 months after the date the
first patient is enrolled in a Phase 3 clinical trial of ABSSSI that is initiated by the
Company and (2) on or before December 31, 2013, approximately $14.7 million in the
aggregate. This payment may become payable simultaneously with the payment described in the
previous bullet above. |
|
|
|
If aggregate net sales of oritavancin in four consecutive calendar quarters ending on or
before December 31, 2021 reach or exceed $400.0 million, approximately $49.4 million in the
aggregate. |
The Company expensed transaction costs as incurred, capitalized as an indefinite lived
intangible asset the value of acquired in-process research and development and recorded contingent
payments at their estimated fair value. The results of Targantas operations have been included in
the Companys consolidated financial statements since the acquisition date. The purchase price of
approximately $64 million, which includes $42 million of cash paid upon acquisition and $23 million
that represents the fair market value of the contingent purchase price on the date of acquisition,
was allocated to the net tangible and intangible assets of Targanta based on their estimated fair
values. Below is a summary which details the assets and liabilities acquired as a result of the
acquisition:
|
|
|
|
|
|
|
(in thousands) |
|
Acquired Assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
4,815 |
|
Available for sale securities |
|
|
397 |
|
Prepaid expenses & other current assets |
|
|
2,440 |
|
Fixed assets, net |
|
|
1,960 |
|
In-process research and development |
|
|
69,500 |
|
Goodwill |
|
|
14,671 |
|
Other assets |
|
|
70 |
|
|
|
|
|
Total assets |
|
|
93,853 |
|
Liabilities Assumed: |
|
|
|
|
Accounts payable |
|
|
3,280 |
|
Accrued expenses |
|
|
6,976 |
|
Contingent purchase price |
|
|
23,181 |
|
Deferred tax liability |
|
|
17,877 |
|
Other liabilities |
|
|
556 |
|
|
|
|
|
Total liabilities |
|
|
51,870 |
|
|
|
|
|
Total cash purchase price paid upon acquisition |
|
$ |
41,983 |
|
|
|
|
|
The purchase price was allocated to the estimated fair value of assets acquired and
liabilities assumed based on a valuation and management estimates. The Company recorded a deferred
tax liability for the difference in basis of the identifiable intangible assets.
In determining the fair value of all of the Companys in-process research and development
projects related to oritavancin, the Company used the income approach, specifically a probability
weighting to the estimated future net cash flows that are derived from projected sales revenues and
estimated costs. These projections are based on factors such as relevant market size, patent
protection, historical pricing of similar products and expected industry trends. This method
requires a forecast of cash inflows, cash outflows, and pro forma charges for economic returns of
and on tangible assets employed, including working capital, fixed assets and assembled workforce.
Cash outflows include direct and indirect expenses for clinical trials, manufacturing, sales,
marketing, general and administrative expenses and taxes. For purposes of these forecasts, the
Company assumed that cash outflows for research and development, general administrative and
marketing expenses from February 2009 and continuing through 2012 would not exceed $165 million.
All internal and external research and development expenses are expensed as incurred.
The Company expects its oritavancin development efforts to have a material impact on its
research and development expenses.
7
The Company defines an in-process research and development project by specific therapeutic
treatment indication. At this time, the Company is pursuing four therapeutic treatment indications
for oritavancin. After applying a risk adjusted discount rate of 13% to each projects expected
cash flow stream, the Company determined a preliminary value for each project as set forth below.
In determining these values, the Company assumed that it would generate cash inflows from
oritavancin for ABSSSI in 2012 and from the other projects thereafter.
|
|
|
|
|
Project |
|
(in thousands) |
|
ABSSSI |
|
$ |
54,000 |
|
Bacteremia |
|
|
5,900 |
|
Anthrax |
|
|
6,400 |
|
Clostridium difficile infections |
|
|
3,200 |
|
|
|
|
|
Total |
|
$ |
69,500 |
|
The Companys success in developing and obtaining marketing approval for oritavancin for
ABSSSI and for any of the other indications is highly uncertain. Subject to the completion of
ongoing discussions with the FDA, the Company expects to commence
such a Phase 3 study of oritavancin in the second half of 2010. The Company
cannot know or predict the nature, timing and estimated costs of the efforts necessary to complete
the development of, or the period in which material net cash inflows are expected to commence from,
oritavancin due to the numerous risks and uncertainties associated with developing and
commercializing drugs. These risks and uncertainties, including their impact on the timing of
completing clinical trial and development work and obtaining regulatory approval, would have a
material impact on each projects value.
If the acquisition of Targanta had occurred as of January 1, 2009, the Companys pro forma
results for the three and six months ended June 30, 2010 and 2009 would have been as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(in thousands, except per share amounts) |
|
Net revenue |
|
$ |
110,135 |
|
|
$ |
104,175 |
|
|
$ |
212,223 |
|
|
$ |
203,392 |
|
Income (loss) from operations |
|
|
16,583 |
|
|
|
6,149 |
|
|
|
26,904 |
|
|
|
(11,633 |
) |
Net income (loss) |
|
|
15,426 |
|
|
|
3,760 |
|
|
|
24,858 |
|
|
|
(10,706 |
) |
Basic and diluted loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
|
$ |
0.29 |
|
|
$ |
0.07 |
|
|
$ |
0.47 |
|
|
$ |
(0.21 |
) |
Diluted earnings (loss) per share |
|
$ |
0.29 |
|
|
$ |
0.07 |
|
|
$ |
0.47 |
|
|
$ |
(0.20 |
) |
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
52,819 |
|
|
|
52,232 |
|
|
|
52,658 |
|
|
|
52,187 |
|
Diluted |
|
|
52,924 |
|
|
|
52,533 |
|
|
|
52,823 |
|
|
|
52,534 |
|
The above pro forma information was determined based on historical GAAP results adjusted for
the elimination of interest foregone on net cash and cash equivalents used to pay the closing
consideration and transaction related costs. Such amount was offset by the elimination of interest
expense on third party debt that is assumed to be repaid in full prior to the completion of the
acquisition.
8. Cash, Cash Equivalents and Available for Sale Securities
The Company considers all highly liquid investments purchased with original maturities at the
date of purchase of three months or less to be cash equivalents. Cash and cash equivalents at June
30, 2010 and December 31, 2009 included investments of $15.2 million and $47.5 million,
respectively, in money market funds and commercial paper with original maturities of less than
three months. These investments are carried at cost, which approximates fair value.
At June 30, 2010 and December 31, 2009, the Company held available for sale securities with a
fair value totaling $117.1 million and $104.0 million, respectively. These available for sale
securities included various U.S. government agency notes and corporate debt securities. At June 30,
2010, approximately $114.9 million of available for sale securities were due on demand or within
one year and the remaining $2.2 million were due within two years. At December 31, 2009,
approximately $100.3 million of available for sale securities were due on demand or within one year
and the remaining $3.7 million were due within two years.
8
Available for sale securities, including carrying value and estimated fair values, are
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010 |
|
|
As of December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
Unrealized |
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
Unrealized |
|
|
|
Cost |
|
|
Fair Value |
|
|
Value |
|
|
Gain |
|
|
Cost |
|
|
Fair Value |
|
|
Value |
|
|
Gain |
|
|
|
(in thousands) |
|
U.S.
government agency
notes |
|
$ |
81,347 |
|
|
$ |
81,392 |
|
|
$ |
81,392 |
|
|
$ |
45 |
|
|
$ |
103,936 |
|
|
$ |
103,965 |
|
|
$ |
103,965 |
|
|
$ |
29 |
|
Corporate debt
securities |
|
$ |
35,748 |
|
|
$ |
35,715 |
|
|
$ |
35,715 |
|
|
$ |
(33 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
117,095 |
|
|
$ |
117,107 |
|
|
$ |
117,107 |
|
|
$ |
12 |
|
|
$ |
103,936 |
|
|
$ |
103,966 |
|
|
$ |
103,966 |
|
|
$ |
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Cash
The Company had restricted cash of $7.0 million at June 30, 2010 and $7.0 million at December
31, 2009, which is included in restricted cash on the consolidated balance sheets. On October 11,
2007, the Company entered into a new lease for office space in Parsippany, New Jersey. The Company
relocated its principal executive offices to the new space in the first quarter of 2009. Restricted
cash of $6.8 million and $6.8 million at June 30, 2010 and December 31, 2009, respectively,
collateralizes outstanding letters of credit associated with such lease. The funds are invested in
certificates of deposit. The letter of credit permits draws by the landlord to cure defaults by
the Company. The amount of the letter of credit is subject to reduction upon the achievement of
certain regulatory and operational milestones relating to the Companys products. However, in no
event will the amount of the letter of credit be reduced below approximately $1.0 million. In
addition, as a result of the Targanta acquisition in 2009, the Company has restricted cash of $0.2
million in the form of a guaranteed investment certificate collateralizing an available credit
facility.
9. Inventory
The Company obtains all of its Angiomax bulk drug substance from Lonza Braine, S.A. (Lonza
Braine). Under the terms of the Companys agreement with Lonza Braine, the Company provides
forecasts of its annual needs for Angiomax bulk substance 18 months in advance. The Company also
has a separate agreement with Ben Venue Laboratories, Inc. for the fill-finish of Angiomax drug
product. As of June 30, 2010, the Company had inventory-related purchase commitments totaling $10.1
million during 2010, $25.3 million during 2011 and $14.7 million during 2012 for Angiomax bulk drug
substance. The Company obtains all of its Cleviprex bulk drug substance from Johnson Matthey Pharma
Services and also has a separate agreement with Hospira, Inc. for the fill-finish of Cleviprex drug
product.
9
The major classes of inventory were as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
Inventory |
|
2010 |
|
|
2009 |
|
|
|
(in thousands) |
|
Raw materials |
|
$ |
10,749 |
|
|
$ |
13,609 |
|
Work-in-progress |
|
|
11,906 |
|
|
|
8,646 |
|
Finished goods |
|
|
5,768 |
|
|
|
3,581 |
|
|
|
|
|
|
|
|
Total |
|
$ |
28,423 |
|
|
$ |
25,836 |
|
|
|
|
|
|
|
|
The Company reviews inventory, including inventory purchase commitments, for slow moving or
obsolete amounts based on expected revenues. If annual revenues are less than expected, the Company
may be required to make additional allowances for excess or obsolete inventory in the future.
10. Intangible Assets and Goodwill
The following information details the carrying amounts and accumulated amortization of the
Companys amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010 |
|
|
As of December 31, 2009 |
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Weighted Average |
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
|
Useful Life |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
|
|
|
|
|
(in thousands) |
|
Identifiable intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships(1) |
|
8 years |
|
$ |
7,457 |
|
|
$ |
(1,288 |
) |
|
$ |
6,169 |
|
|
$ |
7,457 |
|
|
$ |
(861 |
) |
|
$ |
6,596 |
|
Distribution agreements(1) |
|
8 years |
|
|
4,448 |
|
|
|
(768 |
) |
|
|
3,680 |
|
|
|
4,448 |
|
|
|
(514 |
) |
|
|
3,934 |
|
Trademarks(1) |
|
8 years |
|
|
3,024 |
|
|
|
(522 |
) |
|
|
2,502 |
|
|
|
3,024 |
|
|
|
(349 |
) |
|
|
2,675 |
|
Cleviprex milestones(2) |
|
13 years |
|
|
2,000 |
|
|
|
(49 |
) |
|
|
1,951 |
|
|
|
2,000 |
|
|
|
(27 |
) |
|
|
1,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
9 years |
|
$ |
16,929 |
|
|
$ |
(2,627 |
) |
|
$ |
14,302 |
|
|
$ |
16,929 |
|
|
$ |
(1,751 |
) |
|
$ |
15,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Company amortizes intangible assets related to Angiox based on the ratio
of annual forecasted revenue compared to total forecasted revenue from the sale of Angiox
through the end of its patent life. |
|
(2) |
|
The Company amortizes intangible assets related to the Cleviprex approval over the
remaining life of the patent. |
The Company expects amortization expense related to these intangible assets to be $0.9
million for the remainder of 2010. The Company expects annual amortization expense related to these
intangible assets to be $2.4 million, $2.4 million, $3.0 million, $3.6 million and $0.8 for the
years ending December 31, 2011, 2012, 2013, 2014 and 2015, respectively, with the balance of $1.2
million being amortized thereafter. Amortization of customer relationships, distribution
agreements and trademarks will be recorded in selling, general and administrative expense on the
consolidated statements of operations. Amortization of Cleviprex milestones will be recorded in
cost of revenue on the consolidated statements of operations.
The following information details the carrying amounts of the Companys intangible assets not
subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2010 |
|
|
As of December 31, 2009 |
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
|
(in thousands) |
|
Intangible
assets not subject
to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-process
research and
development |
|
$ |
69,500 |
|
|
$ |
|
|
|
$ |
69,500 |
|
|
$ |
69,500 |
|
|
$ |
|
|
|
$ |
69,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
69,500 |
|
|
$ |
|
|
|
$ |
69,500 |
|
|
$ |
69,500 |
|
|
$ |
|
|
|
$ |
69,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The changes in goodwill for the six months ended June 30, 2010 and for the year ended December
31, 2009 are as follows:
10
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
(in thousands) |
|
Balance at beginning of period |
|
$ |
14,934 |
|
|
$ |
|
|
Goodwill acquired during the year |
|
|
|
|
|
|
14,934 |
|
Adjustment to goodwill |
|
|
(263 |
) |
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
14,671 |
|
|
$ |
14,934 |
|
|
|
|
|
|
|
|
The goodwill acquired during 2009 is solely attributable to the Targanta acquisition (note 7).
11. Fair Value Measurements
ASC 820-10 provides a framework for measuring fair value under GAAP and requires expanded
disclosures regarding fair value measurements. ASC 820-10 defines fair value as the exchange price
that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy
that requires an entity to maximize the use of observable inputs, where available, and minimize the
use of unobservable inputs when measuring fair value. The standard describes three levels of inputs
that may be used to measure fair value:
|
Level 1 |
|
Quoted prices in active markets for identical assets or
liabilities. The Companys Level 1 assets and liabilities consist
of money market investments. |
|
|
Level 2 |
|
Observable inputs other than Level 1 prices, such as quoted prices
for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full
term of the assets or liabilities. The Companys Level 2 assets
and liabilities consist of U.S. government agency and corporate
debt securities. |
|
|
Level 3 |
|
Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities. The Companys Level 3 assets and liabilities
consist of the contingent purchase price associated with the
Targanta acquisition (note 7). The fair value of the contingent
purchase price was determined utilizing a probability weighted
discounted financial model. |
The following table sets forth the Companys assets and liabilities that were measured at fair
value on a recurring basis at June 30, 2010 by level within the fair value hierarchy. As required
by ASC 820-10, assets and liabilities measured at fair value are classified in their entirety based
on the lowest level of input that is significant to the fair value measurement. The Companys
assessment of the significance of a particular input to the fair value measurement in its entirety
requires judgment and considers factors specific to the asset or liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
Quoted Prices In |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
Active Markets for |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
|
Balance at |
|
Assets and Liabilities |
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
June 30, 2010 |
|
|
|
(in thousands) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market |
|
$ |
11,216 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
11,216 |
|
U.S. government agency |
|
$ |
|
|
|
$ |
81,392 |
|
|
$ |
|
|
|
$ |
81,392 |
|
Corporate debt securities |
|
$ |
|
|
|
$ |
39,713 |
|
|
$ |
|
|
|
$ |
39,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
11,216 |
|
|
$ |
121,105 |
|
|
$ |
|
|
|
$ |
132,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent purchase price |
|
$ |
|
|
|
$ |
|
|
|
$ |
25,145 |
|
|
$ |
25,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value |
|
$ |
|
|
|
$ |
|
|
|
$ |
25,145 |
|
|
$ |
25,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The changes in fair value of the Companys Level 3 contingent purchase price during the six
months ended June 30, 2010 were as follows:
11
|
|
|
|
|
|
|
Level 3 |
|
|
|
(in thousands) |
|
Balance at December 31, 2009 |
|
$ |
23,667 |
|
Contingent purchase price related to acquisition of Targanta |
|
|
|
|
Fair value adjustment to contingent purchase price included in net income |
|
|
1,478 |
|
|
|
|
|
Balance at June 30, 2010 |
|
$ |
25,145 |
|
|
|
|
|
No changes in valuation techniques or inputs occurred during the six months ended June
30, 2010. No transfers of assets between Level 1 and Level 2 of the fair value measurement
hierarchy occurred during the six months ended June 30, 2010.
12. Restructuring Costs and Other, Net
On January 7, 2010 and February 9, 2010, the Company commenced two separate workforce
reductions to improve efficiencies and better align its costs and structure for the future (the
2010 Programs). As a result of the first workforce reduction, the Company reduced its office-based
personnel by 30 employees. The second workforce reduction resulted in a reduction of 42 primarily
field-based employees. Upon signing release agreements, affected employees received reduction
payments, earned 2009 bonuses, fully paid health care coverage for six months and outplacement
services. The Company completed the workforce reductions in February 2010.
The Company recorded, in the aggregate, charges of $7.1 million associated with these
workforce reductions. These charges were recorded in research and development and selling, general
and administrative costs in the Companys financial statements.
Of the approximately $7.1 million of charges related to the 2010 Programs, $0.9 million were
noncash charges, $5.5 million was paid during the six months ended June 30, 2010 and approximately
$0.7 million are expected to be paid out during the remainder of 2010.
Details of the activities described above during the six-month period ended June 30, 2010 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as |
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
Balance as of |
|
|
|
of January |
|
|
(Income), |
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
1, 2009 |
|
|
Net |
|
|
Cash |
|
|
Noncash |
|
|
2010 |
|
|
|
(in thousands) |
|
Employee severance and other personnel benefits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Programs |
|
$ |
|
|
|
$ |
5,939 |
|
|
$ |
5,387 |
|
|
$ |
|
|
|
$ |
552 |
|
Leases and equipment write-offs |
|
|
|
|
|
|
1,164 |
|
|
|
115 |
|
|
|
945 |
|
|
|
104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
7,103 |
|
|
$ |
5,502 |
|
|
$ |
945 |
|
|
$ |
656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. Segment and Geographic Information
The Company manages its business and operations as one segment and is focused on advancing the
treatment of critical care patients through the delivery of innovative, cost-effective medicines to
the worldwide hospital marketplace. Revenues reported to date are derived primarily from the sales
of Angiomax in the United States.
The geographic information provided below is classified based on the major geographic regions
in which the Company operates.
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
2010 |
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
104,375 |
|
|
|
94.8 |
% |
|
$ |
99,716 |
|
|
|
95.7 |
% |
|
$ |
200,831 |
|
|
|
94.6 |
% |
|
$ |
195,727 |
|
|
|
96.2 |
% |
Europe |
|
|
4,727 |
|
|
|
4.3 |
% |
|
|
3,268 |
|
|
|
3.2 |
% |
|
|
9,595 |
|
|
|
4.5 |
% |
|
|
5,776 |
|
|
|
2.9 |
% |
Other |
|
|
1,033 |
|
|
|
0.9 |
% |
|
|
1,191 |
|
|
|
1.1 |
% |
|
|
1,797 |
|
|
|
0.9 |
% |
|
|
1,889 |
|
|
|
0.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
|
|
110,135 |
|
|
|
|
|
|
|
104,175 |
|
|
|
|
|
|
|
212,223 |
|
|
|
|
|
|
|
203,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Long-lived assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
119,345 |
|
|
|
98.7 |
% |
|
$ |
122,968 |
|
|
|
98.4 |
% |
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,295 |
|
|
|
1.1 |
% |
|
|
1,684 |
|
|
|
1.3 |
% |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
256 |
|
|
|
0.2 |
% |
|
|
353 |
|
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
120,896 |
|
|
|
|
|
|
$ |
125,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14. Relocation of Principal Offices
On January 12, 2009, the Company moved its principal executive offices to new office space in
Parsippany, New Jersey. The lease for the Companys previous office facility expires in January
2013. As a result of vacating the previous facility, the Company triggered a cease-use date on
January 12, 2009 and incurred estimated lease termination costs. Estimated lease termination costs
include the net present value of future minimum lease payments from the cease-use date to the end
of the remaining lease term net of estimated sublease rental income. As of June 30, 2010, the
Company has accrued approximately $1.1 million for its estimate of the net present value of these
estimated lease termination costs. Additionally, certain other costs such as leasing commissions
and legal fees will be expensed as incurred in conjunction with the sublease of the vacated office
space.
15. Contingencies
The Company may be, from time to time, a party to various disputes and claims arising from
normal business activities. The Company accrues for loss contingencies when information available
indicates that it is probable that a liability has been incurred and the amount of such loss can be
reasonably estimated. The Company believes that the ultimate resolution of these matters will not
have a material adverse effect on the Companys financial condition or liquidity. However,
adjustments, if any, to the Companys estimates could be material to operating results for the
periods in which adjustments to the liability are recorded.
The U.S. Patent and Trademark Office (PTO) rejected the Companys application under the
Hatch-Waxman Act for an extension of the term of U.S. Patent No. 5,196,404, the principal U.S.
patent that covers Angiomax (the patent extension filing), because in the PTOs view the
application was not timely filed. The Company has entered into agreements with the law firms
involved in the patent extension filing that suspend the statute of limitations on any claims
against them for failing to make a timely filing. The Company has entered into a similar agreement
with Biogen Idec, one of its licensors for Angiomax, relating to any claims, including claims for
damages and/or license termination, that Biogen Idec may bring relating to the patent extension
filing. Such claims by Biogen Idec could have a material adverse effect on the Companys financial
condition, results of operations, liquidity or business. The Company is currently in discussions
with the law firms involved in the patent extension filing and with Biogen Idec and Health Research
Inc. with respect to the possible resolution of potential claims among the parties.
16. Subsequent Events
On August 3, 2010, the U.S. District Court for the Eastern District of Virginia granted the
Companys motion for summary judgment in the Companys lawsuit challenging the PTOs denial of the Companys
application for an extension of the term of the principal U.S. patent that covers Angiomax. The court
ordered the PTO to consider the Companys patent extension filing timely filed.
13
On August 5, 2010, the PTO granted an interim extension of the term of the principal U.S.
patent that covers Angiomax until August 13, 2011. The PTO routinely grants such interim
extensions when required to provide time to process applications for patent term extension under
the Hatch-Waxman Act.
14
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and
results of operations together with our financial statements and accompanying notes included
elsewhere in this quarterly report. In addition to the historical information, the discussion in
this quarterly report contains certain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated by the
forward-looking statements due to our critical accounting estimates discussed below and important
factors set forth in this quarterly report, including under Risk Factors in Part II, Item 1A of
this quarterly report.
Overview
Our Business
We are a global pharmaceutical company focused on advancing the treatment of intensive
and critical care patients through the delivery of innovative, cost-effective medicines to the
worldwide hospital marketplace. We have two marketed products, Angiomax®
(bivalirudin) and Cleviprex® (clevidipine butyrate) injectable emulsion, and
a pipeline of critical care hospital products in development, including two late-stage development
product candidates, cangrelor and oritavancin, two early stage development product candidates,
CU2010, which we now refer to as MDCO-2010, and ApoA-I Milano, which we now refer to as MDCO-216,
and marketing rights in the United States and Canada to a ready-to-use formulation of Argatroban
for which a new drug application, or NDA, has been submitted to the U.S. Food and Drug
Administration, or FDA. We believe that Angiomax, Cleviprex and our products in development possess
favorable attributes that competitive products do not provide, can satisfy unmet medical needs in
the critical care hospital product market and offer, or, in the case of our products in
development, have the potential to offer, improved performance to patients and hospital
businesses. During the three months ended June 30, 2010, we did not sell Cleviprex due to product
recalls relating to manufacturing issues.
The following chart identifies each of our marketed products and our products in
development, their stage of development, their mechanism of action and the indications which they
address or are intended to address. Each of our marketed products and products in development are
administered intravenously.
|
|
|
|
|
|
|
Product or |
|
|
|
|
|
|
Product in |
|
Development |
|
|
|
|
Development |
|
Stage |
|
Mechanism/Target |
|
Clinical Indication(s) |
|
|
|
|
|
|
|
Angiomax
|
|
Marketed
|
|
Direct thrombin inhibitor
|
|
U.S. for use as an anticoagulant in
combination with aspirin in patients
with unstable angina undergoing
percutaneous coronary intervention,
or PCI, with or at risk of heparin
induced thrombocytopenia and
thrombosis syndrome, or HIT/HITTS
EU for use as an anticoagulant in
patients with acute coronary
syndrome, or ACS, or ST-segment
elevation myocardial infarction, or
STEMI, undergoing primary PCI |
|
|
|
|
|
|
|
Cleviprex
|
|
Marketed in the
U.S.; MAA submitted
in the European
Union
|
|
Calcium channel blocker
|
|
Blood pressure reduction when oral
therapy is not feasible or not
desirable |
|
|
|
|
|
|
|
Cangrelor
|
|
Phase 3
|
|
Antiplatelet agent
|
|
Prevention of platelet activation and
aggregation |
15
|
|
|
|
|
|
|
Product or |
|
|
|
|
|
|
Product in |
|
Development |
|
|
|
|
Development |
|
Stage |
|
Mechanism/Target |
|
Clinical Indication(s) |
|
Oritavancin
|
|
Phase 3
|
|
Antibiotic
|
|
Treatment of serious gram-positive
bacterial infections, including acute
bacterial skin and skin structure
infections, or ABSSSI (which were
formerly referred to as complicated
skin and skin structure infections,
or cSSSI) |
|
|
|
|
|
|
|
MDCO-2010
|
|
Phase 1
|
|
Serine protease inhibitor
|
|
Reduction of blood loss during surgery |
|
|
|
|
|
|
|
MDCO-216
|
|
Phase 1
|
|
Naturally occurring
variant of a protein
found in human
high-density lipoprotein
(HDL)
|
|
Reversal of atherosclerotic plaque
development and reduction of the risk
of coronary events in patients with
ACS |
|
|
|
|
|
|
|
Ready-to-Use
Argatroban
|
|
Phase 3; NDA filed
|
|
Direct thrombin inhibitor
|
|
Anticoagulant for prophylaxis or
treatment of thrombosis in patients
with or at risk for HIT and for
patients with or at risk for HIT
undergoing PCI |
We market and sell Angiomax and Cleviprex in the United States with a sales force that,
as of June 30, 2010, consisted of 118 representatives and managers experienced in selling to
hospital customers. In Europe, we market and sell Angiox with a sales force that, as of June 30,
2010, consisted of 54 representatives and managers experienced in selling to hospital customers.
Our revenues to date have been generated primarily from sales of Angiomax in the United States, but
we continue to expand our sales and marketing efforts in Europe. We believe that by establishing
operations in Europe for Angiox, we will be positioned to commercialize our pipeline of critical
care product candidates in Europe, if and when they are approved.
Research and development expenses represent costs incurred for company acquisitions and
license of rights to products, clinical trials, nonclinical and preclinical studies, activities
relating to regulatory filings and manufacturing development efforts. We outsource much of our
clinical trials, nonclinical and preclinical studies and all of our manufacturing development
activities to third parties to maximize efficiency and minimize our internal overhead. We expense
our research and development costs as they are incurred. Selling, general and administrative
expenses consist primarily of salaries and related expenses, general corporate activities and costs
associated with marketing and promotional activities. Research and development expense, selling,
general and administrative expense and cost of revenue also include stock-based compensation
expense, which we allocate based on the responsibilities of the recipients of the stock-based
compensation.
Except for 2004 and 2006, we have incurred net losses on an annual basis since our
inception. As of June 30, 2010, we had an accumulated deficit of approximately $319.3 million. We
expect to make substantial expenditures to further develop and commercialize our products,
including costs and expenses associated with clinical trials, nonclinical and preclinical studies,
regulatory approvals and commercialization. Although we achieved profitability in 2004 and in 2006,
we have not been profitable on an annual basis since 2006. We will likely need to generate
significantly greater revenue in future periods to achieve and maintain profitability in light of
our planned expenditures.
Angiomax Patent Term
The principal U.S. patent covering Angiomax was set to expire in March 2010, but has been
extended in connection with our litigation against the U.S. Patent
and
Trademark Office, or PTO, the FDA and the U.S. Department of
Health and Human Services, or HHS. We applied, under the Hatch-Waxman Act, for an extension of the
term of the principal U.S. patent covering Angiomax. However, the PTO rejected our application because in its view the application was not timely filed.
As a result, we filed suit against the PTO, the FDA and the HHS seeking to set aside the denial of our application to extend the term of the principal U.S. patent
covering Angiomax. In response to court orders, the PTO first extended the term of the patent to
May 2010 and then to at least 10 days after the court issues an order deciding the case. On August
3, 2010, the court granted our motion for summary judgment and ordered the PTO to consider our
patent term extension application timely filed. On August 5, 2010, the PTO granted an interim
extension of the term of principal U.S. patent covering Angiomax until August 13, 2011. We have also sought legislative action to address the matter.
In
addition, we will have a six-month period of market exclusivity for Angiomax in the United States
due to our study of Angiomax in the pediatric setting following the expiration of the
patents covering Angiomax.
16
In addition, the PTO recently issued two patents to us covering a more consistent and
improved Angiomax drug product and the processes by which it is made. In October 2009, January 2010
and June 2010, we filed suit against pharmaceutical companies which have filed abbreviated new drug
applications, or ANDAs, with the FDA for generic versions of Angiomax, alleging infringement of the
two recently issued patents.
If the August 3, 2010 court order requiring the PTO to consider our
application to extend the term of the principal U.S. patent covering Angiomax timely filed is successful challenged, if we are otherwise unsuccessful in further
extending the term of the principal U.S. patent covering Angiomax, or if we are unable to maintain our market exclusivity for Angiomax in the United States through enforcement of our other U.S.
patents covering Angiomax, Angiomax could be subject to generic competition in the United States following the expiration of the six-month period of market exclusivity resulting from our pediatric
study of Angiomax.
In Europe, the principal patent
covering Angiox expires in 2015.
Cleviprex Recall
On December 16, 2009, we conducted a voluntary recall of 11 lots of Cleviprex due to the
presence of visible particulate matter that was deposited at the bottom of some vials and was
observed in such vials during a routine annual inspection. On March 17, 2010, we extended our
voluntary recall to include four additional manufactured lots of Cleviprex that also showed visible
particulate matter deposited at the bottom of some vials. As a result, we have not been able to
supply the market since March 2010 with existing inventory or use the current manufacturing method
and we did not sell Cleviprex in the second quarter of 2010. We are cooperating with the FDA and
our contract manufacturer on these recalls and to remedy the problem at the manufacturing site. If
the manufacturing problem is remedied, we anticipate being able to supply the market with drug
product and resume selling Cleviprex in the second half of 2010. If the problem is not remedied, we
intend to produce drug product using other approaches, which could delay the supply of Cleviprex by
12 to 18 months.
Distribution and Sales
We distribute Angiomax and Cleviprex in the United States through a sole source
distribution model. Under this model, we sell Angiomax and Cleviprex to our sole source
distributor, Integrated Commercialization Solutions, Inc., or ICS, which then sells Angiomax and
Cleviprex to a limited number of national medical and pharmaceutical wholesalers with distribution
centers located throughout the United States and in certain cases, directly to hospitals. Our
agreement with ICS, which we initially entered into February 2007, provides that ICS will be our
exclusive distributor of Angiomax and Cleviprex in the United States. Under the terms of this
fee-for-service agreement, ICS places orders with us for sufficient quantities of Angiomax and
Cleviprex to maintain an appropriate level of inventory based on our customers historical purchase
volumes. ICS assumes all credit and inventory risks, is subject to our standard return policy and
has sole responsibility for determining the prices at which it sells Angiomax and Cleviprex,
subject to specified limitations in the agreement. The agreement terminates on February 28, 2011,
but will automatically renew for additional one-year periods unless either party gives notice at
least 120 days prior to the automatic extension. We may also terminate the agreement at any time
and for any reason upon prior written notice to ICS and payment of a termination fee of between
$100,000 and $250,000.
In Europe, we market and sell Angiox with a sales force that, as of June 30, 2010,
consisted of 54 representatives and managers. We also market and sell Angiomax outside the United
States through distributors, including Sepracor Inc., which distributes Angiomax in Canada, and
affiliates of Grupo Ferrer Internacional, which distribute Angiox in Greece, Portugal and Spain and
in a number of countries in Central America and South America. We also have agreements with other
third parties for other countries outside of the United States and Europe, including Israel and
Australia. We are developing a global strategy for Cleviprex in preparation for its potential
approval outside of the United States but do not expect to launch Cleviprex in other countries
until the manufacturing issues regarding the product have been resolved.
To support the marketing, sales and distribution efforts of Angiomax, we are continuing
to develop our business infrastructure outside the United States. We currently have subsidiaries in
the Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Italy, the
Netherlands, Norway, Poland, Spain, Sweden, Switzerland and the United Kingdom, in connection with
the development of a business infrastructure to conduct the international sales and marketing of
Angiomax. We also obtained licenses and authorizations necessary to distribute Angiomax in the
various countries outside the United States, hired personnel and entered into third-party
arrangements to provide services, such as importation, packaging, quality control and distribution.
We believe that by establishing operations outside the United States for Angiomax, we will be
positioned to commercialize our products in development, if and when they are approved.
Business Development Activity
Our core strategy is to acquire, develop and commercialize products that we believe help
hospitals treat patients more efficiently by improving the effectiveness and safety of treatment
while reducing cost. Since the beginning of 2009, we have acquired or licensed a portfolio of
critical care products that we are developing.
Targanta Acquisition. In February 2009, we acquired Targanta, a biopharmaceutical company
focused on developing and commercializing innovative antibiotics to treat serious infections in the
hospital and other institutional settings. Targantas product
17
pipeline included an intravenous version of oritavancin and a program to develop an oral
version of oritavancin for the possible treatment of Clostridium difficile infections, or C.
difficile.
Under the terms of our agreement with Targanta, we paid Targanta shareholders an
aggregate of approximately $42.0 million at closing, and agreed to pay contingent cash payments up
to an additional $90.4 million in the aggregate, as described below:
|
|
|
Upon approval from the EMEA for a MAA for oritavancin
for the treatment of ABSSSI on or before December 31,
2013, approximately $10.5 million if such approval is
granted between July 1, 2010 and December 31, 2013. As
of June 30, 2010, we had not filed an application with
the EMEA for oritavancin for the treatment of ABSSSI. |
|
|
|
|
Upon final approval from the FDA for a new drug
application, or NDA, for oritavancin for the treatment
of ABSSSI (1) within 40 months after the date the first
patient is enrolled in a Phase 3 clinical trial of
ABSSSI that is initiated by us and (2) on or before
December 31, 2013, approximately $10.5 million in the
aggregate. |
|
|
|
|
Upon final FDA approval for an NDA for the use of
oritavancin for the treatment of ABSSSI administered by
a single dose intravenous infusion (1) within 40 months
after the date the first patient is enrolled in a Phase
3 clinical trial of ABSSSI that is initiated by us and
(2) on or before December 31, 2013, approximately
$14.7 million in the aggregate. This payment may become
payable simultaneously with the payment described in the
previous bullet above. |
|
|
|
|
If aggregate net sales of oritavancin in four
consecutive calendar quarters ending on or before
December 31, 2021 reach or exceed $400 million,
approximately $49.4 million in the aggregate. |
We expensed the transaction costs as incurred and capitalized the value of acquired
in-process research and development as an indefinite lived intangible asset. We recorded contingent
payments at their estimated fair value. We included the results of Targantas operations in our
consolidated financial statements since the acquisition. The purchase price of approximately
$64 million, which includes $42 million of cash paid upon acquisition and $23 million that
represents the fair market value of the contingent purchase price on the date of acquisition, was
allocated to the net tangible and intangible assets of Targanta based on their estimated fair
values.
As a result of our acquisition of Targanta, we are a party to an asset purchase agreement
that Targanta entered into with InterMune, Inc., or InterMune, in connection with Targantas
December 2005 acquisition of the worldwide rights to oritavancin from InterMune. Under the
agreement, we are obligated to use commercially reasonable efforts to develop oritavancin and to
make a $5.0 million cash payment to InterMune if and when we receive from the FDA all approvals
necessary for the commercial launch of oritavancin. We have no other milestone or royalty
obligations to InterMune.
Licensing Arrangement with Eagle. In September 2009, we licensed marketing rights in the
United States and Canada to a ready-to-use formulation of Argatroban developed by Eagle
Pharmaceuticals, Inc., or Eagle, for which Eagle submitted an NDA to the FDA in 2008. We and Eagle
are currently in discussions with the FDA regarding the NDA. Under the license agreement with
Eagle, we paid Eagle a $5.0 million technology license fee. We also agreed to pay additional
approval and commercialization milestones up to a total of $15.0 million and royalties. Eagle has
agreed to supply us with the ready-to-use product under a supply agreement we entered into with it
in September 2009.
Licensing Arrangement with Pfizer. In December 2009, we licensed exclusive worldwide
rights to ApoA-1 Milano, which we now refer to as MDCO-216, from Pfizer. Under the terms of the
agreement, we paid Pfizer an up-front payment of $10.0 million and agreed to make additional
payments upon the achievement of clinical, regulatory and sales milestones up to a total of
$410 million. We also agreed to pay Pfizer single-digit royalty payments on worldwide net sales of
MDCO-216. We also paid $7.5 million to third parties in connection with the license and agreed to
make additional payments to them of up to $12.0 million in the aggregate upon the achievement of
specified development milestones and continuing payments based on sales of MDCO-216.
Workforce Reductions
On January 7, 2010 and February 9, 2010, we commenced two separate workforce reductions
to improve efficiencies and better align our costs and structure for the future. As a result of the
first workforce reduction, we reduced our office-based personnel by 30 employees. The second
workforce reduction resulted in a reduction of 42 primarily field-based employees. In the six
months ended June 30, 2010, we recorded, in the aggregate, charges of $7.1 million associated with
these workforce reductions. Of the approximately $7.1 million of charges related to the workforce
reductions, $0.9 million were noncash charges, $5.5 million was paid during the six months ended
June 30, 2010 and approximately $0.7 million is expected to be paid out during the remainder of
2010. We expect to realize estimated annualized cost savings from the workforce reductions in the
range of $14.5 to $16.5 million.
18
Results of Operations
Three Months Ended June 30, 2010 and 2009
Net Revenue:
Net revenue increased 6% to $110.1 million for the three months ended June 30, 2010 as
compared to $104.2 million for the three months ended June 30, 2009. The following table reflects
the components of net revenue for the three months ended June 30, 2010 and 2009:
Net Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
Change |
|
|
|
2010 |
|
|
2009 |
|
|
$ |
|
|
% |
|
|
|
(in thousands) |
|
|
(in thousands) |
|
|
(in thousands) |
|
|
|
|
|
Net Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. sales |
|
$ |
104,375 |
|
|
$ |
99,716 |
|
|
$ |
4,659 |
|
|
|
4.7 |
% |
International net revenue |
|
|
5,760 |
|
|
|
4,459 |
|
|
|
1,301 |
|
|
|
29.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
|
$ |
110,135 |
|
|
$ |
104,175 |
|
|
$ |
5,960 |
|
|
|
5.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue during the three months ended June 30, 2010 increased $6.0 million
compared to the three months ended June 30, 2009 primarily due to an increase in sales of Angiox in
Europe and an increase in sales of Angiomax in the United States. Increased Angiomax net sales in
the United States were due in part to an increased number of units sold as a result of our
participation in the 340B Drug Pricing Program under the Public Health Service Act. However, these
increased sales were offset by higher chargebacks related to the 340B Drug Pricing Program. U.S.
sales for the three months ended June 30, 2010 do not include any sales of Cleviprex due to our
recent product recalls due to manufacturing problems, compared to $0.9 million from sales of
Cleviprex in the three months ended June 30, 2009.
International net revenue increased by $1.3 million during the three months ended June
30, 2010 compared to the three months ended June 30, 2009 primarily as a result of increased sales
of Angiomax outside the United States, largely due to increased demand in Italy, Scandinavia and
the United Kingdom.
If the August 3, 2010 court order requiring the PTO to consider our application to extend the term
of the principal U.S. patent covering Angiomax timely filed is successful challenged, if we are otherwise unsuccessful in further extending the term of the principal U.S. patent covering Angiomax,
or if we are unable to maintain our market exclusivity for Angiomax in the United States through
enforcement of our other U.S. patents covering Angiomax, Angiomax could be subject to generic competition in the United States following the expiration of the six-month period of market exclusivity
resulting from our pediatric study of Angiomax.
Competition from generic equivalents sold at a price that is less
than the price at which we currently sell Angiomax could reduce our revenues, possibly materially.
Our participation in the 340B Drug Pricing Program means that we offer qualifying
entities, including disproportionate share hospitals, a discount off the commercial price of
Angiomax for patients undergoing PCI on an outpatient basis. We experienced in the three months
ended June 30, 2010, and expect to continue to experience growth in demand for Angiomax based on
our participation in the 340B Drug Pricing Program and plan to continue to offer Angiomax to
qualifying 340B entities at a discount to our commercial price for outpatient use.
If the manufacturing problem related to Cleviprex that resulted in our recalls of
Cleviprex is remedied, we anticipate being able to supply the market with drug product and resume
selling Cleviprex in the second half of 2010. If the problem is not remedied, we intend to produce
drug product using other approaches, which could delay the supply of Cleviprex by 12 to 18 months.
Cost of Revenue:
Cost of revenue in the three months ended June 30, 2010 was $33.6 million, or 30% of net
revenue, compared to $30.4 million, or 29% of net revenue, in the three months ended June 30, 2009.
Cost of revenue consisted of expenses in connection with the manufacture of Angiomax and Cleviprex
sold, royalty expenses under our agreements with Biogen Idec and Health Research Inc., or HRI,
related to Angiomax and with AstraZeneca AB, or AstraZeneca, related to Cleviprex and the logistics
costs of selling Angiomax and Cleviprex, such as distribution, storage, and handling.
19
Cost of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
|
2010 |
|
|
Cost |
|
|
2009 |
|
|
Cost |
|
|
|
(in thousands) |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Cost of Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing |
|
$ |
8,092 |
|
|
|
24 |
% |
|
$ |
6,650 |
|
|
|
22 |
% |
Royalty |
|
|
21,963 |
|
|
|
65 |
% |
|
|
20,430 |
|
|
|
67 |
% |
Logistics |
|
|
3,513 |
|
|
|
11 |
% |
|
|
3,273 |
|
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cost of Revenue |
|
$ |
33,568 |
|
|
|
100 |
% |
|
$ |
30,353 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue increased $3.2 million during the three months ended June 30, 2010
compared to the three months ended June 30, 2009. Approximately $2.6 million of the increase in
cost of revenue is primarily related to the higher volume of goods sold, an increase in royalty
expense due to a higher effective royalty rate to Biogen Idec, and $0.4 million related to an
increase in manufacturing costs of Angiomax due to production failures at the third-party
manufacturer for Angiomax.
Research and Development Expenses:
Research and development expenses decreased by 6% to $20.6 million for the three months
ended June 30, 2010, compared to $21.8 million for the three months ended June 30, 2009. The
decrease primarily reflects reduced clinical activity for cangrelor as the CHAMPION clinical trial
program for cangrelor was ongoing until we discontinued enrollment in May 2009. The decrease also
reflects reduced regulatory and clinical activity for Cleviprex. These decreases were offset by an
increase in manufacturing development cost for Angiomax, costs incurred in preparation for Phase 3
trials of oritavancin and costs associated with the development of MDCO-2010 and MDCO-216.
We expect to continue to invest in the development of Angiomax, Cleviprex, cangrelor,
oritavancin, MDCO-2010 and MDCO-216 during 2010. We expect research and development expenses in the
second half of 2010 to reflect costs associated with our anticipated Phase 3 clinical trials of
oritavancin and cangrelor, Phase 4 trials of Cleviprex, manufacturing development activities for
Angiomax, Cleviprex and cangrelor, our Phase 1 clinical trial program for MDCO-2010 and product
lifecycle management activities.
The following table identifies, for each of our major research and development projects,
our spending for the three months ended June 30, 2010 and 2009. Spending for past periods is not
necessarily indicative of spending in future periods.
Research and Development Spending
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
2010 |
|
|
Total R&D |
|
|
2009 |
|
|
Total R&D |
|
|
|
(in thousands) |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Research and Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Angiomax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials |
|
$ |
1,823 |
|
|
|
9 |
% |
|
$ |
1,073 |
|
|
|
5 |
% |
Manufacturing development |
|
|
2,718 |
|
|
|
13 |
% |
|
|
1,270 |
|
|
|
6 |
% |
Administrative and headcount costs |
|
|
521 |
|
|
|
3 |
% |
|
|
1,546 |
|
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Angiomax |
|
|
5,062 |
|
|
|
25 |
% |
|
|
3,889 |
|
|
|
18 |
% |
Cleviprex |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials |
|
|
473 |
|
|
|
2 |
% |
|
|
1,873 |
|
|
|
9 |
% |
Manufacturing development |
|
|
472 |
|
|
|
2 |
% |
|
|
330 |
|
|
|
2 |
% |
Administrative and headcount costs |
|
|
560 |
|
|
|
3 |
% |
|
|
1,123 |
|
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cleviprex |
|
|
1,505 |
|
|
|
7 |
% |
|
|
3,326 |
|
|
|
16 |
% |
Cangrelor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials |
|
|
1,535 |
|
|
|
7 |
% |
|
|
8,007 |
|
|
|
37 |
% |
Manufacturing development |
|
|
662 |
|
|
|
3 |
% |
|
|
737 |
|
|
|
3 |
% |
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
2010 |
|
|
Total R&D |
|
|
2009 |
|
|
Total R&D |
|
|
|
(in thousands) |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Administrative and headcount costs |
|
|
855 |
|
|
|
4 |
% |
|
|
1,087 |
|
|
|
5 |
% |
Milestone |
|
|
3,000 |
|
|
|
15 |
% |
|
|
|
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cangrelor |
|
|
6,052 |
|
|
|
29 |
% |
|
|
9,831 |
|
|
|
45 |
% |
Oritavancin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials |
|
|
458 |
|
|
|
2 |
% |
|
|
|
|
|
|
0 |
% |
Manufacturing development |
|
|
848 |
|
|
|
4 |
% |
|
|
|
|
|
|
0 |
% |
Administrative and headcount |
|
|
1,434 |
|
|
|
7 |
% |
|
|
1,201 |
|
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Oritavancin |
|
|
2,740 |
|
|
|
13 |
% |
|
|
1,201 |
|
|
|
5 |
% |
MDCO-2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials |
|
|
413 |
|
|
|
2 |
% |
|
|
|
|
|
|
0 |
% |
Manufacturing development |
|
|
265 |
|
|
|
1 |
% |
|
|
|
|
|
|
0 |
% |
Administrative and headcount |
|
|
1,182 |
|
|
|
6 |
% |
|
|
860 |
|
|
|
4 |
% |
Government subsidy |
|
|
(265 |
) |
|
|
(1 |
)% |
|
|
|
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MDCO-2010 |
|
|
1,595 |
|
|
|
8 |
% |
|
|
860 |
|
|
|
4 |
% |
MDCO-216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative and headcount |
|
|
587 |
|
|
|
3 |
% |
|
|
|
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MDCO-216 |
|
|
587 |
|
|
|
3 |
% |
|
|
|
|
|
|
0 |
% |
Ready-to-Use Argatroban |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing development |
|
|
477 |
|
|
|
2 |
% |
|
|
|
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Ready-to-Use Argatroban |
|
|
477 |
|
|
|
2 |
% |
|
|
|
|
|
|
0 |
% |
Other |
|
|
2,557 |
|
|
|
13 |
% |
|
|
2,677 |
|
|
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
20,575 |
|
|
|
100 |
% |
|
$ |
21,784 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Angiomax
Research and development spending related to Angiomax during the three months ended June
30, 2010 increased by approximately $1.2 million compared to the three months ended June 30, 2009,
primarily due to an increase in manufacturing development expenses related to product lifecycle
management activities and clinical trial costs which increased approximately $0.8 million primarily
due to increased expenditures in connection with our ongoing Phase 4 EUROMAX and EUROVISION
clinical trials. We are conducting the Phase 4 EUROMAX clinical trial to assess whether the early
administration of Angiox in ST-segment elevation myocardial infarction, or STEMI, patients intended
for primary PCI presenting either via ambulance or to referral centers where PCI is not performed
improves 30-day outcomes when compared to the current standard of care, heparin plus an optional GP
IIb/IIIa inhibitor. We expect to enroll approximately 3,680 patients in the EUROMAX trial, in up to
ten European countries. We commenced enrollment in the trial in March 2010. We are conducting the
EUROVISION study to assess Angiox dosing practices in Europe. We plan
to enroll 2,000 patients in this open label trial at 70 sites in six
European countries. We enrolled the first patient in this study in
May 2009 and expect to complete enrollment by December 2010. These
increases were partially offset by a decrease in administrative costs in the second quarter of 2010
of $1.0 million primarily reflecting the increased costs incurred in the three months ended June
30, 2009 in connection with the regulatory filing related to a clinical study report for the
pediatric extension filed with the FDA in the second quarter of 2009.
We plan to continue to incur research and development expenses relating to Angiomax in
connection with our efforts to further develop Angiomax for use in additional patient populations
and our product lifecycle management activities.
Cleviprex
Research and development expenditures for Cleviprex decreased approximately $1.8 million
during the three months ended June 30, 2010 compared to the three months ended June 30, 2009. The
decrease in research and development expenditures is primarily due to the recall and lack of supply of Cleviprex and the discontinuation in late 2009 of our Phase
4 clinical trials and the observational studies conducted by hospitals and third-party researchers
until such time that we are able to resupply the market with Cleviprex.
21
Cangrelor
Research and development expenditures related to cangrelor decreased by approximately
$3.8 million in the three months ended June 30, 2010 compared to the three months ended June 30,
2009. The decrease in research and development expenditures primarily reflects lower clinical trial
expenses related to our Phase 3 CHAMPION clinical trial program. In May 2009, we discontinued
enrollment in our Phase 3 CHAMPION clinical trial program for cangrelor. We have completed our
discussion with the FDA and AstraZeneca and have agreed on a new Phase 3 clinical trial of
cangrelor that we expect to initiate in the second half of 2010. We
expect initially to enroll
approximately 10,900 patients, and may enroll up to
15,000 patients in this double blind study. This decrease
was partially offset by a payment made to AstraZeneca in the second quarter of 2010 in connection
with the June 2010 amendment to our agreement with AstraZeneca.
Oritavancin
With our acquisition of Targanta in February 2009, we acquired a worldwide exclusive
license to oritavancin. Subject to the completion of ongoing discussions with the FDA, we expect to
commence a Phase 3 clinical trial of oritavancin in 2010 for the treatment of ABSSSI. In August
2009, we withdrew the European MAA for oritavancin. Costs incurred during the second quarter of
2010 primarily relate to manufacturing costs, headcount and our preparation for Phase 3 clinical
trials. The results of Targantas operations are included in our consolidated financial statements
as of the acquisition date.
MDCO-2010
Costs incurred during the second quarter of 2010 primarily relate to our Phase 1a
clinical trial of MDCO-2010, which we commenced in July 2009, and headcount related costs. This was
partially offset by a $0.3 million German government research and development subsidy. We plan to
submit an IND for MDCO-2010 to the FDA in 2010.
MDCO-216
In December 2009, we acquired exclusive worldwide rights to MDCO-216 from Pfizer Inc., or
Pfizer. Costs incurred during the second quarter of 2010 primarily relate to administrative and
headcount expenses.
Ready-to-Use Argatroban
In September 2009, we obtained the marketing rights for a ready-to-use formulation of
Argatroban in the United States and Canada. Costs incurred during the second quarter of 2010 were
primarily related to manufacturing development activities.
Other
Spending in this category includes infrastructure costs in support of our product
development efforts, which includes expenses for data management, statistical analysis, analysis of
pre-clinical data, analysis of pharmacokinetic-pharmacodynamic (PK/PD) data and product safety as
well as expenses related to business development activities in connection with our efforts to
evaluate early stage and late stage compounds for development and commercialization and other
strategic opportunities. Spending in this category decreased by approximately $0.1 million during
the second quarter of 2010 compared to the second quarter of 2009, primarily due to a reduction of
business development expenses.
Our success in further developing Angiomax, obtaining marketing approvals for Cleviprex
outside the United States, and developing and obtaining marketing approval for our products in
development, is highly uncertain. We cannot predict expenses associated with ongoing data analysis
or regulatory submissions, if any. Nor can we reasonably estimate or know the nature, timing and
estimated costs of the efforts necessary to complete the development of Cleviprex, or the period in
which material net cash inflows are expected to commence from, Cleviprex outside the United States,
or our products in development due to the numerous risks and uncertainties associated with
developing and commercializing drugs, including the uncertainty of:
|
|
|
the scope, rate of progress and cost of our clinical trials and other research and development activities; |
|
|
|
|
future clinical trial results; |
|
|
|
|
the terms and timing of any collaborative, licensing and other arrangements that we may establish; |
|
|
|
|
the cost and timing of regulatory approvals; |
|
|
|
|
the cost and timing of establishing and maintaining sales, marketing and distribution capabilities; |
|
|
|
|
the cost of establishing and maintaining clinical and commercial supplies of our products and product candidates; |
22
|
|
|
the effect of competing technological and market developments; and |
|
|
|
|
the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights. |
Selling, General and Administrative Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
Change |
|
Change |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
(in thousands) |
Selling, general and administrative expenses |
|
$ |
39,409 |
|
|
$ |
45,910 |
|
|
$ |
(6,501 |
) |
|
|
(14.2 |
)% |
The decrease in selling, general and administrative expenses of $6.5 million includes a
reduction of $4.6 million in selling, marketing and promotional spending, a $1.7 million decrease
in general administrative expenses, and a $2.4 million decrease in stock-based compensation
expense. Selling, general and administrative expenses decreased due to a reduction in personnel
costs caused by our first quarter 2010 reduction in force and a reduction in Cleviprex promotional
activities. These decreases were offset in part by higher expenses associated with ongoing
Angiomax patent restoration efforts.
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
Change |
|
Change |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
(in thousands) |
Other (expense) income |
|
$ |
(117 |
) |
|
$ |
734 |
|
|
$ |
(851 |
) |
|
|
(115.9 |
)% |
Other (expense) income, which is comprised of interest income and gains and losses on
foreign currency transactions and impairment of investment, decreased by $0.9 million to
$0.1 million of expense for the three months ended June 30, 2010, from $0.7 million of income for
the three months ended June 30, 2009. This decrease was primarily due to losses on foreign currency
transactions and to lower rates of return on our available for sale securities in the three months
ended June 30, 2010.
Provision for Income Tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
Change |
|
Change |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
(in thousands) |
Provision for Income Tax |
|
$ |
(1,040 |
) |
|
$ |
(3,051 |
) |
|
$ |
2,011 |
|
|
|
65.9 |
% |
We recorded a $1.0 million provision for income taxes for the three months ended June 30,
2010 based on income before taxes of $16.5 million. We recorded a $3.1 million provision for the
three months ended June 30, 2009 based on income before taxes of $6.9 million. Our effective income
tax rate for the three months ended June 30, 2010 and 2009 was approximately 6% and 44%,
respectively. The effective tax rate for 2010 currently assumes utilization of U.S. net operating
loss carryforwards against projected taxable income and a liability for alternative minimum tax. It
also includes a non-cash tax expense arising from purchase accounting for in-process research and
development acquired in the Targanta acquisition. It is possible that our full-year effective tax
rate could change because of discrete events, specific transactions or receipt of new information
affecting our current projections.
In 2009, we established a full valuation allowance against our deferred tax assets and
continue to evaluate their future realizability on a periodic basis in light of changing facts and
circumstances. These would include but are not limited to projections of future taxable income, tax
legislation, rulings by relevant tax authorities, the progress of ongoing tax audits, the
regulatory approval of products currently under development, the extension of the patent rights
relating to Angiomax and the ability to achieve future anticipated revenues. If we reduce the
valuation allowance on deferred tax assets in a future period, we would recognize an income tax
benefit.
23
Six Months Ended June 30, 2010 and 2009
Net Revenue:
Net revenue increased 4% to $212.2 million for the six months ended June 30, 2010, as compared
to $203.4 million for the six months ended June 30, 2009. The following table reflects the
components of net revenue for the six months ended June 30, 2010 and 2009:
Net Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
Change |
|
|
|
2010 |
|
|
2009 |
|
|
$ |
|
|
% |
|
|
|
(in thousands) |
|
|
(in thousands) |
|
|
(in thousands) |
|
|
|
|
|
Net Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. sales |
|
$ |
200,831 |
|
|
$ |
195,727 |
|
|
$ |
5,104 |
|
|
|
2.6 |
% |
International net revenue |
|
|
11,392 |
|
|
|
7,665 |
|
|
|
3,727 |
|
|
|
48.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue |
|
$ |
212,223 |
|
|
$ |
203,392 |
|
|
$ |
8,831 |
|
|
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue during the six months ended June 30, 2010 increased $8.8 million compared to
the six months ended June 30, 2009 primarily due to an increase in sales of Angiox in Europe and an
increase in sales of Angiomax in the United States. Increased Angiomax net sales in the United
States were offset by higher chargebacks related to the 340B Drug Pricing Program under the Public
Health Services Act. U.S. sales also include net revenue of $0.8 million from sales of Cleviprex in
the six months ended June 30, 2010 compared to $1.4 million in the six months ended June 30, 2009.
The $0.8 million in sales of Cleviprex in the six months ended June 30, 2010 reflects an offset of
$0.7 million due to returns related to the Cleviprex recall.
International net revenue increased by $3.7 million during the six months ended June 30, 2010
compared to the six months ended June 30, 2009 primarily as a result of increased sales of Angiomax
outside the United States, largely due to increased demand in Italy, Scandinavia and the United
Kingdom.
Cost of Revenue:
Cost of revenue in the six months ended June 30, 2010 was $62.3 million, or 29% of net
revenue, compared to $58.7 million, or 29% of net revenue, in the six months ended June 30, 2009.
Cost of revenue consisted of expenses in connection with the manufacture of Angiomax and Cleviprex
sold, royalty expenses under our agreements with Biogen Idec and HRI related to Angiomax and with
AstraZeneca related to Cleviprex and the logistics costs of selling Angiomax and Cleviprex, such as
distribution, storage, and handling.
24
Cost of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
% of Total |
|
|
|
|
|
|
% of Total |
|
|
|
2010 |
|
|
Cost |
|
|
2009 |
|
|
Cost |
|
|
|
(in thousands) |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Cost of Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing |
|
$ |
14,368 |
|
|
|
23 |
% |
|
$ |
12,845 |
|
|
|
22 |
% |
Royalty |
|
|
41,876 |
|
|
|
67 |
% |
|
|
39,620 |
|
|
|
68 |
% |
Logistics |
|
|
6,093 |
|
|
|
10 |
% |
|
|
6,185 |
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cost of Revenue |
|
$ |
62,337 |
|
|
|
100 |
% |
|
$ |
58,650 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue increased $3.7 million during the six months ended June 30, 2010 compared to
the six months ended June 30, 2009. The increase in cost of revenue is primarily related to the
higher volume of goods sold, an increase in royalty expense due to a higher effective royalty rate
to Biogen Idec, and $0.5 million related to inventory write offs associated with the Cleviprex
recall. These increases were partially offset by $0.9 million related to a reversal of certain
charges originally recorded in the fourth quarter of 2009 in connection with production failures at
the third-party manufacturer for Angiomax.
Research and Development Expenses:
Research and development expenses decreased by 19% to $37.5 million for the six months ended
June 30, 2010, compared to $46.2 million for the six months ended June 30, 2009. The decrease
primarily reflects reduced clinical activity for cangrelor as the CHAMPION clinical trial program
for cangrelor was ongoing until we discontinued enrollment in May 2009. The decrease also reflects
reduced regulatory and clinical activity for Cleviprex. These decreases were offset by an increase
in costs incurred in preparation for Phase 3 trials of oritavancin, costs associated with the
development of MDCO-2010 and MDCO-216 and charges of approximately $1.7 million associated with our
workforce reductions in the first quarter of 2010.
The following table identifies, for each of our major research and development projects, our
spending for the six months ended June 30, 2010 and 2009. Spending for past periods is not
necessarily indicative of spending in future periods.
Research and Development Spending
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
2010 |
|
|
Total R&D |
|
|
2009 |
|
|
Total R&D |
|
|
|
(in thousands) |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Research and Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Angiomax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials |
|
$ |
3,299 |
|
|
|
9 |
% |
|
$ |
1,714 |
|
|
|
4 |
% |
Manufacturing development |
|
|
3,974 |
|
|
|
10 |
% |
|
|
3,634 |
|
|
|
8 |
% |
Administrative and headcount costs |
|
|
1,407 |
|
|
|
4 |
% |
|
|
2,609 |
|
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Angiomax |
|
|
8,680 |
|
|
|
23 |
% |
|
|
7,957 |
|
|
|
18 |
% |
Cleviprex |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials |
|
|
1,087 |
|
|
|
3 |
% |
|
|
3,553 |
|
|
|
8 |
% |
Manufacturing development |
|
|
721 |
|
|
|
2 |
% |
|
|
616 |
|
|
|
1 |
% |
Administrative and headcount costs |
|
|
1,089 |
|
|
|
3 |
% |
|
|
2,900 |
|
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cleviprex |
|
|
2,897 |
|
|
|
8 |
% |
|
|
7,069 |
|
|
|
15 |
% |
Cangrelor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials |
|
|
3,353 |
|
|
|
9 |
% |
|
|
16,934 |
|
|
|
37 |
% |
Manufacturing development |
|
|
961 |
|
|
|
3 |
% |
|
|
1,988 |
|
|
|
4 |
% |
Administrative and headcount costs |
|
|
2,012 |
|
|
|
5 |
% |
|
|
2,352 |
|
|
|
5 |
% |
Milestone |
|
|
3,000 |
|
|
|
8 |
% |
|
|
|
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cangrelor |
|
|
9,326 |
|
|
|
25 |
% |
|
|
21,274 |
|
|
|
46 |
% |
Oritavancin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials |
|
|
1,065 |
|
|
|
3 |
% |
|
|
|
|
|
|
0 |
% |
Manufacturing development |
|
|
2,450 |
|
|
|
6 |
% |
|
|
|
|
|
|
0 |
% |
Administrative and headcount |
|
|
3,694 |
|
|
|
10 |
% |
|
|
1,920 |
|
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Oritavancin |
|
|
7,209 |
|
|
|
19 |
% |
|
|
1,920 |
|
|
|
4 |
% |
MDCO-2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials |
|
|
655 |
|
|
|
2 |
% |
|
|
|
|
|
|
0 |
% |
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
2010 |
|
|
Total R&D |
|
|
2009 |
|
|
Total R&D |
|
|
|
(in thousands) |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Manufacturing development |
|
|
370 |
|
|
|
1 |
% |
|
|
|
|
|
|
0 |
% |
Administrative and headcount |
|
|
2,075 |
|
|
|
5 |
% |
|
|
1,880 |
|
|
|
4 |
% |
Government subsidy |
|
|
(508 |
) |
|
|
(1 |
)% |
|
|
|
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MDCO-2010 |
|
|
2,592 |
|
|
|
7 |
% |
|
|
1,880 |
|
|
|
4 |
% |
MDCO-216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative and headcount |
|
|
940 |
|
|
|
2 |
% |
|
|
|
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MDCO-216 |
|
|
940 |
|
|
|
2 |
% |
|
|
|
|
|
|
0 |
% |
Ready-to-Use Argatroban |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing development |
|
|
477 |
|
|
|
1 |
% |
|
|
|
|
|
|
0 |
% |
Administrative and headcount |
|
|
169 |
|
|
|
1 |
% |
|
|
|
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Ready-to-Use Argatroban |
|
|
646 |
|
|
|
2 |
% |
|
|
|
|
|
|
0 |
% |
Other |
|
|
5,162 |
|
|
|
14 |
% |
|
|
6,121 |
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
37,452 |
|
|
|
100 |
% |
|
$ |
46,221 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Angiomax
Research and development spending related to Angiomax during the six months ended June 30,
2010 increased by approximately $0.7 million compared to the six months ended June 30, 2009,
primarily due to an increase in clinical trial costs which increased approximately $1.6 million
primarily due to increased expenditures in connection with our Phase 4 EUROMAX and EUROVISON
clinical trials. We commenced enrollment in our Phase 4 EUROMAX clinical trial in March 2010 and in
our EUROVISION trial in May 2009. These increases were partially offset by a decrease in
manufacturing development expenses related to product lifecycle management activities.
Administrative costs in the six months ended June 30, 2010 decreased $1.2 million primarily
reflecting the increased costs incurred in the six months ended June 30, 2009 in connection with
the regulatory filing related to a clinical study report for the pediatric extension filed with the
FDA in the second quarter of 2009.
We plan to continue to incur research and development expenses relating to Angiomax in
connection with our efforts to further develop Angiomax for use in additional patient populations
and our product lifecycle management activities.
Cleviprex
Research and development expenditures for Cleviprex decreased approximately $4.2 million
during the six months ended June 30, 2010 compared to the six months ended June 30, 2009. The
decrease in research and development expenditures is primarily due to the recalls and lack of
supply of Cleviprex and the discontinuation in late 2009 of our Phase 4 clinical trials and the
observational studies conducted by hospitals and third-party researchers until such time that we
are able to resupply the market with Cleviprex.
Cangrelor
Research and development expenditures related to cangrelor decreased by approximately $11.9
million in the six months ended June 30, 2010 compared to the six months ended June 30, 2009. The
decrease in research and development expenditures primarily reflects lower clinical trial expenses
related to our Phase 3 CHAMPION clinical trial program. In May 2009, we discontinued enrollment in
our Phase 3 CHAMPION clinical trial program for cangrelor. This decrease was partially offset by a
payment made to AstraZeneca in the second quarter of 2010 in connection with the June 2010
amendment to our agreement with AstraZeneca.
Oritavancin
Research and development costs for oritavancin incurred during the six months ended June 30,
2010 primarily relate to manufacturing costs, headcount and our preparation for Phase 3 clinical
trials of oritavancin. Research and development costs also include approximately $1.3 million of
severance payments related to the workforce reductions initiated in the first quarter of 2010. The
results of Targantas operations are included in our consolidated financial statements as of the
February 9, 2009 acquisition date.
MDCO-2010
Research and development costs for MDCO-2010 incurred during the six months ended June 30,
2010 primarily relate to our Phase 1a clinical trial of MDCO-2010, which we commenced in July 2009,
and headcount related costs. This was partially offset by a $0.5 million German government research
and development subsidy.
26
MDCO-216
In December 2009, we acquired exclusive worldwide rights to MDCO-216 from Pfizer Inc. Costs incurred during the six months ended June 30, 2010 primarily relate to administrative
and headcount expenses.
Ready-to-Use Argatroban
In September 2009, we obtained the marketing rights for a ready-to-use formulation of
Argatroban in the United States and Canada. Costs incurred during the six months ended June 30,
2010 primarily relate to manufacturing development activities and administrative and headcount
related expenses.
Other
Spending in this category includes infrastructure costs in support of our product development
efforts, which includes expenses for data management, statistical analysis, analysis of
pre-clinical data, analysis of PK/PD data and product safety as
well as expenses related to business development activities in connection with our efforts to
evaluate early stage and late stage compounds for development and commercialization and other
strategic opportunities. Spending in this category decreased by approximately $1.0 million during
the six months ended June 30, 2010 compared to the six months ended June 30, 2009, primarily due to
a reduction of business development expenses.
27
Selling, General and Administrative Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
Change |
|
Change |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
(in thousands) |
Selling, General and Administrative expenses |
|
$ |
85,530 |
|
|
$ |
99,504 |
|
|
$ |
(13,974 |
) |
|
|
(14.0 |
)% |
The decrease in selling, general and administrative expenses of $14.0 million reflects the
$6.6 million in costs we incurred in the six months ended June 30, 2009 in connection with the
acquisition of Targanta and our U.S. headquarters relocation, a $9.0 million decrease related to
lower levels of promotional activity principally related to Angiomax and Cleviprex, approximately
$3.1 million of lower general corporate and administrative spending, and a $4.8 million decrease in
stock-based compensation expense. These decreases were partially offset by costs associated with
the Companys ongoing patent restoration efforts and approximately $5.4 million associated with our
reduction in force announced in the first quarter of 2010, including expenses related to employee
severance arrangements and the closure and consolidation of our Indianapolis site which was
completed in February 2010.
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
Change |
|
Change |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
(in thousands) |
Other (expense) income |
|
$ |
(428 |
) |
|
$ |
1,903 |
|
|
$ |
(2,331 |
) |
|
|
(122.5 |
)% |
Other (expense) income, which is comprised of interest income and gains and losses on foreign
currency transactions and impairment of investment, decreased by $2.3 million to $0.4 million of
expense for the six months ended June 30, 2010, from $1.9 million of income for the six months
ended June 30, 2009. This decrease was primarily due to losses on foreign currency transactions and
to lower rates of return on our available for sale securities in the six months ended June 30,
2010.
Provision for Income Tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
Change |
|
Change |
|
|
2010 |
|
2009 |
|
$ |
|
% |
|
|
(in thousands) |
Provision for Income Tax |
|
$ |
(1,618 |
) |
|
$ |
(458 |
) |
|
$ |
(1,160 |
) |
|
|
(253.3 |
)% |
We recorded a $1.6 million provision for income taxes for the six months ended June 30, 2010
based on income before taxes of $26.5 million. We recorded a $0.5 million provision for the six
months ended June 30, 2009 based on income before taxes of $0.9 million. Our effective income tax
rate for the three months ended June 30, 2010 and 2009 was approximately 6% and 50%, respectively.
The effective tax rate for 2010 currently assumes utilization of U.S. net operating loss
carryforwards against projected taxable income and a liability for alternative minimum tax. It also
includes a non-cash tax expense arising from purchase accounting for in-process research and
development acquired in the Targanta acquisition. It is possible that our full-year effective tax
rate could change because of discrete events, specific transactions or receipt of new information
affecting our current projections.
In 2009, we established a full valuation allowance against our deferred tax assets and
continue to evaluate their future realizability on a periodic basis in light of changing facts and
circumstances. These would include but are not limited to projections of future taxable income, tax
legislation, rulings by relevant tax authorities, the progress of ongoing tax audits, the
regulatory approval of products currently under development, the extension of the patent rights
relating to Angiomax and the ability to achieve future
anticipated revenues. If we reduce the valuation allowance on deferred tax assets in a future
period, we would recognize an income tax benefit.
28
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have financed our operations principally through the sale of common
stock, sales of convertible promissory notes and warrants, interest income and revenues from sales
of Angiomax. Except for 2006 and 2004, we have incurred losses on an annual basis since our
inception. We had $218.8 million in cash, cash equivalents and available for sale securities as of
June 30, 2010.
Cash Flows
As of June 30, 2010, we had $101.7 million in cash and cash equivalents, as compared to $72.2
million as of December 31, 2009. Our primary sources of cash during the six months ended June 30,
2010 included $40.6 million of net cash provided by operating activities and $2.5 million in net
cash provided by financing activities. These amounts were partially offset by the $14.6 million in
net cash that we used in investing activities.
Net cash provided by operating activities was $40.6 million in the six months ended June 30,
2010, compared to net cash provided by operating activities of $11.8 million in the six months
ended June 30, 2009. The cash provided by operating activities in the six months ended June 30,
2010 included net income of $24.9 million and non-cash items of $12.0 million consisting primarily
of stock-based compensation expense of $5.1 million and depreciation and amortization of
$3.7 million. Cash provided by operating activities in the six months ended June 30, 2010 also
includes an increase of $3.8 million due to changes in working capital items.
During the six months ended June 30, 2010, $14.6 million in net cash was used in investing
activities, which reflected $65.9 million used to purchase available for sale securities, offset by
$51.1 million in proceeds from the maturity and sale of available for sale securities.
For the six months ended June 30, 2010, we received $2.5 million in net cash provided by
financing activities, which consisted of proceeds to us from option exercises and purchases of
stock under our employee stock purchase plan.
Funding Requirements
We expect to devote substantial resources to our research and development efforts and to our
sales, marketing and manufacturing programs associated with Angiomax, Cleviprex and our products in
development. Our funding requirements to support these efforts and programs depend upon many
factors, including:
|
|
|
the extent to which Angiomax is commercially successful globally; |
|
|
|
|
the outcome of our efforts to extend the patent term of the principal U.S. patent
covering Angiomax and the degree of market exclusivity in the United States provided by
our other U.S. patents covering Angiomax; |
|
|
|
|
the terms of any settlements with Biogen Idec, HRI or the two law firms with
respect to the principal U.S. patent covering Angiomax and the PTOs denial of our
application to extend the term of the patent; |
|
|
|
|
our ability to resupply the market with Cleviprex and the extent to which Cleviprex
is commercially successful in the United States; |
|
|
|
|
the extent to which we can successfully establish a commercial infrastructure
outside the United States; |
|
|
|
|
the cost of acquisitions or licensing of development-stage products, approved
products, or businesses and strategic or licensing arrangements with companies that fit
within our growth strategy; |
|
|
|
|
the progress, level, timing and cost of our research and development activities
related to our clinical trials and non-clinical studies with respect to Angiomax,
Cleviprex and our products in development; |
|
|
|
|
the cost and outcomes of regulatory submissions and reviews for approval of
Cleviprex outside the United States and of our products in development globally; |
29
|
|
|
the continuation or termination of third-party manufacturing and sales and
marketing arrangements; |
|
|
|
|
the size, cost and effectiveness of our sales and marketing programs globally; |
|
|
|
|
the amounts of our payment obligations to third parties as to Angiomax, Cleviprex
and our products in development; and |
|
|
|
|
our ability to defend and enforce our intellectual property rights. |
If our existing resources are insufficient to satisfy our liquidity requirements due to slower
than anticipated sales of Angiomax and our sales of Cleviprex not resuming as soon as we
anticipate, or higher than anticipated costs globally, if we acquire additional product candidates
or businesses, or if we determine that raising additional capital would be in our interest and the
interests of our stockholders, we may sell equity or debt securities or seek additional financing
through other arrangements. Any sale of additional equity or debt securities may result in dilution
to our stockholders, and debt financing may involve covenants limiting or restricting our ability
to take specific actions, such as incurring additional debt or making capital expenditures. We
cannot be certain that public or private financing will be available in amounts or on terms
acceptable to us, if at all. If we seek to raise funds through collaboration or licensing
arrangements with third parties, we may be required to relinquish rights to products, product
candidates or technologies that we would not otherwise relinquish or grant licenses on terms that
may not be favorable to us. If we are unable to obtain additional financing, we may be required to
delay, reduce the scope of, or eliminate one or more of our planned research, development and
commercialization activities, which could harm our financial condition and operating results.
Certain Contingencies:
As we have previously disclosed, the PTO, rejected the application under the Hatch-Waxman Act
for an extension of the term of U.S. Patent No. 5,196,404, or the 404 patent, the principal U.S.
patent that covers Angiomax, beyond March 23, 2010 because in its view the application was not
timely filed. We refer to such application herein as the patent extension filing.
As a result, we filed suit against the PTO, the FDA and the HHS seeking to set aside the denial of
our patent extension filing. On August 3, 2010, the court granted our motion for summary judgment
and ordered the PTO to consider our patent term extension application timely filed. On August 5,
2010, the PTO granted an interim extension of the term of principal U.S. patent covering Angiomax
until August 13, 2011.
We have entered
into agreements with the law firms involved in the patent extension filing that suspend the statute
of limitations on any claims against them for failing to make a timely filing. We have entered into
a similar agreement with Biogen Idec, one of our licensors for Angiomax, relating to any claims,
including claims for damages and/or license termination, that Biogen Idec may bring relating to the
patent extension filing. Such claims by Biogen Idec could have a material adverse effect on our
financial condition, results of operations, liquidity or business. In the third quarter of 2009, we
initiated discussions, which are still ongoing, with the law firms involved in the patent extension
filing of the application and are currently in related discussions with Biogen Idec and HRI with
respect to the possible resolution of potential claims among the parties.
Contractual Obligations
Our long-term contractual obligations include commitments and estimated purchase obligations
entered into in the normal course of business. These include commitments related to the purchase of
inventory of our products, research and development service agreements, milestone payments due
under our license agreements, income tax contingencies, operating leases, and selling, general and
administrative obligations. A summary of these aggregate contractual obligations was included in
our Annual Report on Form 10-K for the year ended December 31, 2009. As of June 30, 2010, we have
inventory-related purchase commitments totaling $10.1 million during 2010, $25.3 million during
2011 and $14.7 million for 2012 for Angiomax bulk drug substance.
Application of Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations is based on
our unaudited condensed consolidated financial statements, which have been prepared in accordance
with GAAP for interim financial information and with the instructions to Form 10-Q. Accordingly,
they do not include all the information and footnotes required by GAAP for complete financial
statements. The preparation of these financial statements requires us to make estimates and
judgments that affect our reported assets and liabilities, revenues and expenses, and other
financial information. Actual results may differ significantly from these estimates under different
assumptions and conditions. In addition, our reported financial condition and results of operations
could vary due to a change in the application of a particular accounting standard.
We regard an accounting estimate or assumption underlying our financial statements as a
critical accounting estimate where:
|
|
|
the nature of the estimate or assumption is material due to the level of
subjectivity and judgment necessary to account for highly uncertain matters or the
susceptibility of such matters to change; and |
30
|
|
|
the impact of the estimates and assumptions on financial condition or operating
performance is material. |
Our significant accounting policies are more fully described in note 2 of our unaudited
condensed consolidated financial statements in this Quarterly Report and note 2 of our consolidated
financial statements in our Annual Report on Form 10-K for the year ended December 31, 2009. Not
all of these significant accounting policies, however, require that we make estimates and
assumptions that we believe are critical accounting estimates. We have discussed our accounting
policies with the audit committee of our board of directors, and we believe that our estimates
relating to revenue recognition, inventory, income taxes and stock-based compensation described
under the caption Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations Application of Critical Accounting Estimates in our Annual Report on Form 10-K for
the year ended December 31, 2009 are critical accounting estimates.
Off-Balance Sheet Transactions
We do not maintain any off-balance sheet transactions, arrangements, obligations or other
relationships with unconsolidated entities or others that are reasonably likely to have a material
current or future effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital resources.
Forward-Looking Information
This quarterly report on Form 10-Q includes forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. For this purpose, any statements
contained herein regarding our strategy, future operations, financial position, future revenue,
projected costs, prospects, plans and objectives of management, other than statements of historical
facts, are forward-looking statements. The words anticipates, believes, estimates, expects,
intends, may, plans, projects, will, would and similar expressions are intended to
identify forward-looking statements, although not all forward-looking statements contain these
identifying words. We cannot guarantee that we actually will achieve the results, plans, intentions
or expectations expressed or implied in our forward-looking statements. There are a number of
important factors that could cause actual results, levels of activity, performance or events to
differ materially from those expressed or implied in the forward-looking statements we make. These
important factors include our critical accounting estimates described in Part I, Item 2 of this
quarterly report on Form 10-Q and the factors set forth under the caption Risk Factors in Part
II, Item 1A of this quarterly report on Form 10-Q. Although we may elect to update forward-looking
statements in the future, we specifically disclaim any obligation to do so, even if our estimates
change, and readers should not rely on those forward-looking statements as representing our views
as of any date subsequent to the date of this quarterly report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of change in fair value of a financial instrument due to changes in
interest rates, equity prices, creditworthiness, financing, exchange rates or other factors. Our
primary market risk exposure relates to changes in interest rates in our cash, cash equivalents and
available for sale securities. We place our investments in high-quality financial instruments,
primarily money market funds, corporate debt securities, asset backed securities and U.S.
government agency notes with maturities of less than two years, which we believe are subject to
limited interest rate and credit risk. We currently do not hedge interest rate exposure. At June
30, 2010 we held $218.8 million in cash, cash equivalents and available for sale securities which
had an average interest rate of approximately 0.6% and a 10 basis point change in such average
interest rate would have had an approximate $0.2 million impact on our interest income. Of $218.8
million, approximately $216.6 million of cash, cash equivalents and available for sale securities
were due on demand or within one year and had an average interest rate of approximately 0.6%. The
remaining $2.2 million were due within two years and had an average interest rate of approximately
0.5%.
Most of our transactions are conducted in U.S. dollars. We do have certain agreements with
parties 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. As of June 30, 2010, we had receivables denominated in currencies other than the
U.S. dollar. A 10% change in foreign exchange rates would have had an approximate $0.6 million
impact on our other income and cash.
31
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial
officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2010.
The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act, means controls and other procedures of a company that are designed to ensure that
information required to be disclosed by us in the reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the SECs
rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is accumulated and communicated to the companys
management, including its principal executive and principal financial officers, as appropriate to
allow timely decisions regarding required disclosure. Management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving their objectives and management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Based on the evaluation of our
disclosure controls and procedures as of June 30, 2010, our chief executive officer and chief
financial officer concluded that, as of such date, our disclosure controls and procedures were
effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) occurred during the quarter ended June 30, 2010 that has
materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
32
Part II. Other Information
Item 1. Legal Proceedings
From time to time we are party to legal proceedings in the course of our business in addition
to those described below. Other than the proceedings discussed below, we do not, however, expect
such other legal proceedings to have a material adverse effect on our business, financial condition
or results of operations.
Teva Parenteral Medicines, Inc.
In September 2009, we were notified that Teva Parenteral Medicines, Inc. had submitted an ANDA
seeking permission to market its generic version of Angiomax prior to the expiration of U.S. Patent
No. 7,528,727, or the 727 patent. The 727 patent was issued on September 1, 2009 and relates to a
more consistent and improved Angiomax drug product. The 727 patent expires on July 27, 2028. On
October 8, 2009, we filed suit against Teva Parenteral Medicines, Inc., Teva Pharmaceuticals USA,
Inc. and Teva Pharmaceutical Industries, Ltd., which we refer to collectively as Teva, in the U.S.
District Court for the District of Delaware for infringement of the 727 patent. On October 29,
2009, Teva filed an answer denying infringement and alleging affirmative defenses of
non-infringement and invalidity. On October 21, 2009, the case was reassigned in lieu of a vacant
judgeship to the U.S. District Court for the Eastern District of Pennsylvania. The court has set a
pre-trial schedule in the case and fact discovery is ongoing. No trial date has been set by the
court.
On October 8, 2009, we were issued U.S. Patent No. 7,598,343, or the 343 patent, which
relates to a more consistent and improved Angiomax drug product made by processes described in the
patent. On January 4, 2010, we filed suit against Teva Parenteral Medicines, Inc. and its related
parent entities in the U.S. District Court for the District of Delaware for infringement of the
343 patent. The case was assigned to the same Judge in the Eastern District of Pennsylvania as
the 727 case above.
Pliva Hrvatska d.o.o.
In September 2009, we were notified that Pliva Hrvatska d.o.o. had submitted an ANDA seeking
permission to market its generic version of Angiomax prior to the expiration of the 727 patent. On
October 8, 2009, we filed suit against Pliva Hrvatska d.o.o., Pliva d.d., Barr Laboratories, Inc.,
Barr Pharmaceuticals, Inc., Barr Pharmaceuticals, LLC, Teva Pharmaceuticals USA, Inc. and Teva
Pharmaceutical Industries, Ltd., which we refer to collectively as Pliva, in the U.S. District
Court for the District of Delaware for infringement of the 727 patent. On October 28, 2009, Pliva
filed an answer denying infringement and alleging affirmative defenses of non-infringement and
invalidity. On October 21, 2009, the case was reassigned in lieu of a vacant judgeship to the U.S.
District Court for the Eastern District of Pennsylvania. The court has set a pre-trial schedule in
the case and fact discovery is ongoing. No trial date has been set by the court.
On October 8, 2009, we were issued the 343 patent, which relates to a more consistent and
improved Angiomax drug product made by processes described in the patent. On January 4, 2010, we
filed suit against Pliva Hrvatska d.o.o. and its related parent entities in the U.S. District Court
for the District of Delaware for infringement of the 343 patent. The case was assigned to the
same Judge in the Eastern District of Pennsylvania as the 727 case above.
APP Pharmaceuticals, LLC
In September 2009, we were notified that APP Pharmaceuticals, LLC had submitted an ANDA
seeking permission to market its generic version of Angiomax prior to the expiration of the 727
patent. On October 8, 2009, we filed suit against APP Pharmaceuticals, LLC and APP Pharmaceuticals,
Inc., which we refer to collectively as APP, in the U.S. District Court for the District of
Delaware for infringement of the 727 patent. On October 21, 2009, the case was reassigned in lieu
of a vacant judgeship to the U.S. District Court for the Eastern District of Pennsylvania. An
amended complaint was filed on February 5, 2010. APPs answer denied infringement and raised
counterclaims of invalidity, non-infringement and a request to delist the 727 patent from the
Orange Book. On March 1, 2010, we filed a reply denying the counterclaims raised by APP. The
court has set a pre-trial schedule in the case and fact discovery is ongoing. No trial date has
been set by the court.
On October 8, 2009, we were issued the 343 patent, which relates to a more consistent and
improved Angiomax drug product made by processes described in the patent. In April 2010, we were
notified by APP that it is seeking permission to market its generic version of Angiomax prior to
the expiration of the 343 patent. On June 1, 2010, we filed suit against APP in the U.S. District
Court
33
for the District of Delaware for infringement of the 343 patent. On June 28, 2010, APP filed
an answer denying infringement and raised counterclaims of invalidity, non-infringement and a
request to delist the 343 patent from the Orange Book. On July 16, 2010, we filed a reply denying
the counterclaims raised by APP. The case has been assigned to a judge in the U.S. District Court
for the District of Delaware.
Hospira, Inc.
In
July 2010, we were notified that Hospira, Inc. had submitted two
ANDAs seeking permission to
market its generic version of Angiomax prior to the expiration of the 727 and 343 patents. We
are presently evaluating Hospiras notice letter.
PTO, FDA and U.S. Department of Health and Human Services, et al.
On January 27, 2010, we filed a complaint in the U.S. District Court for the Eastern District
of Virginia against the PTO, the FDA, the U.S. Department of Health and Human Services, et al.
seeking to set aside the denial of our application pursuant to the Hatch-Waxman Act to extend the
term of the 404 patent. In our complaint, we primarily allege that the PTO and FDA each
misinterpreted the filing deadlines in the Hatch-Waxman Act when they rendered their respective
determinations that our application for extension of the term of the 404 patent was not timely
filed. As a result, we are asking the court to grant relief including to vacate and set aside the
PTOs and FDAs determinations regarding the timeliness of our application for patent term
extension and to order the PTO to extend the term of the 404 patent for the full period required
under the Hatch-Waxman Act. On March 10, 2010, the court conducted a hearing on the parties cross
motions for summary judgment. On March 16, 2010, the court set aside the PTOs denial of our
patent term extension application and sent the matter back to the PTO for reconsideration. The
court further ordered that the PTO take the actions necessary to ensure that 404 patent does not
expire pending resolution of the court proceedings. On March 19, 2010, the PTO issued a decision
again denying our application for patent term extension for the 404 patent.
On March 26, 2010, we filed a complaint in the U.S. District Court for the Eastern District of
Virginia against the PTO, the FDA, the U.S. Department of Health and Human Services, et al. asking
the court to set aside the PTOs March 19, 2010 decision, to instruct the PTO to accept our patent
term extension application as timely filed and to order the PTO to extend the term of the Angiomax
patent for the full period required under the Hatch-Waxman Act. On May 6, 2010, the court
conducted a hearing on the parties cross motions for summary judgment. On May 21, 2010, the court
issued an order instructing the PTO to take the actions necessary to ensure that 404 patent does
not expire until at least 10 days after the court issues an order deciding the case. On August 3,
2010, the court granted our motion for summary judgment and ordered the PTO to consider our patent
term extension application timely filed.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider
the risks and uncertainties described below in addition to the other information included or
incorporated by reference in this quarterly report. If any of the following risks actually occur,
our business, financial condition or results of operations would likely suffer. In that case, the
trading price of our common stock could fall.
An updated description of the risk factors associated with our business is set forth below.
These risk factors have been updated from those included in our Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 2010, to, among other things, update the risk factors related
to our use of third-party manufacturers for the supply of our products and our product candidates,
our ability to extend the patent term of the principal U.S. patent covering Angiomax or to maintain
market exclusivity for Angiomax in the United States through the enforcement of our other U.S.
patents covering Angiomax, and our agreements under which we license rights to products or
technology from others.
Risks Related to Our Financial Results
We have a history of net losses and may not maintain profitability on an annual basis
Except for 2004 and 2006, we have incurred net losses on an annual basis since our inception.
As of June 30, 2010, we had an accumulated deficit of approximately $319.3 million. We expect to
make substantial expenditures to further develop and commercialize our products, including costs
and expenses associated with clinical trials, nonclinical and preclinical studies, regulatory
approvals and commercialization. Although we achieved profitability in 2004 and in 2006, we have
not been profitable in any year since 2006. We will likely need to generate significantly greater
revenue in future periods to achieve and maintain profitability in
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light of our planned expenditures. Our ability to generate this revenue will be adversely
impacted, possibly materially, if we are unable to maintain market exclusivity for Angiomax. We
may not achieve profitability in future periods or at all, and we may not be able to maintain
profitability for any substantial period of time. If we fail to achieve profitability or maintain
profitability on a quarterly or annual basis within the time frame expected by investors or
securities analysts, the market price of our common stock may decline.
Our business is very dependent on the commercial success of Angiomax
Angiomax has accounted for substantially all of our revenue since we began selling this
product in 2000. Until the approval of Cleviprex by the FDA in August 2008, Angiomax was our only
commercial product and in the three months ended June 30, 2010 our only revenues were from sales of
Angiomax. We expect revenues from Angiomax to continue to account for substantially all of our
revenues in 2010. The commercial success of Angiomax depends upon:
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the outcome of our efforts to extend the patent term of the principal U.S. patent
covering Angiomax and the degree of market exclusivity in the United States provided by our
other U.S. patents covering Angiomax; |
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the continued acceptance by regulators, physicians, patients and other key
decision-makers of Angiomax as a safe, therapeutic and cost-effective alternative to heparin
and other products used in current practice or currently being developed; |
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our ability to further develop Angiomax for use in additional patient populations and the
clinical data we generate to support expansion of the product label; |
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the overall number of PCI procedures performed; |
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our success in selling and marketing Angiox in Europe; |
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the impact of competition from competitive products and generic versions of Angiomax and
those competitive products; and |
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the extent to which we and our international distributors are successful in marketing
Angiomax. |
We intend to continue to develop Angiomax for use in additional patient populations. Even if
we are successful in expanding the Angiomax label, the expanded label may not result in higher
revenue or income on a continuing basis.
As of June 30, 2010, our inventory of Angiomax was $27.4 million and we had inventory-related
purchase commitments to Lonza Braine totaling $10.1 million for 2010, $25.3 million for 2011 and
$14.7 million for 2012 for Angiomax bulk drug substance. If sales of Angiomax were to decline, we
could be required to make an allowance for excess or obsolete inventory or increase our accrual for
product returns.
Our revenue has been substantially dependent on our sole source distributor, ICS, and a
limited number of domestic wholesalers and international distributors involved in the sale of our
products, and such revenue may fluctuate from quarter to quarter based on the buying patterns of
such distributor, wholesalers and distribution partners
We distribute Angiomax and Cleviprex in the United States through a sole source distribution
model. Under this model, we sell Angiomax and Cleviprex to our sole source distributor, ICS, which
then sells Angiomax and Cleviprex to a limited number of national medical and pharmaceutical
wholesalers with distribution centers located throughout the United States and, in certain cases,
directly to hospitals. Our revenue from sales of Angiomax in the United States is now exclusively
from sales to ICS. We anticipate that our revenue from sales of Cleviprex in the United States
will be exclusively from sales to ICS. As a result, we expect that our revenue will continue to be
subject to fluctuation from quarter to quarter based on the buying patterns of ICS.
In some countries outside the European Union and in a few countries in the European Union, we
sell Angiomax to international distributors and these distributors then sell Angiomax to hospitals.
Our reliance on a small number of distributors for international sales of Angiomax could cause our
revenue to fluctuate from quarter to quarter based on the buying patterns of these distributors,
regardless of underlying hospital demand.
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If inventory levels at ICS or at our international distributors become too high, these
distributors may seek to reduce their inventory levels by reducing purchases from us, which could
have a materially adverse effect on our revenue in periods in which such purchase reductions occur.
Failure to achieve our revenue targets or raise additional funds in the future may require us
to delay, reduce the scope of, or eliminate one or more of our planned activities
We expect to devote substantial resources to our research and development efforts and to our
sales, marketing and manufacturing programs associated with Angiomax, Cleviprex and our products in
development. Our funding requirements to support these efforts and programs depend upon many
factors, including:
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the extent to which Angiomax is commercially successful globally; |
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the outcome of our efforts to extend the patent term of the principal U.S. patent
covering Angiomax and the degree of market exclusivity in the United States provided by our
other U.S. patents covering Angiomax; |
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the terms of any settlements with Biogen Idec, HRI or the two law firms with respect to
the principal U.S. patent covering Angiomax and the PTOs denial of our application to
extend the term of the patent; |
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our ability to resupply the market with Cleviprex and the extent to which Cleviprex is
commercially successful in the United States; |
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the extent to which we can successfully establish a commercial infrastructure outside
the United States; |
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the cost of acquisitions and licenses of development-stage products, approved products,
or businesses and strategic or licensing arrangements with companies that fit within our
growth strategy; |
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the progress, level, timing and cost of our research and development activities related
to our clinical trials and non-clinical studies with respect to Angiomax, Cleviprex and our
products in development; |
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the cost and outcomes of regulatory submissions and reviews for approval of Cleviprex
outside the United States, Australia and New Zealand and of our products in development
globally; |
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the continuation or termination of third-party manufacturing and sales and marketing
arrangements; |
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the size, cost and effectiveness of our sales and marketing programs globally; |
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the amounts of our payment obligations to third parties as to Angiomax, Cleviprex and
our products in development; and |
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our ability to defend and enforce our intellectual property rights. |
If our existing resources, together with revenues that we generate from sales of our products
and other sources, are insufficient to satisfy our funding requirements, or if we determine that
raising additional capital would be in our interest and the interests of our stockholders, we may
sell equity or debt securities or seek additional financing through other arrangements. Any sale of
equity or debt securities may result in dilution to our stockholders. Any debt financing may
involve covenants limiting or restricting our ability to take specific actions, such as incurring
additional debt or making capital expenditures. Public or private financing may not be available
in amounts or on terms acceptable to us, if at all. If we seek to raise funds through collaboration
or licensing arrangements with third parties, we may be required to relinquish rights to products,
products in development or technologies that we would not otherwise relinquish or grant licenses on
terms that may not be favorable to us. If we are unable to obtain additional financing, we may be
required to delay, reduce the scope of, or eliminate one or more of our planned research,
development and commercialization activities, which could harm our financial condition and
operating results.
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Risks Related to Commercialization
Angiomax competes with all categories of anticoagulant drugs, which may limit the use of
Angiomax and adversely affect our revenue
Due to the incidence and severity of cardiovascular diseases, the market for anticoagulant
therapies is large and competition is intense. There are a number of anticoagulant drugs currently
on the market, awaiting regulatory approval and in development, including orally administered
agents, which we compete with or may compete with in the future. Angiomax competes with these
anticoagulant drugs to the extent Angiomax and any of these anticoagulant drugs are approved for
the same or similar indications.
We have positioned Angiomax to compete primarily with heparin, platelet inhibitors such as GP
IIb/IIIa inhibitors, and treatment regimens combining heparin and GP IIb/IIIa inhibitors. Because
heparin is inexpensive and has been widely used for many years, physicians and medical
decision-makers may be hesitant to adopt Angiomax instead of heparin. GP IIb/IIIa inhibitors that
Angiomax competes with include ReoPro from Eli Lilly and Johnson & Johnson/Centocor, Inc.,
Integrilin from Merck & Co., Inc., and Aggrastat from Iroko Pharmaceuticals, LLC and MediCure Inc.
GP IIb/IIIa inhibitors are widely used and some physicians believe they offer superior efficacy in
high risk patients. Physicians may chose to use heparin combined with GP IIb/IIIa inhibitors due
their years of experience with this combination therapy and reluctance to change existing hospital
protocols and pathways.
Angiomax may compete with other anticoagulant drugs for the use of hospital financial
resources. For example, many U.S. hospitals receive a fixed reimbursement amount per procedure for
the angioplasties and other treatment therapies they perform. As this amount is not based on the
actual expenses the hospital incurs, hospitals may choose to use either Angiomax or other
anticoagulant drugs but not necessarily several of the drugs together.
In addition, if we are unable to extend the patent term of the principal U.S. patent covering
Angiomax or to maintain our market exclusivity for Angiomax in the United States through
enforcement of our other U.S. patents covering Angiomax, Angiomax could be subject to generic
competition following the expiration of the period of market exclusivity resulting from our
pediatric study of Angiomax. Competition from generic equivalents that would be sold at a price
that is less than the price at which we currently sell Angiomax could have a material adverse
impact on our financial condition and operating results.
Cleviprex competes with all categories of intravenous antihypertensive, or IV-AHT, drugs,
which may limit the use of Cleviprex and adversely affect our revenue
Because different IV-AHT drugs act in different ways on the factors contributing to elevated
blood pressure, physicians have several therapeutic options to reduce acutely elevated blood
pressure.
We have positioned Cleviprex as an improved alternative drug for selected patient types with
acute, severe hypertension. Because all other drug options are available as generics, Cleviprex
must demonstrate compelling advantages in delivering value to the hospital. In addition to
advancements in efficacy, convenience, tolerability and/or safety, we may need to demonstrate that
Cleviprex will save the hospital resources in other areas such as length of stay and other resource
utilization in order to become commercially successful. Because generic therapies are inexpensive
and have been widely used for many years, physicians and decision-makers for hospital resource
allocation may be hesitant to adopt Cleviprex and fail to recognize the value delivered through a
newer agent that offers precise blood pressure control.
Hospitals establish formularies, which are lists of drugs approved for use in the hospital. If
a drug is not included on the formulary, the ability of our sales representatives to promote the
drug may be limited or denied. Hospital formularies may also limit the number of IV-AHT drugs in
each drug class. If we fail to secure and maintain formulary inclusion for Cleviprex on favorable
terms or are significantly delayed in doing so, we will have difficultly achieving market
acceptance of Cleviprex and our business could be materially adversely affected.
We face substantial competition, which may result in others discovering, developing or
commercializing competing products before or more successfully than we do
Our industry is highly competitive. Our success will depend on our ability to acquire or
license, and then develop, products and apply technology, as well as our ability to establish and
maintain markets for our products. Competitors in the United States and other countries include
major pharmaceutical companies, specialized pharmaceutical companies and 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 or license products or
other novel technologies that are more effective, safer, more convenient or less costly than
existing products or technologies or products or technologies that are being developed by us or may
obtain regulatory approvals for products more rapidly
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than we are able. Technological developments by others may render our products or products in
development noncompetitive. We may not be successful in establishing or maintaining technological
competitiveness.
If physicians, patients and other key decision-makers do not accept clinical data from trials
of Angiomax and Cleviprex, then sales of Angiomax and Cleviprex may be adversely affected
We believe that the near-term commercial success of Angiomax and Cleviprex will depend in part
upon the extent to which physicians, patients and other key decision-makers accept the results of
clinical trials of Angiomax and Cleviprex. For example, since the original results of REPLACE-2
were announced in 2002, additional hospitals have granted Angiomax formulary approval and hospital
demand for the product has increased. These trends, however, may not continue. Some commentators
have challenged various aspects of the trial design of REPLACE-2, the conduct of the study and the
analysis and interpretation of the results from the study. Similarly, physicians, patients and
other key decision-makers may not accept the results of the ACUITY and HORIZONS AMI trials. The
FDA, in denying our sNDA for an additional dosing regimen in the treatment of ACS initiated in the
emergency department, indicated that the basis of its decision involved the appropriate use and
interpretation of non-inferiority trials such as our ACUITY trial. If physicians, patients and
other key decision-makers do not accept clinical trial results, adoption and continued use of
Angiomax and Cleviprex may suffer, and our business will be materially adversely affected.
If the number of PCI procedures performed decrease, sales of Angiomax may be negatively
impacted
We believe that as a result of data from a clinical trial that was published in March 2007 in
the New England Journal of Medicine entitled Clinical Outcomes Utilizing Revascularization and
Aggressive Drug Evaluation, or COURAGE, and the controversy regarding the use of drug-eluting
stents, the number of PCI procedures performed in the United States declined in 2007. PCI procedure
volume increased in 2008 from 2007 levels, but has not returned to the level of PCI procedures
performed prior to the 2007 decline and declined again in 2009 from 2008 levels. We believe
that the 2009 decline was due, in part, to economic pressures on our hospital customers in 2009.
The decline in the number of PCI procedures has had a direct impact on our net revenues. PCI
procedure volume might further decline and might not return to its previous levels. Because PCI
procedures are the primary procedures during which Angiomax is used, a further decline in the
number of procedures may negatively impact sales of Angiomax.
If we are unable to successfully expand our business infrastructure and develop our global
operations, our ability to generate future product revenue will be adversely affected
To support the global sales and marketing of Angiomax, Cleviprex and our product candidates in
development if and when they are approved for sale and marketed outside the United States, we are
developing our business infrastructure globally, with European operations being our initial focus.
If we are unable to expand our global operations successfully and in a timely manner, the growth of
our business may be limited and our business, operating results and financial condition may be
harmed. Such expansion may be more difficult, more expensive or take longer than we anticipate, and
we may not be able to successfully market and sell our products globally.
Future rapid expansion could strain our operational, human and financial resources. In order
to manage expansion, we must:
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continue to improve operating, administrative, and information systems; |
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accurately predict future personnel and resource needs to meet contract commitments; |
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track the progress of ongoing projects; and |
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attract and retain qualified management, sales, professional, scientific and technical
operating personnel. |
If we do not take these actions and are not able to manage our global business, then our
global operations may be less successful than anticipated, and we may be required to allocate
additional resources to the expanded business, which we would have otherwise allocated to another
part of our business.
The success of our global operations may be adversely affected by international risks and
uncertainties. If these operations are not successful, our results of operations and financial
position could be adversely affected.
Our future profitability will depend in part on our ability to grow and ultimately maintain
our product sales in foreign markets, particularly in Europe. In addition, with our acquisitions of
Curacyte Discovery and Targanta, we are conducting research and development activities in Germany
and Canada. These foreign operations subject us to additional risks and uncertainties, particularly
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because we have limited experience in marketing, servicing and distributing our products or
otherwise operating our business outside of the United States. These risks and uncertainties
include:
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our customers ability to obtain reimbursement for procedures using our products in
foreign markets; |
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the burden of complying with complex and changing foreign legal, tax, accounting and
regulatory requirements; |
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language barriers and other difficulties in providing long-range customer support and
service; |
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longer accounts receivable collection times; |
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significant currency fluctuations; |
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reduced protection of intellectual property rights in some foreign countries; and |
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the interpretation of contractual provisions governed by foreign laws in the event of a
contract dispute. |
Our foreign operations could also be adversely affected by export license requirements, the
imposition of governmental controls, political and economic instability, trade restrictions,
changes in tariffs and difficulties in staffing and managing foreign operations. In addition, we
are subject to the Foreign Corrupt Practices Act, any violation of which could create a substantial
liability for us and also cause a loss of reputation in the market.
Our ability to generate future product revenue will be affected by reimbursement and drug
pricing and if access to our products by governmental and other third-party payors is reduced or
terminated
Acceptable levels of coverage and reimbursement of drug treatments by government payers such
as Medicare and Medicaid programs, private health insurers and other organizations will have a
significant effect on our ability to successfully commercialize our product candidates.
Reimbursement in the United States, Europe or elsewhere may not be available for any products we
may develop or, if already available, may be decreased in the future. We may not get reimbursement
or reimbursement may be limited if government payers, private health insurers and other
organizations are influenced by the prices of existing drugs in determining whether our products
will be reimbursed and at what levels. For example, the availability of numerous generic
antibiotics at lower prices than branded antibiotics, such as oritavancin, if it were approved for
commercial sale, could substantially affect the likelihood of reimbursement and the level of
reimbursement for oritavancin. If reimbursement is not available or is available only to limited
levels, we may not be able to commercialize our products, or may not be able to obtain a
satisfactory financial return on our products.
In certain countries, particularly the countries of the European Union, the pricing of
prescription pharmaceuticals and the level of reimbursement are subject to governmental control. In
some countries, it can take an extended period of time to establish and obtain reimbursement, and
reimbursement approval may be required at the individual patient level, which can lead to further
delays. In addition, in some countries, it may take an extended period of time to collect payment
even after reimbursement has been established.
Third-party payers increasingly are challenging prices charged for medical products and
services. Also, the trend toward managed health care in the United States and the changes in health
insurance programs may result in lower prices for pharmaceutical products. Additionally, the newly
enacted Health Care Reform Act has provided sweeping health care reform, which may impact the
prices of drugs. In addition to the newly enacted federal legislation, state legislatures and
foreign governments have also shown significant interest in implementing cost-containment programs,
including price controls, restrictions on reimbursement and requirements for substitution of
generic products. The establishment of limitations on patient access to our drugs, adoption of
price controls and cost-containment measures in new jurisdictions or programs, and adoption of more
restrictive policies in jurisdictions with existing controls and measures, including the impact of
the Health Care Reform Act, could adversely impact our business and future results. If these
organizations and third-party payors do not consider our products to be cost-effective compared to
other available therapies, they may not reimburse providers or consumers of our products or, if
they do, the level of reimbursement may not be sufficient to allow us to sell our products on a
profitable basis.
Our ability to sell our products to hospitals in the United States depends in part on our
relationships with group purchasing organizations, or GPOs. Many existing and potential customers
for our products become members of GPOs. GPOs negotiate pricing arrangements and contracts,
sometimes on an exclusive basis, with medical supply manufacturers and distributors, and these
negotiated prices are made available to a GPOs affiliated hospitals and other members. If we are
not one of the providers selected by a GPO, affiliated hospitals and other members may be less
likely to purchase our products, and if the GPO has negotiated a strict sole
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source, market share compliance or bundling contract for another manufacturers products, we
may be precluded from making sales to members of the GPO for the duration of the contractual
arrangement. Our failure to renew contracts with GPOs may cause us to lose market share and could
have a material adverse effect on our sales, financial condition and results of operations. We
cannot assure you that we will be able to renew these contracts at the current or substantially
similar terms. If we are unable to keep our relationships and develop new relationships with GPOs,
our competitive position may suffer.
If we do not comply with federal, state and foreign laws and regulations relating to the
health care business, we could face substantial penalties
We and our customers are subject to extensive regulation by the federal government, and the
governments of the states and foreign countries in which we may conduct our business. In the United
States, the laws that directly or indirectly affect our ability to operate our business include the
following:
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the Federal Anti-Kickback Law, which prohibits persons from knowingly and willfully
soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash
or in kind, to induce either the referral of an individual or furnishing or arranging for a
good or service for which payment may be made under federal health care programs such as
Medicare and Medicaid; |
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other Medicare laws and regulations that prescribe the requirements for coverage and
payment for services performed by our customers, including the amount of such payment; |
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the Federal False Claims Act, which imposes civil and criminal liability on individuals
and entities who submit, or cause to be submitted, false or fraudulent claims for payment
to the government; |
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the Federal False Statements Act, which prohibits knowingly and willfully falsifying,
concealing or covering up a material fact or making any materially false statement in
connection with delivery of or payment for health care benefits, items or services; and |
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various state laws that impose similar requirements and liability with respect to state
healthcare reimbursement and other programs. |
If our operations are found to be in violation of any of the laws and regulations described
above or any other law or governmental regulation to which we or our customers are or will be
subject, we may be subject to civil and criminal penalties, damages, fines, exclusion from the
Medicare and Medicaid programs and the curtailment or restructuring of our operations. Similarly,
if our customers are found to be non-compliant with applicable laws, they may be subject to
sanctions, which could also have a negative impact on us. Any penalties, damages, fines,
curtailment or restructuring of our operations would adversely affect our ability to operate our
business and our financial results. Any action against us for violation of these laws, even if we
successfully defend against it, could cause us to incur significant legal expenses, divert our
managements attention from the operation of our business and damage our reputation.
If we are unable to obtain insurance at acceptable costs and adequate levels or otherwise
protect ourselves against potential product liability claims, we could be exposed to significant
liability
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 patients in clinical trials, 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 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. With respect to our
commercial sales and our clinical trials, we are covered by 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 continue to commercialize our products, we may wish to increase our product liability
insurance. 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.
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Risks Related to Regulatory Matters
If we do not obtain regulatory approvals for our product candidates, we will not be able to
market our product candidates and our ability to generate additional revenue could be materially
impaired
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. Except for Angiomax in the United States, Europe and other countries and Cleviprex in
the United States, Australia and New Zealand, we do not have any other product approved for sale in
the United States or any foreign market. Obtaining regulatory approval is uncertain, time-consuming
and expensive. Any regulatory approval we ultimately obtain may be limited or subject to
restrictions or post-approval commitments that render the product commercially non-viable. Securing
regulatory approval requires the submission of extensive pre-clinical and clinical data,
information about product manufacturing processes and inspection of facilities and supporting
information to the regulatory authorities for each therapeutic indication to establish the
products safety and efficacy. If we are unable to submit the necessary data and information, for
example, because the results of clinical trials are not favorable, or if the applicable regulatory
authority delays reviewing or does not approve our applications, we will be unable to obtain
regulatory approval. Delays in obtaining or failure to obtain regulatory approvals may:
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diminish our competitive advantage; and |
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defer or decrease our receipt of revenue. |
The regulatory review and approval process to obtain marketing approval for a new drug or
indication takes many years and requires the expenditure of substantial resources. This process can
vary substantially based on the type, complexity, novelty and indication of the product candidate
involved. The regulatory authorities globally have substantial discretion in the approval process
and may refuse to accept any application or may decide that data is insufficient for approval and
require additional pre-clinical, clinical or other studies. In addition, varying interpretations of
the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory
approval of a product candidate. For example, the FDA issued a complete response letter to Targanta
in December 2008 before it was acquired by us with respect to the oritavancin NDA indicating that
the FDA could not approve the NDA in its present form and that it would be necessary for Targanta
to perform an additional adequate and well-controlled study to demonstrate the safety and efficacy
of oritavancin in patients with ABSSSI before the application could be approved.
We cannot expand the indications for which we are marketing Angiomax unless we receive
regulatory approval for each additional indication. Failure to expand these indications will limit
the size of the commercial market for Angiomax
The FDA has approved Angiomax for use as an anticoagulant in combination with aspirin in
patients with unstable angina undergoing PCI and patients undergoing PCI with or at risk of
HIT/HITTS. Angiox is approved for patients undergoing PCI, for adult patients with ACS and for the
treatment of STEMI patients undergoing primary PCI in the European Union. One of our key objectives
is to expand the indications for which Angiomax is approved. In order to market Angiomax for
expanded indications, we will need to conduct appropriate clinical trials, obtain positive results
from those trials and obtain regulatory approval for such proposed indications. Obtaining
regulatory approval is uncertain, time-consuming and expensive. The regulatory review and approval
process to obtain marketing approval for a new indication can take many years and require the
expenditure of substantial resources. This process can vary substantially based on the type,
complexity, novelty and indication of the product candidate involved. The regulatory authorities
have substantial discretion in the approval process and may refuse to accept any application or may
decide that any data submitted is insufficient for approval and require additional pre-clinical,
clinical or other studies. In addition, varying interpretations of the data obtained from
pre-clinical and clinical testing could delay, limit or prevent regulatory approval of a new
indication product candidate.
For example, in 2006 we received a non-approvable letter from the FDA in connection with our
application to market Angiomax in patients with or at risk of HIT/HITTS undergoing cardiac surgery.
While we have indicated to the FDA that we are evaluating potential next steps, the FDA may require
additional studies which may require the expenditure of substantial resources. Even if any such
studies are undertaken, we might not be successful in obtaining regulatory approval for this
indication in a timely manner or at all. In addition, in May 2008, we received a non-approvable
letter from the FDA with respect to an sNDA that we submitted to the FDA seeking approval of an
additional indication for Angiomax for the treatment of patients with ACS in the emergency
department. In its letter, the FDA indicated that the basis of their decision involved the
appropriate use and interpretation of non-inferiority trials, including the ACUITY trial. We
disagree with the FDA on these issues and continue to evaluate how to respond to the FDAs views on
the ACUITY trial. We might not be successful in obtaining regulatory approval for these indications
or any other indications in a timely manner or at all. If we are unsuccessful in expanding the
Angiomax product label, the size of the commercial market for Angiomax will be limited.
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Clinical trials of product candidates are expensive and time-consuming, and the results of
these trials are uncertain
Before we can obtain regulatory approvals to market any product for a particular indication,
we will be required to complete pre-clinical studies and extensive clinical trials in humans to
demonstrate the safety and efficacy of such product for such indication.
Clinical testing is expensive, difficult to design and implement, can take many years to
complete and is uncertain as to outcome. Success in pre-clinical testing or early clinical trials
does not ensure that later clinical trials will be successful, and interim results of a clinical
trial do not necessarily predict final results. An unexpected result in one or more of our clinical
trials can occur at any stage of testing. For example, in May 2009 we discontinued enrollment in
our Phase 3 CHAMPION clinical trial program of cangrelor in patients undergoing PCI after receiving
a letter from the clinical programs independent Interim Analysis Review Committee that stated that
the CHAMPION-PLATFORM trial would not meet the goal of demonstrating persuasive evidence of
clinical effectiveness that could form the basis for regulatory approval.
We may experience numerous unforeseen events during, or as a result of, the clinical trial
process that could delay or prevent us from receiving regulatory approval or commercializing our
products, including:
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our clinical trials may produce negative or inconclusive results, and we may decide, or
regulators may require us, to conduct additional clinical trials which even if undertaken
cannot ensure we will gain approval; |
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data obtained from pre-clinical testing and clinical trials may be subject to varying
interpretations, which could result in the FDA or other regulatory authorities deciding not
to approve a product in a timely fashion, or at all; |
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the cost of clinical trials may be greater than we currently anticipate; |
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regulators or institutional review boards may not authorize us to commence a clinical
trial or conduct a clinical trial at a prospective trial site; |
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we, or the FDA or other regulatory authorities, might suspend or terminate a clinical
trial at any time on various grounds, including a finding that participating patients are
being exposed to unacceptable health risks. For example, we have in the past voluntarily
suspended enrollment in one of our clinical trials to review an interim analysis of safety
data from the trial; and |
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the effects of our product candidates may not be the desired effects or may include
undesirable side effects or the product candidates may have other unexpected
characteristics. |
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 patient enrollment in any of our current or future clinical trials may result in increased costs
and program delays.
If we or our contract manufacturers fail to comply with the extensive regulatory requirements
to which we, our contract manufacturers and our products are subject, our products could be subject
to restrictions or withdrawal from the market and we could be subject to penalties
The testing, manufacturing, labeling, safety, advertising, promotion, storage, sales,
distribution, export and marketing, among other things, of our products, both before and after
approval, are subject to extensive regulation by governmental authorities in the United States,
Europe and elsewhere throughout the world. Both before and after approval of a product, quality
control and manufacturing procedures must conform to current good manufacturing practice, or cGMP.
Regulatory authorities, including the FDA, periodically inspect manufacturing facilities to assess
compliance with cGMP. Our failure or the failure of our contract manufacturers to comply with the
laws administered by the FDA, the European Medicines Agency or other governmental authorities could
result in, among other things, any of the following:
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delay in approving or refusal to approve a product; |
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product recall or seizure; |
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suspension or withdrawal of an approved product from the market; |
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interruption of production; |
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operating restrictions; |
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untitled or warning letters; |
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injunctions; |
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fines and other monetary penalties; |
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the imposition of civil or criminal penalties; and |
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unanticipated expenditures. |
Risks Related to our Dependence on Third Parties for Manufacturing, Research and Development, and
Distribution Activities
We depend on single source suppliers for the production of bulk drug substance for Angiomax,
Cleviprex and our other products in development and a limited number of suppliers to carry out all
fill-finish activities
We do not manufacture any of our products and do not plan to develop any capacity to
manufacture them. We currently obtain all bulk drug substance for each of Angiomax, Cleviprex and
our products in development from single source suppliers, and rely on a limited number of
manufacturers to carry out all fill-finish activities for each of Angiomax, Cleviprex and our
products in development.
We do not currently have alternative sources for production of bulk drug substance or to carry
out fill finish activities. In the event that any of our third-party manufacturers is unable or
unwilling to carry out its respective manufacturing or supply obligations or terminates or refuses
to renew its arrangements with us, we may be unable to obtain alternative manufacturing or supply,
or obtain such manufacturing or supply on commercially reasonable terms or on a timely basis. In
addition, we purchase finished drug product from a number of our third-party manufacturers under
purchase orders. In such cases, the third-party manufacturers have made no commitment to supply the
drug product to us on a long-term basis and could reject a new purchase order. Only a limited
number of manufacturers are capable of manufacturing Angiomax, Cleviprex and our products in
development. Moreover, consolidation within the pharmaceutical manufacturing industry could further
reduce the number of manufacturers capable of producing our products, or otherwise affect our
existing contractual relationships. If we were required to transfer manufacturing processes to
other third-party manufacturers and we were able to identify an alternative manufacturer, we would
still need to satisfy various regulatory requirements, which could cause us to experience
significant delays in receiving an adequate supply of Angiomax, Cleviprex and our products in
development. Moreover, we may not be able to transfer processes that are proprietary to the
manufacturer. Any delays in the manufacturing process may adversely impact our ability to meet
commercial demands for Angiomax or Cleviprex on a timely basis, which could reduce our revenue, and
supply product for clinical trials of Angiomax, Cleviprex and our products in development, which
could affect our ability to complete clinical trials on a timely basis or at all.
If third parties on whom we rely to manufacture and support the development and
commercialization of our products do not fulfill their obligations, the development and
commercialization of our products may be terminated or delayed, and the costs of development and
commercialization may increase.
Our development and commercialization strategy involves entering into arrangements with
corporate and academic collaborators, contract research organizations, distributors, third-party
manufacturers, licensors, licensees and others to conduct development work, manage or conduct our
clinical trials, manufacture our products and market and sell our products outside of the United
States. We do not have the expertise or the resources to conduct many of these activities on our
own and, as a result, are particularly dependent on third parties in many areas.
We may not be able to maintain our existing arrangements with respect to the commercialization
or manufacture of Angiomax and Cleviprex or establish and maintain arrangements to develop,
manufacture and commercialize our products in development or any additional product candidates or
products we may acquire on terms that are acceptable to us. Any current or future arrangements for
development and commercialization may not be successful. If we are not able to establish or
maintain agreements relating to
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Angiomax, Cleviprex, our products in development or any additional products we may acquire,
our results of operations would be materially adversely affected.
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
are not within our control. Our collaborators may develop, manufacture or commercialize, either
alone or with others, products and services that are similar to or competitive with the products
that are the subject of the collaboration with us. Furthermore, our interests may differ from those
of third parties that manufacture or commercialize our products. Our collaborators may reevaluate
their priorities from time to time, including following mergers and consolidations, and change the
focus of their development, manufacturing or commercialization efforts. 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 commit sufficient resources to
our collaboration or conduct its activities in a timely manner, or fails to comply with regulatory
requirements, such breach, termination or failure could:
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delay or otherwise adversely impact the manufacturing, development or commercialization
of Angiomax, Cleviprex, our products in development or any additional products that we may
acquire or develop; |
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require us to seek a new collaborator or undertake unforeseen additional
responsibilities or devote unforeseen additional resources to the manufacturing,
development or commercialization of our products; or |
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result in the termination of the development or commercialization of our products. |
Use of third-party manufacturers may increase the risk that we will not have appropriate
supplies of our products or our product candidates
Reliance on third-party manufacturers entails risks to which we would not be subject if we
manufactured product candidates or products ourselves, including:
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reliance on the third party for regulatory compliance and quality assurance; |
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the possible breach of the manufacturing agreement by the third party; and |
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the possible termination or nonrenewal of the agreement by the third party, based on its
own business priorities, at a time that is costly or inconvenient for us. |
Angiomax and Cleviprex and our products in development may compete with products and product
candidates of third parties for access to manufacturing facilities. If we are not able to obtain
adequate supplies of Angiomax, Cleviprex and our products in development, it will be more difficult
for us to compete effectively, market and sell our approved products and develop our products in
development.
Our contract manufacturers are subject to ongoing, periodic, unannounced inspection by the FDA
and corresponding state and foreign agencies or their designees to evaluate compliance with the
FDAs cGMP, regulations and other governmental regulations and corresponding foreign standards. We
cannot be certain that our present or future manufacturers will be able to comply with cGMP
regulations and other FDA regulatory requirements or similar regulatory requirements outside the
United States. We do not control compliance by our contract manufacturers with these regulations
and standards. Failure of our third-party manufacturers or us to comply with applicable regulations
could result in sanctions being imposed on us, including fines and other monetary penalties,
injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our
product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or
recalls of product candidates or products, interruption of production, warning letters, operating
restrictions and criminal prosecutions, any of which could significantly and adversely affect
supplies of Angiomax, Cleviprex and our products in development.
On December 16, 2009, we conducted a voluntary recall of 11 lots of Cleviprex due to the
presence of visible particulate matter that was deposited at the bottom of some vials and was
observed in such vials during a routine annual inspection. On March 17, 2010, we extended our
voluntary recall to include four additional manufactured lots of Cleviprex that also showed visible
particulate matter that was deposited at the bottom of some vials. As a result, we are not able to
supply the market at this time with existing inventory or
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using the current manufacturing method. We are cooperating with the FDA and our contract
manufacturer on these recalls and to remedy the problem at the manufacturing site. If the
manufacturing problem is remedied, we anticipate being able to supply the market with drug product
and resume selling Cleviprex in the second half of 2010. If the problem is not remedied, we intend
to produce drug product using other approaches, which could delay the supply of Cleviprex 12 to 18
months. Any delay in resupplying the market with Cleviprex would reduce our revenues.
In order to satisfy some regulatory authorities, we may need to reformulate the way in which
our oritavancin bulk drug substance is created to remove animal source product, which may delay
marketing approval of our products and increase our costs
Oritavancin bulk drug substance is manufactured using animal-sourced products, namely
porcine-sourced products. Some non-U.S. regulatory authorities have historically objected to the
use of animal-sourced products, particularly bovine-sourced products, during the preparation of
finished drug product. As a result and in order to better position oritavancin for approval in
foreign jurisdictions, under our agreement with Abbott, we and Abbott are seeking to develop a
manufacturing process for oritavancin bulk drug substance that does not rely on the use of any
animal-sourced products.
If we are unable to develop a manufacturing process for oritavancin bulk drug substance that
does not rely on the use of animal-sourced product, we may be unable to receive regulatory approval
for oritavancin in some foreign jurisdictions, which would likely have a negative impact on our
ability to achieve our business objectives as to oritavancin.
If we use hazardous and biological materials in a manner that causes injury or violates
applicable law, we may be liable for damages
As a result of our acquisitions of Curacyte Discovery and Targanta, we now conduct research
and development activities that involve the controlled use of potentially hazardous substances,
including chemical, biological and radioactive materials and viruses. In addition, our operations
produce hazardous waste products. Federal, state and local laws and regulations in each of the
United States, Canada and Germany govern the use, manufacture, storage, handling and disposal of
hazardous materials. We may incur significant additional costs to comply with applicable laws in
the future. Also, we cannot completely eliminate the risk of contamination or injury resulting from
hazardous materials and we may incur liability as a result of any such contamination or injury. In
the event of an accident, we could be held liable for damages or penalized with fines, and the
liability could exceed our resources. We have only limited insurance for liabilities arising from
hazardous materials. Compliance with applicable environmental laws and regulations is expensive,
and current or future environmental regulations may restrict our research, development and
production efforts, which could harm our business, operating results and financial condition.
Risks Related to Our Intellectual Property
If the court order requiring the PTO to consider our application to extend the term of the
principal U.S. patent covering Angiomax timely filed is successful challenged, if we are otherwise
unsuccessful in further extending the term of the principal U.S. patent covering Angiomax, or if we
are unable to maintain our market exclusivity for Angiomax in the United States through enforcement
of our other U.S. patents covering Angiomax, Angiomax could be subject to generic competition.
Generic competition for Angiomax would have an adverse effect on the our business, financial
condition and results of operations
The principal U.S. patent covering Angiomax was set to expire in March 2010, but has been
extended in connection with our litigation against the PTO, the FDA and the HHS. We applied, under the Hatch-Waxman Act, for an extension of the
term of the principal U.S. patent covering Angiomax. However, the PTO rejected our application
because in its view the application was not timely filed. Since 2002, we have filed requests with
the PTO for reconsideration of the denial of the application, but in April 2007 and again in
January and March 2010, the PTO denied our application for patent term extension. In January 2010,
we brought suit against the PTO, the FDA and HHS seeking to set aside the denial of our application
to extend the term of the principal U.S. patent that covers Angiomax. The court set aside the PTOs
denial of our patent term extension application and sent the matter back for reconsideration.
Following the court order, the PTO again denied our patent term extension application for the principal U.S. patent covering Angiomax. In March 2010, we filed a second complaint against the PTO, FDA and HHS asking the court to
set aside the PTOs latest application denial, to instruct the PTO to accept our patent term
extension application as timely filed and to order the PTO to extend the term of the Angiomax
patent for the full period required under the Hatch-Waxman Act. On August 3, 2010, the court
granted our motion for summary judgment and ordered the PTO to consider our patent term extension
application for the 404 patent timely filed.
As a result of the courts August 3, 2010 decision, the PTO granted an interim extension
of the term of principal U.S. patent covering Angiomax until August 13, 2011. The PTO routinely
grants such interim extensions when required to provide time to process applications for patent
term extension under the Hatch-Waxman Act.
However, if the PTO appeals the
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courts August 3, 2010 decision and is successful, the PTO may decide to rescind the 404 patent
interim extension and Angiomax could be subject to generic competition.
On June 23, 2008, the United States House of Representatives passed a bill that, if
enacted, would have provided the PTO with discretion to consider patent extension applications
filed late unintentionally under the Hatch-Waxman Act. The United States Senate adjourned without
considering this bill. We continue to advocate the current Congress to consider legislation similar
to that passed by the House in June 2008; however, a bill may not be introduced or enacted. We plan
to continue to explore alternatives to extend the term of the 404 patent, but we may not be
successful in doing so.
In September and October 2009, we were granted two U.S. patents covering Angiomax. We
listed both patents in the Orange Book for Angiomax. In
October 2009, January 2010 and June 2010, in
response to Paragraph IV Certification Notice letters we received with respect to ANDAs filed with
the FDA seeking approval to market generic versions of Angiomax, we filed lawsuits against the ANDA
filers alleging patent infringement of the two patents in the U.S. District Court for the District
of Delaware. In addition, in July 2010, we received another Paragraph IV Certification Notice
letter. We are presently evaluating this notice letter. We cannot predict the outcome of these
lawsuits.
If the August 3, 2010 court order requiring the PTO to consider our application to extend
the term of the principal U.S. patent covering Angiomax timely filed is successful
challenged, if we are otherwise unsuccessful in further extending the term of the
principal U.S. patent covering Angiomax, or if we are unable to maintain our market
exclusivity for Angiomax in the United States through enforcement of our other U.S.
patents covering Angiomax, Angiomax could be subject to generic competition in the
United States following the expiration of the six-month period of market exclusivity
resulting from our pediatric study of Angiomax.
Competition from generic equivalents that would be sold at a price that is less than the
price at which we currently sell Angiomax could have a material adverse impact on our business,
financial condition and operating results.
If we breach any of the agreements under which we license rights to products or
technology from others, we could lose license rights that are material to our business or be
subject to claims by our licensors
We license 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 have exclusively licensed
patents and patent applications relating to Angiomax, Cleviprex and each of our products in
development other than MDCO-2010. Under these agreements, we are subject to a range of
commercialization and development, sublicensing, royalty, patent prosecution and maintenance,
insurance and other obligations.
Any failure by us to comply with any of these obligations or any other breach by us of
our license agreements could give the licensor the right to terminate the license in whole,
terminate the exclusive nature of the license or bring a claim against us for damages. Any such
termination or claim, particularly relating to our agreements with respect to Angiomax, could have
a material adverse effect on our financial condition, results of operations, liquidity or business.
Even if we contest any such termination or claim and are ultimately successful, our stock price
could suffer. In addition, on termination we may be required to license to the licensor any related
intellectual property that we developed.
We have entered into an agreement with Biogen Idec, one of our licensors for Angiomax,
that suspends the statute of limitations relating to any claims, including claims for damages
and/or license termination, that Biogen Idec may bring relating to the PTOs rejection of the
application under the Hatch-Waxman Act for an extension of the term of the principal U.S. patent
that covers Angiomax on the grounds that, in its view, it was not timely filed. We have also
entered into agreements with the law firms involved in the patent extension filing that suspend the
statute of limitations on our claims against them for the filing. In the third quarter of 2009, we
initiated discussions with the two law firms involved in the patent extension filing of the
application under the Hatch-Waxman Act and are currently in related discussions with Biogen Idec
and HRI with respect to the possible resolution of the potential claims among the parties. We may
not reach an agreement with the parties on acceptable terms to us or at all.
If we are unable to obtain or maintain patent protection for the intellectual property
relating to our products, the value of our products will be adversely affected
The patent positions of pharmaceutical companies like us are generally uncertain and
involve complex legal, scientific and factual issues. Our success depends significantly on our
ability to:
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obtain and maintain U.S. and foreign patents, including defending those patents against adverse claims; |
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secure patent term extension for the patents covering our approved products; |
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protect trade secrets; |
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operate without infringing the proprietary rights of others; and |
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prevent others from infringing our proprietary rights. |
We may not have any additional patents issued from any patent applications that we own or
license. If additional 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,
narrowed, invalidated or circumvented, which could limit our ability to stop competitors from
marketing similar products or limit the length of term of patent protection we may have for our
products, and we may not be able to obtain patent term extension to prolong the terms of the
principal patents covering our approved products. Changes in patent laws or in interpretations of
patent laws in the United States and other countries may diminish the value of our intellectual
property or narrow the scope of our patent protection.
Our patents also may not afford us protection against competitors with similar
technology. Because patent applications in the United States and many foreign jurisdictions are
typically not published until eighteen months after filing, or in some cases not at all, and
because publications of discoveries in the scientific literature often lag behind actual
discoveries, neither we nor our licensors can be certain that others have not filed or maintained
patent applications for technology used by us or covered by our pending patent applications without
our being aware of these applications.
We exclusively licensed patents and patent applications for Angiomax, Cleviprex and each
of our other products in development other than MDCO-2010. The U.S. patents licensed by us are
currently set to expire at various dates. We plan to file applications for U.S. patent term
extension for our products in development upon their approval by the FDA.
We are a party to a number of lawsuits that we brought against pharmaceutical companies
that have notified us that they have filed ANDAs seeking approval to market generic versions of
Angiomax. We cannot predict the outcome of these lawsuits. During the period in which these matters
are pending, the uncertainty of their outcome may cause our stock price to decline. In addition, an
adverse result in these matters whether appealable or not, will likely cause our stock price to
decline. Any final, unappealable, adverse result in these matters will likely have a material
adverse effect on our results of operations and financial conditions and cause our stock price to
decline. In addition, involvement in litigation can be expensive.
We may be unable to utilize the Chemilog process if Lonza Braine breaches our agreement
Our agreement with Lonza Braine for the supply of Angiomax bulk drug substance requires
that Lonza Braine transfer the technology that was used to develop the Chemilog process to a
secondary supplier of Angiomax bulk drug substance or to us or an alternate supplier at the
expiration of the agreement, which is currently scheduled to occur in September 2013, but is
subject to automatic renewals of consecutive three-year periods unless either party provides notice
of non-renewal at least one year prior to the expiration of the initial term or any renewal term.
If Lonza Braine fails or is unable to transfer successfully this technology, we would be unable to
employ the Chemilog process to manufacture our Angiomax bulk drug substance, which could cause us
to experience delays in the manufacturing process and increase our manufacturing costs in the
future.
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. If our confidential
information or trade secrets become publicly known, they may lose their value to us.
If we infringe or are alleged to infringe intellectual property rights of third parties,
it will adversely affect our business
Our research, development and commercialization activities, as well as any product
candidates or products resulting from these activities, may infringe or be claimed to infringe
patents or patent applications under which we do not hold licenses or other rights. Third parties
may own or control these patents and patent applications in the United States and abroad. These
third parties could bring claims against us or our collaborators that would cause us to incur
substantial expenses and, if successful against us, could cause us to pay substantial damages.
Further, if a patent infringement suit were brought against us or our collaborators, we or they
could be forced to stop or delay research, development, manufacturing or sales of the product or
product candidate that is the subject of the suit.
As a result of patent infringement claims, or in order to avoid potential claims, we or
our collaborators may choose or be required to seek a license from the third party and be required
to pay license fees or royalties or both. These licenses may not be available on acceptable terms,
or at all. Even if we or our collaborators were able to obtain a license, the rights may be
nonexclusive, which could result in our competitors gaining access to the same intellectual
property. Ultimately, we could be prevented from commercializing a
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product, or be forced to cease some aspect of our business operations, if, as a result of actual or
threatened patent infringement claims, we or our collaborators are unable to enter into licenses on
acceptable terms. This could harm our business significantly.
There has been substantial litigation and other proceedings regarding patent and other
intellectual property rights in the pharmaceutical and biotechnology industries. In addition to
infringement claims against us, we may become a party to other patent litigation and other
proceedings, including interference proceedings declared by the PTO and opposition proceedings in
the European Patent Office, regarding intellectual property rights with respect to our products and
technology. The cost to us of any patent litigation or other proceeding, even if resolved in our
favor, could be substantial. Some of our competitors may be able to sustain the costs of such
litigation or proceedings more effectively than we can because of their substantially greater
financial resources. Uncertainties resulting from the initiation and continuation of patent
litigation or other proceedings could have a material adverse effect on our ability to compete in
the marketplace. Patent litigation and other proceedings may also absorb significant management
time.
Risks Related to Growth and Employees
If we fail to acquire and develop additional product candidates or approved products it
will impair our ability to grow
We sell and generate revenue from two products, Angiomax and Cleviprex. In order to
generate additional revenue, our business plan is to acquire or license, and then develop and
market, additional product candidates or approved products. In 2008 and 2009, for instance, we
acquired Curacyte Discovery and Targanta, licensed marketing rights to the ready-to-use formulation
of Argatroban and licensed development and commercialization rights to MDCO-216. The success of
this growth strategy depends upon our ability to identify, select and acquire or license
pharmaceutical products that meet the criteria we have established. Because we have only the
limited internal scientific research capabilities that we acquired in our acquisitions of Curacyte
Discovery and Targanta, and we do not anticipate establishing additional scientific research
capabilities, we are dependent upon pharmaceutical and biotechnology companies and other
researchers to sell or license product candidates to us. We need to integrate any acquired products
into our existing operations. Integrating any newly acquired business or product could be expensive
and time-consuming. We may not be able to integrate any acquired business or product successfully
or operate any acquired business profitably. In addition, managing the development of a new product
entails numerous financial and operational risks, including difficulties in attracting qualified
employees to develop the product.
Any product candidate we acquire or licenses will require additional research and
development efforts prior to commercial sale, including extensive pre-clinical and/or clinical
testing and approval by the FDA and corresponding foreign regulatory authorities.
All product candidates are prone to the risks of failure inherent in pharmaceutical
product development, including the possibility that the product candidate will not be safe and
effective or approved by regulatory authorities. In addition, any approved products that we develop
or acquire may not be:
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successfully commercialized; or |
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widely accepted in the marketplace. |
We have previously acquired or licensed rights to products and, after having conducted
development activities, determined not to devote further resources to those products. Any
additional products that we acquire or license may not be successfully developed. In addition,
proposing, negotiating and implementing an economically viable acquisition or license is a lengthy
and complex process. Other companies, including those with substantially greater financial,
marketing and sales resources, may compete with us for the acquisition or license of product
candidates and approved products. We may not be able to acquire or license the rights to additional
product candidates and approved products on terms that we find acceptable, or at all.
We may not be able to manage our business effectively if we are unable to attract and
retain key personnel and consultants
Our 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 Chairman and Chief Executive Officer,
Clive A. Meanwell, our Executive Vice President and Chief Financial Officer, Glenn P. Sblendorio,
or other key employees or consultants, our ability to implement successfully our business strategy
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 our industry with the
breadth of skills and experience required to acquire, 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.
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Risks Related to Our Common Stock
Fluctuations in our operating results could affect the price of our common stock
Our operating results may vary from period to period based on factors including the
amount and timing of sales of Angiomax and Cleviprex, underlying hospital demand for Angiomax and
Cleviprex, our customers buying patterns, the timing, expenses and results of clinical trials,
announcements regarding clinical trial results and product introductions by us or our competitors,
the availability and timing of third-party reimbursement, including in Europe, sales and marketing
expenses and the timing of regulatory approvals. If our operating results do not meet the
expectations of securities analysts and investors as a result of these or other factors, the
trading price of our common stock will likely decrease.
Our stock price has been and may in the future be volatile. This volatility may make it
difficult for you to sell common stock when you want or at attractive prices
Our common stock has been and in the future may be subject to substantial price
volatility. From January 1, 2008 to August 5, 2010, the last reported sale price of our common
stock ranged from a high of $27.68 per share to a low of $6.47 per share. The value of your
investment could decline due to the effect of any of the following factors upon the market price of
our common stock:
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changes in securities analysts estimates of our financial performance; |
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changes in valuations of similar companies; |
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variations in our operating results; |
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acquisitions and strategic partnerships; |
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announcements of technological innovations or new commercial products by us or our competitors; |
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disclosure of results of clinical testing or regulatory proceedings by us or our competitors; |
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the timing, amount and receipt of revenue from sales of our products and margins on sales of our products; |
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governmental regulation and approvals; |
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developments in patent rights or other proprietary rights, particularly with respect to the our U.S.
Angiomax patents; |
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the terms of any settlement with Biogen Idec, HRI or the two law firms with respect to the principal U.S.
patent covering Angiomax and the PTOs denial of our application to extend the term of the patent; |
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developments or issues with our contract manufacturers; |
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changes in our management; and |
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general market conditions. |
In addition, the stock market has experienced significant price and volume fluctuations,
and the market prices of specialty pharmaceutical companies have been highly volatile. Moreover,
broad market and industry fluctuations that are not within our control may adversely affect the
trading price of our common stock. You must be willing to bear the risk of fluctuations in the
price of our common stock and the risk that the value of your investment in our securities could
decline.
Our corporate governance structure, including provisions in our certificate of
incorporation and by-laws and Delaware law, may prevent a change in control or management that
security holders may consider desirable
Section 203 of the General Corporation Law of the State of Delaware and our certificate
of incorporation and by-laws contain provisions that might enable our management to resist a
takeover of our company or discourage a third party from attempting to take over our company. These
provisions include the inability of stockholders to act by written consent or to call special
meetings, a classified board of directors and the ability of our board of directors to designate
the terms of and issue new series of preferred stock without stockholder approval.
These provisions could have the effect of delaying, deferring, or preventing a change in
control of us or a change in our management that stockholders may consider favorable or beneficial.
These provisions could also discourage proxy contests and make
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it more difficult for stockholders to elect directors and take other corporate actions. These
provisions could also limit the price that investors might be willing to pay in the future for
shares of our common stock or our other securities.
Item 5. Other Information
We have an annual cash incentive program, which we refer to as our cash bonus plan, which is
designed to provide cash incentive awards to our employees. In the second quarter of 2010, our
compensation committee recommended and board of directors approved the following company
performance measures under our cash bonus plan for 2010:
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minimum net sales growth rates relative to 2009 for Angiomax in the United States and outside the
United States; |
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with regards to Cleviprex, a minimum net sales growth rate relative to 2009; |
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with regards to oritavancin, to secure FDA and EMEA concordance with clinical study program
and commence enrollment in such program; |
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with regards to cangrelor, to secure AstraZeneca, FDA and EMEA concordance with clinical
study program and commence enrollment in such program; |
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to advance a Phase I clinical program of MDCO-2010 so that we are ready to initiate a Phase II
trial of the product candidate; |
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with regards to the ready-to-use formulation of Argatroban, to manage and support our partner
Eagle in its responses to the FDA; |
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with regards to MDCO-216, to complete the technology transfer from Pfizer and the necessary
preclinical activities to be able to commence clinical trials; |
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to achieve a minimum operating profit per employee; |
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to close at least one transaction which provides near term revenue or expense leverage; and |
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to achieve these goals while managing operating expenses within a certain range of our budget. |
Item 6. Exhibits
Exhibits
See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed
as part of this quarterly report, which Exhibit Index is incorporated herein by this reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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THE MEDICINES COMPANY
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Date: August 9, 2010 |
By: |
/s/ Glenn P. Sblendorio
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Glenn P. Sblendorio |
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Executive Vice President and Chief Financial
Officer (Principal Financial and Accounting Officer) |
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EXHIBIT INDEX
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Exhibit Number |
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Description |
10.1
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Second Amendment to License Agreement dated as of June 1,
2010 between AstraZeneca AB and the registrant |
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10.2
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The Medicines Companys 2010 Employee Stock Purchase Plan
(incorporated by reference to Appendix I to the
registrants definitive proxy statement, dated and filed
with the Securities and Exchange Commission on April 30,
2010, for the registrants 2010 Annual Meeting of
Stockholders). |
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10.3
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The Medicines Companys 2004 Amended and Restated Stock
Incentive Plan, as amended (incorporated by reference to
Appendix II to the registrants definitive proxy statement,
dated and filed with the Securities and Exchange Commission
on April 30, 2010, for the registrants 2010 Annual Meeting
of Stockholders). |
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31.1
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Chairman and Chief Executive Officer Certification pursuant
to Rule 13a-14(a) of the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 |
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31.2
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Chief Financial Officer Certification pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 |
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32.1
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Chairman and Chief Executive Officer Certification pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
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32.2
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Chief Financial Officer Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
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101*
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The following materials from The Medicines Company
Quarterly Report on Form 10-Q for the quarter ended June
30, 2010, formatted in XBRL (Extensible Business Reporting
Language): (i) the Consolidated Balance Sheet, (ii) the
Consolidated Statement of Operations, (iii) the
Consolidated Statement of Cash Flow, and (iv) Notes to
Consolidated Financial Statements, tagged as blocks of
text. |
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Confidential treatment requested as to certain portions,
which portions have been omitted and filed separately with
the Securities and Exchange Commission Unless otherwise
indicated, the exhibits incorporated herein by reference
were filed under Commission file number 000-31191. |
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* |
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The registrant will be furnishing Exhibit 101 within 30 days of the filing
date of this Form 10-Q, as allowable under the rules of the Securities and Exchange
Commission. |
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