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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark
One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended: December 31,
2010
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Or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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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)
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Registrants telephone number, including area code:
(973) 290-6000
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which
Registered
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Common Stock, $.001 Par Value Per Share
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NASDAQ Global Select Market
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or
Section 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 þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. 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 the 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)
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
The aggregate market value of voting Common Stock held by
non-affiliates of the registrant on June 30, 2010 was
approximately $403,721,649 based on the last reported sale price
of the Common Stock on the Nasdaq Global Select Market on
June 30, 2010 of $7.61 per share.
Number of shares of the registrants class of Common Stock
outstanding as of March 8, 2011: 53,860,883.
DOCUMENTS
INCORPORATED BY REFERENCE
The registrant intends to file a proxy statement pursuant to
Regulation 14A within 120 days of the end of the
fiscal year ended December 31, 2010. Portions of the proxy
statement are incorporated herein by reference into the
following parts of the
Form 10-K:
Part III, Item 10. Directors, Executive Officers and
Corporate Governance;
Part III, Item 11. Executive Compensation;
Part III, Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters;
Part III, Item 13. Certain Relationships and Related
Transactions, and Director Independence; and
Part III, Item 14. Principal Accountant Fees and
Services.
THE
MEDICINES COMPANY
ANNUAL
REPORT ON
FORM 10-K
For the Fiscal Year Ended December 31, 2010
TABLE OF
CONTENTS
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 annual report on
Form 10-K
are the property of their respective owners. Except where
otherwise indicated, or where the context may otherwise require,
references to Angiomax in this annual report on
Form 10-K
mean Angiomax and Angiox, collectively. References to the
Company, we, us or
our mean The Medicines Company, a Delaware
corporation, and its subsidiaries.
This annual report on
Form 10-K
includes forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as
amended. For this purpose, any statements contained herein
regarding our strategy, future operations, financial position,
future revenues, 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 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 Item 7 in Part II of this
annual report and the factors set forth under the caption
Risk Factors in Item 1A in Part I of this
annual report. 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 our forward-looking statements as
representing our views as of any date subsequent to the date of
this annual report.
1
PART I
Our
Company
We are a global pharmaceutical company focused on advancing the
treatment of 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
acute and intensive care hospital products in development,
including two late-stage development product candidates,
cangrelor and oritavancin, two early stage development product
candidates, MDCO-2010 (formerly known as CU2010) and MDCO-216
(formerly known as ApoA-I Milano), 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
acute and intensive care hospital product market and offer, or,
in the case of our products in development, have the potential
to offer, improved performance to hospital businesses.
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 is administered intravenously.
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Product or Product
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in Development
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Development Stage
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Mechanism/Target
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Clinical Indication(s)
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Angiomax
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Marketed
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Direct thrombin inhibitor
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U.S. for use as an anticoagulant in combination
with aspirin in patients with unstable angina undergoing
percutaneous transluminal coronary angioplasty, or PTCA, and for
use in patients undergoing percutaneous coronary intervention,
or PCI, including patients with or at risk of heparin induced
thrombocytopenia and thrombosis syndrome, or HIT/HITTS
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Europe for use as an anticoagulant in patients
undergoing PCI, adult patients with acute coronary syndrome, or
ACS, and for the treatment of patients with ST-segment elevation
myocardial infarction, or STEMI, undergoing primary PCI
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Cleviprex
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Marketing Approval in the
United States; Marketing Authorization Application, or MAA,
submitted in European Union countries
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Calcium channel blocker
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Blood pressure reduction when oral therapy is not feasible or
not desirable
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Cangrelor
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Phase 3
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Antiplatelet agent
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Prevention of platelet activation and aggregation
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Product or Product
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in Development
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Development Stage
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Mechanism/Target
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Clinical Indication(s)
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Oritavancin
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Phase 3
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Antibiotic
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Treatment of serious gram-positive bacterial infections,
including acute bacterial skin and skin structure infections, or
ABSSSI
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MDCO-2010
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Phase 2
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Serine protease inhibitor
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Reduction of blood loss during surgery
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MDCO-216
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Phase 1
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Naturally occurring variant of a protein found in HDL
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Reversal of atherosclerotic plaque development and reduction of
the risk of coronary events in patients with ACS
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Ready-to-Use
Argatroban
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NDA filed
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Direct thrombin inhibitor
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Anticoagulant for prophylaxis or treatment of thrombosis in
patients with or at risk for heparin induced thrombocytopenia,
or HIT, and for patients with or at risk for HIT undergoing PCI
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Angiomax. We market Angiomax, an intravenous
direct thrombin inhibitor that is a peptide compound, primarily
in the United States and in Europe to hospital systems,
individual hospitals, and health care providers, including
interventional cardiologists in cardiac catheterization
laboratories. We market Angiomax under the name
Angiox®
(bivalirudin) in Europe. Angiomax is approved in the United
States for use as an anticoagulant in combination with aspirin
in patients with unstable angina undergoing PTCA and for use in
patients undergoing PCI, including patients with or at risk of
HIT/HITTS, a complication of heparin administration that can
result in limb amputation, renal failure and death. Angiox is
approved in Europe for use as an anticoagulant in patients
undergoing PCI, for use in adult patients with ACS, and for the
treatment of STEMI patients undergoing primary PCI. STEMI is
caused by a prolonged period of blocked blood supply, which
affects a large area of the heart muscle.
The principal U.S. patent covering Angiomax,
U.S. patent No. 5,196,404, or the 404 patent,
was set to expire in March 2010, but has been extended under the
Hatch-Waxman Act following 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 had applied,
under the Hatch-Waxman Act, for an extension of the term of the
404 patent. 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 HHS seeking
to set aside the denial of our application to extend the term of
the 404 patent. On August 3, 2010, the
U.S. Federal District Court for the Eastern District of
Virginia granted our motion for summary judgment and ordered the
PTO to consider our patent term extension application timely
filed. The period for the government to appeal the federal
district courts August 3, 2010 decision expired
without government appeal. However, on August 19, 2010, APP
Pharmaceuticals, LLC, or APP, filed a motion to intervene for
the purpose of appeal in our case against the PTO, the FDA and
HHS. On September 13, 2010, the federal district court
denied APPs motion. APP has appealed the denial of its
motion, as well as the federal district courts
August 3, 2010 order. This appeal is pending. In addition,
APP or other third parties could challenge the August 3,
2010 order in separate proceedings.
Cleviprex. Cleviprex is an intravenous small
molecule calcium channel blocker for the reduction of blood
pressure when oral therapy is not feasible or not desirable.
Cleviprex is approved for sale in the United States,
Australia, New Zealand and Switzerland. During the first quarter
of 2009, we submitted to member states of the European Union,
pursuant to the European Unions decentralized procedure,
marketing authorization applications, or MAAs, for Cleviprex for
the reduction of blood pressure when rapid and predictable
control is required. In December 2009 and March 2010, we
conducted voluntary recalls of manufactured lots of Cleviprex
due to the presence of visible particulate matter at the bottom
of some vials. As a result, we have not been able to supply
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the market with Cleviprex and have not sold Cleviprex since the
first quarter of 2010. We expect to begin to resupply the market
with Cleviprex and resume selling Cleviprex in the first half of
2011.
Cangrelor. Cangrelor is an intravenous small
molecule antiplatelet agent that we are developing to prevent
platelet activation and aggregation that leads to thrombosis in
the acute care setting of the cardiac catheterization laboratory
to address unmet medical needs in patients undergoing PCI. In
2009, we discontinued enrollment in our Phase 3 CHAMPION
clinical trial program of cangrelor in patients undergoing PCI
after the Independent Analysis Review Committee for the program
reported to us that the efficacy endpoints of the trial program
would not be achieved. However, our post-hoc analysis of the
48-hour and
30-day
CHAMPION data suggested evidence of cangrelors
pharmacological effects, clinical effectiveness and safety in
patients undergoing PCI. As a result, in October 2010, we
commenced a new Phase 3 clinical trial of cangrelor, which we
refer to as the PHOENIX clinical trial, to evaluate cangrelor in
patients undergoing PCI. We initially expect to enroll
approximately 10,900 patients, and may enroll up to a total
of 15,000 patients. This trial is a double-blind parallel
group randomized study, which compares cangrelor to clopidogrel
administered at a high dose by giving patients undergoing PCI
four to eight oral tablets of clopidogrel as soon as possible
after it is determined that a patient will undergo a PCI. This
high dose of clopidogrel is the current standard of care for
patients undergoing PCI. Clopidogrel is a platelet inhibitor
which is marketed under the brand name
Plavix®
by Bristol-Myers Squibb Co./Sanofi Pharmaceuticals Partnership.
Oritavancin. Oritavancin is an intravenous
antibiotic that we are developing for the treatment of serious
gram-positive skin and skin structure infections, including
ABSSSI (which was formerly referred to as complicated skin and
skin structure infections, or cSSSI), Clostridium
difficile infections, or C. difficile, which are infections
of the gastro-intestinal tract, bacteremia, which is an
infection involving bacteria in the blood, anthrax and other
possible indications. We acquired oritavancin in February 2009
in connection with our acquisition of Targanta Therapeutics
Corporation, or Targanta. In the fourth quarter of 2010, the FDA
notified us under the Special Protocol Assessment, or SPA,
process that the design and planned analysis of the Phase 3
clinical trials we proposed to conduct for oritavancin in
patients with ABSSSI adequately addressed the objectives
necessary to support regulatory submission. Based on that
notification, in the fourth quarter of 2010, we commenced two
identical Phase 3 clinical trials of oritavancin for the
treatment of ABSSSI. We refer to these trials as the SOLO I and
SOLO II clinical trials. We plan to enroll a total of
approximately 2,000 patients in the SOLO I and SOLO II
clinical trials and to test the use of a simplified dosing
regimen involving a single dose of oritavancin as compared to
multiple doses of vancomycin for the treatment of ABSSSI. We
expect to initiate Phase 1 studies of an oral formulation of
oritavancin for the treatment of C. difficile in 2011.
MDCO-2010. MDCO-2010 is a small molecule
serine inhibitor that we are developing as an intravenous
antifibrinolytic drug for the reduction of blood loss during
surgery. We acquired MDCO-2010 in August 2008 in connection with
our acquisition of Curacyte Discovery GmbH, or Curacyte
Discovery. In preclinical studies, the compound has demonstrated
a favorable pharmacokinetic profile for the surgical setting
with a rapid onset and offset of effect, due to its short half
life. From 2009 to 2010, we conducted a Phase 1 clinical trial
of MDCO-2010 in Switzerland in healthy volunteers that
demonstrated safety and tolerability at low doses. Following
that trial, in November 2010, we commenced a Phase 2 clinical
trial of MDCO-2010 to study the safety, tolerability,
pharmacokinetics and pharmacodynamics of
MDCO-2010 in
patients undergoing elective coronary artery bypass graft
surgery, or CABG surgery. CABG surgery is a procedure in which
surgeons bypass a blockage in the patients artery by
grafting a vein to the artery on both sides of the blockage to
restore blood flow around the obstruction. We plan to submit an
investigational new drug application, or IND, for MDCO-2010 to
the FDA in 2011. Subject to the successful completion of our
current Phase 2 trial and the IND becoming effective, we
plan to commence a Phase 2 clinical trial of MDCO-2010 in
the United States in 2012 in patients undergoing high risk
cardiothoracic surgery.
MDCO-216. MDCO-216, a novel biologic, is a
naturally occurring variant of a protein found in human
high-density lipoprotein, or HDL, that we licensed from Pfizer
Inc., or Pfizer, in December 2009. Based upon non-clinical
studies and a Phase 1/2 clinical trial of MDCO-216 conducted
prior to our license of this product candidate, we believe that
MDCO-216 has the potential to reverse atherosclerotic plaque
development and reduce the risk of coronary events in patients
with ACS. In 2010, we completed a technology transfer program
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with Pfizer related to improved manufacturing methodologies
developed by Pfizer since the Phase 1/2 trial. Using these new
methodologies, we manufactured MDCO-216 on a small scale for use
in preclinical studies of MDCO-216. We plan to commence a Phase
1 study of MDCO-216 in 2011 and to use these new methologies to
manufacture product for the trial.
Ready-to-Use Argatroban. In the third quarter
of 2009, we licensed marketing rights in the United States and
Canada to an intravenous, ready-to-use formulation of Argatroban
being developed by Eagle Pharmaceuticals, Inc., or Eagle, a
specialty pharmaceutical company. Argatroban, which is currently
marketed by GlaxoSmithKline in a concentrated formulation, is
approved as an anticoagulant for prophylaxis or treatment of
thrombosis in patients with or at risk for heparin induced
thrombocytopenia, or HIT, and for patients with or at risk for
HIT undergoing PCI. Eagle submitted an NDA for the ready-to-use
formulation of Argatroban to the FDA in 2008. In January 2010,
Eagle received a complete response letter from the FDA requiring
Eagle to submit a new Chemistry, Manufacturing and Control
section of the NDA that is complete, up-to-date and corresponds
to the ready-to-use formulation of Argatroban. In January 2011,
Eagle submitted to the FDA a response letter, including a new
Chemistry, Manufacturing and Control section, to address the
issues raised in FDAs complete response letter.
We market and sell Angiomax and, prior to the recalls and
related supply issues, marketed and sold Cleviprex, in the
United States with a sales force that, as of February 15,
2011, consisted of 110 representatives, which we refer to as
engagement partners, and engagement managers, experienced in
selling to hospital customers. In Europe, we market and sell
Angiox with a sales force that, as of February 15, 2011,
consisted of 42 engagement partners and engagement 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 outside the United States. We believe that by
establishing operations in Europe for Angiox, we will be
positioned to commercialize our pipeline of acute and intensive
care product candidates in Europe, if and when they are approved.
Angiomax
Overview
We licensed Angiomax from Biogen Idec, Inc., or Biogen Idec, in
1997 and have exclusive license rights to develop, market, and
sell Angiomax worldwide. We received our first marketing
approval for Angiomax from the FDA in December 2000 and our
first marketing approval for the European Union in September
2004. We market Angiomax in the United States for use as an
anticoagulant in combination with aspirin in patients with
unstable angina undergoing PTCA and for use in patients
undergoing PCI, including patients with or at risk of HIT/HITTS.
In Europe, we market Angiox for use as an anticoagulant in
patients undergoing PCI, for use in adult patients with ACS, and
for the treatment of STEMI patients undergoing primary PCI. Our
approval for ACS in Europe includes specifically patients with
unstable angina or non-ST segment elevation myocardial
infarction planned for urgent or early intervention when used
with aspirin and clopidogrel. Angiomax is also approved for sale
in Australia, Canada and a number of countries in Central
America, South America and the Middle East for PCI indications
similar to those approved by the FDA. In addition, Angiomax is
approved in Canada for the treatment of patients with HIT/HITTS
undergoing cardiac surgery.
We continue to develop Angiomax and intend to seek market
approval of Angiomax for use in additional patient populations,
including patients with structural heart disease, patients
undergoing peripheral angioplasty, carotid angioplasty and
cardiovascular surgery and patients with or at risk of HIT/HITTS.
We market Angiomax to hospital systems, individual hospitals and
health care providers, including interventional cardiologists in
cardiac catheterization laboratories. In evaluating our
operating performance, we focus on use of Angiomax by existing
hospital customers and penetration into new hospitals. Both of
these efforts are critical elements of our ability to increase
market share and revenue. In 2010, our net sales of Angiomax
totaled approximately $436.9 million, including
approximately $412.3 million of net sales in the United
States.
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To support the commercialization and distribution efforts of
Angiomax, we have developed, and continue to develop, our
business infrastructure outside the United States, including
forming subsidiaries, obtaining licenses and authorizations
necessary to distribute Angiomax, hiring personnel and entering
into third-party arrangements to provide services, such as
importation, packaging, quality control and distribution. We
currently have operations in Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Italy, the
Netherlands, New Zealand, Norway, Poland, Spain, Sweden,
Switzerland and the United Kingdom and are developing our
business infrastructure in Brazil, India, Turkey, Russia and
Eastern Europe. We believe that by establishing operations
outside the United States for Angiomax, we will be positioned to
commercialize Cleviprex and our products in development, if and
when they are approved outside the United States.
The principal U.S. patent covering Angiomax, the 404
patent, was set to expire in March 2010, but has been extended
under the Hatch-Waxman Act following our litigation against PTO,
the FDA and HHS. We had applied, under the Hatch-Waxman Act, for
an extension of the term of the 404 patent. 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 HHS seeking to set aside the denial of our
application to extend the term of the 404 patent. On
August 3, 2010, the federal district court granted our
motion for summary judgment and ordered the PTO to consider our
patent term extension application timely filed. The period for
the government to appeal the courts August 3, 2010
decision expired without government appeal. However, on
August 19, 2010, APP filed a motion to intervene for the
purpose of appeal in our case against the PTO, the FDA and HHS.
On September 13, 2010, the federal district court denied
APPs motion. APP has appealed the denial of its motion, as
well as the federal district courts August 3, 2010
order. This appeal is pending. In addition, APP or other third
parties could challenge the August 3, 2010 order in
separate proceedings.
Following the expiration of the governments appeal period,
the FDA determined the applicable regulatory review period for
Angiomax. Based on the FDAs determination, we believe that
application of the PTOs patent term extension formula
would result in the extension of the patent term of the
404 patent to December 15, 2014. However, the PTO has
not yet determined the length of any patent term extension. As a
result of our study of Angiomax in the pediatric setting, we are
entitled to a six-month period of exclusivity following
expiration of the 404 patent.
In the second half of 2009, the PTO issued to us
U.S. Patent No. 7,528,727, or the 727 patent,
and U.S. Patent No. 7,598,343, or the 343
patent, covering a more consistent and improved Angiomax drug
product and the processes by which it is made. The 727
patent and the 343 patent are set to expire in July 2028.
We have filed suits against pharmaceutical companies which have
filed abbreviated new drug applications, or ANDAs, with the FDA
for generic versions of Angiomax, alleging infringement of the
727 and 343 patents.
Our litigation with the PTO, the FDA and HHS, APPs efforts
to appeal the August 3, 2010 decision and the patent
infringement suits are described in more detail in Item 3
of this annual report.
Medical
Need
Arterial thrombosis is a condition involving the formation of
blood clots in arteries that is associated with life-threatening
conditions, such as ischemic heart disease, peripheral vascular
disease and stroke. Anticoagulation therapy is used for the
treatment of arterial thrombosis. Anticoagulation therapy
attempts to modify actions of the components in the blood system
that lead to the formation of blood clots and is usually started
immediately after a diagnosis of blood clots, or after risk
factors for clotting are identified. Anticoagulation therapy
typically involves the use of drugs to inhibit one or more
components of the clotting process and reduces the risk of clot
formation. There are three main areas of the hospital where
anticoagulants are used for acute treatment of arterial
thrombosis:
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the cardiac catheterization laboratory, where coronary
angioplasties are performed;
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the emergency department, where patients with ACS, including
chest pain and heart attacks, also known as myocardial
infarctions or MIs, are initially treated; and
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the operating room, where valve replacement and repair surgery
and CABG surgery are performed.
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Coronary angioplasty procedures inherently increase the risk of
clots forming in the coronary arteries or in other arteries of
the body. Clots form as the body reacts to the manipulation of
the artery as a result of, for example, the use of catheters and
other devices in connection with the angioplasty procedure.
Accordingly, anticoagulation therapy is routinely administered
to patients undergoing angioplasty to slow the clotting process
and avoid unwanted clotting in the coronary artery and the
potential growth of clots or the movement of a clot or portions
of a clot downstream in the blood vessels to new sites.
ACS patients are subject to chest pain that results from a range
of conditions, from unstable angina to acute myocardial
infarction, or AMI. Unstable angina is caused most often by a
rupture of plaque on an arterial wall that results in clot
formation and ultimately decreases coronary blood flow but does
not cause complete blockage of the artery. Unstable angina is
often medically managed in the emergency department with
anticoagulation therapy. AMI occurs when coronary arteries,
which supply blood to the heart, become completely blocked by a
clot. AMI patients are routinely treated with anticoagulants and
are increasingly undergoing angioplasty as a primary treatment
to unblock clogged arteries.
Many of the most severe ACS patients undergo CABG surgery. A
high level of anticoagulation is necessary in on-pump cardiac
surgery during the period of cardiopulmonary bypass in order to
prevent clots from forming in the machine used in such surgery
or in the patients cardiovascular system. Anticoagulation
is also necessary in off-pump cardiac surgery to prevent clots
from forming in the patients cardiovascular system as a
result of the manipulation of coronary arteries and the heart.
Heparin has historically been used in the United States as an
anticoagulant in the treatment of arterial thrombosis. However,
heparin can precipitate the immune response HIT/HITTS and its
pharmacokinetics are non-linear, making it less predictable and
making standardized dosing difficult. In some patients,
especially higher risk ACS patients, either higher doses of
heparin or adjunct therapy, such as glycoprotein IIb/IIIa, or GP
IIb/IIIa, inhibitors, are needed, which can result in higher
rates of bleeding. These shortcomings are significant because
when anticoagulation is insufficient in patients being treated
for ischemic heart disease, the consequences can include death,
AMI or revascularization. Revascularization occurs when a
treated artery is blocked again and requires re-opening. In
addition, because anticoagulation therapy reduces clotting, it
also may cause excessive bleeding.
Clinical
Development
We have invested significantly in the development of clinical
data on the mode of action and clinical effects of Angiomax in
procedures including coronary angioplasty and stenting. In our
investigations, we have compared Angiomax to various competitive
products, including heparin and enoxaparin, a low-molecular
weight heparin, which until relatively recently were the only
injectable anticoagulants for use in coronary angioplasty, GP
IIb/IIIa inhibitors, and combinations of drugs including heparin
or enoxaparin and GP IIb/IIIa inhibitors. In total, we have
tested Angiomax against heparin or enoxaparin or combinations of
drugs including heparin or enoxaparin and GP IIb/IIIa inhibitors
in 12 comparative PCI and ACS trials. In these trials, Angiomax
use resulted in rates of complications, such as MI, that were
comparable to the comparator drugs in the trials while resulting
in fewer bleeding events, including a reduction in the need for
blood transfusion, as compared to the comparator drugs in the
trials. In addition, in these trials, the therapeutic effects of
Angiomax were shown to be more predictable than the therapeutic
effects of heparin.
REPLACE-2. We conducted the REPLACE-2 clinical
trial in 2001 and 2002 to evaluate Angiomax as the foundation
anticoagulant for angioplasty within the context of modern
therapeutic products and technologies, including coronary
stents. We designed the trial, which involved
6,002 patients in 233 clinical sites, to evaluate whether
the use of Angiomax with provisional use of GP IIb/IIIa
inhibitors provides clinical outcomes relating to rates of
ischemic and bleeding events that are the same as, or
non-inferior to, low-dose weight- adjusted heparin plus GP
IIb/IIIa inhibitors. The primary objective of REPLACE-2 was to
demonstrate non-inferiority to heparin plus a GP IIb/IIIa
inhibitor for the quadruple composite effectiveness criteria, or
endpoint, of death, MI, urgent revascularization and major
bleeding. The secondary objectives of REPLACE-2 included
non-inferiority to heparin plus a GP IIb/IIIa inhibitor for a
triple composite endpoint of death, MI
7
and urgent revascularization. We assessed these outcomes, using
formal statistical tests for non-inferiority. Based on
30-day,
6-month and
12-month
patient
follow-up
results, Angiomax met all primary and secondary objectives for
the study. In addition, major hemorrhage was reported
significantly less frequently in the Angiomax with provisional
GP IIb/IIIa inhibitor arm compared to the heparin plus a GP
IIb/IIIa inhibitor arm.
ACUITY. In 2004 and 2005, we conducted a
13,819 patient Phase 3 trial, called ACUITY, which involved
Angiomaxs use in patients presenting to the emergency
department with ACS. In ACUITY, we tested the safety and
effectiveness of Angiomax, as compared to heparin plus a GP
IIb/IIIa inhibitor, at a lower dose than that which was then
used in PCI patients. If an ACS patient treated with Angiomax in
the emergency department subsequently underwent PCI, the dose
was increased to provide the level of anticoagulation needed to
perform the PCI. Outcomes were also measured among ACS patients
that did not undergo PCI, namely those patients who were
medically managed or who underwent CABG surgery. All of these
emergency department ACS patients were randomized into one of
three arms:
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a control arm, Arm A, providing for the administration of
heparin or enoxaparin with GP IIb/IIIa inhibitors;
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a second arm, Arm B, providing for the administration of
Angiomax with planned use of GP IIb/IIIa inhibitors; and
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a third arm, Arm C, providing for the administration of Angiomax
alone and permitting use of GP IIb/IIIa inhibitors only in
selected cases involving ischemic events during PCI.
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The 30-day
patient results from the ACUITY trial, which were published in
the New England Journal of Medicine in November 2006 by the
principal investigators, showed that Angiomax met all
pre-specified primary and secondary objectives for the ACUITY
study. Specifically, in Arm C, the Angiomax monotherapy arm,
Angiomax was effective and reduced the risk of major bleeding by
47% compared to the control arm, Arm A. In the Angiomax
combination arm, Arm B, the Angiomax and GP IIb/IIIa combination
was as effective, with similar reductions in bleeding, as the
control arm. In December 2007, the one-year ACUITY results,
which confirmed the ACUITY
30-day
results, were published in the Journal of the American Medical
Association. A subgroup analysis of the ACUITY trial, which was
reported in the Journal of the American College of Cardiology in
May 2008, revealed that in the trial switching to Angiomax after
pre-treatment with heparin resulted in comparable ischemic
outcomes and an approximately 50% reduction in major bleeding
compared to consistent heparin therapy plus routine GP IIb/IIIa
inhibitor for ACS patients undergoing early invasive treatment.
Based on the results of our Phase 3 ACUITY trial, in December
2006 we submitted an application to the European Agency for
Evaluation of Medical Products, or EMEA, now the European
Medicines Agency, or EMA, seeking approval of an additional
indication for Angiomax for the treatment of patients with ACS.
In July 2007 we submitted a supplemental new drug application,
or sNDA, to the FDA seeking approval of an additional indication
for Angiomax for an additional dosing regimen in the treatment
of ACS initiated in the emergency department. In January 2008,
the EMEA approved our application and authorized the use of
Angiox in adult patients with ACS, when used with aspirin and
clopidogrel, including specifically patients with unstable
angina or non-ST segment elevation myocardial infarction planned
for urgent or early intervention. In May 2008, we received a
non-approvable letter from the FDA with respect to the Angiomax
sNDA. In its letter, the FDA indicated that the basis of its
decision involved the appropriate use and interpretation of the
non-inferiority trials we relied upon in support of our sNDA,
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.
HORIZONS AMI. We supported an
investigator-initiated trial called HORIZONS AMI that was
conducted from 2005 to 2007 to study Angiomax use in patients
with STEMI undergoing PCI. The trial involved more than
3,600 patients presenting with STEMI undergoing a primary
PCI strategy in hospitals in 11 countries and was designed to
evaluate whether Angiomax with provisional use of GPIIb/IIIa
inhibitors was as safe and effective as heparin with planned use
of GPIIb/IIIa inhibitors in PCI patients. The two primary
endpoints of the trial were major bleeding and net adverse
clinical events, a composite of major bleeding and major adverse
cardiovascular events, including death, reinfarction, stroke or
ischemic target vessel
8
revascularization. The principal secondary endpoint was major
adverse cardiovascular events. The results of HORIZONS AMI,
which were reported in the New England Journal of Medicine in
May 2008, showed that treatment with Angiomax in the trial, as
compared with the heparin arm of the trial, resulted in a
statistically significant reduction in the incidence of net
adverse clinical events by 24%, major bleeding by 40% and
cardiac-related mortality by 38%. In addition, treatment with
Angiomax demonstrated comparable rates of major adverse cardiac
events. In the one-year
follow-up
data from the HORIZONS AMI trial, Angiomax showed a
statistically significant reduction in the incidence of
cardiac-related mortality by 43%; all-cause mortality by 31%;
major bleeding by 39%; and net adverse clinical events by 16%.
In this data, there was no difference in rates of major adverse
cardiac events between Angiomax and the comparator drug
therapies. We obtained approval in the European Union for the
use of Angiox for the treatment of STEMI patients undergoing
primary PCI on the basis of the HORIZONS AMI trial results.
Additional
Development
We continue to develop Angiomax and intend to seek market
approval of Angiomax for use in additional patient populations,
including patients with structural heart disease, patients
undergoing peripheral angioplasty, carotid angioplasty and
cardiovascular surgery and patients with or at risk of HIT/HITTS.
EUROMAX. We are currently conducting a Phase 4
clinical trial of Angiomax, which we refer to as the EUROMAX
trial, to assess whether the early administration of Angiox in
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 are conducting the
trial at sites in ten European countries and plan to enroll
approximately 3,680 patients. We commenced enrollment for
EUROMAX in Germany in March 2010.
EUROVISION. In 2009, we initiated a registry
in Europe called EUROVISION, which was designed to study
utilization patterns of patients receiving Angiox and collect
descriptive outcome and safety data of patients. We conducted
the study as an open label trial at 70 sites in six European
countries. In October 2010, we completed enrollment of the study
with 2,022 patients. We are currently evaluating the data from
this study and expect to announce results in the first half of
2011.
HIT/HITTS Patients. In December 2005, we
submitted an application to the FDA for approval to market
Angiomax in patients with or at risk of HIT/HITTS undergoing
cardiac surgery after completing four studies in our Phase 3
clinical development program in cardiac surgery. In October
2006, we received a non-approvable letter from the FDA in
connection with this application. In the letter, the FDA stated
that it did not consider the data that we submitted in support
of the application adequate to support approval for this
indication because the FDA did not consider the evidence used to
qualify patients for inclusion in the trials that formed the
basis for our application as a persuasive indicator for the risk
of HIT/HITTS. We are evaluating potential next steps. In July
2007, Canadian health authorities approved the use of Angiomax
in Canada for the treatment of patients with HIT/HITTS
undergoing cardiac surgery.
Cleviprex
Overview
We licensed Cleviprex in March 2003 from AstraZeneca AB, or
AstraZeneca. Under the terms of the agreement, we have exclusive
license rights to develop, market, and sell Cleviprex worldwide.
We received marketing approval for Cleviprex from the FDA in
August 2008 for the reduction of blood pressure when oral
therapy is not feasible or not desirable. Cleviprex was approved
for sale in New Zealand in 2009 and in Australia and Switzerland
in 2010 for indications similar to those approved by the FDA.
During the first quarter of 2009, we submitted to member states
of the European Union, pursuant to the European Unions
decentralized procedure, MAAs for Cleviprex for the reduction of
blood pressure when rapid and predictable control is required.
We have also submitted an application for approval to market
Cleviprex in Canada.
Following approval in the United States, we marketed Cleviprex
to anesthesiology/surgery, acute and intensive care and
emergency department practitioners in the United States,
primarily for use in cardiovascular
9
surgery. In December 2009 and March 2010, we conducted voluntary
recalls of manufactured lots of Cleviprex due to the presence of
visible particulate matter at the bottom of some vials. As a
result, we have not been able to supply the market with
Cleviprex and have not sold Cleviprex since the first quarter of
2010. We have cooperated with the FDA and our contract
manufacturer to remedy the problem at the manufacturing site
that resulted in the recalls. Our contract manufacturer made
manufacturing process improvements, including enhanced
filtration and equipment maintenance, to assure product quality.
We expect to begin to resupply the market with Cleviprex and
begin selling Cleviprex in the first half of 2011. We have
resumed our efforts to obtain marketing approval of Cleviprex
outside the United States. In addition, we expect that the
clinical studies of Cleviprex that were being conducted by
hospitals and third-party researchers and were discontinued in
late 2009 as a result of the supply issues will be resumed in
the first half of 2011.
Prior to the recalls, we had added Cleviprex to more than 400
hospital formularies in the United States and were marketing
Cleviprex to anesthesiology/surgery, acute and intensive care
and emergency department practitioners in the United States with
the same sales force that sells Angiomax in the United States.
When we re-launch Cleviprex, we plan to focus the marketing of
Cleviprex on neurocritical care, including intracranial bleeding
and acute ischemic stroke requiring blood pressure control. We
plan to target certified stroke centers that specialize in the
treatment of neurocritical care patients, because the stroke
market is highly concentrated around these specialized centers.
At these stroke centers patients require individualized rapid
and precise control of blood pressure as they start and continue
their rehabilitation from stroke. We believe Cleviprex offers
the rapid and precise control necessary to treat neurocritical
care patients.
Medical
Need
Increases in blood pressure, which are sometimes rapid and
acute, often occur in patients treated in the acute and
intensive care setting. Hospital physicians administer
intravenous antihypertensive drugs to control high blood
pressure, or acute hypertension, because prolonged severe
hypertension is known to cause irreversible damage to the brain,
heart, kidneys and blood vessels. Similarly, blood pressure that
is too low is also known to cause organ dysfunction and
potential damage, particularly ischemia of the heart and brain.
As a result, physicians strive to control blood pressure within
a range to ensure safe treatment of the patient.
During the twelve-month period ending October 31, 2008,
patients made an estimated 3.3 million hospital visits in
the United States for conditions requiring treatment with an
intravenous antihypertensive. These patients include patients
presenting to the emergency department and patients undergoing
surgery. Of these patients, approximately:
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1.7 million medically managed patients were administered
intravenous antihypertensives;
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1.1 million surgical intervention patients were
administered intravenous antihypertensives in connection with
surgical procedures, and of these, approximately
475,000 patients were treated with intravenous
antihypertensives in cardiac and vascular surgery; and
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556,000 all other patients were administered
intravenous antihypertensives.
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In 2007, we surveyed 259 cardiologists, neurologists, surgeons
and other acute and intensive care specialists to describe the
features of an intravenous antihypertensive that they would
value, along with the benefits they would expect to achieve.
Approximately 90% of these physicians identified rapid onset,
efficacy, few side effects and easy titration as important
features that guide their selection of an intravenous
antihypertensive medication.
Cleviprex belongs to a well-known class of drugs, called
intravenous calcium channel blockers, which are used to control
acute high blood pressure. Cleviprex acts by selectively
relaxing the smooth muscle cells that line small arteries,
resulting in widening of the artery and reduction of blood
pressure. However, unlike most other calcium channel blockers,
Cleviprex is metabolized in the blood and tissue and does not
accumulate in the body, which results in an ultra-short
half-life. We believe that Cleviprex is well suited for lowering
blood pressure in the acute and intensive care setting because
its rapid onset and offset effect, its selective activity on
arteries and its ability to be cleared from the body independent
of organ function provide rapid, reliable and
10
predictable blood pressure control with ease of use and a
favorable safety profile. In addition, due to its mode of
metabolism, we believe that Cleviprex is suitable for a wide
range of patients.
We believe that Cleviprex is particularly useful in the
treatment of patients suffering from stroke. In 2010, we
conducted research to understand physicians needs
regarding the treatment of acute ischemic stroke and
intracranial bleeding patients. The research indicated that
improved speed and control of blood pressure control were the
principal areas of treatment that required improvement.
Clinical
Development
We developed Cleviprex in a clinical trial program comprised of
six Phase 3 clinical trials. The results of these trials formed
the basis of our applications for marketing approval.
ESCAPE. We conducted two Phase 3 efficacy
clinical trials of Cleviprex in 2003 to 2004, which we refer to
as the ESCAPE trials, to evaluate the effectiveness of Cleviprex
in approximately 152 patients in controlling blood pressure
before and after cardiac surgery compared to a placebo control.
The protocol-defined objective for both trials, as measured by
rates of treatment success was defined as at least a 15%
reduction in blood pressure within 30 minutes without the need
to use an alternate drug. Cleviprex met this objective in both
trials.
ECLIPSE. We conducted three Phase 3 clinical
trials, which we refer to as the ECLIPSE trials, from 2003 to
2006 to evaluate the safety of Cleviprex in approximately
1,500 patients in comparison to sodium nitroprusside,
nicardipine and nitroglycerine, three leading marketed blood
pressure-reducing agents, before, during and following cardiac
surgery. The protocol-defined safety objectives for all three
trials included primary endpoints measured by the incidences of
death, stroke, myocardial infarction and renal dysfunction, and
secondary objectives measuring blood pressure control. Cleviprex
met these safety objectives in all three trials.
VELOCITY. We conducted our sixth Phase 3
clinical trial of Cleviprex, which we refer to as the VELOCITY
trial, from 2006 to 2007 to evaluate Cleviprex in over
100 patients with acute severe hypertension in the
emergency room and acute and intensive care unit. The primary
efficacy endpoint was the percentage of patients in whom blood
pressure was successfully reduced to the target blood pressure
range within 30 minutes of initiating therapy. Cleviprex met the
primary efficacy endpoint of this study, demonstrating a rapid
reduction in blood pressure, to the specified blood pressure
range, in over 90% of patients within 30 minutes with a very low
incidence of overshoot. Subset analyses, which were presented at
the annual meeting of the Society of Clinical Care Medicine, or
SCCM, in February 2008, further demonstrated Cleviprexs
safety and efficacy in high risk patients, such as those with
heart and renal failure. According to such subset analyses, in
this study, Cleviprex rapidly achieved and maintained blood
pressure control in patients with renal dysfunction and patients
with acute heart failure.
We have also conducted Phase 4 trials of Cleviprex.
ACCELERATE. Our ACCELERATE trial, which we
conducted from 2008 to 2010, evaluated the efficacy and safety
of intravenous infusion of Cleviprex for the treatment of acute
hypertension in patients with intracerebral hemorrhage. The
final data from this trial were presented in February 2011 at
the AHA International Stroke Conference, and showed that:
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target blood pressure was achieved in a median of 5.5 minutes;
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changes in hematoma volume in patients with intracerebral
hemorrhage after blood pressure reduction and stroke scores in
the time period studied were minimal;
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no meaningful increases or other clinically meaningful changes
were observed in intracranial pressure;
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100% of patients achieved target blood pressure within 30
minutes of Cleviprex initiation;
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97% of patients did not need additional or alternative
intravenous antihypertensives during the initial
30-minute
period of Cleviprex therapy to reach the target blood
pressure; and
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there was no need for supplemental therapy to raise blood
pressure in the initial
30-minute
period of Cleviprex therapy.
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SPRINT. Our SPRINT trial, which we conducted
from 2008 to 2009, evaluated the pharmacokinetics and
pharmacodynamics of a bolus dosing regimen of Cleviprex for the
management of blood pressure in cardiac surgery patients. Data
from this trial demonstrated that the administration of
Cleviprex as an intravenous bolus dose effectively decreased
arterial blood pressure in cardiac surgery patients in a
dose-proportional manner.
PRONTO. Our PRONTO trial, which we commenced
in 2009, is evaluating the efficacy and safety of an intravenous
infusion of Cleviprex as compared with standard-of-care
intravenous antihypertensives for blood pressure lowering in
patients with acute heart failure and elevated blood pressure.
We expect to enroll approximately 140 patients in this clinical
trial.
Additional Development. Prior to the recalls,
numerous clinical studies of Cleviprex were being conducted by
hospitals and third-party researchers in areas such as
intracranial bleeding, major cardiovascular surgery and
neurocritical care, along with health economics analyses. We
were also supporting observational studies which include the
assessment of acute severe hypertension treatment practices,
including our MERCURY trial, a retrospective observational
registry, studying the use and impact of Cleviprex therapy
initiated in the emergency department in the management of
patients with acute blood pressure elevations, assessed through
the end of the initial hospitalization. In late 2009, these
clinical studies were discontinued as a result of our supply
issues. As we resupply the market with drug product and resume
selling Cleviprex, we expect that these trials will be resumed.
Cangrelor
Overview
We exclusively licensed cangrelor in December 2003 from
AstraZeneca. Under the terms of our agreement with AstraZeneca,
we have exclusive license rights to develop, market, and sell
cangrelor worldwide, excluding Japan, China, Korea, Taiwan and
Thailand. We are developing cangrelor for use as an intravenous
antiplatelet agent to prevent platelet activation and
aggregation that leads to thrombosis in the acute and intensive
care setting of the cardiac catheterization laboratory to
address unmet medical needs in patients undergoing PCI.
Medical
Need
In patients undergoing PCI, the use of antiplatelet agents to
block platelet activation at the time of the PCI and reduce the
risk of clot formation is considered important therapy based on
several studies of oral platelet inhibitors that have
demonstrated better patient outcomes in coronary angioplasty.
There is currently no intravenous drug that primarily inhibits
platelet activation. One of the leading oral platelet inhibitors
is clopidogrel, which, like cangrelor, acts by blocking the
P2Y12
receptor, which is a receptor involved in platelet aggregation.
Clopidogrel is an irreversible inhibitor and is commonly
administered at a high dose by giving patients four to eight
oral tablets at the time of PCI. This practice is known as
pre-loading. Although clopidogrel pre-loading has been shown to
improve ischemic outcomes in coronary angioplasty, there are
several efficacy, safety and convenience issues with the use of
this agent in acute and intensive care practice:
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Clopidogrel requires liver metabolism to form the active agent
which metabolism can be influenced by other medications;
therefore, the effect of clopidogrel can be delayed and variable.
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There does not appear to be a consistent relationship between
increased dosage of clopidogrel and intended effect across
different patient groups.
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The inhibition of platelet function is irreversible, meaning the
agent remains bound to receptors for the life of the platelet,
which is typically five to ten days. This may impede patient
management and treatment flexibility, as well as increase the
potential for bleeding, especially if a patient requires other
interventions such as cardiac surgery, which would then be
delayed for days awaiting the generation
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and release of new platelets from the bone marrow. As a result,
physicians are reluctant to administer a long acting or
irreversible agent such as clopidogrel to patients with chest
pain before the treatment decision to perform PCI has been made.
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Oral agents like clopidogrel are difficult to administer in the
acute and intensive care setting because they need to be
swallowed by patients who may have received light anesthesia.
This is especially true when there is a need for patients to
swallow multiple tablets in a restricted period of time.
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Based on input from our hospital customers in the cardiac
catheterization laboratory, we believe that the combination of
the reduction in ischemic events, including stent thrombosis,
through platelet inhibition and the acute and intensive care
limitations of current oral therapy have created a need for an
injectable platelet inhibitor that acts quickly and is cleared
from the bloodstream rapidly.
In order to minimize bleeding complications, patients undergoing
surgery, including CABG surgery, are taken off antiplatelet
therapy five to 10 days prior to surgery. However, this
alone significantly increases the risk that during the period
prior to the surgical procedure or during the surgical procedure
the patient will develop clots around the preexisting stent.
Currently, physicians face the difficult choice of discontinuing
antiplatelet therapy prior to surgery and risking a potential
ischemic event in the unprotected perioperative period or
delaying surgery until the time at which the antiplatelet
therapy is no longer required. There are no short-acting
platelet inhibitors available that allow maintenance of platelet
inhibition before surgery without increasing bleeding
complications at the time of surgery. We believe that an ultra
short-acting reversible platelet inhibitor, which would maintain
platelet inhibition at target levels and allow rapid restoration
of platelet function after discontinuation may allow patients to
undergo surgical procedures without increasing the risk of
bleeding complications while maintaining ischemic protection. We
are developing cangrelor to address this market.
Clinical
Development
CHAMPION Program. In May 2009, we discontinued
enrollment in our Phase 3 clinical trial program for cangrelor.
This program consisted of two trials, CHAMPION-PCI and CHAMPION
PLATFORM, which we designed to evaluate cangrelors
effectiveness and safety in preventing ischemic events in
patients who require PCI. In these trials, cangrelor was
compared to the use of eight 75 mg clopidogrel tablets
(600 mg). The primary composite endpoint of the
CHAMPION-PCI trial measured death, MI, or urgent
revascularization at 48 hours after the procedure and the
CHAMPION-PLATFORM trial measured the composite endpoint of
death, MI, or urgent revascularization of patients requiring
PCI. Approximately 14,000 patients in the aggregate,
reflecting approximately 98% of targeted patients in CHAMPION
PCI and 84% of targeted patients in CHAMPION PLATFORM, had been
enrolled in these trials when we discontinued enrollment after
the independent Interim Analysis Review Committee for the
program reported to us that the efficacy endpoints of the trial
program would not be achieved.
In November 2009, the results of the CHAMPION trials were, in
parallel, published in two New England Journal of Medicine
papers and presented at the American Heart Association
Scientific Sessions 2009. Cangrelor did not show superiority to
clopidogrel in the pre-specified primary endpoints comprising
death, MI or urgent revascularization, at 48 hours.
However, a post-hoc analysis of the data in patient subsets and
combinations determined as part of this analysis provided
evidence of pharmacological effects, clinical effectiveness and
suitable safety in patients undergoing PCI.
Following discussions with the FDA, leading experts in ischemic
heart disease and AstraZeneca, in October 2010 we commenced the
PHOENIX Phase 3 clinical trial of cangrelor. We initially expect
to enroll approximately 10,800 patients, and may enroll up
to a total of 15,000 patients in the trial. The trial is a
double-blind parallel group randomized study, which compares
cangrelor to clopidogrel administered at a high dose by giving
patients four to eight oral tablets of clopidogrel tablets as
soon as possible after it is determined that the patient will
undergo PCI. This high dose of clopidogrel is the current
standard of care for patients undergoing PCI. The primary
endpoint of the trial is measured by the composite incidence of
death, MI, ischemic-driven revascularization or stent
thrombosis. In this study, as compared to the CHAMPION program,
we changed the process of endpoint evaluation to ensure that
only the MIs which occur after randomization
13
are counted for the purpose of the endpoints. In addition,
patients who have already received clopidogrel are excluded from
the trial.
BRIDGE. In the fourth quarter of 2008, we
commenced a clinical trial, which we refer to as the BRIDGE
trial, to assess the use of prolonged cangrelor infusion as a
platelet inhibiting bridge for patients who need to discontinue
clopidogrel before cardiac surgery. The BRIDGE study aims to
establish the dosage of cangrelor that achieves greater than or
equal to 60% inhibition of platelet aggregation for up to seven
days. We expect to complete enrollment in the BRIDGE trial in
2011.
Oritavancin
Overview
Oritavancin is an investigational intravenous antibiotic that we
are developing for the treatment of serious gram-positive skin
and skin structure infections. It is synthetically modified from
a naturally occurring compound. Oritavancin was originally
discovered and developed by Eli Lilly and Company, or Eli Lilly,
to combat a broad spectrum of gram-positive pathogens in
response to the emergence of resistance to vancomycin, the most
commonly prescribed antibiotic for resistant gram-positive
infections. We obtained rights to oritavancin as a result of our
acquisition of Targanta in February 2009. We have exclusive
rights to develop, market, and sell oritavancin worldwide under
a license agreement with Eli Lilly.
In February 2008, Targanta submitted an NDA to the FDA seeking
to commercialize oritavancin for the treatment of ABSSSI,
including infections caused by methicillin-resistant
staphylococcus aureus, or MRSA. In December 2008, the FDA issued
a complete response letter to Targanta indicating that the NDA
could not be approved in its present form. In its letter, the
FDA stated that the NDA did not contain sufficient evidence to
demonstrate the safety and efficacy of oritavancin for treatment
of ABSSSI. In particular, the FDA stated that while one of the
two Phase 3 trials on which Targantas submission was based
provided evidence of activity of oritavancin, it did not provide
substantial evidence alone or in combination with the second,
smaller Phase 3 clinical trial, to support the efficacy and
safety of oritavancin. In addition, the FDA stated that in the
larger trial called ARRI, oritavancin did not appear to perform
well in patients with MRSA and that in the smaller trial called
ARRD, the number of patients with MRSA was insufficient to
address the performance of oritavancin in treating those
patients. The FDA also referenced several safety findings from
the trials in its letter, including the higher rate of study
discontinuations for lack of efficacy among oritavancin-treated
patients, the greater number of oritavancin-treated patients who
died or had a serious adverse event of sepsis, septic shock and
related events, and the greater number of oritavancin-treated
patients who experienced adverse events of osteomyelitis and
sepsis, in each case as compared to the patients treated with
vancomycin and the oral antibiotic cephalexin in the trial. The
FDA indicated that it would be necessary to perform an
additional adequate and well-controlled study to demonstrate the
safety and efficacy of oritavancin in patients with ABSSSI.
In June 2008, Targanta submitted an MAA to the EMA seeking
approval of oritavancin for the treatment of complicated skin
and soft tissue infections, or cSSTI, caused by methicillin
susceptible and resistant gram-positive bacteria. We withdrew
this MAA in August 2009 after the EMA expressed concerns similar
to those raised by the FDA in its complete response letter.
Following our acquisition of Targanta, we worked with the FDA to
design a clinical trial responsive to the issues raised in the
FDAs complete response letter. As a result, in the fourth
quarter of 2010, the FDA notified us under the SPA process that
the design and planned analysis of the Phase 3 clinical trials
we proposed to conduct for oritavancin in patients with ABSSSI
adequately addressed the objectives necessary to support
regulatory submission. Based on that notification, in the fourth
quarter of 2010, we commenced the SOLO I and SOLO II Phase 3
clinical trials of oritavancin to evaluate the efficacy and
safety of a single-dose oritavancin as compared to multiple
doses of vancomycin for the treatment of patients with ABSSSI.
The ARRI and ARRD trial evaluated multiple dose administration
of oritavancin. The SOLO I and SOLO II trials are identical
multicenter, double-blind, randomized clinical studies in which
a single 1,200 mg intravenous dose of oritavancin is
compared with seven to 10 days of intravenous vancomycin
treatment. We plan to enroll
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approximately 1,000 patients in each trial and to evaluate
oritavancins non-inferiority to vancomycin using a primary
efficacy endpoint that is a composite of resolution of fever and
cessation of spread of visible infection without the use of
rescue antibiotics at 48 to 72 hours following initiation
of treatment. Under the protocols for the trials, if the
non-inferiority primary endpoints of both trials are met, we
will also assess the superiority of oritavancin to vancomycin
with respect to the primary efficacy endpoint.
Medical
Need
Although there are a number of approved antibiotics for the
treatment of gram-positive infections, these antibiotics have
important shortcomings, including:
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bacteria are increasingly becoming resistant to one or more of
these existing antibiotics;
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some of these antibiotics, referred to as bacteriostatic drugs,
solely inhibit the growth of pathogens and rely on the immune
system to actually kill the bacteria. Bacteriostatic drugs are
less effective in treating patients with compromised immune
systems that cannot rid their bodies of the pathogens;
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many of these antibiotics have a narrow spectrum, which is the
range of bacteria treated by a drug, and, as a result, are only
effective against some serious pathogens but not others;
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many of the antibiotics used to treat serious infections are
difficult or inconvenient to administer, as they must be
administered twice daily for seven to 14 days, or longer,
with the patients being hospitalized for much or all of this
period; and
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many of these antibiotics may cause serious side effects in some
patients, sometimes requiring discontinuation of therapy. Due to
these side effects, health care providers are required to engage
in costly and time-consuming monitoring of blood levels and
other parameters.
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As a result, there is a significant need for new antibiotics
that address the limitations of currently available products. We
believe that infectious disease physicians desire new
antibiotics with greater efficacy, fewer side effects, fewer
administration issues and better hospital economics.
Clinical
Development
Oritavancin has been tested in 1,617 patients and has been
the subject of two Phase 3 trials for the treatment of ABSSSI.
Eli Lilly and InterMune, Inc., or InterMune, which transferred
its rights for oritavancin to Targanta in 2005, conducted these
trials. Both of these Phase 3 clinical trials compared treatment
with oritavancin to a control arm of vancomycin followed by an
oral antibiotic, cephalexin, using a non-inferiority trial
design. In both of the trials, oritavancin met the primary
endpoint. In both trials, oritavancin was found to be effective
in an average of 5.2 days compared to an average of
11.2 days for the vancomycin / cephalexin control
arm.
In September 2008, Targanta completed its SIMPLIFI Phase 2
clinical study of oritavancin. In the trial, Targanta evaluated
the efficacy and safety of different dosing regimens of
oritavancin in 300 patients with ABSSI. In Arm A of the
trial, patients received a single 1,200 mg dose of
oritavancin, in Arm B, patients received a 800 mg dose of
oritavancin on day 1 followed by an optional 400 mg dose of
oritavancin on day 5, and in Arm C, patients received a
200 mg dose of oritavancin given daily for three to seven
days, which was the dose used in the ARRD and ARRI trials. The
results showed comparable efficacy and safety across all three
treatment arms. In addition, electrocardiography data collected
in patients receiving the single 1,200 mg dose supported
the cardiac safety of oritavancin administered in a single dose.
In September 2007, Targanta completed a QT study to evaluate the
cardiac safety of oritavancin. In this study, Targanta examined
the effects of a single 200 mg intravenous dose of
oritavancin, a single 800 mg intravenous dose of oritavancin, a
single 400 mg oral dose of moxifloxacin in a control arm
and an intravenous placebo. In this study, oritavancin at the
doses examined did not demonstrate an undesirable effect on the
cardiac QT interval.
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In addition to the SOLO Phase 3 trials, we are exploring the
development of oritavancin for other indications, including for
the treatment of C. difficile, bacteremia, anthrax and other
gram positive bacterial infections. We plan to initiate a Phase
1 clinical trial of an oral formulation of oritavancin for C.
difficile in 2011.
MDCO-2010
We acquired MDCO-2010 in August 2008 as a result of our
acquisition of Curacyte Discovery.
MDCO-2010 is
a small molecule serine protease inhibitor that we are
developing as an intraveneous antifibrinolytic for the reduction
of blood loss during surgery. Since Bayer Healthcare
Pharmaceuticals withdrew Trasylol (aprotinin) from the market in
2008, there has been a significant unmet medical need for a
product that reduces blood loss during surgery. The FDA had
approved Trasylol for prophylactic use to reduce perioperative
blood loss and the need for blood transfusion in patients
undergoing cardiopulmonary bypass in the course of CABG surgery
who are at an increased risk for blood loss and blood
transfusion. In preclinical studies in animal models, MDCO-2010
has demonstrated a favorable pharmacokinetic profile for the
surgical setting with a rapid onset and offset of effect, due to
its short half life.
From 2009 to 2010, we conducted a Phase 1 clinical trial of
MDCO-2010 in Switzerland in healthy volunteers that demonstrated
safety and tolerability at low doses. Following that trial, in
November 2010, we commenced a Phase 2 clinical trial of
MDCO-2010 in Switzerland to study the safety, tolerability,
pharmacokinetics and pharmacodynamics of MDCO-2010 in patients
undergoing elective CABG surgery. We plan to submit an IND for
MDCO-2010 to the FDA in 2011. Subject to the successful
completion of our current Phase 2 trial and the IND
becoming effective, we plan to commence a Phase 2 clinical trial
of MDCO-2010 in the United States in 2012 in patients undergoing
high risk cardiothoracic surgery.
MDCO-216
We licensed exclusive worldwide rights to MDCO-216, a novel
biologic, from Pfizer in December 2009. MDCO-216 is a naturally
occurring variant of a protein found in human HDL that has the
potential to reverse atherosclerotic plaque development and
reduce the risk of coronary events in patients with ACS. In
multiple non-clinical studies, conducted by Pfizer and its
predecessors in animal models, MDCO-216 rapidly removed excess
cholesterol from artery walls, thereby stabilizing and
regressing atherosclerotic plaque. In a Phase 1/2 study
conducted by Pfizer from 2001 through 2003 in 36 patients,
MDCO-216 demonstrated statistically significant reductions in
coronary plaque volume by 4.2% in six weeks. These findings were
published in the Journal of the American Medical Association in
2003. In 2010, we completed a technology transfer program with
Pfizer related to improved manufacturing methodologies developed
by Pfizer since the Phase 1/2 trial. Using these new
methodologies, we manufactured MDCO-216 on a small scale for use
in preclinical studies of MDCO-216. We plan to commence a Phase
1 study of MDCO-216 in 2011 and to use these new methodologies
to manufacture product for the trial.
Ready-to-Use
Formulation Argatroban
In the third quarter of 2009, we licensed marketing rights in
the United States and Canada to a ready-to-use formulation of
Argatroban being developed by Eagle. Argatroban, currently
marketed by GlaxoSmithKline in a concentrated formulation, is
approved as an anticoagulant in the United States for
prophylaxis or the treatment of thrombosis in patients with or
at risk for HIT and for patients with or at risk for HIT
undergoing PCI. We licensed the ready-to-use formulation of
Argatroban because we believe it may provide a more efficient
delivery system than the currently marketed formulation of
Argatroban. Eagle submitted an NDA for the ready-to-use
formulation of Argatroban to the FDA in 2008. In January 2010,
Eagle received a complete response letter from the FDA requiring
Eagle to submit a new Chemistry, Manufacturing and Control
section of the NDA that is complete, up-to-date and corresponds
to the ready-to-use formulation of Argatroban. In January 2011,
Eagle submitted to the FDA a response letter, including a new
Chemistry, Manufacturing and Control section, to address the
issues raised in FDAs complete response letter.
16
Sales and
Distribution
We sell Angiomax in the United States using a hospital sales
force that, as of February 15, 2011, consisted of 110
engagement partners and engagement managers. For Angiomax, our
sales force targets, as potential hospital customers, hospitals
with cardiac catheterization laboratories in the United States
that perform approximately 200 or more coronary angioplasties
per year. These hospitals conduct a significant percentage of
the total number of the coronary angioplasties performed each
year in the United States. Prior to the recalls of Cleviprex and
related supply issues, we used our hospital sales force to sell
Cleviprex and plan to use this sales force when we re-launch
Cleviprex. Our sales force targeted and will target many of the
same hospitals it does for Angiomax, as most institutions with a
cardiac catheterization laboratory also perform heart surgeries
and have intensive care units as well as emergency rooms.
Additionally, we plan to focus the marketing of Cleviprex on
neurocritical care, including intracranial bleeding and acute
ischemic stroke requiring blood pressure control. As a result,
our sales force will target certified stroke centers that
specialize in the care of patients requiring neurocritical care.
We distribute Angiomax in the United States through a sole
source distribution model. Under this model, we sell Angiomax to
our sole source distributor, Integrated Commercialization
Solutions, Inc., or ICS. ICS then sells Angiomax 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. We used ICS as our
distributor for Cleviprex prior to the recalls of Cleviprex and
related supply issues and plan to use ICS when we resupply our
existing customers with Cleviprex and resume sales. Our
agreement with ICS, which we initially entered into February
2007 and has since been amended, 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. In addition,
ICS assumes all credit and inventory risks and is subject to our
standard return policy. ICS 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 September 30, 2013, but will automatically
renew for additional one-year periods unless either party gives
notice at least 90 days prior to the automatic extension.
Either party may terminate the agreement at any time and for any
reason upon 180 days prior written notice to the other
party. In addition, either party may terminate the agreement
upon default of a material obligation by the other party, if the
default is not cured after receipt of written notice within
30 days, upon noncompliance with any applicable law (as
defined in the agreement) after a reasonable opportunity to cure
such noncompliance or if the parties are unable to negotiate in
good faith a modification to the agreement upon the change or
enactment of a new law or regulation that would materially
affect either party or upon the parties inability to
negotiate in good faith a modification resulting from the
establishment of a new best price or average sale price (as
defined in the agreement).
In Europe, we market and sell Angiox with a sales force that, as
of February 15, 2011, consisted of 42 engagement partners
and engagement managers experienced in selling to hospital
customers. Our engagement partners and engagement managers
target hospitals with cardiac catheterization laboratories that
perform approximately 200 or more coronary angioplasties per
year. We also market and sell Angiomax outside the United States
through distributors, including Sunovion Pharmaceuticals 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.
In support of sales efforts, we focus our Angiomax marketing in
the United States and in Europe on hospital systems, individual
hospitals, and health care providers, including interventional
cardiologists in cardiac catheterization laboratories. Following
approval in the United States, we focused our Cleviprex
marketing on anesthesiology/surgery, acute and intensive care
and emergency department practitioners in the United States.
When we re-launch Cleviprex, we plan to focus the marketing of
Cleviprex on neurocritical care, including intracranial bleeding
and acute ischemic stroke requiring blood pressure control and
to target certified stroke centers that specialize in the
treatment of neurocritical care patients. We believe our ability
to
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deliver relevant, advanced and reliable service and information
to our concentrated customer base provides us with significant
market advantage in the United States, and will provide us with
such advantage outside the United States, even in highly
competitive sub-segments of the hospital market such as
cardiology and neurocritical care.
Manufacturing
We do not have a manufacturing infrastructure and do not intend
to develop one. We are a party to agreements with contract
manufacturers for the supply of bulk drug substance for our
products and with other third parties for the formulation,
packaging and distribution of our products. Our product
manufacturing operation is comprised of professionals with
expertise in pharmaceutical manufacturing development and
logistics and supply chain management. These professionals
oversee the manufacturing and distribution of our products by
third-party companies.
Angiomax
In December 1999, we entered into a commercial development and
supply agreement with Lonza Braine, S.A., which was formerly
known as UCB Bioproducts S.A., for the development and supply of
Angiomax bulk drug substance. Together with Lonza Braine, we
developed a second generation chemical synthesis process to
improve the economics of manufacturing Angiomax bulk drug
substance. This process, which was approved by the FDA in May
2003 and is used in the manufacture of Angiomax bulk drug
substance today, is known as the Chemilog process. We have
agreed that, during the term of the agreement, we will purchase
a substantial portion of our Angiomax bulk drug substance
manufactured using the Chemilog process from Lonza Braine at
agreed upon prices. Following the expiration of the agreement or
if we terminate the agreement prior to its expiration, Lonza
Braine has agreed to transfer the development technology to us.
If we engage a third party to manufacture Angiomax for us using
the Chemilog process prior to bivalirudin becoming a generic
drug in the United States, we will be obligated to pay Lonza
Braine a royalty based on the amount paid by us to the
third-party manufacturer. Our agreement with Lonza Braine
expires in September 2013, subject to automatic renewals of
consecutive three-year periods unless either party provides
notice of non-renewal within one year prior to the expiration of
the initial term or any renewal term. We may only terminate the
agreement prior to its expiration in the event of a material
breach by Lonza Braine, if such breach is not cured within
30 days.
In October 1997, we entered into a master agreement with Ben
Venue Laboratories, Inc., or Ben Venue, for the manufacture of
Angiomax drug product. Ben Venue conducts the fill-finish of
Angiomax drug product in the United States for us through
purchase order arrangements agreed upon by the parties at the
time of the order and governed by the master agreement. Ben
Venue has no obligation under the master agreement to accept
purchase orders from us.
In the European Union, Almac Pharma Services is responsible for
the importation, bulk vial testing and secondary packaging of
Angiox drug product. Almac Pharma Services provide these
services to us through purchase order arrangements agreed upon
by the parties at the time of the order.
Cleviprex
In October 2002, we entered into a master research and
manufacturing agreement with Johnson Matthey Pharma Services, or
Johnson Matthey, for the manufacture of Cleviprex bulk drug
substance for use for our clinical trials of Cleviprex and for
our commercial requirements. Johnson Matthey manufactures the
bulk drug substance under project work orders agreed upon by the
parties at the time of the order and governed by the master
research and manufacturing agreement. Johnson Matthey has no
obligation under the master agreement to accept project work
orders from us.
In December 2003, we entered into a contract manufacturing
agreement with Fresenius Kabi Clayton, L.P., which was
subsequently assigned to Hospira, Inc., or Hospira. Pursuant to
the agreement, Hospira is the exclusive supplier for all
finished drug product of Cleviprex for the intravenous treatment
of primarily peri-operative hypertension using its proprietary
formulation technology. The agreement continues until August
2018 and thereafter unless either party provides three
years prior written notice of termination which may be
18
given any time after August 2015. Either party may terminate the
agreement for material breach by the other party, if the
material breach is not cured within 60 days after written
notice. In addition, upon 90 days prior written
notice either party may terminate the agreement if we
permanently stop selling the Cleviprex. Upon expiration or
termination of the agreement, Hospira is required to grant us a
non-exclusive, world-wide, perpetual license to Hospiras
proprietary technology for the manufacture of Cleviprex, subject
to a low single digit royalty in specified circumstances.
In December 2009 and March 2010, we conducted voluntary recalls
of manufactured lots of Cleviprex due to the presence of visible
particulate matter at the bottom of some vials. As a result, we
have not been able to supply the market with Cleviprex and have
not sold Cleviprex since the first quarter of 2010. We have
cooperated with the FDA and our contract manufacturer to remedy
the problem at the manufacturing site that resulted in the
recalls. Our contract manufacturer made manufacturing process
improvements, including enhanced filtration and equipment
maintenance, to assure product quality. We expect to begin to
resupply the market with Cleviprex and resume selling Cleviprex
in the first half of 2011.
Cangrelor
Johnson Matthey manufactures cangrelor bulk drug substance for
us for our clinical trial needs under the terms of the same
master research and manufacturing agreement we entered into for
Cleviprex in October 2002. Johnson Matthey manufactures the bulk
drug substance under project work orders agreed upon by the
parties and governed by the master research and manufacturing
agreement with Johnson Matthey. Johnson Matthey has no
obligation under the master agreement to accept project work
orders from us.
In October 2004, we entered into a drug product development and
clinical supply agreement with Baxter Pharmaceutical Solutions
LLC, or Baxter, a division of Baxter Healthcare Corporation, for
the manufacture of a portion of cangrelor finished drug product
for our cangrelor clinical trials and to carry out release
testing. The agreement expires when the development plan for
cangrelor established under the agreement is completed. Either
party may terminate the agreement for breach by the other party,
if the breach is not cured after receipt of written notice of
the breach within 10 days for monetary defaults and within
30 days for non-monetary defaults. Ben Venue supplies the
remainder of the cangrelor finished drug product under purchase
order arrangements agreed upon by the parties and governed by
our 1997 master agreement with them. We have not entered into an
agreement for commercial supply of cangrelor finished drug
product, although we believe our contract manufacturers have the
capability to manufacture and package cangrelor on a commercial
scale appropriate for launch of the drug when and if cangrelor
is approved for sale.
Oritavancin
Prior to our acquisition of oritavancin, in December 2001,
Targanta entered into a development and supply agreement with
Abbott Laboratories, or Abbott, for the supply of oritavancin
bulk drug substance for clinical use in clinical trials. Under
the Abbott agreement, which we acquired with our acquisition of
Targanta, we are required to purchase oritavancin bulk drug
substance exclusively from Abbott, unless Abbott fails to
deliver sufficient oritavancin bulk drug substance to meet our
needs. In such event, we may use another manufacturer to supply
oritavancin bulk drug substance for as long as Abbott is unable
to supply sufficient oritavancin bulk drug substance. We are
also required to purchase a minimum amount of oritavancin bulk
drug substance from Abbott. The agreement expires on
December 31, 2014, subject to automatic two-year renewal
periods unless either party gives at least 24 months
written notice of termination prior to the expiration of the
initial term or 12 months written notice prior to the
expiration of any renewal term. Either party may terminate the
agreement upon two-years notice if the party determines that the
launch of the product is not technically, clinically or
commercially feasible or economically justifiable. Abbott has
the right to terminate the agreement at any time upon
30 months written notice. Either party may terminate the
agreement for breach by the other party, if the breach is not
cured within 60 days after receipt of written notice or for
breaches of a type that cannot be remedied within 60 days,
if a remedy is not promptly commenced and diligently pursued
until
19
complete remediation. Upon termination, Abbott is required to
assist us with a technology transfer to us or our designee.
We obtain oritavancin finished drug product from Ben Venue under
a manufacturing and services agreement Targanta entered into in
August 2008. Under the agreement, we have minimum purchase
obligations commencing the first full year after the commercial
launch of the product. The agreement expires on August 22,
2013. Either party may terminate the agreement for any reason
with 24 months prior written notice or for material breach by
the other party, if the material breach is not cured within
three months after written notice of the breach. We can
terminate the agreement with 90 days written notice in the
event oritavancin is withdrawn from the market. Upon termination
of the agreement, Ben Venue has agreed to conduct a
manufacturing services and technology transfer to a third party
designated by us. We are currently in discussions with a second
contract fill/finish provider.
MDCO-2010
We currently obtain our supply of MDCO-2010 bulk drug substance
and drug product for our early stage clinical trials from a
third-party manufacturer in Germany on a purchase order basis.
MDCO-216
In connection with the license of MDCO-216 from Pfizer we
acquired sufficient protein to carry out preclinical and early
phase clinical studies. In 2010, we completed a technology
transfer program with Pfizer related to improved manufacturing
methodologies developed by Pfizer, primarily to reduce the cost
to manufacture the drug product to make it commercially viable.
Using these new methodologies, we manufactured MDCO-216 on a
small scale for use in preclinical studies of MDCO-216. We
expect to use these methodologies to manufacture
MDCO-216 for
our Phase 1 clinical trial, but we believe additional work
will be needed to scale up the manufacturing process in order to
have drug product available for use in further clinical trials.
Ready-to-Use
Argatroban
In connection with our license of marketing rights to
Eagles formulation of Argatroban, Eagle has agreed to
supply us with the ready-to-use product for a price equal to
Eagles costs, under a supply agreement we entered into
with Eagle in September 2009. The supply agreement expires at
the earlier of the termination of our license agreement with
Eagle or September 24, 2019. Either party may terminate the
agreement for material breach by the other party, if the
material breach is not cured after receipt of written notice
within 30 days or up to 60 days if the breaching party
gives notice that it is in good faith attempting to cure the
breach.
Business
Development Strategy
We intend to continue building our acute and intensive care
portfolio of hospital products by selectively licensing or
acquiring and then developing clinical compound candidates or
products approved for marketing. We believe that we have proven
capabilities in developing and commercializing in-licensed or
acquired acute and intensive care drug candidates. We believe
that products may be acquired from pharmaceutical companies
which are in the process of refining their own product
portfolios and from companies seeking specialist development or
commercial collaborations.
In evaluating product acquisition candidates, we plan to
continue to seek products that have the potential to provide
appropriate evidence of safety and efficacy, together with the
potential to reduce a patients hospital stay. We plan to
focus on acquisition candidates that are either approved
products or late stage products in development in order to
leverage our current business infrastructure. In addition, our
acquisition strategy is to acquire global rights for development
compounds wherever possible. We may acquire approved products
that can be marketed in hospitals by our commercial organization.
20
Competition
The development and commercialization of new drugs is highly
competitive. We face competition from pharmaceutical companies,
specialty pharmaceutical companies and biotechnology companies
worldwide. Many of our competitors are substantially larger than
we are and have substantially greater capital resources,
research and development capabilities and experience, and
financial, technical, manufacturing, marketing and human
resources than we have. Additional mergers and acquisitions in
the pharmaceutical industry may result in even more resources
being concentrated in our competitors.
Our business strategy is based on us selectively licensing or
acquiring and then developing clinical compound candidates or
products approved for marketing. Our success will be based in
part on our ability to build and actively manage a portfolio of
drugs that addresses unmet medical needs and creates value in
patient therapy. However, the acquisition and licensing of
pharmaceutical products is a competitive area, and a number of
more established companies, which have acknowledged strategies
to license and acquire products, may have competitive
advantages, as may emerging companies taking similar or
different approaches to product acquisition. Established
companies pursuing this strategy may have a competitive
advantage over us due to their size, cash flows and
institutional experience.
In addition, our competitors may develop, market or license
products or other novel technologies that are more effective,
safer or less costly than any that have been or are being
developed by us, or may obtain marketing approval for their
products from the FDA or equivalent foreign regulatory bodies
more rapidly than we may obtain approval for ours. We compete,
in the case of Angiomax and Cleviprex, and expect to compete, in
the cases of our products in development, on the basis of
product efficacy, safety, ease of administration, price and
economic value compared to drugs used in current practice or
currently being developed.
Angiomax
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 therapies
currently on the market, awaiting regulatory approval or in
development for the indications for which Angiomax is approved.
Angiomax competes primarily with heparin and enoxaparin, GP
IIb/IIIa inhibitors, and combinations of drugs including heparin
or enoxaparin and GP IIb/IIIa inhibitors. Heparin is widely used
in patients with ischemic heart disease. Heparin is manufactured
and distributed by a number of companies as a generic product
and is sold at a price that is significantly less than the price
for Angiomax. GP IIb/IIIa inhibitors with which Angiomax
competes include ReoPro from Eli Lilly and Johnson &
Johnson/Centocor, Inc., Integrilin from Schering-Plough
Corporation, 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 as compared to Angiomax.
Although in some cases GP IIb/IIIa inhibitors may be
complementary to Angiomax, Angiomax may compete with GP IIb/IIIa
inhibitors 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 a GP IIb/IIIa inhibitor but not necessarily
more than one of these drugs.
If the federal district court order requiring the PTO to
consider our application to extend the term of the 404
patent timely filed is successfully challenged either by APP in
its pending appeal or by APP or a third party in a separate
challenge, then if we are unsuccessful in the pending litigation
relating to the patents covering Angiomax, Angiomax could become
subject to generic competition in the United States earlier than
we anticipate.
Cleviprex
Cleviprex competes with a variety of antihypertensive agents in
the acute and intensive care setting, many of which are generic
and inexpensive. The FDA has approved nine intravenous drugs for
the treatment of hypertension in the acute and intensive care
setting. Physician selection of these agents depends upon
patient diagnosis, how quickly they need to control blood
pressure, relevant surgeries or procedures that may be
21
planned in the near future, co-morbidities and end organ damage.
Cleviprex therefore, competes with all of these agents.
Cangrelor
We expect that cangrelor, if approved, will compete with oral
platelet inhibitors that are well known and widely used in acute
and intensive care settings, such as Plavix from Bristol Meyers
Squibb/Sanofi Pharmaceuticals Partnership, and Effient
(prasugrel), an anti-platelet agent from Eli Lilly and Sankyo
Co., Ltd. We believe that the combination of the reduction in
ischemic events through platelet inhibition and the acute and
intensive care limitations of current oral therapy have created
a need for an injectable platelet inhibitor that acts quickly
and is cleared from the bloodstream rapidly.
Oritavancin
We expect that oritavancin, if approved, will compete with a
number of drugs that target serious gram-positive infections
acquired in the community or hospital and treated in an
outpatient setting or hospital. These drugs include vancomycin,
a generic drug that is manufactured by a variety of companies,
daptomycin from Cubist Pharmaceuticals, Inc., linezolid from
Pfizer, quinupristin/dalfopristin from Sanofi-Aventis and
Monarch Pharmaceuticals Inc., telavancin, from Theravance, Inc.
and Astellas Pharma Inc., teicoplanin from Sanofi-Aventis, and
tigecycline from Pfizer. Each of these drugs is already
established in the market, which will make market penetration
for oritavancin more difficult. We believe that oritavancin, if
approved as a single dose formulation, would provide advantages
over other drug therapies by providing a full regimen in a
single dose, which would eliminate the need for daily infusions
and potentially reduce patient hospitalizations.
Ready-to-Use
Argatroban
We expect that the ready-to-use formulation of Argatroban that
we licensed from Eagle, if approved, would compete with the
currently marketed version of Argatroban promoted by
GlaxoSmithKline in addition to other potential direct generic
copies or other innovative forms of the product. The
GlaxoSmithKline version of Argatroban is indicated as an
anticoagulant for prophylaxis or treatment of thrombosis in
patients with heparin-induced thrombocytopenia. Argatroban is
also indicated as an anticoagulant in patients with or at risk
for heparin-induced thrombocytopenia undergoing PCI. We believe
that the ready-to-use formulation of Argatroban is a more
efficient delivery system than the currently marketed
formulation of Argatroban.
Patents,
Proprietary Rights and Licenses
Our success will depend in part on our ability to protect the
products we acquire or license by obtaining and maintaining
patent protection both in the United States and in other
countries. We rely upon trade secrets, know-how, continuing
technological innovations, contractual restrictions and
licensing opportunities to develop and maintain our competitive
position. We plan to prosecute and defend patents or patent
applications we file, acquire or license.
Angiomax. We have exclusively licensed from
Biogen Idec and Health Research Inc., or HRI, patents and patent
applications covering Angiomax and Angiomax analogs and other
novel anticoagulants as compositions of matter, and processes
for using Angiomax and Angiomax analogs and other novel
anticoagulants. We also own two U.S. patents covering a
more consistent and improved Angiomax drug product and the
processes by which it is made. We have also filed and are
currently prosecuting a number of patent applications relating
to Angiomax in the United States and Europe.
The 404 patent, was set to expire in March 2010, but has
been extended under the Hatch-Waxman Act following our
litigation against the PTO, the FDA and HHS. We had applied,
under the Hatch-Waxman Act, for an extension of the term of the
404 patent. 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 HHS seeking
to set aside the denial of our application to extend the term of
the 404 patent. On August 3, 2010, the federal
district court granted our motion for summary judgment and
ordered the PTO to consider our patent term extension
application timely filed. On October 5, 2010, the period for the
government to appeal the federal
22
district courts August 3, 2010 summary judgment decision
expired without government appeal. Our litigation with the PTO,
the FDA and HHS is described in more detail in Item 3 of
this annual report.
Following the expiration of the governments appeal period,
the FDA determined the applicable regulatory review period for
Angiomax. Based on the FDAs determination, we believe that
application of the PTOs patent term extension formula
would result in the extension of the patent term of the
404 patent to December 15, 2014. However, the PTO has
not yet determined the length of any patent term extension. As a
result of our study of Angiomax in the pediatric setting, we are
also entitled to a six-month period of exclusivity following
expiration of the 404 patent. If the federal district
courts decision is overturned and the 404 patent is
found not to have been validly extended, the 404 patent
would have expired in March 2010 and the pediatric exclusivity
period would have expired in September 2010.
On August 19, 2010, APP filed a motion to intervene for the
purpose of appeal in our case against the PTO, the FDA and HHS.
On September 13, 2010, the federal district court issued an
order denying APPs motion to intervene. On
September 1, 2010, as amended on September 17, 2010,
APP filed a notice of appeal to the United States Court of
Appeals for the Federal Circuit of the federal district
courts August 3, 2010 and September 13, 2010
orders (and all related and underlying orders). On
October 5, 2010, we filed a motion to dismiss APPs
appeal. On February 2, 2011, the court issued an order
denying our motion to dismiss and requesting additional
briefings by both parties in connection with APPs appeal.
The court expressed no opinion on the merits of APPs
appeal. We also continue to pursue legislative action to address
the 404 patent.
We have entered into an agreement with Biogen Idec 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 initial rejection of our application under the
Hatch-Waxman Act for an extension of the term of the 404
patent on the grounds that it was filed late. We are also in
discussions with Biogen Idec and HRI with respect to the
possible resolution of the potential claims among the parties.
In February 2011, we entered into an agreement with the law firm
Wilmer Cutler Pickering Hale and Dorr LLP, or WilmerHale,
resolving all potential claims between us and WilmerHale related
to the 404 patent. We have entered into an agreement with
the other law firm involved in the filing of the application
under the Hatch-Waxman Act that suspends the statute of
limitations on our claims against them related to the filing. We
are also involved in discussions with that firm with respect to
the possible resolution of the potential claims among the
parties.
In 2009, we were granted two U.S. patents relating to
Angiomax. The first, the 727 patent, was issued on
September 1, 2009 and expires in July 2028. The 727
patent contains claims which relate to a more consistent and
improved Angiomax drug product. The second, the 343
patent, was issued on October 6, 2009 and expires on in
July 2028. The 343 patent contains claims which also
relate to a more consistent and improved Angiomax drug product
made by processes described in the 343 patent. We listed
both patents in the FDAs publication Approved Drug
Products with Therapeutic Equivalence Evaluations, which
is commonly known as the Orange Book, for Angiomax. 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 have filed lawsuits
against the ANDA filers alleging patent infringement of the
727 patent and 343 patent. These lawsuits are
described in more detail in Item 3 of this annual report.
In Europe, the principal patent covering Angiomax expires in
2015.
Cleviprex. We have exclusively licensed from
AstraZeneca rights to patents and patent applications covering
Cleviprex as a composition of matter and covering formulations
and uses of Cleviprex. Under the license, AstraZeneca is
responsible for prosecuting and maintaining the patents and
patent applications relating to Cleviprex. The principal
U.S. patent for Cleviprex is set to expire in January 2016.
Following receipt of marketing approval from the FDA, we
submitted an application under the Hatch-Waxman Act to extend
the term of the principal U.S. patent. This application is
currently pending. In addition, we have filed and are currently
prosecuting a number of patent applications relating to
Cleviprex covering compositions of matter and uses in the United
States, Europe and other foreign countries.
In Europe, we expect to obtain at least ten years of exclusivity
for Cleviprex upon regulatory approval of the drug.
23
Cangrelor. We have exclusively licensed from
AstraZeneca rights to patent and patent applications covering
cangrelor as a composition of matter and covering formulations
and uses of cangrelor. Under the license, AstraZeneca is
responsible for prosecuting and maintaining the patents and
patent applications relating to cangrelor. The principal
U.S. patent for cangrelor is set to expire in February 2014
if no patent term extension is obtained. In addition, we have
also filed and are currently prosecuting a number of patent
applications related to cangrelor.
Oritavancin. As a result of our acquisition of
Targanta, we obtained an exclusive license from Eli Lilly to
patents and patent applications covering oritavancin, its uses,
formulations and analogs. Under this license, we are responsible
for prosecuting and maintaining these patents and patent
applications. The principal U.S. patent for oritavancin is
set to expire in November 2015 if no patent term extension is
obtained. We have also filed and are prosecuting a number of
patent applications relating to oritavancin and its uses.
MDCO-2010. In connection with our acquisition
of Curacyte Discovery, we acquired a portfolio of patents and
patent applications covering MDCO-2010, its analogs or other
similar protease inhibitors. We are currently prosecuting and
maintaining these patents and patent applications. The principal
U.S. patent for MDCO-2010 expires in October 2027.
MDCO-216. In connection with our acquisition
of MDCO-216, we obtained an exclusive license from Pfizer to
patents and patent applications covering MDCO-216 as a
composition of matter, and processes for using MDCO-216 and
making MDCO-216. We are currently prosecuting and maintaining
these patents and patent applications relating to MDCO-216 and
its use. As a biologic, we expect MDCO-216 to receive
12 years of regulatory exclusivity from the date of the
initial marketing approval of the product candidate by the FDA.
Ready-to-Use Argatroban. We have exclusively
licensed from Eagle rights to a patent application covering
certain formulations of Argatroban. Our exclusive license is
limited to the United States and Canada. Under this license,
Eagle is responsible for prosecuting this patent application.
The patent positions of pharmaceutical and biotechnology firms
like us can be uncertain and involve complex legal, scientific
and factual questions. In addition, the coverage claimed in a
patent application can be significantly reduced before the
patent is issued. Consequently, we do not know whether any of
the patent applications we acquire, license or file will result
in the issuance of patents or, if any patents are issued,
whether they will provide significant proprietary protection or
will be challenged, circumvented or invalidated. Because
unissued U.S. patent applications filed prior to
November 29, 2000 and patent applications filed within the
last 18 months are maintained in secrecy until patents
issue, and since publication of discoveries in the scientific or
patent literature often lags behind actual discoveries, we
cannot be certain of the priority of inventions covered by
pending patent applications. Moreover, we may have to
participate in interference proceedings declared by the PTO to
determine priority of invention, or in opposition proceedings in
a foreign patent office. Participation in these proceedings
could result in substantial cost to us, even if the eventual
outcome is favorable to us. Even issued patents may not be held
valid by a court of competent jurisdiction. An adverse outcome
could subject us to significant liabilities to third parties,
require disputed rights to be licensed from third parties or
require us to cease using such technology.
The development of acute and intensive care hospital products is
intensely competitive. A number of pharmaceutical companies,
biotechnology companies, universities and research institutions
have filed patent applications or received patents in this
field. Some of these patent applications could be competitive
with applications we have acquired or licensed, or could
conflict in certain respects with claims made under our
applications. Such conflict could result in a significant
reduction of the coverage of the patents we have acquired or
licensed, if issued, which would have a material adverse effect
on our business, financial condition and results of operations.
In addition, if patents are issued to other companies that
contain competitive or conflicting claims with claims of our
patents and such claims are ultimately determined to be valid,
we may not be able to obtain licenses to these patents at a
reasonable cost, or develop or obtain alternative technology.
We also rely on trade secret protection for our confidential and
proprietary information. However, others may independently
develop substantially equivalent proprietary information and
techniques. Others may also
24
otherwise gain access to our trade secrets or disclose such
technology. We may not be able to meaningfully protect our trade
secrets.
It is our policy to require our employees, consultants, outside
scientific collaborators, sponsored researchers and other
advisors to execute confidentiality agreements upon the
commencement of employment or consulting relationships with us.
These agreements generally provide that all confidential
information developed or made known to the individual during the
course of the individuals relationship with us is to be
kept confidential and not disclosed to third parties except in
specific circumstances. In the case of employees and
consultants, the agreements provide that all inventions
conceived by the individual shall be our exclusive property.
These agreements may not provide meaningful protection or
adequate remedies for our trade secrets in the event of
unauthorized use or disclosure of such information.
We have a number of trademarks that we consider important to our
business. The Medicines
Company®
name and logo,
Angiomax®,
Angiox®
and
Cleviprex®
names and logos are either our registered trademarks or our
trademarks in the United States and other countries. We have
also registered some of these marks in a number of foreign
countries. Although we have a foreign trademark registration
program for selected marks, we may not be able to register or
use such marks in each foreign country in which we seek
registration. We believe that our products are identified by our
trademarks and, thus, our trademarks are of significant value.
Each registered trademark has a duration of 10 to 15 years,
depending on the date it was registered and the country in which
it is registered, and is subject to an infinite number of
renewals for a like period upon continued use and appropriate
application. We intend to continue the use of our trademarks and
to renew our registered trademarks based upon each
trademarks continued value to us.
License
Agreements
A summary of our material licenses for our products and products
in development is set forth below.
Angiomax. In March 1997, we entered into an
agreement with Biogen, Inc., a predecessor of Biogen Idec, for
the license of the anticoagulant pharmaceutical bivalirudin,
which we have developed and market as Angiomax. Under the terms
of the agreement, we acquired exclusive worldwide rights to the
technology, patents, trademarks, inventories and know-how
related to Angiomax. In exchange for the license, we paid
$2.0 million on the closing date and are obligated to pay
up to an additional $8.0 million upon the first commercial
sales of Angiomax for the treatment of AMI in the United States
and Europe. In addition, we are obligated to pay royalties on
sales of Angiomax and on any sublicense royalties on a
country-by-country
basis earned until the later of the date 12 years after the
date of the first commercial sales of the product in a country
and the date on which the product or its manufacture, use or
sale is no longer covered by a valid claim of the licensed
patent rights in such country. The royalty rate due to Biogen
Idec on sales increases as annual sales of Angiomax increase.
Under the agreement, we are obligated to use commercially
reasonable efforts to develop and commercialize Angiomax in the
United States and specified European markets, including for PTCA
and AMI indications. The license and rights under the agreement
remain in force until our obligation to pay royalties ceases.
Either party may terminate the agreement for material breach by
the other party, if the material breach is not cured within
90 days after written notice. In addition, we may
terminate the agreement for any reason upon 90 days
prior written notice. During 2010, we incurred approximately
$85.5 million in royalties related to Angiomax under our
agreement with Biogen Idec.
In March 1997, in connection with entering into the Biogen Idec
license, Biogen Idec assigned to us a license agreement with HRI
under which Biogen Idec had licensed HRIs right to a
specified patent application held jointly with Biogen Idec which
resulted in a series of U.S. patents including the
404 patent. Under the terms of the agreement, we have
exclusive worldwide rights to HRIs rights to the licensed
patent application and patents arising from the licensed patent
application, other than rights for noncommercial research and
educational purposes, which HRI retained. We are obligated to
pay royalties on sales of Angiomax and on any sublicense income
we earn. The royalty rate due to HRI on sales increases as
annual sales of Angiomax increase. Under the agreement, we are
obligated to use commercially reasonable efforts to research and
develop, obtain regulatory approval and commercialize Angiomax.
The license and rights under the agreement remain in force until
the expiration of the last remaining patent granted under the
licensed patent application. HRI may terminate the agreement for
a material breach by us, if the material breach is not cured
within
25
90 days after written notice or, in the event of
bankruptcy, liquidation or insolvency, immediately on written
notice. In addition, we may terminate the agreement for any
reason upon 90 days prior written notice upon payment
of a termination fee equal to the minimum royalty fee payable
under the license agreement.
Cleviprex. In March 2003, we licensed from
AstraZeneca exclusive worldwide rights to Cleviprex for all
countries other than Japan. In May 2006, we amended our license
agreement with AstraZeneca to provide us with exclusive license
rights in Japan in exchange for an upfront payment. Under the
terms of the agreement, we have the rights to the patents,
trademarks, inventories and know-how related to Cleviprex. We
paid AstraZeneca $1.0 million in 2003 upon entering into
the license and agreed to pay up to an additional
$5.0 million upon reaching agreed upon regulatory
milestones, of which we paid $1.5 million in September 2007
as a result of the FDAs acceptance to file of our NDA for
Cleviprex for the treatment of acute hypertension and
$1.5 million in the third quarter of 2008 as a result of
Cleviprexs approval for sale by the FDA. We are obligated
to pay royalties on a
country-by-country
basis on annual sales of Cleviprex, and on any sublicense income
earned, until the later of the duration of the licensed patent
rights which are necessary to manufacture, use or sell Cleviprex
in a country and the date ten years from our first commercial
sale of Cleviprex in such country. Under the agreement, we are
obligated to use commercially reasonable efforts to develop,
market and sell Cleviprex.
The licenses and rights under the agreement remain in force on a
country-by-country
basis until we cease selling Cleviprex in such country or the
agreement is otherwise terminated. We may terminate the
agreement upon 30 days written notice, unless
AstraZeneca, within 20 days of having received our notice,
requests that we enter into good faith discussions to redress
our concerns. If we cannot reach a mutually agreeable solution
with AstraZeneca within three months of the commencement of such
discussions, we may then terminate the agreement upon
90 days written notice. Either party may terminate
the agreement for material breach upon 60 days prior
written notice if the breach is not cured within such
60 days. During 2010, we incurred $0.7 million in
royalties related to Cleviprex under our agreement with
AstraZeneca.
Cangrelor. In December 2003, we licensed from
AstraZeneca exclusive rights to cangrelor for all countries
other than Japan, China, Korea, Taiwan and Thailand. Under the
terms of the agreement, we have the rights to the patents,
trademarks, inventories and know-how related to cangrelor. In
June 2010, we entered into an amendment to our license agreement
with AstraZeneca. The amendment requires us to commence certain
clinical studies of cangrelor, eliminates the specific
development time lines set forth in the license agreement and
terminates certain regulatory assistance obligations of
AstraZeneca. We paid an upfront payment of $1.5 million
upon entering into the license and $3.0 million upon
entering the amendment to the license. We also agreed to make
additional milestone payments of up to $54.5 million in the
aggregate upon reaching agreed upon regulatory and commercial
milestones. We also paid AstraZeneca $0.2 million for the
transfer of technology in 2004. We are obligated to pay
royalties on a
country-by-country
basis on annual sales of cangrelor, and on any sublicense income
earned, until the later of the duration of the licensed patent
rights which are necessary to manufacture, use or sell cangrelor
in a country ten years from our first commercial sale of
cangrelor in such country.
Under the agreement we are obligated to use commercially
reasonable efforts to diligently and expeditiously file NDAs in
the United States and in other agreed upon major markets. The
licenses and rights under the agreement remain in force on a
country-by-country
basis until we cease selling cangrelor in such country or the
agreement is otherwise terminated. We may terminate the
agreement upon 30 days written notice, unless
AstraZeneca, within 20 days of having received our notice,
requests that we enter into good faith discussions to redress
our concerns. If we cannot reach a mutually agreeable solution
with AstraZeneca within three months of the commencement of such
discussions, we may then terminate the agreement upon
90 days written notice. In the event that a change of
control of our company occurs in which we are acquired by a
specified company at a time when that company is developing or
commercializing a specified competitor product, AstraZeneca may
terminate the agreement upon 120 days written notice.
Either party may terminate the agreement for material breach
upon 60 days prior written notice if the breach is
not cured within such 60 days.
26
Oritavancin. As a result of our acquisition of
Targanta, we are a party to a license agreement with Eli Lilly
through our Targanta subsidiary. Under the terms of the
agreement, we have exclusive worldwide rights to patents and
other intellectual property related to oritavancin and other
compounds claimed in the licensed patent rights. We are required
to make payments to Eli Lilly upon reaching specified regulatory
and sales milestones. In addition, we are obligated to pay
royalties based on net sales of products containing oritavancin
or the other compounds in any jurisdiction in which we hold
license rights to a valid patent. The royalty rate due to Eli
Lilly on sales increases as annual sales of these products
increase.
We are obligated to use commercially reasonable efforts to
obtain and maintain regulatory approval for oritavancin in the
United States and to commercialize oritavancin in the United
States. If we breach that obligation, Eli Lilly may terminate
our license in the United States, license rights to oritavancin
could revert to Eli Lilly and we would lose our rights to
develop and commercialize oritavancin. The license rights under
the agreement remain in force, on a
country-by-country
basis, until there is no valid patent in such country and our
obligation to pay royalties ceases in that country. Either party
may terminate the agreement upon an uncured material breach by
the other party. In addition, either party may terminate the
agreement upon the other partys insolvency or bankruptcy.
MDCO-216. In December 2009, we licensed
exclusive worldwide rights to MDCO-216 from Pfizer. Under the
terms of the agreement, we have rights under specified Pfizer
patents, patent applications and know-how to develop,
manufacture and commercialize products containing MDCO-216 and
improvements to the compound. We paid Pfizer $10 million
upon entering into the agreement and agreed to pay up to an
aggregate of $410 million upon the achievement of specified
clinical, regulatory and sales milestones. We are obligated to
make royalty payments, which are payable on a
product-by-product
and
country-by-country
basis, until the latest of the expiration of the last patent or
patent application covering MDCO-216, the expiration of any
market exclusivity and a specified period of time after the
first commercial sale of MDCO-216. In addition, we agreed to pay
Pfizer a portion of the consideration received by us or our
affiliates in connection with sublicenses. Under the agreement,
we may sublicense the intellectual property to third parties,
provided that we have complied with Pfizers right of first
negotiation and, in the case of sublicenses to an unaffiliated
third parties in certain countries, provided that we first
obtain Pfizers consent. We, either directly or through our
affiliates or sublicensees, have also agreed to use commercially
reasonable efforts to develop at least one product with MDCO-216
and to commercialize any approved products related thereto.
The agreement expires upon the expiration of our obligation to
pay royalties under the agreement. Either party may terminate
the agreement upon an uncured material breach by the other
party. In addition, either party may terminate the agreement
upon the other partys insolvency or bankruptcy or if the
other party is subject to a force majeure event. We may
terminate this agreement in its entirety, or on a
product-by-product
basis, at any time and for any reason upon prior written notice.
Pfizer may terminate this agreement if we notify them that we
intend to permanently abandon the development, manufacture and
commercialization of the products or if we otherwise cease, for
a specified period of time, to use commercially reasonable
efforts to develop, manufacture and commercialize, as
applicable, at least one product.
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 on sales of MDCO-216.
Ready-to-Use Argatroban. In September 2009, we
licensed marketing rights in the United States and Canada to an
intravenous, ready-to-use formulation of Argatroban from Eagle.
Under the license agreement, 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 on net sales of the
ready-to-use formulation. The license agreement expires at the
later of the termination of the development plan under the
agreement or as long as we exploit the products under the
agreement. Either party may terminate the agreement for material
breach by the other party, if the material breach is not cured
after receipt of written notice within 30 days or up to
60 days if the breaching party gives notice that it is in
good faith attempting to cure the breach. In addition, we have
the right to terminate the agreement at any time upon
60 days notice.
27
Customers
Since March 2007, we have sold Angiomax in the United States to
our sole source distributor, ICS. We began selling Cleviprex to
ICS in September 2008. ICS accounted for 94% of our net revenue
in 2010 and 96% of our net revenue in both 2009 and 2008. At
December 31, 2010, amounts due from ICS represented
approximately $55.2 million, or 90%, of gross accounts
receivable. At December 31, 2009, amounts due from ICS
represented approximately $33.8 million, or 94%, of gross
accounts receivable. At December 31, 2008, amounts due from
ICS represented approximately $32.4 million, or 90%, of
gross accounts receivable.
Government
Regulation
Government authorities in the United States and other countries
extensively regulate the testing, manufacturing, labeling,
safety advertising, promotion, storage, sales, distribution,
export and marketing, among other things, of our products and
product candidates. In the United States, the FDA regulates
drugs, including biologic drugs, under the Federal Food, Drug,
and Cosmetic Act and the Public Health Service Act and their
implementing regulations. We cannot market a drug until we have
submitted an application for marketing authorization to the FDA,
and the FDA has approved it. Both before and after approval is
obtained, violations of regulatory requirements may result in
various adverse consequences, including, among other things,
untitled letters, warning letters, fines and other monetary
penalties, the FDAs delay in approving or refusal to
approve a product, product recall or seizure, suspension or
withdrawal of an approved product from the market, interruption
of production, operating restrictions, injunctions and the
imposition of civil or criminal penalties. The steps required
before a drug may be approved by the FDA and marketed in the
United States include:
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pre-clinical laboratory tests, animal studies and formulation
studies;
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submission to the FDA of an IND for human clinical testing,
which must become effective before human clinical trials may
begin;
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adequate and well-controlled clinical trials to establish the
safety and efficacy of the drug for each indication;
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submission to the FDA of an NDA or biologics license approval,
or BLA;
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satisfactory completion of an FDA inspection of the
manufacturing facility or facilities at which the drug is
produced to assess compliance with current good manufacturing
practices, or cGMP; and
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FDA review and approval of the NDA or BLA.
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Pre-clinical tests include laboratory evaluations of product
chemistry, toxicity and formulation, as well as animal studies.
The results of the pre-clinical tests, together with
manufacturing information and analytical data, are submitted to
the FDA as part of an IND, which must become effective before
human clinical trials may begin. An IND will automatically
become effective 30 days after receipt by the FDA, unless
before that time the FDA puts the trial on clinical hold because
of concerns or questions about issues such as the conduct of the
trials as outlined in the IND. In such a case, the IND sponsor
and the FDA must resolve any outstanding FDA concerns or
questions before clinical trials can proceed. Submission of an
IND does not necessarily result in the FDA allowing clinical
trials to commence. In addition, the FDA may impose a clinical
hold on an ongoing clinical trial if, for example, safety
concerns arise, in which case the trial cannot recommence
without FDAs authorization.
Clinical trials involve the administration of the
investigational drug to human subjects under the supervision of
qualified investigators. Clinical trials are conducted under
protocols detailing the objectives of the study, the parameters
to be used in monitoring subject safety, and the effectiveness
criteria, or endpoints, to be evaluated. Each protocol must be
submitted to the FDA as part of the IND and the FDA may or may
not allow that trial to proceed. Each trial also must be
reviewed and approved by an independent Institutional Review
Board, or IRB, before it can begin.
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Clinical trials typically are conducted in three sequential
phases, but the phases may overlap or be combined. Phase 1
usually involves the initial introduction of the investigational
drug into people to evaluate its safety, dosage tolerance,
pharmacodynamics, and, if possible, to gain an early indication
of its effectiveness. Phase 2 usually involves trials in a
limited patient population to:
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evaluate dosage tolerance and appropriate dosage;
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identify possible adverse effects and safety risks; and
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evaluate preliminarily the efficacy of the drug for specific
indications.
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Phase 3 trials usually further evaluate clinical efficacy and
test further for safety by administering the drug in its final
form in an expanded patient population. We cannot guarantee that
Phase 1, Phase 2 or Phase 3 testing will be completed
successfully within any specified period of time, if at all.
Furthermore, we, the IRB, or the FDA may suspend clinical trials
at any time on various grounds, including a finding that the
subjects or patients are being exposed to an unacceptable health
risk.
Sponsors of drugs may apply for an SPA from the
FDA. The SPA process is a procedure by which the FDA
provides official evaluation and written guidance on the design
and size of proposed protocols that are intended to form the
basis for a new drug application. However, final marketing
approval depends on the results of efficacy, the adverse event
profile and an evaluation of the benefit/risk of treatment
demonstrated in the Phase 3 trial. The SPA agreement may only be
changed through a written agreement between the sponsor and the
FDA, or if the FDA becomes aware of a substantial scientific
issue essential to product safety or efficacy.
Assuming successful completion of the required clinical testing,
the results of the pre-clinical studies and of the clinical
studies, together with other detailed information, including
information on the manufacture and composition of the drug, are
submitted to the FDA in the form of an NDA or BLA requesting
approval to market the product for one or more indications.
Before approving an application, the FDA usually will inspect
the facility or the facilities at which the drug is
manufactured, and will not approve the product unless cGMP
compliance is satisfactory. If the FDA determines the
application or manufacturing facilities are not acceptable, the
FDA may outline the deficiencies in the submission and often
will request additional testing or information. Notwithstanding
the submission of any requested additional information, the FDA
ultimately may decide that the application does not satisfy the
regulatory criteria for approval. As a condition of approval of
an application, the FDA may require postmarket testing and
surveillance to monitor the drugs safety or efficacy.
After approval, certain changes to the approved product, such as
adding new indications, manufacturing changes, or additional
labeling claims, are subject to further FDA review and approval
before the changes can be implemented. The testing and approval
process requires substantial time, effort and financial
resources, and we cannot be sure that any approval will be
granted on a timely basis, if at all.
Under the Biologics Price Competition and Innovation Act,
enacted in the United States in 2010, the FDA now has the
authority to approve similar versions, or biosimilars, of
innovative biologic products. A competitor seeking approval of a
biosimilar must file an application to show its molecule is
highly similar to an approved innovator biologic, address the
challenges of biologics manufacturing, and include a certain
amount of safety and efficacy data which the FDA will evaluate
on a
case-by-case
basis. Under the data protection provisions of this law, the FDA
cannot approve a biosimilar application until 12 years
after initial marketing approval of the innovator biologic.
Regulators in the European Union and other countries also have
been given the authority to approve biosimilars. The extent to
which a biosimilar, once approved, will be substituted for the
innovator biologic in a way that is similar to traditional
generic substitution for non-biologic products is not yet clear,
and will depend on a number of marketplace and regulatory
factors that are still developing.
After the FDA approves a product, we, our suppliers, and our
contract manufacturers must comply with a number of
post-approval requirements. For example, holders of an approved
NDA or BLA are required to report certain adverse reactions and
production problems, if any, to the FDA, and to comply with
certain requirements concerning advertising and promotional
labeling for their products. Also, quality control and
manufacturing procedures must continue to conform to cGMP after
approval, and the FDA periodically
29
inspects manufacturing facilities to assess compliance with
cGMP. Accordingly, we and our contract manufacturers must
continue to expend time, money, and effort to maintain
compliance with cGMP and other aspects of regulatory compliance.
In addition, discovery of problems such as safety problems may
result in changes in labeling or restrictions on a product
manufacturer, or NDA or BLA holder, including removal of the
product from the market.
We use and will continue to use third-party manufacturers to
produce our products in clinical and commercial quantities, and
we cannot be sure that future FDA inspections will not identify
compliance issues at the facilities of our contract
manufacturers that may disrupt production or distribution, or
require substantial resources to correct. In addition, discovery
of problems with a product may result in restrictions on a
product, manufacturer, or holder of an approved NDA or BLA,
including withdrawal of the product from the market. Also, new
government requirements may be established that could delay or
prevent regulatory approval of our products under development.
After FDA marketing exclusivity expires for an approved drug
product, the drug product may be eligible for submission by
other parties of applications for approval that require less
information than the NDAs and BLAs described above. The FDA may
approve an ANDA if the product is the same in important respects
as a listed drug, such as a drug with an effective FDA approval,
or the FDA has declared it suitable for an ANDA submission. In
these situations, applicants must submit studies showing that
the product is bioequivalent to the listed drug, meaning that
the rate and extent of absorption of the drug does not show a
significant difference from the rate and extent of absorption of
the listed drug. Conducting bioequivalence studies is generally
less time-consuming and costly than conducting pre-clinical and
clinical trials necessary to support an NDA or BLA. A number of
ANDAs have been filed with respect to Angiomax. The regulations
governing marketing exclusivity and patent protection are
complex, and until the outcomes of our effort to extend the
patent term and our patent infringement litigation we may not
know the disposition of such ANDA submissions.
Foreign
Regulations
In addition to regulations in the United States, we are subject
to a variety of regulations in other jurisdictions governing,
among other things, clinical trials and any commercial sales and
distribution of our products.
Whether or not we obtain FDA approval for a product, we must
obtain the requisite approvals from regulatory authorities in
foreign countries prior to the commencement of clinical trials
or marketing of the product in those countries. Certain
countries outside of the United States have a similar process
that requires the submission of a clinical trial application
much like the IND prior to the commencement of human clinical
trials. In Europe, for example, a clinical trial application, or
CTA, must be submitted to each countrys national health
authority and an independent ethics committee, much like the FDA
and IRB, respectively. Once the CTA is approved in accordance
with a countrys requirements, clinical trial development
may proceed.
The requirements and process governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary from
country to country. In all cases, the clinical trials are
conducted in accordance with Good Clinical Practices, or GCPs,
and the applicable regulatory requirements and the ethical
principles that have their origin in the Declaration of Helsinki.
To obtain regulatory approval of an investigational drug or
biological product under European Union regulatory systems, we
must submit a marketing authorization application. The
application used to file the NDA or BLA in the United States is
similar to that required in Europe, with the exception of, among
other things, country-specific document requirements.
For other countries outside of the European Union, such as
countries in Eastern Europe, Latin America or Asia, the
requirements governing the conduct of clinical trials, product
licensing, pricing and reimbursement vary from country to
country. In all cases, again, the clinical trials are conducted
in accordance with GCP and the applicable regulatory
requirements and the ethical principles that have their origin
in the Declaration of Helsinki.
30
If we fail to comply with applicable foreign regulatory
requirements, we may be subject to, among other things, fines,
suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and
criminal prosecution.
Drugs can be authorized in the European Union by using either
the centralized authorization procedure or national
authorization procedures.
Centralized EMA Procedure. The EMA, formerly
the EMEA, implemented the centralized procedure for the approval
of human medicines to facilitate marketing authorizations that
are valid throughout the European Union. This procedure results
in a single marketing authorization issued by the EMA that is
valid across the European Union, as well as Iceland,
Liechtenstein and Norway. The centralized procedure is
compulsory for human medicines that are derived from
biotechnology processes, such as genetic engineering, contain a
new active substance indicated for the treatment of certain
diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative
disorders or autoimmune diseases and other immune dysfunctions,
and officially designated orphan medicines.
For drugs that do not fall within these categories, an applicant
has the option of submitting an application for a centralized
marketing authorization to the EMA, as long as the drug
concerned is a significant therapeutic, scientific or technical
innovation, or if its authorization would be in the interest of
public health.
National EMA Procedures. There are also two
other possible routes to authorize medicinal products outside
the scope of the centralized procedure:
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Decentralised procedure. Using the
decentralised procedure, an applicant may apply for simultaneous
authorization in more than one European Union country of
medicinal products that have not yet been authorized in any
European Union country and that do not fall within the mandatory
scope of the centralised procedure.
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Mutual recognition procedure. In the mutual
recognition procedure, a medicine is first authorized in one
European Union member state, in accordance with the national
procedures of that country. Following this, further marketing
authorizations can be sought from other European Union countries
in a procedure whereby the countries concerned agree to
recognize the validity of the original, national marketing
authorization.
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Research
and Development
Our research and development expenses totaled $85.2 million
in 2010, $117.6 million in 2009 and $105.7 million in
2008.
Employees
We believe that our success depends greatly on our ability to
identify, attract and retain capable employees. We have
assembled a management team with significant experience in drug
development and commercialization. In January 2010 and February
2010, we implemented workforce reductions in our office-based
and field-based functions, eliminating a total of 72 positions
with us. We implemented these reductions to improve efficiencies
and better align our costs and structures for the future. As of
February 15, 2011, we employed 420 persons worldwide.
Our employees are not represented by any collective bargaining
unit, and we believe our relations with our employees are good.
Segments
and Geographic Information
We have one reporting segment. For information regarding revenue
and other information regarding our results of operations,
including geographic segment information, for each of our last
three fiscal years, please refer to our consolidated financial
statements and note 19 to our consolidated financial
statements, which are included in Item 8 of this annual
report, and Managements Discussion and Analysis of
Financial Condition and Results of Operations included in
Item 7 of this annual report.
31
Available
Information
Our Internet address is
http://www.themedicinescompany.com.
The contents of our website are not part of this annual report
on
Form 10-K,
and our Internet address is included in this document as an
inactive textual reference only. We make our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and all amendments to those reports available free of charge on
our website as soon as reasonably practicable after we file such
reports with, or furnish such reports to, the Securities and
Exchange Commission, or SEC. We were incorporated in Delaware on
July 31, 1996.
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 annual 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.
Risks
Related to Our Financial Results
We have a history of net losses and may not achieve
profitability in future periods or maintain profitability on an
annual basis
Except for 2004, 2006, and 2010, we have incurred net losses on
an annual basis since our inception. As of December 31,
2010, we had an accumulated deficit of approximately
$239.5 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. We will likely need to generate significantly
greater revenue in future periods to achieve and maintain
profitability in 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. If Angiomax does not generate the revenues we
anticipate, our business may be materially harmed
Angiomax has accounted for substantially all of our revenue
since we began selling this product in 2001. Until the approval
of Cleviprex by the FDA in August 2008, Angiomax was our only
commercial product. Since we ceased supplying Cleviprex to the
market in the first quarter of 2010, our only revenues have been
from sales of Angiomax. We expect revenues from Angiomax to
account for substantially all of our revenues in 2011. The
commercial success of Angiomax depends upon:
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whether the federal district courts orders requiring
the PTO to consider our application to extend the term of the
404 patent timely filed is successfully challenged either
by APP in its pending appeal or by APP or a third party in a
separate challenge;
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the outcome of our efforts to otherwise extend the patent term
of the 404 patent to 2014 and our ability to maintain
market exclusivity for Angiomax in the United States through 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 and obtain marketing
approval of 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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the impact of competition from competitive products;
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to what extent and in what amount government and third-party
payors cover or reimburse for the costs of Angiomax; and
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our success and the success of our international distributors in
selling and marketing Angiomax in Europe and in other countries
outside the United States.
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We continue to develop Angiomax and intend to seek market
approval of Angiomax for use in additional patient populations,
including in patients with structural heart disease, patients
undergoing peripheral angioplasty, carotid angioplasty and
cardiovascular surgery and patients with or at risk of
HIT/HITTS. Even if we are successful in obtaining approval of an
expanded Angiomax label, the expanded label may not result in
higher revenue or income on a continuing basis.
As of December 31, 2010, our inventory of Angiomax was
$24.4 million and we had inventory-related purchase
commitments to Lonza Braine totaling $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 international distributors involved
in the sale of our products, and such revenue may fluctuate from
quarter to quarter based on the buying patterns of ICS and our
international distributors
We distribute Angiomax and, prior to the recalls and related
supply issues, distributed 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.
ICS 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 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, which may be independent of underlying hospital
demand.
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, independent of underlying
hospital demand.
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.
If we are unable to meet our funding requirements, we may
need to raise additional capital. If we are unable to obtain
such capital on favorable terms or at all, our business,
financial condition or results of operations may be adversely
affected
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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whether the federal district courts order requiring the
PTO to consider our application to extend the term of the
404 patent timely filed is successfully challenged either
by APP in its pending appeal or by APP or a third party in a
separate challenge;
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the outcome of our efforts to otherwise extend the patent term
of the 404 patent to 2014 and our ability to maintain
market exclusivity for Angiomax in the United States through our
other U.S. patents covering Angiomax;
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the terms of any settlements with Biogen Idec, HRI or the law
firm with which we have not settled our claims with respect to
the 404 patent and the PTOs initial denial of our
application to extend the term of the patent;
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our ability to resupply the U.S. market with Cleviprex and
re-launch the product on the time frames we expect 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 consideration paid by us in connection with acquisitions and
licenses of development-stage products, approved products, or
businesses, and in connection with other strategic arrangements;
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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 Angiomax in additional countries and for additional
indications, of Cleviprex outside the United States, Australia,
New Zealand and Switzerland 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.
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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, we may need to
sell equity or debt securities or seek additional financing
through other arrangements. 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 adversely affect our business, financial condition
and operating results.
If we seek to raise capital to fund acquisitions or
product candidates or businesses or for other reasons, by
selling equity or debt securities or through other arrangements,
our stockholders could be subject to dilution and we may become
subject to financial restrictions and covenants, which may limit
our activities
If we seek to acquire any product candidates or businesses or
determine that raising additional capital would be in our
interest and in the interest of our stockholders, we may seek to
sell equity or debt securities or seek additional financings
through other arrangements. Any sale of additional equity or
debt securities may result in dilution to our stockholders. Debt
financing may involve covenants limiting or restricting our
ability to take specific actions, such as incurring additional
debt or making capital expenditures. Our ability to comply with
these financial restrictions and covenants could be dependent on
our future performance, which is subject to prevailing economic
conditions and other factors, including factors that are beyond
our control such as foreign exchange rates, interest rates and
changes in the level of competition. Failure to comply with the
financial restrictions and covenants would adversely affect our
business, 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 or in development,
including orally administered agents. Angiomax competes with, or
may compete with in the future, 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 to Angiomax in high risk patients. Physicians may
choose 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.
In some circumstances, Angiomax competes 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 or a
GP IIb/IIIa inhibitor but not necessarily more than one of these
drugs.
If the federal district courts order requiring the PTO to
consider our application to extend the term of the 404
patent timely filed is successfully challenged, either by APP in
its pending appeal or in a separate challenge, if we are
otherwise unsuccessful in further extending the term of the
404 patent, 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 become subject to generic competition in the
United States earlier than we anticipate. 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.
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 for this use 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 engagement partners and
engagement managers 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.
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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. 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. Our business strategy is based on us selectively
licensing or acquiring and then developing clinical compound
candidates or products approved for marketing. Our success will
be based in part on our ability to build and actively manage a
portfolio of drugs that addresses unmet medical needs and
creates value in patient therapy. However, the acquisition and
licensing of pharmaceutical products is a competitive area, and
a number of more established companies, which have acknowledged
strategies to license and acquire products, may have competitive
advantages, as may emerging companies taking similar or
different approaches to product acquisition. Established
companies pursuing this strategy also may have a competitive
advantage over us due to their size, cash flows and
institutional experience.
In addition, our competitors may develop, market or license
products or other novel technologies that are more effective,
safer or less costly than any that have been or are being
developed by us, or may obtain marketing approval for their
products from the FDA or equivalent foreign regulatory bodies
more rapidly than we may obtain approval for ours. There are
well established products, including generic products, that are
approved and marketed for the indications for which Angiomax and
Cleviprex are approved and the indications for which we are
developing our products in development. In addition, competitors
are developing products for such indications. We compete, in the
case of Angiomax and Cleviprex, and expect to compete, in the
cases of our products in development, on the basis of product
efficacy, safety, ease of administration, price and economic
value compared to drugs used in current practice or currently
being developed. If we are not successful in demonstrating these
attributes, our business, financial condition and results of
operations may be adversely affected.
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, following the announcement of the original results of
REPLACE-2 in 2002, additional hospitals granted Angiomax
formulary approval and hospital demand for the product
increased. However, 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 decreases, sales
of Angiomax may be negatively impacted
The number of PCI procedures performed in the United States
declined in 2007 due in part to the reaction to 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 to the controversy
regarding the use of drug-eluting stents. While PCI procedure
volume has increased from 2007 levels, it has not returned to
the level of PCI procedures performed prior to the 2007 decline.
With ongoing economic pressures on our hospital customers, 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, possibly materially.
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Because we have not sold Cleviprex since the first quarter
of 2010 as a result of product recalls and related supply
issues, our ability to successfully resume selling Cleviprex may
be adversely affected
In December 2009 and March 2010, we conducted voluntary recalls
of manufactured lots of Cleviprex due to the presence of visible
particulate matter at the bottom of some vials. As a result, we
have not been able to supply the market with Cleviprex or sell
Cleviprex since the first quarter of 2010. We expect to begin to
resupply the market with drug product and to resume selling
Cleviprex in the first half of 2011. However, physicians and
decision makers who may have used Cleviprex prior to the recalls
may be reluctant to resume using Cleviprex and physicians and
decision makers who had not used Cleviprex may be reluctant to
begin using Cleviprex because of the recalls and the related
supply issues. Physicians and decision makers who had adopted
Cleviprex as their preferred antihypertensive therapy when it
was available may also have adopted other antihypertensive
therapies during the period when Cleviprex was not available and
may be reluctant to change. In addition, we plan to focus our
marketing of Cleviprex on neurocritical care and to target
stroke centers. We have not focused our marketing of Cleviprex
in this area previously and may not be successful in this change
in marketing focus.
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 and
our business, operating results and financial condition may be
harmed
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. Such expansion may be
more difficult, more expensive or take longer than we
anticipate. If we are not able to successfully market and sell
our products globally, our business, operating results and
financial condition may be harmed.
Future rapid expansion could strain our operational, human and
financial resources. For instance, we may be required to
allocate additional resources to the expanded business, which we
would have otherwise allocated to another part of our business.
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.
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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.
The success of our global operations may be adversely
affected by international risks and uncertainties. If these
operations are not successful, our business, 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 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 foreign currency fluctuations, which could result in
increased operating expenses and reduced revenues;
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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.
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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.
Failure to comply with the U.S. Foreign Corrupt
Practices Act could subject us to penalties and other adverse
consequences
We are subject to the U.S. Foreign Corrupt Act which
generally prohibits U.S. companies from engaging in bribery
or other prohibited payments to foreign officials for the
purpose of obtaining or retaining business and requires
companies to maintain accurate books and records and internal
controls, including at foreign-controlled subsidiaries. We can
make no assurance that our employees or other agents will not
engage in prohibited conduct under our policies and procedures
and the Foreign Corrupt Practices Act for which we might be held
responsible. If our employees or other agents are found to have
engaged in such practices, we could suffer severe penalties and
other consequences that may have a material adverse effect on
our business, financial condition and results of operations.
Our ability to generate product revenue is affected by
reimbursement and drug pricing and whether access to our
products is reduced or terminated by governmental and other
third-party payors
Acceptable levels of coverage and reimbursement of drug
treatments by government payors such as Medicare and Medicaid
programs, private health insurers and other organizations have a
significant effect on our ability to successfully commercialize
our products. 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 payors, 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 at 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 after the
receipt of initial approval of a product to establish and obtain
reimbursement or pricing approval. Reimbursement approval also
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. If reimbursement of our
future products is unavailable or limited in scope or amount, or
if pricing is set at unsatisfactory levels, we may be unable to
achieve or sustain profitability.
Third-party payors 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 and health care reform. The recently
enacted Patient Protection and Affordable Care Act of 2010, or
the PPACA, may also have a significant impact on pricing as the
legislation contains a number of provisions that are intended to
reduce or limit the growth of healthcare costs. The provisions
of the PPACA could, among other things, increase pressure on
drug pricing and, as a result, the number of procedures that are
performed. In addition to 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
38
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
could adversely impact our business and future results. If
governmental 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. These negotiated prices are then 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 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.
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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.
39
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.
Risks
Related to Regulatory Matters
If we do not obtain regulatory approvals for our product
candidates in any jurisdiction or for our products in any
additional jurisdictions, we will not be able to market our
products and product candidates in those jurisdictions 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. In addition, we must obtain approval from
foreign regulatory authorities in order to sell our
U.S.-approved
products in other countries. Except for Angiomax in the United
States, Europe and other countries and Cleviprex in the United
States, Australia, New Zealand and Switzerland, 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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delay or prevent the successful commercialization of any of the
products or product candidates in the jurisdiction for which
approval is sought
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diminish our competitive advantage; and
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defer or decrease our receipt of revenue.
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The regulatory review and approval process to obtain marketing
approval 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
involved. Regulatory authorities 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. 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.
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In the fourth quarter of 2010, we initiated our SOLO I and SOLO
II clinical trials of oritavancin pursuant to a SPA with the
FDA. Many companies which have been granted SPAs have ultimately
failed to obtain final approval to market their drugs. Since we
are developing oritavancin under an SPA, based on protocol
designs negotiated with the FDA, we may be subject to enhanced
scrutiny. Additionally, even if the primary endpoints in the
SOLO trials are achieved, a SPA does not guarantee approval. The
FDA may raise issues of safety, study conduct, bias, deviation
from the protocol, statistical power, patient completion rates,
changes in scientific or medical parameters or internal
inconsistencies in the data prior to making its final decision.
The FDA may also seek the guidance of an outside advisory
committee prior to making its final decision.
The procedures to obtain marketing approvals vary among
countries and can involve additional clinical trials or other
pre-filing requirements. The time required to obtain foreign
regulatory approval may differ from that required to obtain FDA
approval. The foreign regulatory approval process may include
all the risks associated with obtaining FDA approval, or
different or additional risks. We may not obtain foreign
regulatory approvals on a timely basis, if at all. Approval by
the FDA does not ensure approval by the regulatory authorities
in other countries, and approval by one foreign regulatory
authority does not ensure approval by the FDA or regulatory
authorities in other foreign countries. We may not be able to
file for regulatory approvals and may not receive necessary
approvals to commercialize our products and products in
development in any market.
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
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
involved. The regulatory authorities have substantial discretion
in the approval process and may refuse to accept any
application. Alternatively, they 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 for a product.
For example, in 2006 we received a non-approvable letter from
the FDA in connection with our application to market Angiomax
for patients with or at risk of HIT/HITTS undergoing cardiac
surgery. 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 May 2008 letter, the FDA indicated that the
basis of their decision involved the appropriate use and
interpretation of non-inferiority trials, including the ACUITY
trial. If we determine to pursue these indications, the FDA may
require that we conduct additional studies of Angiomax, which
studies could require the expenditure of substantial resources.
Even if we undertook such studies, 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.
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
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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 reported that the
efficacy endpoints of the trial program would not be achieved.
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.
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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 and product candidates are
subject, our products could be subject to restrictions or
withdrawal from the market, the development of our product
candidates could be jeopardized, 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 EMA 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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delays in, suspension of or prohibition of commencing, clinical
trials of products in development;
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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.
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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 products in
development and a limited number of suppliers to carry out
fill-finish activities. If any of these suppliers does not or
cannot fulfill its manufacturing or supply obligations to us,
our ability to meet commercial demands for our products and to
conduct clinical trials of our products and products in
development could be impaired
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 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 on commercially reasonable terms on a timely basis or at
all. 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 our purchase orders. Only a limited number of
manufacturers are capable of manufacturing Angiomax, Cleviprex
and our products in development. 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. Satisfaction of these requirements
could cause us to experience significant delays in receiving an
adequate supply of Angiomax, Cleviprex and our products in
development and could be costly. 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 to 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.
If third parties on whom we rely to manufacture and
support the development and commercialization of our products do
not fulfill their obligations or we are unable to establish or
maintain such arrangements, 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
43
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
Angiomax, Cleviprex, our products in development or any
additional products or product candidates 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 or product
candidates 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.
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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.
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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, suspension of clinical trials, license
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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.
In December 2009 and March 2010, we conducted voluntary recalls
of manufactured lots of Cleviprex due to the presence of visible
particulate matter at the bottom of some vials. As a result, we
have not been able to supply the market with Cleviprex or sell
Cleviprex since the first quarter of 2010. We expect to begin to
resupply the market with Cleviprex in the first half of 2011.
Although we believe that we have identified the cause of the
particulate matter, we may not have done so, or there may be
additional factors that caused the particulate matter in the
lots. Our third party contract manufacturer has implemented
remediation steps that we believe will minimize or eliminate
these failures in the future and has manufactured validation
batches. However, if the remediation steps that our third-party
contract manufacturer has implemented fail to minimize or
eliminate these failures, we may not be able to supply Cleviprex
when we anticipate.
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 federal district courts order requiring the
PTO to consider our application to extend the term of the
404 patent timely filed is successfully challenged, if we
are otherwise unsuccessful in further extending the term of the
404 patent, 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 earlier than we
anticipate. Generic competition for Angiomax would have a
material adverse effect on our business, financial condition and
results of operations
The principal U.S. patent covering Angiomax, the 404
patent, was set to expire in March 2010, but has been extended
under the Hatch-Waxman Act following our litigation against the
PTO, the FDA and HHS. We
45
had applied, under the Hatch-Waxman Act, for an extension of the
term of the 404 patent, but 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
HHS seeking to set aside the denial of our application to extend
the term of the 404 patent. On August 3, 2010, the
federal district court granted our motion for summary judgment
and ordered the PTO to consider our patent term extension
application timely filed. The period for the government to
appeal the federal district courts August 3, 2010
decision expired without government appeal. However, on
August 19, 2010, APP filed a motion to intervene for the
purpose of appeal in our case against the PTO, the FDA and HHS.
On September 13, 2010, the federal district court denied
APPs motion. APP has appealed the denial of its motion,
as well as the federal district courts August 3, 2010
order. This appeal is pending.
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,
June 2010, August 2010 and February 2011, 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. We
cannot predict the outcome of these lawsuits.
Our litigation with the PTO, the FDA and HHS, APPs efforts
to appeal the August 3, 2010 decision and the patent
infringement suits are described in more detail in Item 3
of this annual report.
If the August 3, 2010 federal district courts order
requiring the PTO to consider our application to extend the term
of the 404 patent timely filed is successfully challenged
either by APP in its pending appeal or by APP or a third party
in a separate challenge, if we are otherwise unsuccessful in
further extending the term of the 404 patent, 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 earlier than we
anticipate. 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, such dispute
could lead to delays in the development or commercialization of
potential products and result in time-consuming and expensive
litigation or arbitration. 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 of 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 initial denial of the application under the
Hatch-Waxman Act for an extension of the term of the 404
patent on the grounds that it was filed late. We are also in
discussions with Biogen Idec and HRI with respect to the
possible resolution of any potential claims among the parties
with respect to this matter. We may not reach any agreement with
the parties on acceptable terms to us or at all.
46
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.
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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.
The U.S. Congress is considering patent reform legislation.
In addition, the U.S. Supreme Court has ruled on several
patent cases in recent years, either narrowing the scope of
patent protection available in certain circumstances or
weakening the rights of patent owners in certain situations.
This combination of events has created uncertainty with respect
to the value of patents, once obtained, and with regard to our
ability to obtain patents in the future. Depending on decisions
by the U.S. Congress, the federal courts, and the PTO, the
laws and regulations governing patents could change in
unpredictable ways that would weaken our ability to obtain new
patents or to enforce our existing patents and patents that we
might obtain in the future.
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 have
filed an application for U.S. patent term extension for
Cleviprex and plan to file applications for U.S. patent
term extension for our products in development upon their
approval by the FDA. If we do not receive patent term extensions
for the periods requested by us or at all, our patent protection
for Cleviprex and our products in development could be limited.
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.
Involvement in litigation, regardless of its outcome, is
time-consuming and expensive and may divert our
managements time and attention. During the period in which
these matters are pending, the uncertainty of their outcome may
cause our stock price to decline. 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.
47
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 our business may be adversely
affected
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 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. Patent
litigation and other proceedings may also absorb significant
management time. 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.
48
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 our business
We have sold and generated 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. 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 successful in developing and commercializing
product candidates or approved products we acquire
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 license 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 acquire may not be:
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manufactured or produced economically;
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successfully commercialized; or
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widely accepted in the marketplace.
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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.
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
49
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.
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
March 5, 2011, 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 our U.S. Angiomax patents;
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the extent to which Angiomax is commercially successful globally;
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whether the federal district court order requiring the PTO to
consider our application to extend the term of the 404
patent timely filed is successfully challenged either by APP in
its pending appeal or by APP or a third party in a separate
challenge;
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the terms of any settlements with Biogen Idec, HRI or the law
firm with which we have not settled our claims with respect to
the 404 patent and the PTOs initial 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.
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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
50
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 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.
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Item 1B.
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Unresolved
Staff Comments
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None.
We lease our principal offices in Parsippany, New Jersey. The
lease covers 173,146 square feet and expires January 2024.
We are still subject to a lease for our old office facility in
Parsippany, New Jersey. The lease for our old office facility
expires January 2013. In the second half of 2009, we subleased
our old office space to two tenants. The first sublease, for the
second floor of that office space, expires in March 2011. The
second sublease, covering the first floor of our previous office
space, expires in January 2013.
We also lease small offices and other facilities in Waltham,
Massachusetts, U.S.; Montreal, Canada; Milton Park, Abingdon,
United Kingdom; Basil, Switzerland; Zurich, Switzerland; Paris,
France; Rome, Italy; Munich, and Leipzig, Germany; Vienna,
Austria; Brussels, Belgium; Amsterdam, Netherlands; Madrid,
Spain; Helsinki, Finland; Copenhagen, Denmark; Oslo, Norway;
Stockholm, Sweden; Warsaw, Poland; Sydney, Australia; Auckland,
New Zealand; Sao Paulo, Brazil and New Delhi, India.
We believe our current arrangements will be sufficient to meet
our needs for the foreseeable future and that any required
additional space will be available on commercially reasonable
terms to meet space requirements if they arise.
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Item 3.
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Legal
Proceedings
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From time to time we are party to legal proceedings in the
course of our business in addition to those described 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.
727
Patent and 343 Patent Litigations
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 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.
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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 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 Teva 727 patent case above.
The judge in the Eastern District of Pennsylvania has
consolidated the Teva 727 and 343 patent cases with the
Pliva 727 and 343 patent cases (discussed below),
the APP 727 and 343 patent cases (discussed below)
and the Hospira 727 and 343 patent cases (discussed
below).
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 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 patent 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 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. On
October 14, 2010, the case was reassigned to the same judge
in the Eastern District of Pennsylvania who is presiding over
the above APP 727 patent case and the Teva 727 and
343 patent cases and the Pliva 727 and 343
patent cases. On the same day, the APP 343 patent case was
consolidated with these other cases.
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Hospira,
Inc.
In July 2010, we were notified that Hospira, Inc., or Hospira,
had submitted two ANDAs seeking permission to market its generic
version of Angiomax prior to the expiration of the 727 and
343 patents. On August 19, 2010, we filed suit
against Hospira in the U.S. District Court for the District
of Delaware for infringement of the 727 and 343
patents. On August 25, 2010, the case was reassigned in
lieu of a vacant judgeship to the U.S. District Court for
the Eastern District of Pennsylvania. Hospiras answer
denied infringement of the 727 and 343 patents and
raised counterclaims of non-infringement and invalidity of the
727 and 343 patents. On September 24, 2010, we
filed a reply denying the counterclaims raised by Hospira.
On September 17, 2010, Hospira filed a motion to be
consolidated with the Teva, Pliva and APP cases. On
October 13, 2010 the Court denied Hospiras motion to
consolidate. As part of setting the schedule in this case, the
Hospira 727 and 343 case was consolidated with the
above Teva, Pliva and APP cases. No trial date has been set.
Mylan
Pharmaceuticals, Inc.
In January 2011, we were notified that Mylan Pharmaceuticals,
Inc. had submitted an ANDA seeking permission to market its
generic version of Angiomax prior to the expiration of the
727 and 343 patents. On February 23, 2011, we
filed suit against Mylan Inc., Mylan Pharmaceuticals Inc. and
Bioniche Pharma USA, LLC in the U.S. District Court for the
Northern District of Illinois for infringement of the 727
and 343 patents.
404
Patent Litigation
PTO, FDA
and HHS, 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, and HHS 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 alleged that the PTO and the 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. We asked the court to grant relief including to vacate
and set aside the PTOs and the 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
the 404 patent did not expire pending resolution of the
court proceedings. On March 18, 2010, the PTO issued an
interim extension of the 404 patent to May 23, 2010.
On March 19, 2010, the PTO issued a decision again denying
our application for patent term extension for the 404
patent.
On March 25, 2010, we filed a complaint in the
U.S. District Court for the Eastern District of Virginia
against the PTO, the FDA, and HHS, 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
404 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 did not expire until at least 10 days after the
court issued 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. The period for the government to appeal the courts
August 3, 2010 decision expired on October 5, 2010
without government appeal and the PTO sent our patent term
extension application to the FDA for a determination on the
length of the extension of the 404 patent. On
December 16, 2010, the FDA published its determination of
the applicable regulatory review period for Angiomax. The PTO
uses the regulatory review period determined by the FDA with
several statutory limitations to calculate the length of a
53
patent extension. Based on the FDAs determination and the
PTOs patent term extension formula, we believe that the
404 patent term will be extended to December 15, 2014.
On August 19, 2010, APP filed a motion to intervene in the
U.S. District Court for the Eastern District of Virginia
for purpose of appeal in our case against the PTO, FDA and HHS,
et al. On September 13, 2010, the court issued an order
denying APPs motion to intervene. On September 1,
2010, as amended on September 17, 2010, APP filed a notice
of appeal to the United States Court of Appeals for the Federal
Circuit of the district courts August 3, 2010 and
September 13, 2010 orders (and all related and underlying
orders). On October 5, 2010, we filed a motion to dismiss
APPs appeal. On February 2, 2011, the federal circuit
court issued an order denying our motion to dismiss and
requesting additional briefings by both parties in connection
with APPs appeal. The court expressed no opinion on the
merits of APPs appeal.
|
|
Item 4.
|
(Removed
and Reserved)
|
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities Market Information and
Holders
|
Our common stock trades on the NASDAQ Global Select Market under
the symbol MDCO. The following table reflects the
range of the high and low sale price per share of our common
stock, as reported on the NASDAQ Global Select Market for the
periods indicated. These prices reflect inter-dealer prices,
without retail
mark-up,
mark-down or commission and may not necessarily represent actual
transactions.
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
Price
|
|
|
|
High
|
|
|
Low
|
|
|
Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
16.77
|
|
|
$
|
8.73
|
|
Second Quarter
|
|
|
11.50
|
|
|
|
6.15
|
|
Third Quarter
|
|
|
12.12
|
|
|
|
7.36
|
|
Fourth Quarter
|
|
|
11.24
|
|
|
|
7.00
|
|
Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
10.45
|
|
|
$
|
6.91
|
|
Second Quarter
|
|
|
8.99
|
|
|
|
6.82
|
|
Third Quarter
|
|
|
15.43
|
|
|
|
7.24
|
|
Fourth Quarter
|
|
|
15.33
|
|
|
|
11.65
|
|
American Stock Transfer & Trust Company is the
transfer agent and registrar for our common stock. As of the
close of business on March 8, 2011, we had 178 holders of
record of our common stock.
Dividends
We have never declared or paid cash dividends on our common
stock. We anticipate that we will retain all of our future
earnings, if any, for use in the expansion and operation of our
business and do not anticipate paying cash dividends in the
foreseeable future. Payment of future dividends, if any, will be
at the discretion of our board of directors.
54
Performance
Graph
The graph below matches our cumulative five-year total return on
common equity with the cumulative total returns of the NASDAQ
Composite Index and the NASDAQ Biotechnology Index. The graph
tracks the performance of a $100 investment in our common stock
and in each of the indexes (with the reinvestment of all
dividends) from December 31, 2005 to December 31,
2010. The stock price performance included in this graph is not
necessarily indicative of future stock price performance.
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
among
The Medicines Company, NASDAQ Composite Index
and The NASDAQ Biotechnology Index
|
|
|
* |
|
Fiscal year ended December 31. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/05
|
|
|
12/06
|
|
|
12/07
|
|
|
12/08
|
|
|
12/09
|
|
|
12/10
|
|
|
The Medicines Company
|
|
|
100.00
|
|
|
|
181.78
|
|
|
|
109.80
|
|
|
|
84.41
|
|
|
|
47.79
|
|
|
|
80.97
|
|
NASDAQ Composite
|
|
|
100.00
|
|
|
|
111.74
|
|
|
|
124.67
|
|
|
|
73.77
|
|
|
|
107.12
|
|
|
|
125.93
|
|
NASDAQ Biotechnology
|
|
|
100.00
|
|
|
|
99.71
|
|
|
|
103.09
|
|
|
|
96.34
|
|
|
|
106.49
|
|
|
|
114.80
|
|
This performance graph shall not be deemed filed for
purposes of Section 18 of the Securities Exchange Act of
1934, as amended, or incorporated by reference into any of our
filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, except as shall be expressly
set forth by specific reference in such filing.
55
|
|
Item 6.
|
Selected
Financial Data
|
In the table below, we provide you with our selected
consolidated financial data. We have prepared this information
using our audited consolidated financial statements for the
years ended December 31, 2010, 2009, 2008, 2007 and 2006.
In 2010 and 2006, we computed diluted earnings per share by
giving effect to options and restricted stock awards outstanding
at December 31, 2010 and December 31, 2006. We have
not included options, restricted stock awards or warrants in the
computation of diluted net loss per share for any other periods,
as their effects in those periods would have been anti-dilutive.
For further discussion of the computation of basic and diluted
earnings (loss) per share, please see note 10 of the notes
to our consolidated financial statements included in this report.
You should read the following selected consolidated financial
data in conjunction with our consolidated financial statements
and related notes included in this report and
Item 7 Managements Discussion and
Analysis of Financial Condition and Results of Operations
of this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share
data)
|
|
|
Statements of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
437,645
|
|
|
$
|
404,241
|
|
|
$
|
348,157
|
|
|
$
|
257,534
|
|
|
$
|
213,952
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
129,299
|
|
|
|
118,148
|
|
|
|
88,355
|
|
|
|
66,502
|
|
|
|
51,812
|
|
Research and development
|
|
|
85,241
|
|
|
|
117,610
|
|
|
|
105,720
|
|
|
|
77,255
|
|
|
|
63,536
|
|
Selling, general and administrative
|
|
|
158,690
|
|
|
|
193,832
|
|
|
|
164,903
|
|
|
|
141,807
|
|
|
|
88,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
373,230
|
|
|
|
429,590
|
|
|
|
358,978
|
|
|
|
285,564
|
|
|
|
203,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
64,415
|
|
|
|
(25,349
|
)
|
|
|
(10,821
|
)
|
|
|
(28,030
|
)
|
|
|
10,339
|
|
Other (expense) income
|
|
|
(267
|
)
|
|
|
(2,818
|
)
|
|
|
5,235
|
|
|
|
10,653
|
|
|
|
7,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
64,148
|
|
|
|
(28,167
|
)
|
|
|
(5,586
|
)
|
|
|
(17,377
|
)
|
|
|
17,658
|
|
(Provision for) benefit from income taxes
|
|
|
40,487
|
|
|
|
(48,062
|
)
|
|
|
(2,918
|
)
|
|
|
(895
|
)
|
|
|
46,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
104,635
|
|
|
$
|
(76,229
|
)
|
|
$
|
(8,504
|
)
|
|
$
|
(18,272
|
)
|
|
$
|
63,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share
|
|
$
|
1.98
|
|
|
$
|
(1.46
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.35
|
)
|
|
$
|
1.27
|
|
Diluted earnings (loss) per common share
|
|
$
|
1.97
|
|
|
$
|
(1.46
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.35
|
)
|
|
$
|
1.25
|
|
Shares used in computing basic earnings (loss) per common share
|
|
|
52,842
|
|
|
|
52,269
|
|
|
|
51,904
|
|
|
|
51,624
|
|
|
|
50,300
|
|
Shares used in computing diluted earnings (loss) per common share
|
|
|
53,184
|
|
|
|
52,269
|
|
|
|
51,904
|
|
|
|
51,624
|
|
|
|
51,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, available for sale securities and
accrued interest receivable
|
|
$
|
247,923
|
|
|
$
|
177,113
|
|
|
$
|
217,542
|
|
|
$
|
223,711
|
|
|
$
|
198,231
|
|
Working capital
|
|
|
239,251
|
|
|
|
156,103
|
|
|
|
212,222
|
|
|
|
208,568
|
|
|
|
228,523
|
|
Total assets
|
|
|
474,124
|
|
|
|
374,776
|
|
|
|
387,404
|
|
|
|
361,516
|
|
|
|
318,568
|
|
Accumulated deficit
|
|
|
(239,542
|
)
|
|
|
(344,177
|
)
|
|
|
(267,948
|
)
|
|
|
(259,444
|
)
|
|
|
(241,172
|
)
|
Total stockholders equity
|
|
|
357,598
|
|
|
|
240,389
|
|
|
|
298,025
|
|
|
|
277,896
|
|
|
|
269,951
|
|
56
|
|
Item 7.
|
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
Selected Consolidated Financial Data and our
financial statements and accompanying notes included elsewhere
in this annual report. In addition to the historical
information, the discussion in this annual report contains
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 annual report, including under
Risk Factors in Item 1A of this annual
report.
Overview
Our
Business
We are a global pharmaceutical company focused on advancing the
treatment of 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
acute and intensive care hospital products in development,
including two late-stage development product candidates,
cangrelor and oritavancin, two early stage development product
candidates, MDCO-2010 (formerly known as CU2010) and MDCO-216
(formerly known as ApoA-I Milano), 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
acute and intensive care hospital product market and offer, or,
in the case of our products in development, have the potential
to offer, improved performance to hospital businesses.
Angiomax, Cleviprex and our products in development, their stage
of development, their mechanism of action and the indications
which they address or are intended to address are described in
more detail in Item 1 of this annual report.
We market and sell Angiomax and, prior to its recalls and
related supply issues, we marketed and sold Cleviprex, in the
United States with a sales force that, as of February 15,
2011, consisted of 110 representatives, who we refer to as
engagement partners and engagement managers, experienced in
selling to hospital customers. In Europe, we market and sell
Angiox with a sales force that, as of February 15, 2011,
consisted of 42 engagement partners and engagement 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 outside the United States. We believe that by
establishing operations in Europe for Angiox, we will be
positioned to commercialize our pipeline of acute and intensive
care product candidates in Europe, if and when they are approved.
Research and development expenses represent costs incurred for
company acquisitions, licenses 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,
costs associated with 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, 2006 and 2010, we have incurred net losses on
an annual basis since our inception. As of December 31,
2010, we had an accumulated deficit of approximately
$239.5 million. We expect to make substantial expenditures
to further develop and commercialize our products and to develop
our product candidates, including costs and expenses associated
with clinical trials, nonclinical and preclinical studies,
57
regulatory approvals and commercialization. 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,
U.S. patent No. 5,196,404, or the 404 patent,
was set to expire in March 2010, but has been extended under the
Hatch-Waxman
Act following 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 had applied, under the
Hatch-Waxman Act, for an extension of the term of the 404
patent. 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 HHS seeking to set aside the
denial of our application to extend the term of the 404
patent. On August 3, 2010, the U.S. Federal District
Court for the Eastern District of Virginia granted our motion
for summary judgment and ordered the PTO to consider our patent
term extension application timely filed. Following the
expiration of the governments appeal period, the FDA
determined the applicable regulatory review period for Angiomax.
Based on the FDAs determination, we believe that
application of the PTOs patent term extension formula
would result in the extension of the patent term of the
404 patent to December 15, 2014. However, the PTO has
not yet determined the length of any patent term extension. As a
result of our study of Angiomax in the pediatric setting, we are
entitled to a
six-month
period of exclusivity following expiration of the 404
patent.
The period for the government to appeal the courts
August 3, 2010 decision expired without government appeal.
However, on August 19, 2010, APP Pharmaceuticals, LLC, or
APP, filed a motion to intervene for the purpose of appeal in
our case against the PTO, the FDA and HHS. On September 13,
2010, the federal district court denied APPs motion. APP
has appealed the denial of its motion, as well as the federal
district courts August 3, 2010 order. This appeal is
pending.
In the second half of 2009, the PTO issued to us
U.S. Patent No. 7,528,727, or the 727 patent,
and U.S. Patent No. 7,598,343, or the 343
patent, covering a more consistent and improved Angiomax drug
product and the processes by which it is made. The 727
patent and the 343 patent are set to expire in
July 2028. In response to Paragraph IV Certification
Notice letters we received with respect to abbreviated new drug
applications, or ANDAs, filed with the FDA seeking approval to
market generic versions of Angiomax, we have filed lawsuits
against the ANDA filers alleging patent infringement of the
727 patent and 343 patent.
Our litigation with the PTO, the FDA and HHS, APPs efforts
to appeal the August 3, 2010 decision and the patent
infringement suits are described in more detail in Item 3
of this annual report.
If the August 3, 2010 court order requiring the PTO to
consider our application to extend the term of the 404
patent timely filed is successfully challenged, either by APP in
its pending appeal or by APP or a third party in a separate
challenge, if we are otherwise unsuccessful in further extending
the term of the 404 patent, 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 earlier than we anticipate. If
the federal district courts decision is overturned and the
404 patent is found not to have been validly extended, the
404 patent would have expired in March 2010 and the
pediatric exclusivity period would have expired in September
2010. In Europe, the principal patent covering Angiox expires in
2015.
Cleviprex
Resupply
In December 2009 and March 2010, we conducted voluntary recalls
of manufactured lots of Cleviprex due to the presence of visible
particulate matter at the bottom of some vials. As a result, we
have not been able to supply the market with Cleviprex and have
not sold Cleviprex since the first quarter of 2010. We have
cooperated with the FDA and our contract manufacturer to remedy
the problem at the manufacturing site that resulted in the
recalls. Our contract manufacturer made manufacturing process
improvements, including enhanced filtration and equipment
maintenance, to assure product quality. We expect to begin to
resupply the market with Cleviprex and resume selling Cleviprex
in the first half of 2011.
58
Distribution
and Sales
We distribute Angiomax in the United States through a sole
source distribution model. Under this model, we sell Angiomax to
our sole source distributor, Integrated Commercialization
Solutions, Inc., or ICS. ICS then sells Angiomax 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. We used ICS as our
distributor for Cleviprex prior to the recalls of Cleviprex and
related supply issues and plan to use ICS when we resupply our
existing customers with Cleviprex and resume sales. 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. In addition, ICS assumes all credit
and inventory risk and is subject to our standard return policy.
ICS 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
September 30, 2013, but will automatically renew for
additional one-year periods unless either party gives notice at
least 90 days prior to the automatic extension. Either
party may terminate the agreement at any time and for any reason
upon 180 days prior written notice to the other party. In
addition, either party may terminate the agreement upon an
uncured default of a material obligation by the other party and
other specified conditions.
In Europe, we market and sell Angiox with a sales force that, as
of February 15, 2011, consisted of 42 engagement
partners and engagement managers experienced in selling to
hospital customers. Our European sales force targets hospitals
with cardiac catheterization laboratories that perform
approximately 200 or more coronary angioplasties per year. We
also market and sell Angiomax outside the United States through
distributors, including Sunovion Pharmaceuticals 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.
The reacquisition of all development, commercial and
distribution rights for Angiox from Nycomed Danmark ApS, or
Nycomed, in 2007 was our first step directly into international
markets. In July 2007, we entered into a series of agreements
with Nycomed pursuant to which we terminated our prior
distribution agreement with Nycomed and re-acquired all
development, commercial and distribution rights for Angiox in
the European Union (excluding Spain, Portugal and Greece) and
the former Soviet republics, which we refer to as the Nycomed
territory. Pursuant to the 2007 Nycomed agreements, we and
Nycomed agreed to transition the Angiox rights held by Nycomed
to us. Under these arrangements, including a transitional
distribution agreement, we assumed control of the marketing of
Angiox immediately and Nycomed provided, on a transitional
basis, sales operations services, until December 31, 2007
and product distribution services until the second half of 2008.
We assumed control of the distribution of Angiox in the Nycomed
territory during the second half of 2008.
Under the terms of the transitional distribution agreement with
Nycomed, upon the sale by Nycomed to third parties of vials of
Angiox purchased by Nycomed from us prior to July 1, 2007,
which we refer to as existing inventory, Nycomed agreed to pay
us a specified percentage of Nycomeds net sales of Angiox,
less the amount previously paid by Nycomed to us for the
existing inventory. Under the transitional distribution
agreement, upon the termination of the agreement, Nycomed had
the right to return any existing inventory for the price paid by
Nycomed to us for such inventory. We recorded a reserve of
$3.0 million in the fourth quarter of 2007 for the existing
inventory at Nycomed which we did not believe would be sold
prior to the termination of the transitional distribution
agreement and would be subject to return by Nycomed in
accordance with the agreement. During 2008, we reduced the
reserve by $2.2 million as Nycomed sold a portion of its
existing inventory during the year. Accordingly, we included
within our accrual for product return at December 31, 2008
a reserve of $0.8 million for existing inventory at Nycomed
that Nycomed had the right to return at any time. In July 2009,
we reimbursed Nycomed $0.8 million for the final amount of
inventory held by Nycomed at December 31, 2008. The
transitional distribution agreement terminated on
December 31, 2008.
59
We incurred total costs of $45.7 million in connection with
the reacquisition of the rights to develop, distribute and
market Angiox in the Nycomed territory. These total costs
include transaction fees of approximately $0.7 million and
agreed upon milestone payments of $20.0 million paid to
Nycomed on July 2, 2007, $15.0 million paid to Nycomed
on January 15, 2008 and $5.0 million paid to Nycomed
on July 8, 2008, as well as an additional $5.0 million
paid to Nycomed on July 8, 2008 in connection with our
obtaining European Commission approval to market Angiox for ACS
in January 2008.
To support the commercialization and distribution efforts of
Angiomax, we have developed, and continue to develop, our
business infrastructure outside the United States, including
forming subsidiaries, obtaining licenses and authorizations
necessary to distribute Angiomax, hiring personnel and entering
into third-party arrangements to provide services, such as
importation, packaging, quality control and distribution. We
currently have operations in Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Italy, the
Netherlands, New Zealand, Norway, Poland, Spain, Sweden,
Switzerland and the United Kingdom and are developing our
business infrastructure in Brazil, India, Turkey, Russia and
Eastern Europe. We believe that by establishing operations
outside the United States for Angiomax, we will be positioned to
commercialize Cleviprex and our products in development, if and
when they are approved outside the United States.
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.
Curacyte Discovery Acquisition. In August
2008, we acquired Curacyte Discovery GmbH, or Curacyte
Discovery, a wholly owned subsidiary of Curacyte AG. Curacyte
Discovery, a German limited liability company, was primarily
engaged in the discovery and development of small molecule
serine protease inhibitors. In connection with the acquisition,
we paid Curacyte AG an initial payment of
14.5 million in August 2008 (approximately
$22.9 million at the time of payment) and
3.5 million in December 2009 (approximately
$5.2 million at the time of payment) and
3.0 million in December 2010 (approximately
$4.3 million at the time of payment) upon achievement of
clinical milestones. We also agreed to pay contingent milestone
payments of up to an additional 29.0 million if we
proceed with further clinical development of MDCO-2010 and
achieve a commercial milestone and to pay royalties based on net
sales.
The upfront cost of the Curacyte acquisition was approximately
$23.7 million, which consisted of a purchase price equal to
the initial payment of approximately $22.9 million and
direct acquisition costs of $0.8 million. Since the
acquisition date, we have included results of Curacyte
Discoverys operations in our consolidated financial
statements. We allocated the purchase price to the estimated
fair value of assets acquired and liabilities assumed based on a
third-party valuation and management estimates. We allocated
approximately $21.4 million of the purchase price to
in-process research and development, which we expensed upon
completion of the acquisition. We recorded this amount as
research and development expenses in our consolidated statements
of operations for the three months ended September 30,
2008. We allocated the remaining portion of the purchase price
to net tangible assets.
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.
Under the terms of our agreement with Targanta, we paid Targanta
shareholders an aggregate of approximately $42.0 million at
closing. In addition, we originally agreed to pay contingent
cash payments to Targanta shareholders up to an additional
$90.4 million in the aggregate. This amount has been
reduced to $85.1 million in the aggregate, as certain
milestones have not been achieved by specified dates. The
current contingent cash payments milestones are:
|
|
|
|
|
Upon approval from the European Medicines Agency, or EMA, of an
MAA for oritavancin for the treatment of ABSSSI on or before
December 31, 2013, approximately $10.5 million in the
aggregate.
|
|
|
|
Upon final approval from the FDA of a new drug application, or
NDA, for oritavancin for the treatment of ABSSSI on or before
December 31, 2013, approximately $10.5 million in the
aggregate.
|
60
|
|
|
|
|
Upon final FDA approval of an NDA for the use of oritavancin for
the treatment of ABSSSI administered by a single dose
intravenous infusion 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.
|
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 allocated 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, to the net
tangible and intangible assets of Targanta based on their
estimated fair values. We have included the results of
Targantas operations in our consolidated financial
statements since the acquisition.
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 being
developed by Eagle Pharmaceuticals, Inc., or Eagle. 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 for a price equal to Eagles
cost 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 MDCO-216
(formerly known as ApoA-I Milano) from Pfizer Inc., or 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 a royalty on worldwide net sales of MDCO-216 at a
rate that is less than 10%. 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 year ended December 31, 2010, we recorded, in the
aggregate, charges of $6.8 million associated with these
workforce reductions. Of the approximately $6.8 million of
charges related to the workforce reductions, $1.0 million
were noncash charges, $5.7 million was paid during the year
ended December 31, 2010 and approximately $0.1 million
is expected to be paid during 2011.
61
Results
of Operations
Years
Ended December 31, 2010 and 2009
Net
Revenue:
Net revenue increased 8% to $437.6 million for 2010 as
compared to $404.2 million for 2009. The following table
reflects the components of net revenue for the years ended
December 31, 2010 and 2009:
Net
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
Change
|
|
|
Change
|
|
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
%
|
|
|
|
(In thousands)
|
|
|
U.S. sales
|
|
$
|
413,044
|
|
|
$
|
385,939
|
|
|
$
|
27,105
|
|
|
|
7.0
|
%
|
International net revenue
|
|
|
24,601
|
|
|
|
18,302
|
|
|
|
6,299
|
|
|
|
34.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
$
|
437,645
|
|
|
$
|
404,241
|
|
|
$
|
33,404
|
|
|
|
8.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue during 2010 increased by $33.4 million compared
to 2009 primarily due to an increase in sales of Angiox in
Europe and an increase in sales of Angiomax in the United
States. This increase was a result of increased demand by
existing hospital customers, the addition of new hospital
customers and a price increase we implemented in January 2010.
The increase in Angiomax net sales in the United States was
offset by additional chargebacks related to the 340B Drug
Pricing Program under the Public Health Services Act. Under this
program, we offer qualifying entities a discount off the
commercial price of Angiomax for patients undergoing PCI on an
outpatient basis. These chargebacks were higher in 2010 than
2009, reflecting increased sales of Angiomax under the program.
U.S. sales also include net revenue of $0.8 million
from sales of Cleviprex in 2010 compared to $3.0 million in
2009, as we have not sold any Cleviprex since the first quarter
of 2010 as a result of the recalls and related supply issues.
The $0.8 million in sales of Cleviprex in 2010 reflects an
offset of $0.7 million due to returns related to the 2010
Cleviprex recall.
International net revenue increased by $6.3 million during
2010 compared to 2009 primarily as a result of increased demand
for Angiox in France, Italy, Sweden and the United Kingdom,
which increased demand was partially offset by decreased sales
of Angiomax in Canada.
If the August 3, 2010 court order requiring the PTO to
consider our application to extend the term of the 404
patent timely filed is successfully challenged either by APP in
its pending appeal or in a separate challenge, if we are
otherwise unsuccessful in further extending the term of the
404 patent, 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 earlier than we anticipate. 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.
In December 2009 and March 2010, we conducted voluntary recalls
of manufactured lots of Cleviprex due to the presence of visible
particulate matter at the bottom of some vials. Since the first
quarter of 2010, we have not been able to supply the market with
Cleviprex and have not sold Cleviprex. We expect to begin to
resupply the market with Cleviprex and to sell Cleviprex in the
first half of 2011.
Cost of
Revenue:
Cost of revenue in 2010 was $129.3 million, or 30% of net
revenue, compared to $118.1 million, or 29% of net revenue,
in 2009. Cost of revenue consists 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 our agreement with AstraZeneca
AB, or AstraZeneca, related to Cleviprex and the logistics costs
related to Angiomax and Cleviprex, including distribution,
storage and handling costs.
62
Cost of
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
|
|
% of Total
|
|
|
|
|
|
% of Total
|
|
|
|
2010
|
|
|
Cost
|
|
|
2009
|
|
|
Cost
|
|
|
|
(In thousands)
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Manufacturing
|
|
$
|
29,868
|
|
|
|
23
|
%
|
|
$
|
28,520
|
|
|
|
24
|
%
|
Royalty
|
|
|
86,218
|
|
|
|
67
|
%
|
|
|
77,786
|
|
|
|
66
|
%
|
Logistics
|
|
|
13,213
|
|
|
|
10
|
%
|
|
|
11,842
|
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue
|
|
$
|
129,299
|
|
|
|
100
|
%
|
|
$
|
118,148
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue increased by $11.2 million during 2010
compared to 2009. The increase in cost of revenue was primarily
related to the higher volume of goods sold, with a corresponding
increase in royalty expense to Biogen Idec associated with the
higher sales of Angiomax, and $0.5 million related to
inventory write offs associated with the 2010 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 28% to
$85.2 million for 2010, compared to $117.6 million for
2009. The decrease primarily reflects reduced clinical activity
for cangrelor as we discontinued enrollment in the CHAMPION
clinical trial program for cangrelor in May 2009 and reduced
regulatory and clinical activity for Cleviprex in 2010 as a
result of the recalls and related supply issues. The decrease
also reflects reduced research and development expenses related
to Angiomax primarily as a result of a reduction in
manufacturing development expense. These decreases were offset
by an increase in costs incurred in preparation for Phase 3
trials of cangrelor and 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.
We expect to continue to invest in the development of Angiomax,
Cleviprex, cangrelor, oritavancin, MDCO-2010 and MDCO-216 during
2011 and for our research and development expenses to increase
in 2011. We expect research and development expenses in 2011 to
reflect costs associated with our Phase 3 clinical trials of
oritavancin and cangrelor, manufacturing development activities
for Angiomax, Cleviprex, cangrelor and MDCO-216, preparation for
our Phase 2 clinical trial program for
MDCO-2010
and product lifecycle management activities.
63
The following table identifies for each of our major research
and development projects, our spending for 2010 and 2009.
Spending for past periods is not necessarily indicative of
spending in future periods.
Research
and Development Spending
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
2010
|
|
|
Total R&D
|
|
|
2009
|
|
|
Total R&D
|
|
|
|
(In thousands)
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Angiomax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials
|
|
$
|
6,439
|
|
|
|
7
|
%
|
|
$
|
5,335
|
|
|
|
4
|
%
|
Manufacturing development
|
|
|
4,466
|
|
|
|
5
|
%
|
|
|
12,467
|
|
|
|
11
|
%
|
Administrative and headcount costs
|
|
|
2,381
|
|
|
|
3
|
%
|
|
|
4,437
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Angiomax
|
|
|
13,286
|
|
|
|
15
|
%
|
|
|
22,239
|
|
|
|
19
|
%
|
Cleviprex
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials
|
|
|
1,545
|
|
|
|
2
|
%
|
|
|
4,758
|
|
|
|
4
|
%
|
Manufacturing development
|
|
|
1,777
|
|
|
|
2
|
%
|
|
|
1,443
|
|
|
|
1
|
%
|
Administrative and headcount costs
|
|
|
1,835
|
|
|
|
2
|
%
|
|
|
5,025
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cleviprex
|
|
|
5,157
|
|
|
|
6
|
%
|
|
|
11,226
|
|
|
|
9
|
%
|
Cangrelor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials
|
|
|
9,232
|
|
|
|
11
|
%
|
|
|
21,680
|
|
|
|
19
|
%
|
Manufacturing development
|
|
|
1,998
|
|
|
|
2
|
%
|
|
|
2,665
|
|
|
|
2
|
%
|
Administrative and headcount costs
|
|
|
7,328
|
|
|
|
9
|
%
|
|
|
4,640
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cangrelor
|
|
|
18,558
|
|
|
|
22
|
%
|
|
|
28,985
|
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oritavancin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials
|
|
|
6,196
|
|
|
|
7
|
%
|
|
|
4,593
|
|
|
|
4
|
%
|
Manufacturing development
|
|
|
8,199
|
|
|
|
10
|
%
|
|
|
3,587
|
|
|
|
3
|
%
|
Administrative and headcount costs
|
|
|
7,609
|
|
|
|
9
|
%
|
|
|
3,086
|
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Oritavancin
|
|
|
22,004
|
|
|
|
26
|
%
|
|
|
11,266
|
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MDCO-2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials
|
|
|
2,056
|
|
|
|
2
|
%
|
|
|
2,129
|
|
|
|
2
|
%
|
Manufacturing development
|
|
|
1,475
|
|
|
|
2
|
%
|
|
|
1,042
|
|
|
|
1
|
%
|
Administrative and headcount costs
|
|
|
4,288
|
|
|
|
5
|
%
|
|
|
2,717
|
|
|
|
2
|
%
|
Clinical milestone
|
|
|
4,329
|
|
|
|
5
|
%
|
|
|
5,182
|
|
|
|
4
|
%
|
Government subsidy
|
|
|
(1,403
|
)
|
|
|
(1
|
)%
|
|
|
(1,432
|
)
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MDCO-2010
|
|
|
10,745
|
|
|
|
13
|
%
|
|
|
9,638
|
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MDCO-216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials
|
|
|
689
|
|
|
|
1
|
%
|
|
|
|
|
|
|
0
|
%
|
Manufacturing development
|
|
|
2,716
|
|
|
|
3
|
%
|
|
|
|
|
|
|
0
|
%
|
Administrative and headcount costs
|
|
|
608
|
|
|
|
1
|
%
|
|
|
|
|
|
|
0
|
%
|
Acquisition license fee
|
|
|
|
|
|
|
0
|
%
|
|
|
17,500
|
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MDCO-216
|
|
|
4,013
|
|
|
|
5
|
%
|
|
|
17,500
|
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-to-Use
Argatroban
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing development
|
|
|
316
|
|
|
|
0
|
%
|
|
|
|
|
|
|
0
|
%
|
Administrative and headcount costs
|
|
|
629
|
|
|
|
1
|
%
|
|
|
|
|
|
|
0
|
%
|
Acquisition license fee
|
|
|
|
|
|
|
0
|
%
|
|
|
5,000
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Ready-to-Use
Argatroban
|
|
|
945
|
|
|
|
1
|
%
|
|
|
5,000
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
10,533
|
|
|
|
12
|
%
|
|
|
11,756
|
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
85,241
|
|
|
|
100
|
%
|
|
$
|
117,610
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64
Angiomax
Research and development spending related to Angiomax during
2010 decreased by approximately $8.9 million compared to
2009, primarily due to a decrease of $8.0 million in
manufacturing development expenses related to product lifecycle
management activities. Administrative costs in 2010 decreased by
$2.0 million primarily reflecting the increased costs
incurred in 2009 in connection with the regulatory filing filed
with the FDA in the second quarter of 2009 related to the report
of the clinical study conducted to obtain the pediatric
extension. These decreases were partially offset by an increase
of $1.1 million in clinical trial costs, 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. We expect to
enroll approximately 3,680 patients in the EUROMAX trial,
in up to ten European countries. We commenced enrollment in our
EUROVISION trial in March 2010. In October 2010 we completed
enrollment, with 2,022 patients at 70 sites in six European
countries.
We expect that our research and development expenses relating to
Angiomax will decrease in 2011 due to the completion of
enrollment of the EUROVISION trial in 2010 and decreased
manufacturing and regulatory expenses. We expect that this
decrease will be partially offset by increased expenses in
connection with our efforts to further develop Angiomax for use
in additional patient populations, as well as continued research
and development expenses related to our product lifecycle
management activities.
Cleviprex
Research and development expenditures for Cleviprex decreased by
approximately $6.1 million during 2010 compared to 2009.
The decrease is primarily due to the recalls of Cleviprex and
the related supply issues and the resulting discontinuation in
late 2009 of the clinical studies being conducted by hospitals
and third-party researchers. We have resumed our efforts to
obtain marketing approval of Cleviprex outside the United States
and expect the studies conducted by hospitals and third-party
researchers that were discontinued in late 2009 as a result of
the supply issues to be restarted.
We expect research and development expenses relating to
Cleviprex in 2011 to remain relatively comparable to 2010
levels. We expect we will incur increased research and
development expenses in 2011 in connection with our efforts to
obtain marketing approval of Cleviprex outside the United States
and the clinical studies conducted by hospitals and third-party
researchers. We expect these increased costs to be offset by
decreased manufacturing development expenses.
Cangrelor
Research and development expenditures related to cangrelor
decreased by approximately $10.4 million in 2010 compared
to 2009. The decrease primarily reflects lower clinical trial
expenses related to our Phase 3 CHAMPION clinical trial program,
in which we discontinued enrollment in May 2009. 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. In October 2010, we
commenced a Phase 3 clinical trial of cangrelor, which we refer
to as the PHOENIX clinical trial. We initially expect to enroll
approximately 10,900 patients, and may enroll up to
15,000 patients in this double-blind parallel group
randomized study which compares cangrelor to clopidogrel given
according to institutional practice.
We expect to incur increased research and development expenses
relating to cangrelor in 2011 in connection with the PHOENIX
clinical trial.
Oritavancin
Research and development expenditures related to oritavancin
increased by approximately $10.7 million in 2010 compared
to 2009. The increase primarily reflects increased costs
incurred in 2010 relating to preparation for our SOLO I and SOLO
II Phase 3 clinical trials, including increased manufacturing
costs as we manufactured product for use in the trials and
increased headcount expenses. Oritavancin research and
development costs for 2010 also include approximately
$1.3 million of severance payments related to
65
the workforce reductions initiated in the first quarter of 2010.
Following our acquisition of Targanta, we worked with the FDA to
design a clinical trial responsive to the FDAs complete
response letter. As a result, in the fourth quarter of 2010, we
reached agreement with the FDA on a Special Protocol Assessment,
or SPA, and commenced two identical Phase 3 clinical trials of
oritavancin for the treatment of ABSSSI, which we refer to as
the SOLO I and SOLO II clinical trials. We plan to enroll a
total of approximately 2,000 patients in the SOLO I and
SOLO II clinical trials and to test the use of a simplified
dosing regimen involving a single dose of oritavancin as
compared to multiple doses of vancomycin for the treatment of
ABSSSI. We also expect to initiate Phase 1 studies of an oral
formulation of oritavancin for the treatment of C. difficile in
2011.
We expect to incur increased research and development expenses
relating to oritavancin in 2011 due to the SOLO I and SOLO II
clinical trials and the Phase 1 study of oritavancin for C.
difficile.
MDCO-2010
Research and development expenditures related to MDCO-2010
increased by approximately $1.1 million in 2010 compared to
2009. The increase in research and development expenditures for
MDCO-2010 primarily relates to costs incurred during 2010 with
respect to our Phase 1 clinical trial of MDCO-2010, which we
commenced in July 2009, and preparation for our Phase 2 trial of
MDCO-2010, which we commenced in November 2010. Increased costs
related to our Phase 2 trial include increased manufacturing
expenses related to the production of drug product for the trial
and headcount related costs. This increase was partially offset
by a $1.4 million German government research and
development subsidy received in 2010. We also expect to submit
an investigational new drug application for MDCO-2010 to the FDA
in 2011. Subject to the successfully completion of our current
Phase 2 trial and the IND becoming effective, we plan to
commence a Phase 2 clinical trial of MDCO-2010 in the United
States in 2012 in patients undergoing high risk cardiothoracic
surgery.
We expect that our research and development expenses relating to
MDCO-2010 will decrease in 2011 as compared to 2010, reflecting
that we incurred an expense of $4.3 million for achieving a
clinical milestone in 2010. We expect that these decreased
expenses will be partially offset by an increase in the clinical
trial expense related to our ongoing Phase 2 clinical trial of
MDCO-2010 and the preparation for our Phase 2 clinical trial of
MDCO-2010 in the United States.
MDCO-216
Research and development expenditures related to MDCO-216
decreased by approximately $13.5 million in 2010 compared
to 2009. In December 2009, we paid $17.5 million in
connection with the acquisition of exclusive worldwide rights to
MDCO-216 from Pfizer. Costs incurred during 2010 primarily
related to administrative and headcount expenses, manufacturing
development related to preclinical activities and our
preparation for clinical trials. In 2010, we completed a
technology transfer program with Pfizer related to improved
manufacturing methodologies developed by Pfizer since the Phase
1/2 trial of MDCO-216. Using these new methodologies, we
manufactured MDCO-216 on a small scale for use in preclinical
studies of MDCO-216 in 2010. We plan to commence a Phase 1 study
of MDCO-216 in 2011 and to use the same methodologies to produce
product for the Phase 1 study. We expect to incur increased
research and development expenses relating to MDCO-216 in 2011
in connection with our planned Phase 1 study of MDCO-216.
Ready-to-Use
Argatroban
Research and development expenditures related to
ready-to-use
Argatroban decreased by approximately $4.1 million in 2010
compared to 2009. This decrease relates to the $5.0 million
technology license fee paid to Eagle in September 2009 in
connection with the acquisition of marketing rights for a
ready-to-use
formulation of Argatroban in the United States and Canada. Costs
incurred during 2010 primarily related to manufacturing
development activities and administrative and headcount related
expenses. We expect to
66
incur increased research and development expenses relating to
ready-to-use
Argatroban in 2011 in connection with our validation work
planned in the second half of 2011.
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
data, or 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 $1.2 million during 2010 compared to 2009,
primarily due to a reduction of business development expenses.
Our success in further developing Angiomax and obtaining
marketing approvals for Angiomax in additional countries and for
additional patient populations, developing and obtaining,
marketing approvals for Cleviprex outside the United States, and
developing and obtaining marketing approvals 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 continue
the development of Angiomax, Cleviprex and our products in
development, or the period in which material net cash inflows
are expected to commence from further developing Angiomax and
Cleviprex, obtaining marketing approvals for Angiomax in
additional countries and additional patient populations and for
Cleviprex outside the United States or developing and obtaining
marketing approvals for 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;
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
Change
|
|
Change
|
|
|
2010
|
|
2009
|
|
$
|
|
%
|
|
|
(In thousands)
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
$
|
158,690
|
|
|
$
|
193,832
|
|
|
$
|
(35,142
|
)
|
|
|
(18.1
|
)%
|
The decrease in selling, general and administrative expenses of
$35.1 million reflects the impact of the $6.6 million
in costs we incurred in 2009 in connection with the acquisition
of Targanta and our U.S. headquarters relocation, a
$26.7 million decrease related to lower selling, marketing
and promotional activity principally related to Angiomax and
Cleviprex, approximately $0.9 million of lower general
corporate and administrative spending resulting primarily from a
reduction in personnel costs due to the first quarter 2010
reduction in force, and a $8.5 million decrease in
stock-based compensation expense. The decrease in selling,
marketing and promotional activity reflects in part a decrease
in activity with respect to Cleviprex due to the recalls and the
related supply issues. These decreases were partially offset by
costs associated with our efforts to extend the patent term of
the 404 patent and approximately $5.1 million
associated with our first
67
quarter of 2010 reduction in force, including expenses related
to employee severance arrangements and the closure of our
Indianapolis site which we completed in February 2010.
Other
(Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
Change
|
|
Change
|
|
|
2010
|
|
2009
|
|
$
|
|
%
|
|
|
(In thousands)
|
|
|
|
|
|
Other (expense)
|
|
$
|
(267
|
)
|
|
$
|
(2,818
|
)
|
|
$
|
2,551
|
|
|
|
90.5
|
%
|
Other expense, which is comprised of interest income, gains and
losses on foreign currency transactions and impairment of
investment, decreased by $2.5 million to $0.3 million
of expense for 2010, from $2.8 million of expense for 2009.
This decrease primarily reflects the impact of a
$5.0 million impairment charge taken in 2009 with respect
to our equity investment in Eagle. This was partially offset by
higher losses on foreign currency transactions and to lower
rates of return on our available for sale securities in 2010.
Benefit
from (Provision for) Income Tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
Change
|
|
Change
|
|
|
2010
|
|
2009
|
|
$
|
|
%
|
|
|
(In thousands)
|
|
|
|
|
|
Benefit from (provision for) income tax
|
|
$
|
40,487
|
|
|
$
|
(48,062
|
)
|
|
$
|
88,549
|
|
|
|
184.2
|
%
|
We recorded a $40.5 million net benefit from income taxes
for 2010 based on income before taxes of $64.1 million and
a $48.1 million provision for income taxes for 2009 based
on losses before income taxes of $28.2 million. Our
effective income tax rates for 2010 and 2009 were approximately
63.1% and 170.6%, respectively. The net benefit from income
taxes in 2010 was driven mainly by our decision to reduce the
valuation allowance against our deferred tax assets by
$45.2 million as it is more likely than not that we will
realize the future benefit of these assets. The 2009 provision
for income taxes was driven mainly by our decision to increase
the valuation allowance against our deferred tax assets by
$47.7 million to $171.4 million (100%) as we
determined at that time that it was more likely than not that we
would not realize the future benefit of any of these assets.
At the end of 2010, we maintained a $104.3 million
valuation allowance against $150.1 million of deferred tax
assets we plan to 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.
68
Years
Ended December 31, 2009 and 2008
Net
Revenue:
Net revenue increased 16% to $404.2 million for 2009 as
compared to $348.2 million for 2008. The following table
reflects the components of net revenue for the years ended
December 31, 2009 and 2008:
Net
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
Change
|
|
|
Change
|
|
|
|
2009
|
|
|
2008
|
|
|
$
|
|
|
%
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
U.S. sales
|
|
$
|
385,939
|
|
|
$
|
334,582
|
|
|
$
|
51,357
|
|
|
|
15.3
|
%
|
International net revenue
|
|
|
18,302
|
|
|
|
9,750
|
|
|
|
8,552
|
|
|
|
87.7
|
%
|
Revenue from collaborations, net
|
|
|
|
|
|
|
3,825
|
|
|
|
(3,825
|
)
|
|
|
(100
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
$
|
404,241
|
|
|
$
|
348,157
|
|
|
$
|
56,084
|
|
|
|
16.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue during 2009 increased $56.1 million compared to
2008 primarily due to an increase in sales of Angiomax in the
United States and an increase in European sales of Angiox. This
increase was a result of increased demand by existing hospital
customers, the addition of new hospital customers and a price
increase we implemented in May 2009. Of the approximate 14.6%
increase in U.S. sales of Angiomax in 2009 compared to
2008, approximately 10.9% was related to increased hospital
demand by existing customers and the addition of new customers
and 3.7% was attributable to the price increase in May 2009.
U.S. sales also include net revenue of $3.0 million in
2009 compared to $0.4 million in 2008 from sales of
Cleviprex. The $3.0 million in sales of Cleviprex in 2009
includes an offset of $1.3 million due to a returns reserve
related to our December 2009 recall of Cleviprex.
International net revenue increased by $8.6 million during
2009 compared to 2008 primarily as a result of direct sales we
made after assuming control of the distribution in the European
Union of Angiox in 2008, as well as increased orders from our
international distributors. We assumed control of the
distribution of Angiox in the majority of the countries in the
Nycomed territory during the third quarter of 2008 and the
remainder in the fourth quarter of 2008.
During 2008, we recognized as revenue from collaborations
approximately $3.8 million of net revenue from 2008 Angiox
sales of approximately $8.2 million made by Nycomed under
our transitional distribution agreement with Nycomed which
terminated on December 31, 2008. Under the terms of this
transitional distribution agreement, upon the sale by Nycomed to
third parties of vials of Angiox, Nycomed paid us a specified
percentage of Nycomeds net sales of Angiox, less the
amount previously paid by Nycomed to us for the existing
inventory. In July 2009, we reimbursed Nycomed $0.8 million
for the final amount of inventory held by Nycomed at
December 31, 2008.
Cost of
Revenue:
Cost of revenue in 2009 was $118.1 million, or 29% of net
revenue, compared to $88.4 million, or 25% of net revenue,
in 2008. 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.
69
Cost of
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
|
|
% of Total
|
|
|
|
|
|
% of Total
|
|
|
|
2009
|
|
|
Cost
|
|
|
2008
|
|
|
Cost
|
|
|
|
(In thousands)
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Manufacturing
|
|
$
|
28,520
|
|
|
|
24
|
%
|
|
$
|
22,518
|
|
|
|
25
|
%
|
Royalty
|
|
|
77,786
|
|
|
|
66
|
%
|
|
|
53,642
|
|
|
|
61
|
%
|
Logistics
|
|
|
11,842
|
|
|
|
10
|
%
|
|
|
12,195
|
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenue
|
|
$
|
118,148
|
|
|
|
100
|
%
|
|
$
|
88,355
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue increased $29.8 million during 2009
compared to 2008. Approximately $24.1 million of the total
cost of revenue increase related to an increase in royalty
expense due to a higher effective royalty rate to Biogen Idec,
$3.3 million related to an increase in manufacturing costs
of Angiomax due to production failures at the third-party
manufacturer for Angiomax and increased logistic costs and
$2.3 million related to inventory write offs associated
with the December 2009 Cleviprex recall.
Research
and Development Expenses:
Research and development expenses increased by 11% to
$117.6 million for 2009, compared to $105.7 million
for 2008. The increase primarily reflects licensing fees paid in
connection with the licensing of rights to MDCO-216 and the
ready-to-use
formulation of Argatroban, the acquisition of Targanta and
Angiomax lifecycle management activities, offset by a decrease
in acquired in process research and development expenses related
to our acquisition of Curacyte Discovery in 2008 and a decrease
in cangrelor Phase 3 clinical trial costs as a result of our
discontinuation of enrollment in the CHAMPION trials.
70
The following table identifies for each of our major research
and development projects, our spending for 2009 and 2008.
Spending for past periods is not necessarily indicative of
spending in future periods.
Research
and Development Spending
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
2009
|
|
|
Total R&D
|
|
|
2008
|
|
|
Total R&D
|
|
|
|
(In thousands)
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Angiomax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials
|
|
$
|
5,335
|
|
|
|
4
|
%
|
|
$
|
4,959
|
|
|
|
5
|
%
|
Manufacturing development
|
|
|
12,467
|
|
|
|
11
|
%
|
|
|
3,924
|
|
|
|
4
|
%
|
Administrative and headcount costs
|
|
|
4,437
|
|
|
|
4
|
%
|
|
|
3,711
|
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Angiomax
|
|
|
22,239
|
|
|
|
19
|
%
|
|
|
12,594
|
|
|
|
12
|
%
|
Cleviprex
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials
|
|
|
4,758
|
|
|
|
4
|
%
|
|
|
3,031
|
|
|
|
3
|
%
|
Manufacturing development
|
|
|
1,443
|
|
|
|
1
|
%
|
|
|
2,484
|
|
|
|
2
|
%
|
Administrative and headcount costs
|
|
|
5,025
|
|
|
|
4
|
%
|
|
|
6,214
|
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cleviprex
|
|
|
11,226
|
|
|
|
9
|
%
|
|
|
11,729
|
|
|
|
11
|
%
|
Cangrelor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials
|
|
|
21,680
|
|
|
|
19
|
%
|
|
|
37,090
|
|
|
|
35
|
%
|
Manufacturing development
|
|
|
2,665
|
|
|
|
2
|
%
|
|
|
2,661
|
|
|
|
3
|
%
|
Administrative and headcount costs
|
|
|
4,640
|
|
|
|
4
|
%
|
|
|
4,658
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cangrelor
|
|
|
28,985
|
|
|
|
25
|
%
|
|
|
44,409
|
|
|
|
42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oritavancin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials
|
|
|
4,593
|
|
|
|
4
|
%
|
|
|
|
|
|
|
0
|
%
|
Manufacturing development
|
|
|
3,587
|
|
|
|
3
|
%
|
|
|
|
|
|
|
0
|
%
|
Administrative and headcount costs
|
|
|
3,086
|
|
|
|
3
|
%
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Oritavancin
|
|
|
11,266
|
|
|
|
10
|
%
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MDCO-2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical trials
|
|
|
2,129
|
|
|
|
2
|
%
|
|
|
|
|
|
|
0
|
%
|
Manufacturing development
|
|
|
1,042
|
|
|
|
1
|
%
|
|
|
|
|
|
|
0
|
%
|
Administrative and headcount costs
|
|
|
2,717
|
|
|
|
2
|
%
|
|
|
1,180
|
|
|
|
1
|
%
|
Acquisition related in-process research and development
|
|
|
|
|
|
|
0
|
%
|
|
|
21,373
|
|
|
|
20
|
%
|
Clinical milestone
|
|
|
5,182
|
|
|
|
4
|
%
|
|
|
|
|
|
|
0
|
%
|
Government subsidy
|
|
|
(1,432
|
)
|
|
|
(1
|
)%
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MDCO-2010
|
|
|
9,638
|
|
|
|
8
|
%
|
|
|
22,553
|
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MDCO-216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition license fee
|
|
|
17,500
|
|
|
|
15
|
%
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total MDCO-216
|
|
|
17,500
|
|
|
|
15
|
%
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready-to-Use
Argatroban
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition license fee
|
|
|
5,000
|
|
|
|
4
|
%
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Ready-to-Use
Argatroban
|
|
|
5,000
|
|
|
|
4
|
%
|
|
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
11,756
|
|
|
|
10
|
%
|
|
|
14,435
|
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
117,610
|
|
|
|
100
|
%
|
|
$
|
105,720
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Angiomax
Research and development spending related to Angiomax during
2009 increased by approximately $9.6 million compared to
2008, primarily due to an increase in manufacturing development
expenses related to
71
product lifecycle management activities. Administrative costs
increased $0.7 million primarily in connection with costs
incurred 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. Clinical trial costs
increased approximately $0.4 million primarily due to
increased expenditures in connection with our EUROMAX clinical
trial, which were partially offset by decreased expenditures
associated with the investigator initiated trial, HORIZONS AMI,
that we supported. During the second quarter of 2008, we
incurred $1.5 million in costs related to the final
milestone payment in connection with HORIZONS AMI.
Cleviprex
Research and development expenditures for Cleviprex decreased
approximately $0.5 million during 2009 compared 2008. The
decrease in research and development expenditures primarily
related to decreased manufacturing development expenses
associated with product lifecycle management activities and a
decrease in administrative and headcount costs primarily due to
a reduction in administrative activity in 2009 related to our
MAA for Cleviprex in the European Union, which we submitted
during the first quarter of 2009. These decreases were partially
offset by increased clinical trial expenses related to the
numerous Phase 4 and other clinical studies of Cleviprex we
conducted in 2009 in areas such as intracranial bleeding, major
cardiovascular surgery, neurocritical care and hypertension
associated with congestive heart failure, along with health
economics analyses.
Cangrelor
Research and development expenditures related to cangrelor
decreased by approximately $15.4 million in 2009 compared
to 2008. In May 2009, we discontinued enrollment in our Phase 3
CHAMPION clinical trial program for cangrelor. Manufacturing
development expenses and administrative and headcount costs
remained relatively unchanged.
Oritavancin
Research and development expenditures for oritavancin in 2009
primarily were incurred in preparation of a potential Phase 3
clinical trial and manufacturing and headcount costs.
MDCO-2010
We acquired MDCO-2010 in August 2008 in connection with our
acquisition of Curacyte Discovery. The acquisition of Curacyte
Discovery resulted in the inclusion in research and development
expense of $21.4 million of acquisition related in-process
research and development in 2008. Costs incurred during 2009
primarily related to a clinical milestone of $5.2 million
that we paid in December 2009, our Phase 1a clinical trial of
MDCO-2010, which we commenced in July 2009, and headcount. Such
research and develop expense was partially offset by a
$1.4 million German government research and development
subsidy.
MDCO-216
In December 2009, we paid $17.5 million in license fees to
Pfizer and additional payments to other third parties for
exclusive worldwide rights to MDCO-216.
Argatroban
In September 2009, we paid a $5.0 million technology
license fee to Eagle for marketing rights for a
ready-to-use
formulation of Argatroban in the United States and Canada.
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
72
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 $2.7 million during 2009 compared to 2008,
primarily due to a reduction of business development expenses.
Selling,
General and Administrative Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
|
|
Change
|
|
Change
|
|
|
2009
|
|
2008
|
|
$
|
|
%
|
|
|
(In thousands)
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
$
|
193,832
|
|
|
$
|
164,903
|
|
|
$
|
28,929
|
|
|
|
17.5
|
%
|
The increase in selling, general and administrative expenses of
$28.9 million includes an increase in expenses of
$12.3 million in 2009 related to the sales force expansion
in the United States in connection with the Cleviprex launch and
in Europe in connection with Angiox, $18.6 million related
to business infrastructure, which included $7.5 million for
global facilities expansion and rent, $2.4 million of
information technology related expenses, and $1.6 million
related to the building of our business infrastructure in
Europe. In addition, we incurred in 2009 a total of
$10.2 million of cost related to our acquisitions of
Targanta and Curacyte Discovery, of which $4.3 million of
transaction cost related to Targanta. The increase in selling,
general and administrative expenses was partially offset by a
$9.3 million decrease in marketing, promotional and support
expense reflecting higher spending in 2008 related to the
Cleviprex launch in 2008 and a $3.4 million decrease in
stock-based compensation expense.
Other
(Expense) Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
Change
|
|
Change
|
|
|
2009
|
|
2008
|
|
$
|
|
%
|
|
|
(In thousands)
|
|
|
|
|
|
Other (expense) income
|
|
$
|
(2,818
|
)
|
|
$
|
5,235
|
|
|
$
|
(8,053
|
)
|
|
|
(153.8
|
)%
|
Other (expense) income, which is comprised of interest income
and gains and losses on foreign currency transactions and
impairment of investment, decreased $8.1 million to
$2.8 million of expense for 2009, from $5.2 million of
income for 2008. This decrease was primarily due to a
$5.0 million impairment charge taken with respect to our
equity investment in Eagle and to lower levels of cash to invest
combined with lower rates of return on our available for sale
securities in 2009.
(Provision
for) Income Tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
Change
|
|
Change
|
|
|
2009
|
|
2008
|
|
$
|
|
%
|
|
|
(In thousands)
|
|
|
|
|
|
(Provision for) income tax
|
|
$
|
(48,062
|
)
|
|
$
|
(2,918
|
)
|
|
$
|
(45,144
|
)
|
|
|
(1,547.1
|
)%
|
We recorded a provision for income taxes of $48.1 million
in 2009 and $2.9 million in 2008, based on losses before
income taxes of $28.2 million and $5.6 million,
respectively. The increase in the provision for income taxes was
driven mainly by our decision to fully reserve against our
deferred tax assets as we determined at that time that it was
more likely than not that we would not realize the future
benefit of these assets.
Liquidity
and Capital Resources
Sources
of Liquidity
Since our inception, we have financed our operations principally
through revenues from sales of Angiomax, the sale of common
stock, sales of convertible promissory notes and warrants and
interest income. Except for 2004, 2006 and 2010, we have
incurred losses on an annual basis since our inception. We had
$246.6 million in cash, cash equivalents and available for
sale securities as of December 31, 2010.
73
Cash
Flows
As of December 31, 2010, we had $126.4 million in cash
and cash equivalents, as compared to $72.2 million as of
December 31, 2009. Our primary sources of cash during 2010
included $67.5 million of net cash provided by operating
activities and $3.4 million in net cash provided by
financing activities. These amounts were partially offset by the
$18.4 million in net cash that we used in investing
activities.
Net cash provided by operating activities was $67.5 million
in 2010, compared to net cash provided by operating activities
of $1.0 million in 2009. The cash provided by operating
activities in 2010 reflected net income of $104.6 million
offset by non-cash items of $24.8 million consisting
primarily of a deferred tax benefit of $43.6 million,
stock-based compensation expense of $8.3 million and
depreciation and amortization of $6.1 million. Cash
provided by operating activities in 2010 also includes a
decrease of $12.3 million due to changes in working capital
items.
The cash provided by operating activities in 2009 reflected a
net loss of $76.2 million, offset by non-cash items of
$80.6 million consisting primarily of a deferred tax
provision of $47.7 million, stock-based compensation
expense of $19.4 million and impairment of investment of
$5.0 million. Cash provided by operating activities in 2009
also included a decrease of $3.4 million due to changes in
working capital items.
During 2010, $18.4 million in net cash was used in
investing activities, which reflected $128.2 million used
to purchase available for sale securities, offset by
$108.6 million in proceeds from the maturity and sale of
available for sale securities and a $1.3 million decrease
in restricted cash resulting from a reduction of our outstanding
letter of credit associated with the lease of our principal
executive offices.
During 2009, $11.2 million in net cash was used in
investing activities, which reflected $133.7 million used
to purchase available for sale securities, a net cash
expenditure of $37.2 million in connection with the
Targanta acquisition, an increase of restricted cash of
$1.7 million and $0.3 million used to purchase fixed
assets, offset by $161.6 million in proceeds from the
maturity and sale of available for sale securities.
We received $3.4 million in 2010 and $1.8 million in
2009, respectively, 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;
|
|
|
|
whether the federal district courts order requiring the
PTO to consider our application to extend the term of the
404 patent timely filed is successfully challenged either
by APP in its pending appeal or by APP or a third party in a
separate challenge;
|
|
|
|
the outcome of our efforts to otherwise extend the patent term
of the 404 patent to 2014 and our ability to maintain
market exclusivity for Angiomax in the United States through our
other U.S. patents covering Angiomax;
|
|
|
|
the terms of any settlements with Biogen Idec, HRI or the law
firm with which we have not settled our claims with respect to
the 404 patent and the PTOs initial denial of our
application to extend the term of the patent;
|
|
|
|
our ability to resupply the U.S. market with Cleviprex and
re-launch the product on the time frames we expect 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 consideration paid by us in connection with acquisitions and
licenses of development-stage products, approved products, or
businesses, and in connection with other strategic arrangements;
|
74
|
|
|
|
|
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 Angiomax in additional countries and for additional
indications, of Cleviprex outside the United States, Australia,
New Zealand and Switzerland and of our products in development
globally;
|
|
|
|
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, together with revenues that we
generate from sales of our products and other sources, are
insufficient to satisfy our funding 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, we may need to 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. 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
Our 404 patent was set to expire in March 2010, but has
been extended under the Hatch-Waxman Act following our
litigation against the PTO, the FDA and HHS. We had applied,
under the Hatch-Waxman Act, for an extension of the term of the
404 patent. 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 HHS seeking
to set aside the denial of our application to extend the term of
the 404 patent. On August 3, 2010, the
U.S. Federal District Court for the Eastern District of
Virginia granted our motion for summary judgment and ordered the
PTO to consider our patent term extension application timely
filed. Following the expiration of the governments appeal
period, the FDA determined the applicable regulatory review
period for Angiomax. Based on the FDAs determination, we
believe that application of the PTOs patent term extension
formula would result in the extension of the patent term of the
404 patent to December 15, 2014. However, the PTO has
not yet determined the length of any patent term extension. As a
result of our study of Angiomax in the pediatric setting, we are
also entitled to a six-month period of exclusivity following
expiration of the 404 patent. If the federal district
courts decision is overturned and the 404 patent is
found not to have been validly extended, the 404 patent
would have expired in March 2010 and the pediatric exclusivity
period would have expired in September 2010.
The period for the government to appeal the courts
August 3, 2010 decision expired without government appeal.
However, on August 19, 2010, APP filed a motion to
intervene for the purpose of appeal in our case against the PTO,
the FDA and HHS. On September 13, 2010, the federal
district court denied APPs motion. APP has appealed the
denial of its motion, as well as the federal district
courts August 3, 2010 order. This appeal is pending.
In addition, APP or other third parties could challenge the
August 3, 2010 order in separate proceedings.
Our litigation with the PTO, the FDA and HHS and APPs
efforts to appeal the August 3, 2010 decision are described
in more detail in Item 3 of this annual report.
75
We have entered into an agreement with one of the law firms
involved in the patent term extension application filing that
suspends 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 term extension application 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 one of the law firms involved in the patent term
extension application filing and are currently in related
discussions with Biogen Idec and HRI with respect to the
possible resolution of potential claims among the parties.
In February 2011, we entered into a settlement agreement and
release with the law firm Wilmer Cutler Pickering Hale and Dorr
LLP, or WilmerHale, with respect to all potential claims and
causes of action between the parties related to the 404
patent. Under the settlement agreement, WilmerHale agreed to
make available to us up to approximately $232 million,
consisting of approximately $117 million from the proceeds
of professional liability insurance policies and
$115 million of payments from WilmerHale itself. WilmerHale
has agreed to pay approximately $18 million from its
professional liability insurance providers to us within
60 days after the date of the settlement agreement. The
balance of the approximately $232 million aggregate amount
provided in the settlement agreement remains available to pay
future expenses incurred by us in continuing to defend the
extension of the 404 patent, and any damages that may be
suffered by us in the event that a generic version of Angiomax
is sold in the United States before June 15, 2015 because
the extension of the 404 patent is held invalid on the
basis that the application for the extension was not timely
filed. Payments by WilmerHale itself would be made only after
payments from its insurance policies are exhausted and cannot
exceed $2.875 million for any calendar quarter. While we
believe that the extension of the 404 patent will be
upheld, the court decision ordering the PTO to accept the
extension application as timely filed remains open to future
challenge, including in the pending appeal by APP, and may not
be sustained.
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 purchases of
inventory of our products, research and development service
agreements, operating leases, selling, general and
administrative obligations, increases to our restricted cash in
connection with our lease of our principal office space in
Parsippany, New Jersey and royalties, milestone payments and
other contingent payments due under our license and acquisition
agreements.
Future estimated contractual obligations as of December 31,
2010 are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
More Than
|
|
Contractual Obligations (in
thousands)
|
|
Total
|
|
|
1 Year
|
|
|
1 - 3 Years
|
|
|
3 - 5 Years
|
|
|
5 Years
|
|
|
Inventory related commitments
|
|
$
|
44,985
|
|
|
$
|
30,316
|
|
|
$
|
14,669
|
|
|
$
|
|
|
|
|
|
|
Research and development
|
|
|
46,157
|
|
|
|
26,419
|
|
|
|
19,554
|
|
|
|
184
|
|
|
|
|
|
Operating leases
|
|
|
66,901
|
|
|
|
8,870
|
|
|
|
14,381
|
|
|
|
9,629
|
|
|
|
34,021
|
|
Selling, general and administrative
|
|
|
5,134
|
|
|
|
3.092
|
|
|
|
2,042
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits
|
|
|
1,891
|
|
|
|
1,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
165,068
|
|
|
$
|
70,588
|
|
|
$
|
50,646
|
|
|
$
|
9,813
|
|
|
$
|
34,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All of the inventory related commitments included above are
non-cancellable. Included within the inventory related
commitments above are purchase commitments to Lonza Braine
totaling $25.3 million for 2011 and $14.7 million for
2012 for Angiomax bulk drug substance. Of the total estimated
contractual obligations for research and development and
selling, general and administrative activities,
$8.9 million is non-cancellable.
We lease our principal offices in Parsippany, New Jersey. The
lease covers 173,146 square feet and expires January 2024.
We are still subject to a lease for our old office facility in
Parsippany, New Jersey. The
76
lease for our old office facility expires January 2013. In the
second half of 2009, we subleased our old office space to two
tenants. The first sublease, for the second floor of that office
space, expires in March 2011. The second sublease, covering the
first floor of our previous office space, expires in January
2013. 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.
Approximately 82% of the total operating lease commitments above
relate to our principal office building in Parsippany, New
Jersey. Also included in total property lease commitments are
automobile leases, computer leases, the operating lease from our
previous office space and other property leases that we entered
into while expanding our global infrastructure.
Aggregate rent expense under our property leases was
approximately $5.8 million in 2010, $7.5 million in
2009 and $2.2 million in 2008.
In addition to the amounts shown in the above table, we are
contractually obligated to make potential future success-based
development, regulatory and commercial milestone payments and
royalty payments in conjunction with collaborative agreements or
acquisitions we have entered into with third-parties. These
contingent payments include royalty payments with respect to
Angiomax under our license agreements with Biogen Idec and HRI,
royalty and milestone payments with respect to Cleviprex,
contingent cash payments of up to approximately
$85.1 million that would be owed to former Targanta
shareholders under our merger agreement with Targanta and
contingent payments with respect to cangrelor, MDCO-2010 and
MDCO-216. These payments are contingent upon the occurrence of
certain future events and, given the nature of these events, it
is unclear when, if ever, we may be required to pay such
amounts. These contingent payments have not been included in the
table above. Further, the timing of any future payment is not
reasonable estimable. In 2010 and 2009, the Company paid
aggregate royalties to Biogen Idec and HRI of $85.5 million
and $77.4 million and royalties to AstraZeneca with respect
to Cleviprex of $0.7 million and $0.4 million.
Application
of Critical Accounting Estimates
The discussion and analysis of our financial condition and
results of operations is based on our consolidated financial
statements, which have been prepared in accordance with
U.S. GAAP. 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
|
|
|
|
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 to our consolidated financial statements included in
this annual report on
Form 10-K.
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, stock-based compensation and income
taxes described below are critical accounting
estimates.
Revenue
Recognition
Product Sales. We distribute Angiomax in the
United States through a sole source distribution model. Under
this model, we sell Angiomax to our sole source distributor,
ICS. ICS then sells Angiomax to a limited number of national
medical and pharmaceutical wholesalers with distribution centers
located throughout the
77
United States and in certain cases, directly to hospitals. We
used ICS as our distributor for Cleviprex prior to the recalls
of Cleviprex and related supply issues and plan to use ICS when
we resupply our existing customers with Cleviprex and resume
sales. 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 and is
subject to our standard return policy. ICS 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 September 30, 2013,
but will automatically renew for additional one-year periods
unless either party gives notice at least 90 days prior to
the automatic extension. Either party may terminate the
agreement at any time and for any reason upon 180 days
prior written notice to the other party. In addition, either
party may terminate the agreement upon an uncured default of a
material obligation by the other party and other specified
conditions.
Outside of the United States, we sell Angiomax either directly
to hospitals or to wholesalers or international distributors,
which then sell Angiomax to hospitals. We had deferred revenue
of $0.5 million as of December 31, 2010 and
$0.4 million as of each of December 31, 2009 and
December 31, 2008 associated with sales of Angiomax to
wholesalers outside of the United States. We recognize revenue
from such sales when hospitals purchase the product.
We do not recognize revenue from product sales until there is
persuasive evidence of an arrangement, delivery has occurred,
the price is fixed and determinable, the buyer is obligated to
pay us, the obligation to pay is not contingent on resale of the
product, the buyer has economic substance apart from us, we have
no obligation to bring about the sale of the product, the amount
of returns can be reasonably estimated and collectability is
reasonably assured.
We began selling Cleviprex in the United States in September
2008. Initial gross wholesaler orders of Cleviprex in the United
States in the third quarter of 2008 totaled $10.0 million.
We recorded this amount as deferred revenue as we could not
estimate certain adjustments to gross revenue, including
returns. Under this deferred revenue model, we do not recognize
revenue upon product shipment to ICS. Instead, upon product
shipment, we invoice ICS, record deferred revenue at gross
invoice sales price, classify the cost basis of the product held
by ICS as finished goods inventory held by others and include
such cost basis amount within prepaid expenses and other current
assets on our consolidated balance sheets. We currently
recognize the deferred revenue when hospitals purchase product
and will do so until such time that we have sufficient
information to develop reasonable estimates of expected returns
and other adjustments to gross revenue. When such estimates are
developed, we expect to recognize Cleviprex revenue upon
shipment to ICS in the same manner as we recognize Angiomax
revenue. During the third quarter of 2009, we reduced our
contract price for Cleviprex, which had the effect of reducing
the deferred revenue by approximately $4.0 million. In the
fourth quarter of 2009, we announced a voluntary recall of 11
lots of Cleviprex, including any remaining unsold inventory
associated with its initial wholesaler orders which resulted in
a reduction of deferred revenue of approximately
$2.0 million. We recognized $3.0 million of revenue
associated with Cleviprex during 2009 related to purchases by
hospitals. We recognized $0.8 million of revenue associated
with Cleviprex during 2010 related to purchases by hospitals. We
have not sold Cleviprex since the first quarter of 2010.
We record allowances for chargebacks and other discounts or
accruals for product returns, rebates and
fee-for-service
charges at the time of sale, and report revenue net of such
amounts. In determining the amounts of certain allowances and
accruals, we must make significant judgments and estimates. For
example, in determining these amounts, we estimate hospital
demand, buying patterns by hospitals and group purchasing
organizations from wholesalers and the levels of inventory held
by wholesalers and by ICS. Making these determinations involves
estimating whether trends in past wholesaler and hospital buying
patterns will predict future product sales. We receive data
periodically from ICS and wholesalers on inventory levels and
levels of hospital purchases and we consider this data in
determining the amounts of these allowances and accruals.
The nature of our allowances and accruals requiring critical
estimates, and the specific considerations we use in estimating
our amounts are as follows.
78
|
|
|
|
|
Product returns. Our customers have the right
to return any unopened product during the
18-month
period beginning six months prior to the labeled expiration date
and ending 12 months after the labeled expiration date. As
a result, in calculating the accrual for product returns, we
must estimate the likelihood that product sold might not be used
within six months of expiration and analyze the likelihood that
such product will be returned within 12 months after
expiration. We consider all of these factors and adjust the
accrual periodically throughout each quarter to reflect actual
experience. When customers return product, they are generally
given credit against amounts owed. The amount credited is
charged to our product returns accrual.
|
In estimating the likelihood of product being returned, we rely
on information from ICS and wholesalers regarding inventory
levels, measured hospital demand as reported by third-party
sources and internal sales data. We also consider the past
buying patterns of ICS and wholesalers, the estimated remaining
shelf life of product previously shipped, the expiration dates
of product currently being shipped, price changes of competitive
products and introductions of generic products.
At December 31, 2010 and December 31, 2009, our
accrual for product returns was $0.6 million and
$3.8 million, respectively. Included within the accrual at
December 31, 2009 was a reserve of $1.3 million that
we established related to the Cleviprex product recall which
occurred in December 2009. A 10% change in our accrual for
product returns would have had an approximately
$0.1 million effect on our reported net revenue for the
year ended December 31, 2010.
|
|
|
|
|
Chargebacks and rebates. Although we primarily
sell products to ICS in the United States, we typically enter
into agreements with hospitals, either directly or through group
purchasing organizations acting on behalf of their hospital
members, in connection with the hospitals purchases of
products.
|
Based on these agreements, most of our hospital customers have
the right to receive a discounted price for products and
volume-based rebates on product purchases. In the case of
discounted pricing, we typically provide a credit to ICS, or a
chargeback, representing the difference between ICSs
acquisition list price and the discounted price. In the case of
the volume-based rebates, we typically pay the rebate directly
to the hospitals.
As a result of these agreements, at the time of product
shipment, we estimate the likelihood that product sold to ICS
might be ultimately sold to a contracting hospital or group
purchasing organization. We also estimate the contracting
hospitals or group purchasing organizations volume
of purchases.
We base our estimates on industry data, hospital purchases and
the historic chargeback data we receive from ICS, most of which
ICS receives from wholesalers, which detail historic buying
patterns and sales mix for particular hospitals and group
purchasing organizations, and the applicable customer chargeback
rates and rebate thresholds.
Our allowance for chargebacks was $13.9 million and
$4.7 million at December 31, 2010 and
December 31, 2009, respectively. A 10% change in our
allowance for chargebacks would have had an approximate
$1.4 million effect on our reported net revenue for the
year ended December 31, 2010. We did not have an allowance
for rebates at December 31, 2010 or 2009.
|
|
|
|
|
Fees-for-service. We
offer discounts to certain wholesalers and ICS based on
contractually determined rates for certain services. We estimate
our
fee-for-service
accruals and allowances based on historical sales, wholesaler
and distributor inventory levels and the applicable discount
rate. Our discounts are accrued at the time of the sale and are
typically settled with the wholesalers or ICS within
60 days after the end of each respective quarter. Our
fee-for-service
accruals and allowances were $2.6 million and
$3.1 million at December 31, 2010 and
December 31, 2009, respectively. A 10% change in our
fee-for-service
accruals and allowances would have had an approximately
$0.3 million effect on our net revenue for the year ended
December 31, 2010.
|
We have adjusted our allowances for chargebacks and accruals for
product returns, rebates and
fees-for-service
in the past based on actual sales experience, and we will likely
be required to make adjustments to these allowances and accruals
in the future. We continually monitor our allowances and
79
accruals and makes adjustments when we believe actual experience
may differ from our estimates. The allowances included in the
table below reflect these adjustments.
The following table provides a summary of activity with respect
to our sales allowances and accruals during 2010, 2009 and 2008
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
Fees-for-
|
|
|
|
Discounts
|
|
|
Returns
|
|
|
Chargebacks
|
|
|
Rebates
|
|
|
Service
|
|
|
Balance at January 1, 2008
|
|
$
|
507
|
|
|
$
|
3,060
|
|
|
$
|
597
|
|
|
$
|
1,662
|
|
|
$
|
1,657
|
|
Allowances for sales during 2008
|
|
|
7,510
|
|
|
|
138
|
|
|
|
5,628
|
|
|
|
1,413
|
|
|
|
6,562
|
|
Allowances for prior year sales
|
|
|
|
|
|
|
159
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
Allowances for sales in Nycomed territory
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual credits issued for prior years sales
|
|
|
(506
|
)
|
|
|
(261
|
)
|
|
|
(720
|
)
|
|
|
(1,397
|
)
|
|
|
(721
|
)
|
Actual credits issued for prior years sales in Nycomed
territory
|
|
|
|
|
|
|
(2,121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual credits issued for sales during 2008
|
|
|
(6,829
|
)
|
|
|
|
|
|
|
(4,442
|
)
|
|
|
(1,247
|
)
|
|
|
(5,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
682
|
|
|
|
975
|
|
|
|
1,186
|
|
|
|
431
|
|
|
|
1,956
|
|
Allowances for sales during 2009
|
|
|
8,291
|
|
|
|
3,764
|
|
|
|
13,439
|
|
|
|
212
|
|
|
|
9,582
|
|
Allowances for prior year sales
|
|
|
|
|
|
|
274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual credits issued for prior years sales
|
|
|
(648
|
)
|
|
|
(1,249
|
)
|
|
|
(1,174
|
)
|
|
|
(275
|
)
|
|
|
(1,670
|
)
|
Actual credits issued for sales during 2009
|
|
|
(7,661
|
)
|
|
|
|
|
|
|
(8,787
|
)
|
|
|
(357
|
)
|
|
|
(6,743
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
664
|
|
|
|
3,764
|
|
|
|
4,664
|
|
|
|
11
|
|
|
|
3,125
|
|
Allowances for sales during 2010
|
|
|
9,817
|
|
|
|
3,420
|
|
|
|
53,756
|
|
|
|
|
|
|
|
10,976
|
|
Allowances for prior year sales
|
|
|
|
|
|
|
1,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual credits issued for prior years sales
|
|
|
(688
|
)
|
|
|
(3,811
|
)
|
|
|
(4,041
|
)
|
|
|
|
|
|
|
(3,051
|
)
|
Actual credits issued for sales during 2010
|
|
|
(8,674
|
)
|
|
|
(3,909
|
)
|
|
|
(40,516
|
)
|
|
|
|
|
|
|
(8,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
1,119
|
|
|
$
|
627
|
|
|
$
|
13,863
|
|
|
$
|
11
|
|
|
$
|
2,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included within the balance at January 1, 2008 above is the
reserve of $3.0 million that we recorded during the fourth
quarter of 2007 for the existing inventory at Nycomed which we
did not believe would be sold prior to the termination of our
transitional distribution agreement with Nycomed and would be
subject to purchase in accordance with the agreement. During
2008, we reduced the reserve by $2.2 million as Nycomed
sold a portion of the existing inventory during the year. Such
amount is included within the 2008 allowances above. In 2009, we
reimbursed Nycomed $0.8 million for the final amount of
inventory held by Nycomed at December 31, 2008.
International Distributors. Under our
agreements with our primary international distributors, we sell
Angiomax to these distributors at a fixed price. The established
price is typically determined once per year, prior to the first
shipment of Angiomax to the distributor each year. The minimum
selling price used in determining the price is 50% of the
average net unit selling price.
Revenue associated with sales to our international distributors
during 2010, 2009 and 2008 was $4.5 million,
$4.4 million and $6.6 million, respectively. During
2008, we reduced the Nycomed inventory reserve by
$2.2 million as Nycomed sold a portion of our existing
inventory during the year. Such amounts are included in the
$6.6 million of revenue associated with sales to our
international distributors during 2008. As a result, we reduced
our reserve for existing inventory to $0.8 million, which
resulted in an increase to international net revenue. We
reimbursed Nycomed $0.8 million in July 2009 for the final
amount of inventory held by Nycomed at December 31, 2008.
Revenue from Collaborations. Under the terms
of the transitional distribution agreement with Nycomed, we were
entitled to receive a specified percentage of Nycomeds net
sales of Angiox to third parties. In the event the Angiox sold
was purchased by Nycomed from us prior to July 1, 2007, the
amount we were entitled
80
to receive in connection with such sale was reduced by the
amount previously paid by Nycomed to us for such product.
Accordingly, revenue related to the transitional distribution
agreement with Nycomed entered into in 2007, under which Nycomed
provided product distribution services through the second half
of 2008, was not recognized until the product was sold by
Nycomed to a hospital customer. For the year ended
December 31, 2008, we recorded $3.8 million of net
revenue from sales made by Nycomed of approximately
$8.2 million under the transitional distribution agreement.
We recorded such amount as revenue from collaborations and
included it in net revenue on our consolidated statements of
operations. Because we assumed control of the distribution of
Angiox in all countries in the Nycomed territory by
December 31, 2008, we did not have any revenue from
collaborations during the year ended December 31, 2009 and
2010.
Inventory
We record inventory upon the transfer of title from our vendors.
Inventory is stated at the lower of cost or market value and
valued using
first-in,
first-out methodology. Angiomax and Cleviprex bulk substance is
classified as raw materials and its costs are determined using
acquisition costs from our contract manufacturers. We record
work-in-progress
costs of filling, finishing and packaging against specific
product batches. We obtain all of our Angiomax bulk drug
substance from Lonza Braine, S.A. Under the terms of our
agreement with Lonza Braine, we provide forecasts of our annual
needs for Angiomax bulk substance 18 months in advance. We
also have a separate agreement with Ben Venue Laboratories, Inc.
for the fill-finish of Angiomax drug product. We obtain all of
our Cleviprex bulk drug substance from Johnson Matthey Pharma
Services and also have a separate agreement with Hospira, Inc.
for the fill-finish of Cleviprex drug product.
We review inventory, including inventory purchase commitments,
for slow moving or obsolete amounts based on expected revenues.
If annual revenues are less than expected, we may be required to
make additional allowances for excess or obsolete inventory in
the future.
Stock-Based
Compensation
We have established equity compensation plans for our employees,
directors and certain other individuals. All grants and terms
are authorized by our Board of Directors or the Compensation
Committee of our Board of Directors, as appropriate. We may
grant non-qualified stock options, restricted stock awards,
stock appreciation rights and other stock-based awards under our
Amended and Restated 2004 Stock Incentive Plan. From January
2008 to May 2008, we granted non-qualified stock options under
our 2007 Equity Inducement Plan to new employees as an
inducement to their entering into employment with us. From April
2009 to May 2010, we granted non-qualified stock options under
our 2009 Equity Inducement Plan to new employees as an
inducement to their entering into employment with us.
We account for share-based compensation in accordance with ASC
topic
718-10, or
ASC 718-10,
and recognize expense using the accelerated expense attribution
method.
ASC 718-10
requires companies to recognize compensation expense in an
amount equal to the fair value of all share-based awards granted
to employees.
We estimate the fair value of each option on the date of grant
using the Black-Scholes closed-form option-pricing model based
on assumptions for the expected term of the stock options,
expected volatility of our common stock, and prevailing interest
rates.
ASC 718-10
also requires us to estimate forfeitures in calculating the
expense relating to stock-based compensation as opposed to only
recognizing forfeitures and the corresponding reduction in
expense as they occur.
81
We have based our assumptions on the following:
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Assumption
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Method of Estimating
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Estimated expected term of options
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Employees historical exercise
experience and, at times, estimates of future exercises of
unexercised options based on the midpoint between the vesting
date and end of the contractual term
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Expected volatility
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Historical price of our common stock and
the implied volatility of the stock of our peer group
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Risk-free interest rate
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Yields of U.S. Treasury securities
corresponding with the expected life of option grants
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Forfeiture rates
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Historical forfeiture data
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Of these assumptions, the expected term of the option and
expected volatility of our common stock are the most difficult
to estimate since they are based on the exercise behavior of the
employees and expected performance of our common stock.
Increases in the term and the volatility of our common stock
will generally cause an increase in compensation expense.
Income
Taxes
Our annual effective tax rate is based on pre-tax earnings
adjusted for differences between GAAP and income tax accounting,
existing statutory tax rates, limitations on the use of net
operating loss and tax credit carryforwards and tax planning
opportunities available in the jurisdictions in which we operate.
In accordance with ASC 740, we use a two-step approach for
recognizing and measuring tax benefits taken or expected to be
taken in a tax return and disclosures regarding uncertainties in
income tax positions. The first step is recognition: we
determine whether it is more likely than not that a tax position
will be sustained upon examination, including resolution of any
related appeals or litigation processes, based on the technical
merits of the position. In evaluating whether a tax position has
met the more-likely-than-not recognition threshold, we presume
that the position will be examined by the appropriate taxing
authority that has full knowledge of all relevant information.
The second step is measurement: we measure a tax position that
meets the more-likely-than-not recognition threshold to
determine the amount of benefit to recognize in our financial
statements. The tax position is measured at the largest amount
of benefit that is greater than 50% likely of being realized
upon ultimate settlement. Significant judgment is required in
evaluating our tax position. Settlement of filing positions that
may be challenged by tax authorities could impact the income tax
position in the year of resolution. Our liability for uncertain
tax positions is reflected as a reduction to our deferred tax
assets in our consolidated balance sheet.
On a periodic basis, we evaluate the realizability of our
deferred tax assets net of deferred tax liabilities and adjust
such amounts in light of changing facts and circumstances,
including but not limited to future projections of taxable
income, tax legislation, rulings by relevant tax authorities,
tax planning strategies and the progress of ongoing tax audits.
We consider all available evidence, both positive and negative,
to determine whether, based on the weight of that evidence, a
valuation allowance is needed to reduce the net deferred tax
assets to the amount that is more likely than not to be
realized. During the fourth quarter of 2010, based on review of
the following positive and negative evidence, we adjusted our
valuation allowance to the amount that we determined to be more
likely than not to be realized. In the fourth quarter of 2010,
we recorded a $45.2 million income tax benefit to decrease
our valuation allowance to $104.3 million.
Positive:
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our deferred tax assets primarily relate to U.S. net
operating losses and tax credits, the oldest of which will not
expire until 2028;
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for the most recent three fiscal years, our reported cumulative
U.S. income before income taxes totaled approximately
$95 million and we utilized approximately $137 million
of net operating loss carryforwards in our U.S. income tax
returns;
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82
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in 2010, our operating income exceeded $64 million and we
expect to be profitable in 2011;
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in August 2010, the U.S. District Court for the Eastern
District of Virginia ordered the PTO to consider our patent
extension application for the 404 patent that covers
Angiomax timely filed;
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in August 2010, the PTO granted a one-year interim extension of
the term of the 404 patent that covers Angiomax;
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the PTO and FDA thereafter initiated the regulatory process to
reach a final determination of the extension of the term of the
404 patent, which is proceeding as set forth in the
regulations;
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in October 2010, the period for the U.S. government to
appeal the federal district courts August 2010 decision
expired and the U.S. government did not appeal;
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additional U.S. patents that cover Angiomax exist through July
2028;
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in February 2011, we entered into a settlement agreement with
one of our law firms resolving our potential claims related to
the 404 patent. Terms of the settlement include
$18 million in expense reimbursement paid upfront and up to
an additional $214 million available for damages in the
event of launch of a generic version of Angiomax in the United
States before June 15, 2015 as a result of the extension of
the 404 patent being held invalid on the basis that the
application for the extension was not timely filed; and
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our second product, Cleviprex, was approved for sale in the
United States; we expect it to generate revenue well past the
term of the 404 patent.
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Negative:
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since inception, except for 2004, 2006 and 2010, we have
incurred net losses on an annual basis, as of December 31,
2010, we had an accumulated deficit of approximately
$239.5 million;
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our primary revenue generating product, Angiomax, could face
generic competition before June 15, 2015 if the extension
of the 404 patent is held invalid and we are not
successful in defending the additional Angiomax patents that
expire in July 2028; and
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we are currently involved in patent infringement litigation
relating to the additional U.S. Angiomax patents with a number
of companies that, if unfavorably resolved, would adversely
affect future operations and profit levels.
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Based on this evaluation and consideration of positive and
negative evidence, we determined that the weight of the evidence
required a $104.3 million valuation allowance against our
deferred tax assets to the amount that is more likely than not
to be realized.
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Item 7A.
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Quantitative
and Qualitative Disclosure 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
December 31, 2010 we held $246.6 million in cash, cash
equivalents and available for sale securities which had an
average interest rate of approximately 0.45%. A 10 basis
point change in such average interest rate would have had an
approximate $0.1 million impact on our interest income. Of
the $246.6 million, approximately $241.5 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 of 0.45%. The remaining $5.1 million
were due within two years and had an average interest rate of
approximately 0.53%.
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
83
other of these agreements are conducted in the local foreign
currency. As of December 31, 2010, we had receivables
denominated in currencies other than the U.S. dollar. A
10.0% change would have had an approximate $0.9 million
impact on our other income and cash.
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Item 8.
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Financial
Statements and Supplementary Data
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All financial statements and schedules required to be filed
hereunder are filed as Appendix A to this annual report on
Form 10-K
and incorporated herein by this reference.
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Item 9.
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Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
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None.
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Item 9A.
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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
December 31, 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 December 31, 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.
Managements
Annual Report on Internal Control Over Financial
Reporting
The report required to be filed hereunder is included in
Appendix A to this annual report on
Form 10-K
and incorporated herein by this reference.
Attestation
Report of Independent Registered Public Accounting
Firm
The report required to be filed hereunder is included in
Appendix A to this annual report on
Form 10-K
and incorporated herein by this reference.
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
December 31, 2010 that has materially affected, or is
reasonably likely to materially affect, our internal control
over financial reporting.
PART III
Pursuant to Paragraph G(3) of the General Instructions to
Form 10-K,
the information required by Part III (Items 10, 11,
12, 13 and 14) is being incorporated by reference herein
from our proxy statement to be filed with the Securities and
Exchange Commission within 120 days of the end of the
fiscal year ended
84
December 31, 2010 in connection with our 2010 annual
meeting of stockholders. We refer to such proxy statement herein
as our 2011 Proxy Statement.
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Item 10.
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Directors,
Executive Officers and Corporate Governance
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The information required by this item will be contained in our
2011 Proxy Statement under the captions Discussion of
Proposals, Information About Corporate
Governance, Information About Our Executive
Officers and Section 16(a) Beneficial Ownership
Reporting Compliance and is incorporated herein by this
reference.
We have adopted a code of business conduct and ethics applicable
to all of our directors and employees, including our principal
executive officer, principal financial officer and our
controller. The code of business conduct and ethics is available
on the corporate governance section of Investor
Relations of our website,
www.themedicinescompany.com.
Any waiver of the code of business conduct and ethics for
directors or executive officers, or any amendment to the code
that applies to directors or executive officers, may only be
made by the board of directors. We intend to satisfy the
disclosure requirement under Item 5.05 of
Form 8-K
regarding an amendment to, or waiver from, a provision of this
code of ethics by filing a
Form 8-K
disclosing such waiver, or, to the extent permitted by
applicable NASDAQ regulations, by posting such information on
our website, at the address and location specified above. To
date, no such waivers have been requested or granted.
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Item 11.
|
Executive
Compensation
|
The information required by this item will be contained in our
2011 Proxy Statement under the captions Information About
Corporate Governance and Information About Our
Executive Officers and is incorporated herein by this
reference.
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Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by this item will be contained in our
2011 Proxy Statement under the captions Principal
Stockholders, Information About Our Executive
Officers and Equity Compensation Plan
Information and is incorporated herein by this reference.
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Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information required by this item will be contained in our
2011 Proxy Statement under the caption Information About
Corporate Governance and Information About Our
Executive Officers and is incorporated herein by this
reference.
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Item 14.
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Principal
Accountant Fees and Services
|
The information required by this item will be contained in our
2011 Proxy Statement under the caption Independent
Registered Public Accounting Firm Fees and Other Matters
and Discussion of Proposals and is incorporated
herein by this reference.
85
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Item 15.
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Exhibits
and Financial Statement Schedules
|
(a) Documents filed as part of this annual report:
(1) Financial Statements. The Consolidated Financial
Statements are included as Appendix A hereto and are filed
as part of this annual report. The Consolidated Financial
Statements include:
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Page
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F-2
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F-3
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F-4
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F-5
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F-6
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F-7
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F-8
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F-9
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(2) Exhibits. The exhibits set forth on
the Exhibit Index following the signature page to this
annual report are filed as part of this annual report. This list
of exhibits identifies each management contract or compensatory
plan or arrangement required to be filed as an exhibit to this
annual report.
86
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 15, 2011.
THE MEDICINES COMPANY
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By:
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/s/ Clive
A. Meanwell
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Clive A. Meanwell
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
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Signature
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Title(s)
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/s/ Clive
A. Meanwell
Clive
A. Meanwell
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Chief Executive Officer, President and Chairman of the Board of
Directors (Principal Executive Officer)
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March 15, 2011
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/s/ Glenn
P. Sblendorio
Glenn
P. Sblendorio
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Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
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March 15, 2011
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/s/ William
W. Crouse
William
W. Crouse
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Director
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March 15, 2011
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/s/ Robert
J. Hugin
Robert
J. Hugin
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Director
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March 15, 2011
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/s/ Armin
M. Kessler
Armin
M. Kessler
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Director
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March 15, 2011
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/s/ Robert
G. Savage
Robert
G. Savage
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Director
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March 15, 2011
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/s/ Hiroaki
Shigeta
Hiroaki
Shigeta
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Director
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March 15, 2011
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/s/ Melvin
K. Spigelman
Melvin
K. Spigelman
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Director
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March 15, 2011
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/s/ Elizabeth
H.S. Wyatt
Elizabeth
H.S. Wyatt
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Director
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March 15, 2011
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87
APPENDIX A
INDEX TO
THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE MEDICINES COMPANY
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Page
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F-2
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F-3
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F-4
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F-5
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F-6
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F-7
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F-8
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F-9
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F-1
Managements
Report on Consolidated Financial Statements and
Internal Control over Financial Reporting
The management of The Medicines Company has prepared, and is
responsible for, The Medicines Companys consolidated
financial statements and related footnotes. These consolidated
financial statements have been prepared in conformity with
U.S. generally accepted accounting principles.
The Medicines Companys management is responsible for
establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting
is defined in
Rule 13a-15(f)
or 15d-15(f)
promulgated under the Securities Exchange Act of 1934 as a
process designed by, or under the supervision of the
Companys principal executive and principal financial
officers and effected by the Companys board of directors,
management, and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and
includes those policies and procedures that:
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pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of the assets of The Medicines Company;
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provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of The Medicines Company are
being made only in accordance with authorizations of management
and directors of The Medicines Company; and
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provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of The
Medicines Companys assets that could have a material
effect on the financial statements.
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Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
The Medicines Companys management assessed the
Companys internal control over financial reporting as of
December 31, 2010. Managements assessment was based
upon the criteria established in Internal
Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. Based on its assessment, management concluded that,
as of December 31, 2010, The Medicines Companys
internal control over financial reporting is effective based on
those criteria.
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/s/ Clive
A. Meanwell
Chairman
and
Chief Executive Officer
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/s/ Glenn
P. Sblendorio
Executive
Vice President and
Chief Financial Officer
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Dated March 15, 2011
F-2
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of The Medicines
Company
We have audited the accompanying consolidated balance sheets of
The Medicines Company as of December 31, 2010 and 2009, and
the related consolidated statements of operations,
stockholders equity, and cash flows for each of the three
years in the period ended December 31, 2010. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of The Medicines Company at December 31,
2010 and 2009, and the consolidated results of its operations
and its cash flows for each of the three years in the period
ended December 31, 2010, in conformity with
U.S. generally accepted accounting principles.
As discussed in Note 5 to the consolidated financial
statements, effective January 1, 2009 the Company adopted
revised authoritative guidance related to accounting for
business combinations.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), The
Medicines Companys internal control over financial
reporting as of December 31, 2010, based on criteria
established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 15, 2011 expressed an
unqualified opinion thereon.
MetroPark, NJ
March 15, 2011
F-3
Report of
Independent Registered Public Accounting Firm
on Internal Control over Financial Reporting
The Board of Directors and Stockholders of The Medicines
Company
We have audited The Medicines Companys internal control
over financial reporting as of December 31, 2010, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). The Medicines
Companys management is responsible for maintaining
effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying
Managements Report on Consolidated Financial Statements
and Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the companys
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, The Medicines Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2010, based on the COSO
criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
2010 consolidated financial statements of The Medicines Company
and our report dated March 15, 2011 expressed an
unqualified opinion thereon.
MetroPark, NJ
March 15, 2011
F-4
THE
MEDICINES COMPANY
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December 31,
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2010
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2009
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(In thousands, except share and
per share amounts)
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ASSETS
|
Current assets:
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Cash and cash equivalents
|
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$
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126,364
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$
|
72,225
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|
Available for sale securities
|
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120,280
|
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103,966
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|
Accrued interest receivable
|
|
|
1,279
|
|
|
|
922
|
|
Accounts receivable, net of allowances of approximately
$15.5 million and $6.4 million at December 31,
2010 and 2009
|
|
|
46,551
|
|
|
|
29,789
|
|
Inventory
|
|
|
25,343
|
|
|
|
25,836
|
|
Prepaid expenses and other current assets
|
|
|
4,804
|
|
|
|
9,984
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
324,621
|
|
|
|
242,722
|
|
Fixed assets, net
|
|
|
20,662
|
|
|
|
25,072
|
|
Intangible assets, net
|
|
|
82,925
|
|
|
|
84,678
|
|
Goodwill
|
|
|
14,671
|
|
|
|
14,934
|
|
Restricted cash
|
|
|
5,778
|
|
|
|
7,049
|
|
Deferred tax assets
|
|
|
25,197
|
|
|
|
|
|
Other assets
|
|
|
270
|
|
|
|
321
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
474,124
|
|
|
$
|
374,776
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
8,594
|
|
|
$
|
8,431
|
|
Accrued expenses
|
|
|
76,242
|
|
|
|
77,088
|
|
Deferred revenue
|
|
|
534
|
|
|
|
1,100
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
85,370
|
|
|
|
86,619
|
|
Contingent purchase price
|
|
|
25,387
|
|
|
|
23,667
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
18,395
|
|
Other liabilities
|
|
|
5,769
|
|
|
|
5,706
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
116,526
|
|
|
|
134,387
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $1.00 par value per share,
5,000,000 shares authorized; no shares issued and
outstanding
|
|
|
|
|
|
|
|
|
Common stock, $.001 par value per share,
125,000,000 shares authorized; 53,464,145 and 52,830,376
issued and outstanding at December 31, 2010 and 2009,
respectively
|
|
|
53
|
|
|
|
53
|
|
Additional paid-in capital
|
|
|
596,667
|
|
|
|
584,678
|
|
Accumulated deficit
|
|
|
(239,542
|
)
|
|
|
(344,177
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
420
|
|
|
|
(165
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
357,598
|
|
|
|
240,389
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
474,124
|
|
|
$
|
374,776
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-5
THE
MEDICINES COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except per share
amounts)
|
|
|
Net revenue
|
|
$
|
437,645
|
|
|
$
|
404,241
|
|
|
$
|
348,157
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
129,299
|
|
|
|
118,148
|
|
|
|
88,355
|
|
Research and development
|
|
|
85,241
|
|
|
|
117,610
|
|
|
|
105,720
|
|
Selling, general and administrative
|
|
|
158,690
|
|
|
|
193,832
|
|
|
|
164,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
373,230
|
|
|
|
429,590
|
|
|
|
358,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
64,415
|
|
|
|
(25,349
|
)
|
|
|
(10,821
|
)
|
Other (loss) income
|
|
|
(267
|
)
|
|
|
(2,818
|
)
|
|
|
5,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
64,148
|
|
|
|
(28,167
|
)
|
|
|
(5,586
|
)
|
Benefit (provision) for income taxes
|
|
|
40,487
|
|
|
|
(48,062
|
)
|
|
|
(2,918
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
104,635
|
|
|
$
|
(76,229
|
)
|
|
$
|
(8,504
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share
|
|
$
|
1.98
|
|
|
$
|
(1.46
|
)
|
|
$
|
(0.16
|
)
|
Diluted earnings (loss) per common share
|
|
$
|
1.97
|
|
|
$
|
(1.46
|
)
|
|
$
|
(0.16
|
)
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
52,842
|
|
|
|
52,269
|
|
|
|
51,904
|
|
Diluted
|
|
|
53,184
|
|
|
|
52,269
|
|
|
|
51,904
|
|
See accompanying notes to consolidated financial statements.
F-6
THE
MEDICINES COMPANY
For The Years Ended December 31, 2008,
2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Comprehensive
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
(Loss)
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income
|
|
|
Equity
|
|
|
|
(In thousands)
|
|
|
Balance at January 1, 2008
|
|
|
51,866
|
|
|
|
52
|
|
|
|
537,027
|
|
|
|
(259,444
|
)
|
|
|
261
|
|
|
|
277,896
|
|
Employee stock purchases
|
|
|
321
|
|
|
|
|
|
|
|
5,541
|
|
|
|
|
|
|
|
|
|
|
|
5,541
|
|
Issuance of restricted stock awards
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash stock compensation
|
|
|
|
|
|
|
|
|
|
|
22,798
|
|
|
|
|
|
|
|
|
|
|
|
22,798
|
|
Tax effect of option exercises
|
|
|
|
|
|
|
|
|
|
|
(283
|
)
|
|
|
|
|
|
|
|
|
|
|
(283
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,504
|
)
|
|
|
|
|
|
|
(8,504
|
)
|
Currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52
|
)
|
|
|
(52
|
)
|
Unrealized gain on available for sale securities (net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
629
|
|
|
|
629
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,927
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
52,280
|
|
|
$
|
52
|
|
|
$
|
565,083
|
|
|
$
|
(267,948
|
)
|
|
$
|
838
|
|
|
$
|
298,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock purchases
|
|
|
231
|
|
|
|
|
|
|
|
1,803
|
|
|
|
|
|
|
|
|
|
|
|
1,803
|
|
Issuance of restricted stock awards
|
|
|
319
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Non-cash stock compensation
|
|
|
|
|
|
|
|
|
|
|
19,437
|
|
|
|
|
|
|
|
|
|
|
|
19,437
|
|
Tax effect of option exercises
|
|
|
|
|
|
|
|
|
|
|
(1,645
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,645
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(76,229
|
)
|
|
|
|
|
|
|
(76,229
|
)
|
Currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(297
|
)
|
|
|
(297
|
)
|
Unrealized loss on available for sale securities (net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(706
|
)
|
|
|
(706
|
)
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77,232
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
52,830
|
|
|
$
|
53
|
|
|
$
|
584,678
|
|
|
$
|
(344,177
|
)
|
|
$
|
(165
|
)
|
|
$
|
240,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock purchases
|
|
|
558
|
|
|
|
|
|
|
|
3,361
|
|
|
|
|
|
|
|
|
|
|
|
3,361
|
|
Issuance of restricted stock awards
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash stock compensation
|
|
|
|
|
|
|
|
|
|
|
8,336
|
|
|
|
|
|
|
|
|
|
|
|
8,336
|
|
Tax effect of option exercises
|
|
|
|
|
|
|
|
|
|
|
292
|
|
|
|
|
|
|
|
|
|
|
|
292
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,635
|
|
|
|
|
|
|
|
104,635
|
|
Currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
611
|
|
|
|
611
|
|
Unrealized loss on available for sale securities (net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
|
|
(26
|
)
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
53,464
|
|
|
$
|
53
|
|
|
$
|
596,667
|
|
|
$
|
(239,542
|
)
|
|
$
|
420
|
|
|
$
|
357,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-7
THE
MEDICINES COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
104,635
|
|
|
$
|
(76,229
|
)
|
|
$
|
(8,504
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
6,124
|
|
|
|
5,767
|
|
|
|
2,932
|
|
Acquired in-process research and development
|
|
|
|
|
|
|
|
|
|
|
21,373
|
|
Impairment of investment
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
Amortization of net premiums and discounts on available for sale
securities
|
|
|
3,260
|
|
|
|
2,118
|
|
|
|
113
|
|
Unrealized foreign currency transaction (gains) losses, net
|
|
|
(1,217
|
)
|
|
|
|
|
|
|
580
|
|
Non-cash stock compensation expense
|
|
|
8,336
|
|
|
|
19,437
|
|
|
|
22,798
|
|
Loss on disposal of fixed assets
|
|
|
293
|
|
|
|
|
|
|
|
33
|
|
Loss on available for sale securities
|
|
|
|
|
|
|
33
|
|
|
|
33
|
|
Deferred tax (benefit) provision
|
|
|
(43,592
|
)
|
|
|
47,737
|
|
|
|
1,520
|
|
Tax effect of option exercises
|
|
|
292
|
|
|
|
|
|
|
|
|
|
Adjustment to contingent purchase price
|
|
|
1,720
|
|
|
|
486
|
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
(364
|
)
|
|
|
414
|
|
|
|
262
|
|
Accounts receivable
|
|
|
(16,627
|
)
|
|
|
3,182
|
|
|
|
(7,614
|
)
|
Inventory
|
|
|
701
|
|
|
|
2,774
|
|
|
|
6,890
|
|
Prepaid expenses and other current assets
|
|
|
5,031
|
|
|
|
(1,713
|
)
|
|
|
(1,236
|
)
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
165
|
|
|
|
(7,851
|
)
|
|
|
3,315
|
|
Accrued expenses
|
|
|
(736
|
)
|
|
|
8,343
|
|
|
|
(18,945
|
)
|
Deferred revenue
|
|
|
(616
|
)
|
|
|
(8,519
|
)
|
|
|
9,588
|
|
Other liabilities
|
|
|
62
|
|
|
|
(28
|
)
|
|
|
4,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
67,467
|
|
|
|
951
|
|
|
|
38,077
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of available for sale securities
|
|
|
(128,240
|
)
|
|
|
(133,700
|
)
|
|
|
(161,822
|
)
|
Proceeds from maturities and sales of available for sale
securities
|
|
|
108,640
|
|
|
|
161,646
|
|
|
|
161,505
|
|
Purchases of fixed assets
|
|
|
(340
|
)
|
|
|
(342
|
)
|
|
|
(19,395
|
)
|
Proceeds from sale of fixed assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of intangible assets
|
|
|
|
|
|
|
|
|
|
|
(2,000
|
)
|
Investment in pharmaceutical company
|
|
|
|
|
|
|
|
|
|
|
(5,000
|
)
|
Acquisition of business, net of cash acquired
|
|
|
263
|
|
|
|
(37,168
|
)
|
|
|
(23,534
|
)
|
Decrease (increase) in restricted cash
|
|
|
1,278
|
|
|
|
(1,652
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(18,399
|
)
|
|
|
(11,216
|
)
|
|
|
(50,246
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuances of common stock, net
|
|
|
3,361
|
|
|
|
1,804
|
|
|
|
5,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
|
|
|
|
|
|
|
|
|
|
|
|
|
financing activities
|
|
|
3,361
|
|
|
|
1,804
|
|
|
|
5,542
|
|
Effect of exchange rate changes on cash
|
|
|
1,710
|
|
|
|
(332
|
)
|
|
|
(482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
54,139
|
|
|
|
(8,793
|
)
|
|
|
(7,109
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
72,225
|
|
|
|
81,018
|
|
|
|
88,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
126,364
|
|
|
$
|
72,225
|
|
|
$
|
81,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes paid
|
|
$
|
1,699
|
|
|
$
|
358
|
|
|
$
|
2,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset additions included in current liabilities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-8
THE
MEDICINES COMPANY
The Medicines Company (the Company) is a global pharmaceutical
company focused on advancing the treatment of 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
acute and intensive care hospital products in development,
including two late-stage development product candidates,
cangrelor and oritavancin, two early stage development product
candidates, MDCO-2010 (formerly known as CU2010) and MDCO-216
(formerly known as ApoA-I Milano), 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 acute and intensive care hospital product market
and offer, or, in the case of the Companys products in
development, have the potential to offer, improved performance
to hospital businesses.
|
|
2.
|
Significant
Accounting Policies
|
Basis
of Presentation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation. The Company has no unconsolidated subsidiaries or
investments accounted for under the equity method.
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.
Reclassifications
Certain prior year amounts have been reclassified to conform to
the current year presentation.
Risks
and Uncertainties
The Company is subject to risks common to companies in the
pharmaceutical industry including, but not limited to,
uncertainties related to commercialization of products,
regulatory approvals, dependence on key products, dependence on
key customers and suppliers, and protection of intellectual
property rights.
Concentrations
of Credit Risk
Financial instruments that potentially subject the Company to
concentration of credit risk include cash, cash equivalents,
available for sale securities and accounts receivable. The
Company believes it minimizes its exposure to potential
concentrations of credit risk by placing investments in
high-quality financial instruments with high quality
institutions. At December 31, 2010 and 2009, approximately
$12.2 million and $25.1 million, respectively, of the
Companys cash and cash equivalents was invested in a
single fund, the Dreyfus Cash Management Money Market Fund, a
no-load money market fund with Capital Advisors Group.
In March 2007, the Company began selling Angiomax in the United
States to a sole source distributor, Integrated
Commercialization Solutions, Inc. (ICS). The Company began
selling Cleviprex to ICS in September 2008. ICS accounted for
94%, 96% and 96% of the Companys net revenue for 2010,
2009 and 2008, respectively. At December 31, 2010 and 2009,
amounts due from ICS represented approximately
F-9
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$55.2 million and $33.8 million, or 90% and 94%, of
gross accounts receivable, respectively. At December 31,
2010 and 2009, the Company maintained an allowance for doubtful
accounts for its ICS accounts receivable of $0.1 million.
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
included cash of $114.1 million and $24.7 million at
December 31, 2010 and December 31, 2009, respectively.
Cash and cash equivalents at December 31, 2010 and
December 31, 2009 included investments of
$12.2 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. The Company measures all
original maturities from the date the investment was originally
purchased by the Company.
The Company considers securities with original maturities of
greater than three months to be available for sale securities.
Securities under this classification are recorded at fair market
value and unrealized gains and losses are recorded as a separate
component of stockholders equity. The estimated fair value
of the available for sale securities is determined based on
quoted market prices or rates for similar instruments. In
addition, the cost of debt securities in this category is
adjusted for amortization of premium and accretion of discount
to maturity. The Company evaluates securities with unrealized
losses to determine whether such losses are other than temporary.
The Company held available for sale securities with a fair value
totaling $120.3 million at December 31, 2010 and
$104.0 million at December 31, 2009. These available
for sale securities included various United States government
agency notes, corporate debt securities and asset backed
securities. At December 31, 2010, approximately
$115.2 million of available for sale securities were due
within one year. The remaining $5.1 million were due within
two years. At December 31, 2009, approximately
$100.3 million of available for sale securities were due
within one year. The remaining $3.7 million were due within
two years.
Available for sale securities, including carrying value and
estimated fair values, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
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
|
|
$
|
55,222
|
|
|
$
|
55,222
|
|
|
$
|
55,222
|
|
|
$
|
|
|
|
$
|
103,936
|
|
|
$
|
103,965
|
|
|
$
|
103,965
|
|
|
$
|
29
|
|
Corporate debt securities
|
|
$
|
65,055
|
|
|
$
|
65,058
|
|
|
$
|
65,058
|
|
|
$
|
3
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
120,277
|
|
|
$
|
120,280
|
|
|
$
|
120,280
|
|
|
$
|
3
|
|
|
$
|
103,936
|
|
|
$
|
103,965
|
|
|
$
|
103,965
|
|
|
$
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
The Company accounts for its investment in a minority interest
of a company over which it does not exercise significant
influence on the cost method in accordance with the Financial
Accounting Standards Board (FASB) Accounting Standards
Codification (ASC)
325-20,
Cost Method Investments (ASC
325-20).
Under the cost method, an investment is carried at cost until it
is sold or there is evidence that changes in the business
environment or other facts and circumstances suggest it may be
other than temporarily impaired based on criteria outlined in
ASC 325-20.
These non-marketable securities have been classified as
investments and included in other assets on the consolidated
balance sheets.
F-10
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Restricted
Cash
The Company had restricted cash of $5.8 million at
December 31, 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 lease for new 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 $5.5 million and $6.8 million at
December 31, 2010 and December 31, 2009, respectively,
collateralizes outstanding letters of credit associated with
this 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 acquisition of Targanta
Therapeutics Corporation (Targanta) in 2009, the Company had at
December 31, 2010 and December 31, 2009 restricted
cash of $0.3 million and $0.2 million, respectively,
in the form of a guaranteed investment certificate
collateralizing an available credit facility.
Revenue
Recognition
Product Sales. The Company distributes
Angiomax in the United States through a sole source distribution
model. Under this model, the Company sells Angiomax to its sole
source distributor, ICS, which then sells Angiomax 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. The Company used ICS as
its distributor for Cleviprex prior to the recalls of Cleviprex
and related supply issues and plans to use ICS at such time as
it is able to resupply the market with Cleviprex and resume
sales. The Companys agreement with ICS, which it initially
entered into February 2007, provides that ICS will be the
Companys 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. In addition, ICS assumes all credit and inventory risks
and is subject to our standard return policy. ICS 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 September 30, 2013,
but will automatically renew for additional one-year periods
unless either party gives notice at least 90 days prior to
the automatic extension. Either party may terminate the
agreement at any time and for any reason upon 180 days
prior written notice to the other party. In addition, either
party may terminate the agreement upon an uncured default of a
material obligation by the other party and in other specified
conditions.
Outside of the United States, the Company sells Angiomax either
directly to hospitals or to wholesalers or international
distributors, which then sell Angiomax to hospitals. The Company
had deferred revenue of $0.5 million as of
December 31, 2010 and $0.4 million as
December 31, 2009 associated with sales of Angiomax to
wholesalers outside of the United States. The Company recognizes
revenue from such sales when hospitals purchase the product from
the wholesaler.
The Company does not recognize revenue from product sales until
there is persuasive evidence of an arrangement, delivery has
occurred, the price is fixed and determinable, the buyer is
obligated to pay the Company, the obligation to pay is not
contingent on resale of the product, the buyer has economic
substance apart from the Company, the Company has no obligation
to bring about the sale of the product, the amount of returns
can be reasonably estimated and collectability is reasonably
assured.
The Company began selling Cleviprex in the United States in
September 2008. The Company does not recognize revenue upon
product shipment to ICS. Instead, upon product shipment, the
Company invoices ICS, records deferred revenue at gross invoice
sales price, classifies the cost basis of the product held by
ICS as finished goods inventory held by others and includes such
cost basis amount within prepaid expenses and other
F-11
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
current assets on its consolidated balance sheets. The Company
currently recognizes the deferred revenue when hospitals
purchase product and will do so until such time that it has
sufficient information to develop reasonable estimates of
expected returns and other adjustments to gross revenue. When
such estimates are developed, the Company expects to recognize
Cleviprex revenue upon shipment to ICS in the same manner as it
recognizes Angiomax revenue. During the third quarter of 2009,
the Company reduced its contract price for Cleviprex which had
the effect of reducing the deferred revenue by approximately
$4.0 million. In the fourth quarter of 2009, the Company
announced a voluntary recall of 11 lots of Cleviprex, including
any remaining unsold inventory associated with its initial
wholesaler orders, which resulted in a reduction of deferred
revenue of approximately $2.0 million. In 2009, the Company
recognized $3.0 million of Cleviprex revenue related to
purchases by hospitals. The Company recognized $0.8 million
of revenue associated with Cleviprex during 2010 related to
purchases by hospitals. The Company has not sold Cleviprex since
the first quarter of 2010.
The Company records allowances for chargebacks and other
discounts or accruals for product returns, rebates and
fee-for-service
charges at the time of sale, and reports revenue net of such
amounts. In determining the amounts of certain allowances and
accruals, the Company must make significant judgments and
estimates. For example, in determining these amounts, the
Company estimates hospital demand, buying patterns by hospitals
and group purchasing organizations from wholesalers and the
levels of inventory held by wholesalers and by ICS. Making these
determinations involves estimating whether trends in past
wholesaler and hospital buying patterns will predict future
product sales. The Company receives data periodically from ICS
and wholesalers on inventory levels and levels of hospital
purchases and the Company considers this data in determining the
amounts of these allowances and accruals.
The nature of the Companys allowances and accruals
requiring critical estimates, and the specific considerations it
uses in estimating their amounts are as follows.
|
|
|
|
|
Product returns. The Companys customers
have the right to return any unopened product during the
18-month
period beginning six months prior to the labeled expiration date
and ending 12 months after the labeled expiration date. As
a result, in calculating the accrual for product returns, the
Company must estimate the likelihood that product sold might not
be used within six months of expiration and analyze the
likelihood that such product will be returned within
12 months after expiration. The Company considers all of
these factors and adjusts the accrual periodically throughout
each quarter to reflect actual experience. When customers return
product, they are generally given credit against amounts owed.
The amount credited is charged to the Companys product
returns accrual.
|
In estimating the likelihood of product being returned, the
Company relies on information from ICS and wholesalers regarding
inventory levels, measured hospital demand as reported by
third-party sources and internal sales data. The Company also
considers the past buying patterns of ICS and wholesalers, the
estimated remaining shelf life of product previously shipped,
the expiration dates of product currently being shipped, price
changes of competitive products and introductions of generic
products.
At December 31, 2010 and December 31, 2009, the
Companys accrual for product returns was $0.6 million
and $3.8 million, respectively. Included within the accrual
at December 31, 2009 was a reserve of $1.3 million
that the Company established related to the Cleviprex product
recall which occurred in December 2009.
|
|
|
|
|
Chargebacks and rebates. Although the Company
primarily sells products to ICS in the United States, the
Company typically enters into agreements with hospitals, either
directly or through group purchasing organizations acting on
behalf of their hospital members, in connection with the
hospitals purchases of products.
|
Based on these agreements, most of the Companys hospital
customers have the right to receive a discounted price for
products and volume-based rebates on product purchases. In the
case of discounted
F-12
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
pricing, the Company typically provides a credit to ICS, or a
chargeback, representing the difference between ICSs
acquisition list price and the discounted price. In the case of
the volume-based rebates, the Company typically pays the rebate
directly to the hospitals.
As a result of these agreements, at the time of product
shipment, the Company estimates the likelihood that product sold
to ICS might be ultimately sold to a contracting hospital or
group purchasing organization. The Company also estimates the
contracting hospitals or group purchasing
organizations volume of purchases.
The Company bases its estimates on industry data, hospital
purchases and the historic chargeback data it receives from ICS,
most of which ICS receives from wholesalers, which detail
historic buying patterns and sales mix for particular hospitals
and group purchasing organizations, and the applicable customer
chargeback rates and rebate thresholds.
The Companys allowance for chargebacks was
$13.9 million and $4.7 million at December 31,
2010 and December 31, 2009, respectively. The
Companys accrual for rebates was $0.0 million at
December 31, 2010 and 2009.
|
|
|
|
|
Fees-for-service. The
Company offers discounts to certain wholesalers and ICS based on
contractually determined rates for certain services. The Company
estimates its
fee-for-service
accruals and allowances based on historical sales, wholesaler
and distributor inventory levels and the applicable discount
rate. The Companys discounts are accrued at the time of
the sale and are typically settled with the wholesalers or ICS
within 60 days after the end of each respective quarter.
The Companys
fee-for-service
accruals and allowances were $2.6 million and
$3.1 million at December 31, 2010 and
December 31, 2009, respectively.
|
The Company has adjusted its allowances for chargebacks and
accruals for product returns, rebates and
fees-for-service
in the past based on actual sales experience, and the Company
will likely be required to make adjustments to these allowances
and accruals in the future. The Company continually monitors its
allowances and accruals and makes adjustments when the Company
believes actual experience may differ from its estimates. The
allowances included in the table below reflect these adjustments.
F-13
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table provides a summary of activity with respect
to the Companys sales allowances and accruals during 2010,
2009 and 2008 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
Fees-for-
|
|
|
|
Discounts
|
|
|
Returns
|
|
|
Chargebacks
|
|
|
Rebates
|
|
|
Service
|
|
|
Balance at January 1, 2008
|
|
$
|
507
|
|
|
$
|
3,060
|
|
|
$
|
597
|
|
|
$
|
1,662
|
|
|
$
|
1,657
|
|
Allowances for sales during 2008
|
|
|
7,510
|
|
|
|
138
|
|
|
|
5,628
|
|
|
|
1,413
|
|
|
|
6,562
|
|
Allowances for prior year sales
|
|
|
|
|
|
|
159
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
Allowances for sales in Nycomed territory
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual credits issued for prior years sales
|
|
|
(506
|
)
|
|
|
(261
|
)
|
|
|
(720
|
)
|
|
|
(1,397
|
)
|
|
|
(721
|
)
|
Actual credits issued for prior years sales in Nycomed
territory
|
|
|
|
|
|
|
(2,121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual credits issued for sales during 2008
|
|
|
(6,829
|
)
|
|
|
|
|
|
|
(4,442
|
)
|
|
|
(1,247
|
)
|
|
|
(5,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
682
|
|
|
|
975
|
|
|
|
1,186
|
|
|
|
431
|
|
|
|
1,956
|
|
Allowances for sales during 2009
|
|
|
8,291
|
|
|
|
3,764
|
|
|
|
13,439
|
|
|
|
212
|
|
|
|
9,582
|
|
Allowances for prior year sales
|
|
|
|
|
|
|
274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual credits issued for prior years sales
|
|
|
(648
|
)
|
|
|
(1,249
|
)
|
|
|
(1,174
|
)
|
|
|
(275
|
)
|
|
|
(1,670
|
)
|
Actual credits issued for sales during 2009
|
|
|
(7,661
|
)
|
|
|
|
|
|
|
(8,787
|
)
|
|
|
(357
|
)
|
|
|
(6,743
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
664
|
|
|
|
3,764
|
|
|
|
4,664
|
|
|
|
11
|
|
|
|
3,125
|
|
Allowances for sales during 2010
|
|
|
9,817
|
|
|
|
3,420
|
|
|
|
53,756
|
|
|
|
|
|
|
|
10,976
|
|
Allowances for prior year sales
|
|
|
|
|
|
|
1,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual credits issued for prior years sales
|
|
|
(688
|
)
|
|
|
(3,811
|
)
|
|
|
(4,041
|
)
|
|
|
|
|
|
|
(3,051
|
)
|
Actual credits issued for sales during 2010
|
|
|
(8,674
|
)
|
|
|
(3,909
|
)
|
|
|
(40,516
|
)
|
|
|
|
|
|
|
(8,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
1,119
|
|
|
$
|
627
|
|
|
$
|
13,863
|
|
|
$
|
11
|
|
|
$
|
2,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included within the balance at January 1, 2008 above is the
reserve of $3.0 million that the Company recorded during
the fourth quarter of 2007 for the existing inventory at Nycomed
which the Company did not believe would be sold prior to the
termination of the transitional distribution agreement and would
be subject to purchase in accordance with the agreement. During
2008, the Company reduced the reserve by $2.2 million as
Nycomed sold a portion of the existing inventory during the
year. Such amount is included within the 2008 allowances above.
In 2009, the Company reimbursed Nycomed $0.8 million for
the final amount of inventory held by Nycomed at
December 31, 2008.
International Distributors. Under the
Companys agreements with its primary international
distributors, the Company sells Angiomax to these distributors
at a fixed price. The established price is typically determined
once per year, prior to the first shipment of Angiomax to the
distributor each year. The minimum selling price used in
determining the price is 50% of the average net unit selling
price.
Revenue associated with sales to the Companys
international distributors during 2010, 2009 and 2008 was
$4.5 million, $4.4 million and $6.6 million,
respectively. During 2008, the Company reduced the Nycomed
inventory reserve by $2.2 million as Nycomed sold a portion
of its existing inventory during the year. Such amounts are
included in the $6.6 million of revenue associated with
sales to the Companys international distributors during
2008. As a result, the Company reduced its reserve for existing
inventory to $0.8 million, which resulted in an increase in
international net revenue. The Company reimbursed Nycomed
$0.8 million in July 2009 for the final amount of inventory
held by Nycomed at December 31, 2008.
Revenue from Collaborations. Under the terms
of the transitional distribution agreement with Nycomed, the
Company was entitled to receive a specified percentage of
Nycomeds net sales of Angiox to third parties.
F-14
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In the event the Angiox sold was purchased by Nycomed from the
Company prior to July 1, 2007, the amount the Company is
entitled to receive in connection with such sale was reduced by
the amount previously paid by Nycomed to the Company for such
product. Accordingly, revenue related to the transitional
distribution agreement with Nycomed entered into in 2007, under
which Nycomed provided product distribution services through the
second half of 2008, was not recognized until the product was
sold by Nycomed to a hospital customer. For the year ended
December 31, 2008, the Company recorded $3.8 million
of net revenue from sales made by Nycomed of approximately
$8.2 million under the transitional distribution agreement.
The Company recorded such amount as revenue from collaborations
and included it in net revenue on the Companys
consolidated statements of operations. Because the Company
assumed control of the distribution of Angiox in all countries
in the former Nycomed territory by December 31, 2008, the
Company did not have any revenue from collaborations during the
year ended December 31, 2009 and 2010.
Cost
of Revenue
Cost of revenue consists of expenses in connection with the
manufacture of Angiomax and Cleviprex sold, royalty expenses
under the Companys agreements with Biogen Idec, Inc.
(Biogen Idec), Health Research Inc. (HRI) and AstraZeneca AB
(AstraZeneca) and the logistics costs of selling Angiomax and
Cleviprex, such as distribution, storage and handling.
Advertising
Costs
The Company expenses advertising costs as incurred. Advertising
costs were approximately $1.5 million, $2.1 million
and $5.5 million for the years ended December 31,
2010, 2009, and 2008, respectively.
Inventory
The Company records inventory upon the transfer of title from
the Companys vendors. Inventory is stated at the lower of
cost or market value and valued using
first-in,
first-out methodology. Angiomax and Cleviprex bulk substance is
classified as raw materials and its costs are determined using
acquisition costs from the Companys contract
manufacturers. The Company records
work-in-progress
costs of filling, finishing and packaging against specific
product batches. The Company obtains all of its Angiomax bulk
drug substance from Lonza Braine, S.A. 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. The Company obtains all of its
Cleviprex bulk drug substance from Johnson Matthey Pharma
Services and also has a separate agreement with Hospira, Inc.
(Hospira) for the fill-finish of Cleviprex drug product.
Fixed
Assets
Fixed assets are stated at cost. Depreciation is provided using
the straight-line method based on estimated useful lives or, in
the case of leasehold improvements, over the lesser of the
useful lives or the lease terms.
Recoverability
of Long-Lived Assets
The Company reviews the carrying value of goodwill and
indefinite lived intangible assets annually and whenever
indicators of impairment are present. The Company determines
whether goodwill may be impaired by comparing the carrying value
of its reporting unit to the fair value of its reporting unit
determined using an income approach valuation. A reporting unit
is defined as an operating segment or one level below an
operating segment. Long-lived assets used in operations and
amortizing intangible assets are reviewed for impairment
whenever events or changes in circumstances indicate that
carrying amounts may not be recoverable. For long-lived assets
to be held and used, the Company recognizes an impairment loss
only if its carrying amount is not recoverable through its
undiscounted cash flows and measures the impairment loss
F-15
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
based on the difference between the carrying amount and the fair
value. Based on the Companys analysis, there was no
impairment of goodwill and indefinite lived intangible assets in
connection with the annual impairment tests that were performed
during 2010.
Research
and Development
Research and development costs are expensed as incurred.
Stock-Based
Compensation
The Company accounts for share-based compensation in accordance
with ASC topic
718-10 (ASC
718-10), and
recognizes expense using the accelerated expense attribution
method.
ASC 718-10
requires companies to recognize compensation expense in an
amount equal to the fair value of all share-based awards granted
to employees. The Company estimates the fair value of its
options on the date of grant using the Black-Scholes closed-form
option-pricing model.
Expected volatilities are based on historic volatility of the
Companys common stock as well as implied volatilities of
peer companies in the life science industry over a range of
periods from 12 to 60 months and other factors. The Company
uses historical data to estimate forfeiture rate. The expected
term of options represents the period of time that options
granted are expected to be outstanding. The Company has made a
determination of expected term by analyzing employees
historical exercise experience and has made estimates of future
exercises of unexercised options based on the midpoint between
the vesting date and end of the contractual term. The risk-free
interest rate is based on the U.S. Treasury yield in effect
at the time of grant corresponding with the expected life of the
options.
Translation
of Foreign Currencies
The functional currencies of the Companys foreign
subsidiaries are the local currencies: Euro, Swiss franc,
and British pound sterling. The Companys assets and
liabilities are translated using the current exchange rate as of
the balance sheet date. Stockholders equity is translated
using historical rates at the balance sheet date. Expenses and
items of income are translated using a weighted average exchange
rate over the period ended on the balance sheet date.
Adjustments resulting from the translation of the financial
statements of the Companys foreign subsidiaries into
U.S. dollars are excluded from the determination of net
earnings (loss) and are accumulated in a separate component of
stockholders equity. Foreign exchange transaction gains
and losses are included in the Companys results of
operations.
Income
Taxes
The Company provides for income taxes in accordance with ASC
topic 740 (ASC 740).
In accordance with ASC 740, the Company uses a two-step
approach for recognizing and measuring tax benefits taken or
expected to be taken in a tax return and disclosures regarding
uncertainties in income tax positions. The first step is
recognition: the Company determines whether it is more likely
than not that a tax position will be sustained upon examination,
including resolution of any related appeals or litigation
processes, based on the technical merits of the position. In
evaluating whether a tax position has met the
more-likely-than-not recognition threshold, the Company presumed
that the position will be examined by the appropriate taxing
authority that has full knowledge of all relevant information.
The second step is measurement: a tax position that meets the
more-likely-than-not recognition threshold is measured to
determine the amount of benefit to recognize in the financial
statements. The tax position is measured at the largest amount
of benefit that is greater than 50% likely of being realized
upon ultimate settlement. The recognition of this tax benefit
may impact the effective income tax rate if such tax benefit is
more likely than not to be realized when such benefit is
recognized. The Company does not anticipate a significant change
in its unrecognized tax benefits in
F-16
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the next twelve months. The Company is no longer subject to
federal, state or foreign income tax audits for tax years prior
to 2006, however such taxing authorities can review any net
operating losses utilized by the Company in years subsequent to
2006.
In accordance with ASC 740, deferred tax assets and
liabilities are determined based on differences between
financial reporting and income tax bases of assets and
liabilities, as well as net operating loss carryforwards, and
are measured using the enacted tax rates and laws in effect when
the differences are expected to reverse. Deferred tax assets are
reduced by a valuation allowance to reflect the uncertainty
associated with ultimate realization.
The Company recognizes potential interest and penalties relating
to income tax positions as a component of the benefit
(provision) for income taxes.
Comprehensive
Income (Loss)
The Company reports comprehensive income (loss) and its
components in accordance with the provisions of
SFAS No. 130, Reporting Comprehensive
Income, which was later superseded by the FASB
Codification and included in ASC topic
220-10 (ASC
220-10).
Comprehensive income (loss) includes net income (loss), all
changes in equity for cumulative translations adjustments
resulting from the consolidation of foreign subsidiaries
financial statements and unrealized gain (loss) on available for
sale securities.
The major classes of inventory were as follows:
|
|
|
|
|
|
|
|
|
Inventory
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Raw materials
|
|
$
|
9,801
|
|
|
$
|
13,609
|
|
Work-in-progress
|
|
|
7,183
|
|
|
|
8,646
|
|
Finished goods
|
|
|
8,359
|
|
|
|
3,581
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
25,343
|
|
|
$
|
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.
Fixed assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
December 31,
|
|
|
|
Life (Years)
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(In thousands)
|
|
|
Furniture, fixtures and equipment
|
|
|
3-7
|
|
|
$
|
12,376
|
|
|
$
|
12,680
|
|
Computer software
|
|
|
3
|
|
|
|
1,924
|
|
|
|
2,622
|
|
Computer hardware
|
|
|
3
|
|
|
|
2,204
|
|
|
|
3,549
|
|
Leasehold improvements
|
|
|
5-15
|
|
|
|
19,170
|
|
|
|
20,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,674
|
|
|
|
39,336
|
|
Less: Accumulated depreciation
|
|
|
|
|
|
|
(15,012
|
)
|
|
|
(14,264
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,662
|
|
|
$
|
25,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-17
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Depreciation expense was approximately $4.4 million,
$4.6 million and $2.4 million for the years ended
December 31, 2010, 2009 and 2008, respectively.
Effective January 1, 2009, the Company adopted the revised
authoritative guidance under ASC topic 805, Business
Combinations (ASC 805), which changed the Companys
existing practice, in part, as follows: the fair value of
contingent consideration arrangements are now determined at the
acquisition date and included on that basis in the purchase
price consideration; transaction costs are now expensed as
incurred, rather than capitalized as part of the purchase price;
reversal of valuation allowances created in purchase accounting
are now recorded through the income tax provision; and in order
to accrue for a restructuring plan in purchase accounting, all
authoritative guidance would have to be met at the acquisition
date.
Targanta
Therapeutics Corporation
In February 2009, the Company acquired Targanta, a
biopharmaceutical company focused on developing and
commercializing innovative antibiotics to treat serious
infections in the hospital and other institutional settings. The
Company accounted for the acquisition under the revised
authoritative guidance in ASC 805.
Under the terms of the Companys agreement with Targanta,
it paid Targanta shareholders an aggregate of approximately
$42.0 million at closing. In addition, the Company
originally agreed to pay contingent cash payments up to an
additional $90.4 million in the aggregate. This amount has
been reduced to $85.1 million in the aggregate as certain
milestones have not been achieved by specified dates. The
current contingent cash payments milestones are:
|
|
|
|
|
Upon approval from the European Medicines Agency (EMA) of 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 cSSSI) on or before
December 31, 2013, approximately $10.5 million.
|
|
|
|
Upon final approval from the FDA of a new drug application (NDA)
for oritavancin for the treatment of ABSSSI on or before
December 31, 2013, approximately $10.5 million.
|
|
|
|
Upon final approval from the FDA of an NDA for the use of
oritavancin for the treatment of ABSSSI administered by a single
dose intravenous infusion on or before December 31, 2013,
approximately $14.7 million. 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.
|
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. In 2009, the Company
incurred a total of $4.3 million of cost related to its
acquisition of Targanta, which was included in selling, general
and administrative expenses. The results of Targantas
operations since the acquisition date have been included in the
Companys consolidated financial statements. The Company
allocated 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
F-18
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
of acquisition, 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.
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.
F-19
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
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. 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, 2008, the Companys pro forma results for
the years ended December 31, 2009 and 2008 would have been
as follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
December 31,
|
|
|
2009
|
|
2008
|
|
|
(In thousands, except per share
amounts)
|
|
Net revenue
|
|
$
|
404,241
|
|
|
$
|
348,157
|
|
Income (loss) from operations
|
|
|
(36,020
|
)
|
|
|
(70,219
|
)
|
Net income (loss)
|
|
|
(87,346
|
)
|
|
|
(67,317
|
)
|
Basic and diluted loss per share:
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
(1.67
|
)
|
|
$
|
(1.30
|
)
|
Diluted earnings (loss) per share
|
|
$
|
(1.67
|
)
|
|
$
|
(1.30
|
)
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
52,269
|
|
|
|
51,904
|
|
Diluted
|
|
|
52,269
|
|
|
|
51,904
|
|
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.
Curacyte
Discovery GmbH
In August 2008, the Company acquired Curacyte Discovery GmbH
(Curacyte Discovery), a wholly owned subsidiary of Curacyte AG.
Curacyte Discovery, a German limited liability company, was
primarily engaged in the discovery and development of a small
molecule serine protease inhibitor. Its lead compound,
MDCO-2010, is being developed for the prevention of blood loss
during surgery. In connection with the acquisition, the Company
paid Curacyte AG an initial payment of 14.5 million
(approximately $22.9 million at the time of payment), and
3.5 million in December 2009 (approximately
$5.2 million at the time of payment) and
3.0 million in December 2010 (approximately
$4.3 million at the time of payment) upon achievement of
clinical milestones. The Company also agreed to pay contingent
milestone payments of up to an additional
F-20
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
29.0 million if the Company proceeds with further
clinical development of MDCO-2010 and achieves a commercial
milestone. In addition, the Company agreed to pay royalties
based on net sales.
The total cost of the acquisition was approximately
$23.7 million which included a purchase price of
approximately $22.9 million and direct acquisition costs of
$0.8 million. The results of Curacyte Discoverys
operations since the acquisition date have been included in the
Companys consolidated financial statements. Below is a
summary which details the assets and liabilities acquired as a
result of the acquisition:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Acquired Assets:
|
|
|
|
|
Total current assets
|
|
$
|
1,970
|
|
Fixed assets
|
|
|
1,273
|
|
Other assets
|
|
|
51
|
|
In-process research and development
|
|
|
21,373
|
|
|
|
|
|
|
Total acquired assets
|
|
|
24,667
|
|
Acquired Liabilities:
|
|
|
|
|
Total current liabilities
|
|
|
(1,004
|
)
|
|
|
|
|
|
Total purchase price
|
|
$
|
23,663
|
|
|
|
|
|
|
The purchase price was allocated to the estimated fair value of
assets acquired and liabilities assumed based on a preliminary
valuation and management estimates. The Company allocated
approximately $21.4 million of the purchase price to
in-process research and development and was expensed upon
completion of the acquisition. This amount was recorded as
research and development in the consolidated statements of
operations.
|
|
6.
|
Intangible
Assets and Goodwill
|
The following information details the carrying amounts and
accumulated amortization of the Companys intangible assets
subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
2010
|
|
|
As of December 31,
2009
|
|
|
|
Weighted
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
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
|
|
|
$
|
(1,715
|
)
|
|
$
|
5,742
|
|
|
$
|
7,457
|
|
|
$
|
(861
|
)
|
|
$
|
6,596
|
|
Distribution agreement(1)
|
|
|
8 years
|
|
|
|
4,448
|
|
|
|
(1,023
|
)
|
|
|
3,425
|
|
|
|
4,448
|
|
|
|
(514
|
)
|
|
|
3,934
|
|
Trademarks(1)
|
|
|
8 years
|
|
|
|
3,024
|
|
|
|
(695
|
)
|
|
|
2,329
|
|
|
|
3,024
|
|
|
|
(349
|
)
|
|
|
2,675
|
|
Cleviprex milestones(2)
|
|
|
13 years
|
|
|
|
2,000
|
|
|
|
(71
|
)
|
|
|
1,929
|
|
|
|
2,000
|
|
|
|
(27
|
)
|
|
|
1,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9 years
|
|
|
$
|
16,929
|
|
|
$
|
(3,504
|
)
|
|
$
|
13,425
|
|
|
$
|
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. |
Amortization expense was approximately $1.8 million,
$1.2 million and $0.6 million for the years ended
December 31, 2010, December 31, 2009 and
December 31, 2008, respectively. 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 million for the years ending
December 31, 2011, 2012, 2013, 2014 and 2015,
F-21
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 December 31,
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 years ended December 31,
2010 and December 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
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 5).
Accrued expenses consisted of the following at December 31:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Nycomed service agreement
|
|
$
|
|
|
|
$
|
71
|
|
Royalties
|
|
|
24,739
|
|
|
|
20,523
|
|
Research and development services
|
|
|
16,873
|
|
|
|
15,208
|
|
Compensation related
|
|
|
18,780
|
|
|
|
14,638
|
|
Product returns, rebates and other fees
|
|
|
3,300
|
|
|
|
5,992
|
|
Legal, accounting and other
|
|
|
7,450
|
|
|
|
7,598
|
|
Manufacturing, logistics and related fees
|
|
|
2,534
|
|
|
|
10,332
|
|
Sales and marketing
|
|
|
2,566
|
|
|
|
2,726
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
76,242
|
|
|
$
|
77,088
|
|
|
|
|
|
|
|
|
|
|
F-22
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Preferred
Stock
The Company has 5,000,000 shares of preferred stock
(Preferred Stock) authorized, none of which are issued.
Common
Stock
Common stockholders are entitled to one vote per share and
dividends when declared by the Companys Board of
Directors, subject to the preferential rights of any outstanding
shares of Preferred Stock.
Employees and directors of the Company purchased
557,725 shares, 231,022 shares, and
320,638 shares of common stock during the years ended
December 31, 2010, 2009 and 2008, respectively, pursuant to
option exercises and the Companys employee stock purchase
plan. The aggregate net proceeds to the Company resulting from
these purchases were approximately $3.4 million,
$1.8 million, and $5.5 million during the years ended
December 31, 2010, 2009 and 2008, respectively, and are
included within the financing activities section of the
consolidated statements of cash flows. The Company issued
76,044 shares, 319,348 shares and 92,970 shares
under restricted stock awards during the years ended
December 31, 2010, 2009 and 2008, respectively.
|
|
9.
|
Stock-Based
Compensation
|
Stock
Plans
The Company has adopted the following stock incentive plans:
|
|
|
|
|
the 2009 Equity Inducement Plan (the 2009 Plan),
|
|
|
|
the 2007 Equity Inducement Plan (the 2007 Plan),
|
|
|
|
the 2004 Stock Incentive Plan (the 2004 Plan),
|
|
|
|
the 2001 Non-Officer,
Non-Director
Stock Incentive Plan (the 2001 Plan),
|
|
|
|
the 2000 Outside Director Stock Option Plan (the
2000 Director Plan), and
|
|
|
|
the 1998 Stock Incentive Plan (the 1998 Plan).
|
Each of these plans provides for the grant of stock options and
other stock- based awards to employees, officers, directors,
consultants and advisors of the Company and its subsidiaries.
Stock option grants have an exercise price equal to the fair
market value of the Companys common stock on the date of
grant and generally have a
10-year
term. The fair value of stock option grants is recognized, net
of an estimated forfeiture rate, using an accelerated method
over the vesting period of the options, which is generally four
years.
2009
Plan
In February 2009, the Board of Directors adopted the 2009 Plan,
which provided for the grant of stock options, restricted stock
awards, stock appreciation rights and other stock-based awards
to any person who (a) was not previously an employee or
director of the Company or (b) was commencing employment
with the Company following a bona fide period of non-employment
by the Company, as an inducement material to the individual
entering into employment with the Company. The purpose of the
2009 Plan was to advance the interests of the Companys
stockholders by enhancing the Companys ability to attract,
retain and motivate persons who were expected to make important
contributions to the Company and providing such persons with
equity ownership opportunities that were intended to better
align their interests with those of the Companys
F-23
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
stockholders. The 2009 Plan was administered by the Compensation
Committee of the Board of Directors, which had the authority to
grant awards under the 2009 Plan. Under the 2009 Plan, the
Company was authorized to issue up to 1,500,000 shares of
common stock, subject to adjustment in the event of stock splits
and other similar events, pursuant to awards granted under the
2009 Plan. Options granted under the 2009 Plan generally have a
10-year term
and vest 25% one year after grant and thereafter in equal
monthly installments over a three-year period. The 2009 Plan
terminated on May 31, 2010. As of December 31, 2010,
an aggregate of 316,967 options had been issued and remained
outstanding under the 2009 Plan.
2007
Plan
In December 2007, the Board of Directors adopted the 2007 Plan,
which provided for the grant of stock options, restricted stock
awards, stock appreciation rights and other stock-based awards
to any person who (a) was not previously an employee or
director of the Company or (b) was commencing employment
with the Company following a bona fide period of non-employment
by the Company, as an inducement material to the individual
entering into employment with the Company. The purpose of the
2007 Plan was to advance the interests of the Companys
stockholders by enhancing the Companys ability to attract,
retain and motivate persons who were expected to make important
contributions to the Company and providing such persons with
equity ownership opportunities that were intended to better
align their interests with those of the Companys
stockholders. The 2007 Plan was administered by the Compensation
Committee of the Board of Directors, which had the authority to
grant awards under the 2007 Plan. Under the 2007 Plan, the
Company was authorized to issue up to 1,700,000 shares of
common stock, subject to adjustment in the event of stock splits
and other similar events, pursuant to awards granted under the
2007 Plan. Options granted under the 2007 Plan generally have a
10-year term
and vest 25% one year after grant and thereafter in equal
monthly installments over a three-year period. The 2007 Plan
terminated on May 29, 2008. As of December 31, 2010,
an aggregate of 199,500 options had been issued and remained
outstanding under the 2007 Plan.
2004
Plan
In April 2004, the Board of Directors adopted, subject to
stockholder approval, the 2004 Plan, which provides for the
grant of stock options, restricted stock awards, stock
appreciation rights and other stock-based awards to the
Companys employees, officers, directors, consultants and
advisors, including any individuals who have accepted an offer
of employment. The Companys stockholders approved the 2004
Plan in May 2004. The 2004 Plan has been amended three times to
increase the number of shares issuable under the 2004 Plan and
to replace the existing sublimit on certain types of awards that
may be granted under the 2004 Plan with a fungible share pool.
The Company may issue up to 13,900,000 shares of common
stock, subject to adjustment in the event of stock splits and
other similar events, pursuant to awards granted under the 2004
Plan. Shares awarded under the 2004 Plan that are subsequently
cancelled are available to be granted again under the 2004 Plan.
The Board of Directors has delegated its authority under the
2004 Plan to the Compensation Committee, consisting of
independent directors, which administers the 2004 Plan,
including granting options and other awards under the 2004 Plan.
In addition, pursuant to the terms of the 2004 Plan, the Board
of Directors has delegated to the Companys executive
officers limited authority to grant stock options to employees
without further action by the Board of Directors or the
Compensation Committee. Options granted under the 2004 Plan
generally have a
10-year term
and vest 25% one year after grant and thereafter in equal
monthly installments over a three-year period.
F-24
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Board of Directors has adopted a program under the 2004 Plan
providing for automatic grants of options to the Companys
non-employee directors. Each non-employee director is granted
non-statutory stock options under the 2004 Plan to purchase:
|
|
|
|
|
20,000 shares of common stock on the date of his or her
initial election to the Board of Directors (the Initial
Options); and
|
|
|
|
7,500 shares of the common stock on the date of each annual
meeting of the Companys stockholders (the Annual Options),
except if such non-employee director was initially elected to
the Board of Directors at such annual meeting. The lead director
will be granted an additional option to purchase
5,000 shares of the common stock on the date of each annual
meeting of the Companys stockholders.
|
Each non-employee director also receives an award of
3,750 shares of restricted stock on the date of each annual
meeting of the Companys stockholders.
These options have an exercise price equal to the closing price
of the common stock on the NASDAQ Global Select Market on the
date of grant and have a
10-year
term. The Initial Options vest in 36 equal monthly installments
beginning on the date one month after the grant date. The Annual
Options vest in 12 equal monthly installments beginning on the
date one month after the date of grant. All vested options are
exercisable at any time prior to the first anniversary of the
date the director ceases to be a director. The restricted stock
awards vest on the first anniversary date after the grant date.
As of December 31, 2010, the Company had granted an
aggregate of 7,782,806 shares as restricted stock or
subject to issuance upon exercise of stock options under the
2004 Plan, of which 6,392,714 shares remained subject to
outstanding options.
2001
Plan
In May 2001, the Board of Directors approved the 2001 Plan,
which provides for the grant of non-statutory stock options to
employees, consultants and advisors of the Company and its
subsidiaries, including individuals who have accepted an offer
of employment, other than those employees who are officers or
directors of the Company. The 2001 Plan provided for the
issuance of up to 1,250,000 shares of common stock. Shares
awarded under the 2001 Plan that were subsequently cancelled
were available to be granted again under the 2001 Plan. The
Board of Directors delegated its authority under the 2001 Plan
to the Compensation Committee, which administers the 2001 Plan,
including granting options under the 2001 Plan. In addition,
pursuant to the terms of the 2001 Plan, the Board of Directors
delegated to the Companys chief executive officer limited
authority to grant stock options to employees without further
action by the Board of Directors or the Compensation Committee.
The Company ceased making grants under the 2001 Plan following
adoption of an amendment to the 2004 Plan at the Companys
annual stockholders meeting on May 25, 2006.
As of December 31, 2010, an aggregate of
1,114,241 shares had been issued under the 2001 Plan and
options to purchase an aggregate of 209,465 shares remained
outstanding.
2000 Director
Plan
Prior to the adoption of the 2004 Plan, the Company granted
non-statutory stock options to the Companys non-employee
directors pursuant to the 2000 Director Plan. The Company
ceased making grants under the 2000 Director Plan following
adoption of the 2004 Plan.
As of December 31, 2010, an aggregate of
177,086 shares had been issued under the
2000 Directors Plan and options to purchase an aggregate of
106,667 shares remained outstanding.
F-25
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
1998
Plan
In April 1998, the Company adopted the 1998 Plan, which provided
for the grant of stock options, restricted stock and other
stock-based awards to employees, officers, directors,
consultants, and advisors of the Company and its subsidiaries,
including any individuals who have accepted an offer of
employment. The 1998 Plan terminated in April 2008. Under the
1998 Plan, the Board of Directors had authority to determine the
term of each option, the option price, the number of shares for
which each option is granted and the rate at which each option
becomes exercisable. The 1998 Plan provided that
6,118,259 shares of common stock could be issued pursuant
to awards under the 1998 Plan. Shares awarded under the 1998
Plan that were subsequently cancelled were available to be
granted again under the 1998 Plan. During 1999, the Board of
Directors amended all then-outstanding options to allow holders
to exercise the options prior to vesting, provided that the
shares of common stock issued upon exercise of the option would
be subject to transfer restrictions and vesting provisions that
allowed the Company to repurchase unvested shares at the
exercise price. The Board of Directors delegated its authority
under the 1998 Plan to the Compensation Committee, which
administered the 1998 Plan, including granting options and other
awards under the 1998 Plan. In addition, pursuant to the terms
of the 1998 Plan, the Board of Directors delegated to the
Companys chief executive officer limited authority to
grant stock options to employees without further action by the
Board of Directors or the Compensation Committee. Options
granted under the 1998 Plan generally vest in increments over
four years and have a ten-year term. The Company ceased making
grants under the 1998 Plan following adoption of an amendment to
the 2004 Plan at its annual stockholders meeting on
May 25, 2006.
As of December 31, 2010, an aggregate of
5,106,910 shares had been issued under the 1998 Plan and
options to purchase an aggregate of 800,640 shares remained
outstanding.
Stock
Option Activity
The following table presents a summary of option activity and
data under the Companys stock incentive plans as of
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Exercise Price
|
|
|
Contractual
|
|
|
Aggregate
|
|
|
|
Number of Shares
|
|
|
Per Share
|
|
|
Term
|
|
|
Intrinsic Value
|
|
|
Outstanding, January 1, 2008
|
|
|
7,923,154
|
|
|
|
21.83
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
3,588,990
|
|
|
|
19.25
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(217,160
|
)
|
|
|
18.36
|
|
|
|
|
|
|
|
|
|
Forfeited and expired
|
|
|
(529,463
|
)
|
|
|
24.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2008
|
|
|
10,765,521
|
|
|
|
20.92
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,533,850
|
|
|
|
10.92
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(18,505
|
)
|
|
|
5.85
|
|
|
|
|
|
|
|
|
|
Forfeited and expired
|
|
|
(1,286,459
|
)
|
|
|
20.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2009
|
|
|
10,994,407
|
|
|
$
|
19.63
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,079,700
|
|
|
|
9.01
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(357,225
|
)
|
|
|
5.77
|
|
|
|
|
|
|
|
|
|
Forfeited and expired
|
|
|
(3,691,471
|
)
|
|
|
20.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2010
|
|
|
8,025,411
|
|
|
$
|
18.51
|
|
|
|
6.23
|
|
|
$
|
9,639,530
|
|
Exercisable, December 31, 2010
|
|
|
5,821,879
|
|
|
$
|
20.62
|
|
|
|
5.41
|
|
|
$
|
2,976,829
|
|
Available for future grant at December 31, 2010
|
|
|
5,851,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-26
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Aggregate intrinsic value is the sum of the amounts by which the
quoted market price of the Companys common stock exceeded
the exercise price of the options at December 31, 2010, for
those options for which the quoted market price was in excess of
the exercise price. The weighted-average grant date fair value
of options granted during the years ended December 31,
2010, 2009 and 2008 was $4.27, $4.69, and $8.08, respectively.
The total intrinsic value of options exercised during the years
ended December 31, 2010, 2009 and 2008 was
$1.0 million, $0.1 million, and $1.2 million,
respectively.
In accordance with
ASC 718-10,
the Company recorded approximately $8.3 million,
$19.4 million and $20.2 million of stock compensation
expense related to the options, restricted stock and ESPP for
the years ended December 31, 2010, 2009 and 2008,
respectively. As of December 31, 2010, there was
approximately $7.4 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 1.19 years.
The Company recorded approximately $5.9 million,
$15.4 million, and $17.6 million in compensation
expense related to options in the years ended December 31,
2010, 2009 and 2008.
For purposes of performing the valuation, employees were
separated into two groups according to patterns of historical
exercise behavior; the weighted average assumptions below
include assumptions from the two groups of employees exhibiting
different behavior.
The Company estimated the fair value of each option on the date
of grant using the Black-Scholes closed-form option-pricing
model applying the weighted average assumptions in the following
table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected stock price volatility
|
|
|
52
|
%
|
|
|
47
|
%
|
|
|
45
|
%
|
Risk-free interest rate
|
|
|
2.13
|
%
|
|
|
2.05
|
%
|
|
|
2.78
|
%
|
Expected option term (years)
|
|
|
5.17
|
|
|
|
5.12
|
|
|
|
4.89
|
|
The fair value of each option element of the Companys 2000
Employee Stock Purchase Plan and 2010 Employee Stock Purchase
Plan (the 2000 ESPP and the 2010 ESPP) is estimated on the date
of grant using the Black-Scholes closed-form option-pricing
model applying the weighted average assumptions in the following
table. Expected volatilities are based on historical volatility
of the Companys common stock. Expected term represents the
six-month offering period for the 2000 ESPP. The risk-free
interest rate is based on the U.S. Treasury yield curve in
effect at the time of grant.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected stock price volatility
|
|
|
65
|
%
|
|
|
79
|
%
|
|
|
39
|
%
|
Risk-free interest rate
|
|
|
0.19
|
%
|
|
|
0.32
|
%
|
|
|
2.04
|
%
|
Expected option term (years)
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
F-27
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes information regarding options
outstanding as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Vested
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Remaining
|
|
|
Weighted Average
|
|
|
Number
|
|
|
Weighted Average
|
|
Range of Exercise
|
|
Outstanding
|
|
|
Contractual Life
|
|
|
Exercise Price
|
|
|
Exercisable
|
|
|
Exercise Price
|
|
Prices Per Share
|
|
at 12/31/10
|
|
|
(Years)
|
|
|
Per Share
|
|
|
at 12/31/10
|
|
|
Per Share
|
|
|
$5.90 $8.07
|
|
|
916,001
|
|
|
|
8.85
|
|
|
$
|
7.46
|
|
|
|
236,010
|
|
|
$
|
7.41
|
|
$8.14 $12.95
|
|
|
925,728
|
|
|
|
7.66
|
|
|
|
10.43
|
|
|
|
363,095
|
|
|
|
10.42
|
|
$13.04 $17.58
|
|
|
992,353
|
|
|
|
6.11
|
|
|
|
15.85
|
|
|
|
640,221
|
|
|
|
16.17
|
|
$17.62 $18.60
|
|
|
928,105
|
|
|
|
5.89
|
|
|
|
18.27
|
|
|
|
814,991
|
|
|
|
18.29
|
|
$18.65 $19. 06
|
|
|
231,562
|
|
|
|
5.81
|
|
|
|
18.91
|
|
|
|
205,520
|
|
|
|
18.90
|
|
$19.09 $19.36
|
|
|
1,007,773
|
|
|
|
6.89
|
|
|
|
19.34
|
|
|
|
732,658
|
|
|
|
19.34
|
|
$19.42 $21.54
|
|
|
906,077
|
|
|
|
5.58
|
|
|
|
20.35
|
|
|
|
790,060
|
|
|
|
20.39
|
|
$21.55 $27.53
|
|
|
897,191
|
|
|
|
4.73
|
|
|
|
24.38
|
|
|
|
839,176
|
|
|
|
24.43
|
|
$27.56 $34.95
|
|
|
1,220,621
|
|
|
|
4.63
|
|
|
|
28.82
|
|
|
|
1,200,148
|
|
|
|
28.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,025,411
|
|
|
|
6.23
|
|
|
$
|
18.51
|
|
|
|
5,821,879
|
|
|
$
|
20.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents a summary of the Companys
outstanding shares of restricted stock awards granted as of
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Number of
|
|
|
Grant-Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Outstanding, January 1, 2008
|
|
|
159,950
|
|
|
|
24.46
|
|
Awarded
|
|
|
92,970
|
|
|
|
18.93
|
|
Vested
|
|
|
(64,050
|
)
|
|
|
22.65
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2008
|
|
|
188,870
|
|
|
|
22.35
|
|
Awarded
|
|
|
408,184
|
|
|
|
12.42
|
|
Vested
|
|
|
(77,938
|
)
|
|
|
21.56
|
|
Forfeited
|
|
|
(88,836
|
)
|
|
|
15.67
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2009
|
|
|
430,280
|
|
|
|
14.45
|
|
Awarded
|
|
|
172,874
|
|
|
|
8.82
|
|
Vested
|
|
|
(128,196
|
)
|
|
|
14.76
|
|
Forfeited
|
|
|
(96,830
|
)
|
|
|
12.85
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2010
|
|
|
378,128
|
|
|
$
|
12.18
|
|
|
|
|
|
|
|
|
|
|
The Company grants restricted stock awards under the 2004 Plan.
The restricted stock granted to employees generally vests in
equal increments of 25% per year on an annual basis commencing
twelve months after grant date. The restricted stock granted to
non-employee directors generally vests on the first anniversary
date after the grant date. Expense of approximately
$1.8 million, $3.2 million and $2.0 million was
recognized related to restricted stock awards in the years ended
December 31, 2010, 2009 and 2008, respectively. The
remaining expense of approximately $1.9 million will be
recognized over a period of 1.16 years. The total fair
value of the restricted stock that vested during the years ended
December 31, 2010, 2009 and 2008 was $1.9 million,
$1.7 million and $1.5 million, respectively.
F-28
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
2000
ESPP
In May 2000, the Board of Directors and the Companys
stockholders approved the 2000 ESPP. The 2000 ESPP provided for
the issuance of up to 805,500 shares of common stock. The
2000 ESPP permitted eligible employees to purchase shares of
common stock at the lower of 85% of the fair market value of the
common stock at the beginning or at the end of each offering
period. Employees who owned 5% or more of the common stock were
not eligible to participate in the 2000 ESPP. Participation was
voluntary.
As of December 31, 2010, the Company had issued
805,437 shares over the life of the 2000 ESPP. The Company
issued 169,241 shares, 212,517 shares, and
103,478 shares under the 2000 ESPP during the years ended
December 31, 2010, 2009 and 2008, respectively. The Company
canceled the 2000 ESPP upon approval of the 2010 ESPP. The
Company recorded approximately $0.3 million,
$0.8 million, and $0.6 million in compensation expense
related to the 2000 ESPP in the years ended December 31,
2010, 2009 and 2008, respectively.
2010
ESPP
In June 2010, the Board of Directors and the Companys
stockholders approved the 2010 ESPP, which provides for the
issuance of up to 1,000,000 shares of common stock. The
2010 ESPP permits eligible employees to purchase shares of
common stock at the lower of 85% of the fair market value of the
common stock at the beginning or at the end of each offering
period. Employees who own 5% or more of the common stock are not
eligible to participate in the 2010 ESPP. Participation in the
2010 ESPP is voluntary.
The Company issued 31,259 shares under the 2010 ESPP during
the year ended December 31, 2010, and currently has
968,741 shares in reserve for future issuance under the
2010 ESPP. The Company recorded approximately $0.3 million
in compensation expense related to the 2010 ESPP in the year
ended December 31, 2010.
Common
Stock Reserved for Future Issuance
At December 31, 2010, there were 968,741 shares of
common stock available for grant under the 2010 ESPP and
5,851,947 shares of common stock available for grant under
the 2004 Plan.
|
|
10.
|
Earnings
(Loss) per Share
|
The following table sets forth the computation of basic and
diluted earnings (loss) per share for the years ended
December 31, 2010, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except per share
amounts)
|
|
|
Basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
104,635
|
|
|
$
|
(76,229
|
)
|
|
$
|
(8,504
|
)
|
Weighted average common shares outstanding, basic
|
|
|
53,209
|
|
|
|
52,722
|
|
|
|
52,090
|
|
Less: unvested restricted common shares outstanding
|
|
|
367
|
|
|
|
453
|
|
|
|
186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net weighted average common shares outstanding, basic
|
|
|
52,842
|
|
|
|
52,269
|
|
|
|
51,904
|
|
Plus: net effect of dilutive stock options and restricted common
shares
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, diluted
|
|
|
53,184
|
|
|
|
52,269
|
|
|
|
51,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share, basic
|
|
$
|
1.98
|
|
|
$
|
(1.46
|
)
|
|
$
|
(0.16
|
)
|
Income (loss) per common share, diluted
|
|
$
|
1.97
|
|
|
$
|
(1.46
|
)
|
|
$
|
(0.16
|
)
|
F-29
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Basic earnings (loss) per share is computed using the weighted
average number of shares of common stock outstanding during the
period, reduced where applicable for outstanding yet unvested
shares of restricted common stock. The number of dilutive common
stock equivalents was calculated using the treasury stock
method. For the years ended December 31, 2010, 2009 and
2008, options to purchase 8,079,671 shares,
10,962,627 shares, and 7,404,748 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 years ended December 31, 2010, 2009 and 2008,
6,375 shares, 87,068 shares, and 0 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.
The benefit from (provision for) income taxes in 2010, 2009 and
2008 consists of current and deferred federal, state and foreign
taxes based on income and state taxes based on net worth as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(1,380
|
)
|
|
$
|
(237
|
)
|
|
$
|
(377
|
)
|
State
|
|
|
(1,433
|
)
|
|
|
(238
|
)
|
|
|
(1,021
|
)
|
Foreign
|
|
|
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,813
|
)
|
|
|
(325
|
)
|
|
|
(1,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
43,582
|
|
|
|
(43,740
|
)
|
|
|
(1,910
|
)
|
State
|
|
|
(282
|
)
|
|
|
(3,997
|
)
|
|
|
390
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,300
|
|
|
|
(47,737
|
)
|
|
|
(1,520
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total benefit from (provision for) income taxes
|
|
$
|
40,487
|
|
|
$
|
(48,062
|
)
|
|
$
|
(2,918
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of income (loss) before income taxes consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Domestic
|
|
$
|
80,765
|
|
|
$
|
(15,744
|
)
|
|
$
|
30,375
|
|
International
|
|
|
(16,617
|
)
|
|
|
(12,423
|
)
|
|
|
(35,961
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
64,148
|
|
|
$
|
(28,167
|
)
|
|
$
|
(5,586
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-30
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The difference between tax expense and the amount computed by
applying the statutory federal income tax rate of 35% in 2010,
2009, and 2008 to income (loss) before income taxes is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Statutory rate applied to pre-tax income (loss)
|
|
$
|
22,452
|
|
|
$
|
(9,858
|
)
|
|
$
|
(1,955
|
)
|
Add (deduct):
|
|
|
|
|
|
|
|
|
|
|
|
|
State income taxes, net of federal benefit
|
|
|
1,115
|
|
|
|
2,753
|
|
|
|
430
|
|
Foreign
|
|
|
1,551
|
|
|
|
168
|
|
|
|
4,576
|
|
Tax credits
|
|
|
|
|
|
|
(1,408
|
)
|
|
|
(1,456
|
)
|
Lobbying costs
|
|
|
1,324
|
|
|
|
1,701
|
|
|
|
219
|
|
Acquisition costs
|
|
|
|
|
|
|
1,398
|
|
|
|
558
|
|
Meals and entertainment
|
|
|
390
|
|
|
|
272
|
|
|
|
191
|
|
Uncertain tax positions
|
|
|
510
|
|
|
|
|
|
|
|
167
|
|
Other
|
|
|
783
|
|
|
|
326
|
|
|
|
188
|
|
Net operating loss utilization
|
|
|
(23,438
|
)
|
|
|
(5,783
|
)
|
|
|
|
|
(Decrease) increase to federal valuation allowances (net)
|
|
|
(45,174
|
)
|
|
|
58,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) provision
|
|
$
|
(40,487
|
)
|
|
$
|
48,062
|
|
|
$
|
2,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The significant components of the Companys deferred tax
assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
74,314
|
|
|
$
|
95,800
|
|
Tax credits
|
|
|
24,931
|
|
|
|
23,460
|
|
Intangible assets
|
|
|
22,922
|
|
|
|
25,137
|
|
Stock based compensation
|
|
|
14,894
|
|
|
|
18,507
|
|
Other
|
|
|
13,002
|
|
|
|
9,500
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
150,063
|
|
|
|
172,404
|
|
Valuation allowance
|
|
|
(104,334
|
)
|
|
|
(171,386
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets net of valuation allowance
|
|
|
45,729
|
|
|
|
1,018
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Fixed assets
|
|
$
|
(1,065
|
)
|
|
$
|
(1,018
|
)
|
Indefinite lived intangible assets
|
|
|
(19,467
|
)
|
|
|
(18,395
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(20,532
|
)
|
|
|
(19,413
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax (liabilities) assets
|
|
$
|
25,197
|
|
|
$
|
(18,395
|
)
|
|
|
|
|
|
|
|
|
|
At December 31, 2010 a total of $9.4 million of the
deferred tax asset valuation allowance related to net operating
loss carryforwards is associated with the exercise of
non-qualified stock options. Such benefits, when realized, will
be credited to additional paid-in capital.
During the fourth quarter of 2010, the Company reduced its
valuation allowance and recognized approximately
$45.2 million of deferred tax assets, primarily federal net
operating losses and research and
F-31
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
development credits that management believes are more likely
than not to be realized in future periods. The Company recorded
a corresponding $45.2 million deferred income tax benefit
in its fourth quarter and full-year income tax provision. The
Company considered positive and negative evidence including its
level of past and future operating income, the utilization of
carryforwards, the status of litigation with respect to the
Angiomax patents and other factors in arriving at its decision
to recognize the deferred tax assets.
During 2009, the Company increased the valuation allowance
associated with its net deferred tax assets to
$171.4 million (100% ) because it considered at that time
that future realization of these assets would not be more likely
than not.
During 2008, the Company reduced its net deferred tax assets to
$48.2 million which included a reduction of the net
deferred tax asset by $1.5 million related to the deferred
tax provision and by $0.7 million of other activity
recorded directly to equity including an adjustment to
additional paid-in capital for the tax effect of option
exercises and adjustments for unrealized gains on available for
sale securities. The Company believed that it was more likely
than not that the net deferred tax asset of $48.2 million
would be realized in future periods.
The Company will continue to evaluate the realizability of its
deferred tax assets and liabilities on a periodic basis, and
will adjust such amounts in light of changing facts and
circumstances, including but not limited to future projections
of 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. If the Company further
reduces the valuation allowance on deferred tax assets in future
years, the Company would recognize a tax benefit.
In 1998 and 2002, the Company experienced a change in ownership
as defined in Section 382 of the Internal Revenue Code.
Section 382 can potentially limit a companys ability
to use net operating losses, tax credits and other tax
attributes in periods subsequent to a change in ownership.
However, based on the market value of the Company at such dates,
the Company believes that these ownership changes will not
significantly impact its ability to use net operating losses or
tax credits in the future to offset taxable income. On
February 26, 2009 the Company acquired 100% of the stock of
Targanta and became a successor to certain of its net operating
loss and tax credit carryforwards. These tax attributes are also
subject to a limitation under Internal Revenue Code
Section 382 and the amounts combined with those of the
Company in the table below have been reduced for such limitation.
F-32
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At December 31, 2010, the Company has federal net operating
loss carryforwards available to reduce taxable income, and
federal research and development tax credit carryforwards
available to reduce future tax liabilities, which expire
approximately as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Research
|
|
|
|
Federal Net
|
|
|
and Development
|
|
|
|
Operating Loss
|
|
|
Tax Credit
|
|
Year of Expiration
|
|
Carryforwards
|
|
|
Carryforwards
|
|
|
|
(In thousands)
|
|
|
2018
|
|
$
|
|
|
|
$
|
95
|
|
2019
|
|
|
|
|
|
|
923
|
|
2020
|
|
|
|
|
|
|
1,083
|
|
2021
|
|
|
|
|
|
|
477
|
|
2022
|
|
|
29,711
|
|
|
|
1,856
|
|
2023
|
|
|
19,693
|
|
|
|
2,031
|
|
2024
|
|
|
11
|
|
|
|
1,795
|
|
2025
|
|
|
12,858
|
|
|
|
3,436
|
|
2026
|
|
|
9,628
|
|
|
|
1,971
|
|
2027
|
|
|
30,804
|
|
|
|
1,028
|
|
2028
|
|
|
43,710
|
|
|
|
1,186
|
|
2029
|
|
|
|
|
|
|
899
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
146,415
|
|
|
$
|
16,780
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010 the Company has the following
additional carryforwards: Alternative Minimum Tax Credits of
$3.7 million with no expiration date, state net operating
losses of approximately $105 million expiring between 2011
and 2014 and foreign net operating losses of approximately
$69.6 million expiring between 2013 and 2029.
ASC 740 clarifies the accounting for income taxes by prescribing
the minimum threshold a tax position is required to meet before
being recognized in the financial statements and provides
guidance on de-recognition, measurement, classification and
disclosure of tax positions. The Company reduced its deferred
tax asset attributable to certain tax credits by approximately
$0.5 million in 2010 to appropriately measure the amount of
such deferred tax asset. No adjustment was made in 2009. The
recognition of these tax benefits will impact the Companys
effective income tax rate when recognized. The Company does not
anticipate a significant change in its unrecognized tax benefits
in the next twelve months. The Company is no longer subject to
federal, state or foreign income tax audits for tax years prior
to 2006. However such taxing authorities can
F-33
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
review any net operating losses utilized by the Company in years
subsequent to 2003. A reconciliation of the beginning and ending
amount of gross unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
Gross
|
|
|
|
Unrecognized
|
|
|
|
Tax Benefits
|
|
|
|
(In thousands)
|
|
|
Balance at January 1, 2009
|
|
$
|
1,381
|
|
Additions related to current year tax positions
|
|
|
|
|
Additions for prior year tax positions
|
|
|
|
|
Reductions for prior year tax positions
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
1,381
|
|
Additions related to current year tax positions
|
|
|
|
|
Additions for prior year tax positions
|
|
|
510
|
|
Reductions for prior year tax positions
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
1,891
|
|
|
|
|
|
|
The Company classifies interest and penalties related to
unrecognized tax benefits in income tax expense. The Company has
not accrued any interest or penalties as of December 31,
2010.
|
|
12.
|
Fair
Value Measurements
|
On January 1, 2008, the Company adopted the provisions of
ASC 820-10,
Fair Value Measurements and Disclosures (ASC
820-10) for
financial assets and liabilities. As permitted by
ASC 820-10,
the Company elected to defer until January 1, 2009 the
adoption of
ASC 820-10
for all nonfinancial assets and nonfinancial liabilities, except
those that are recognized or disclosed at fair value in the
financial statements on a recurring basis.
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 6). The fair
value of the contingent purchase price was determined utilizing
a probability weighted discounted financial model.
|
F-34
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table sets forth the Companys assets and
liabilities that were measured at fair value on a recurring
basis at December 31, 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
|
|
|
Balance at
|
|
|
|
Identical Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
December 31,
|
|
Assets and Liabilities
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market
|
|
$
|
9,360
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,360
|
|
U.S. government agency
|
|
|
|
|
|
|
55,222
|
|
|
|
|
|
|
|
55,222
|
|
Corporate debt securities
|
|
|
|
|
|
|
65,058
|
|
|
|
|
|
|
|
65,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
9,360
|
|
|
$
|
120,280
|
|
|
$
|
|
|
|
$
|
129,640
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent purchase price
|
|
$
|
|
|
|
$
|
|
|
|
$
|
25,387
|
|
|
$
|
25,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value
|
|
$
|
|
|
|
$
|
|
|
|
$
|
25,387
|
|
|
$
|
25,387
|
|
The changes in fair value of the Companys Level 3
contingent purchase price during the year ended
December 31, 2010 were as follows:
|
|
|
|
|
|
|
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
|
|
|
1,720
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
25,387
|
|
|
|
|
|
|
No changes in valuation techniques or inputs occurred during the
year ended December 31, 2010. No transfers of assets
between Level 1 and Level 2 of the fair value
measurement hierarchy occurred during the year ended
December 31, 2010.
|
|
13.
|
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. 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 these
workforce reductions in February 2010.
The Company recorded, in the aggregate, charges of
$6.8 million associated with the workforce reductions.
These charges were recorded in research and development and
selling, general and administrative costs in the Companys
financial statements.
Of the approximately $6.8 million of charges related to the
workforce reductions, $1.0 million were noncash charges,
$5.7 million was paid during the year ended
December 31, 2010 and $0.1 million are expected to be
paid out during 2011.
F-35
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table sets forth details regarding the activities
described above during the year ended December 31, 2010 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of
|
|
|
|
of January 1,
|
|
|
Expenses,
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Net
|
|
|
Cash
|
|
|
Noncash
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Employee severance and other personnel benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Workforce reductions
|
|
$
|
|
|
|
$
|
5,703
|
|
|
$
|
5,569
|
|
|
$
|
|
|
|
$
|
134
|
|
Leases and equipment write-offs
|
|
|
|
|
|
|
1,105
|
|
|
|
150
|
|
|
|
945
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
6,808
|
|
|
$
|
5,719
|
|
|
$
|
945
|
|
|
$
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Angiomax
In March 1997, the Company entered into an agreement with
Biogen, Inc., a predecessor of Biogen Idec, for the license of
the anticoagulant pharmaceutical bivalirudin, which the Company
has developed as Angiomax. Under the terms of the agreement, the
Company acquired exclusive worldwide rights to the technology,
patents, trademarks, inventories and know-how related to
Angiomax. In exchange for the license, the Company paid
$2.0 million on the closing date and are obligated to pay
up to an additional $8.0 million upon the first commercial
sale of Angiomax for the treatment of AMI in the United States
and Europe. In addition, the Company is obligated to pay
royalties on sales of Angiomax and on any sublicense royalties
on a
country-by-country
basis earned until the later of (1) 12 years after the
date of the first commercial sales of the product in a country
or (2) the date on which the product or its manufacture,
use or sale is no longer covered by a valid claim of the
licensed patent rights in such country. Under the terms of the
agreement, the royalty rate due to Biogen Idec on sales
increases with growth in annual sales of Angiomax. The agreement
also stipulates that the Company use commercially reasonable
efforts to meet certain milestones related to the development
and commercialization of Angiomax, including expending at least
$20 million for certain development and commercialization
activities, which the Company met in 1998. The license and
rights under the agreement remain in force until the
Companys obligation to pay royalties ceases. Either party
may terminate the agreement for material breach by the other
party, if the material breach is not cured within 90 days
after written notice. In addition, the Company may terminate the
agreement for any reason upon 90 days prior written notice.
The Company recognized royalty expense under the agreement of
$85.5 million in 2010, $77.4 million in 2009 and
$53.6 million in 2008 for Angiomax sales.
Cleviprex
The Company exclusively licensed Cleviprex in March 2003 from
AstraZeneca for all countries other than Japan. In May 2006, the
Company amended its license agreement with AstraZeneca to
provide exclusive license rights in Japan in exchange for an
upfront payment. The Company acquired this license after having
studied Cleviprex under a study and exclusive option agreement
with AstraZeneca that the Company entered into in March 2002.
Under the terms of the agreement, the Company has the rights to
the patents, trademarks, inventories and know-how related to
Cleviprex. In exchange for the license, the Company paid
$1.0 million in 2003 upon entering into the license and
agreed to pay up to an additional $5.0 million upon
reaching certain regulatory milestones, including a payment of
$1.5 million that was remitted in September 2007 after the
FDA accepted the NDA for Cleviprex for the treatment of acute
hypertension and a payment of $1.5 million paid in the
third quarter of 2008 upon the FDAs approval of Cleviprex.
In addition, the Company is obligated to pay royalties on a
country-by-country
basis on annual sales of Cleviprex, and on any sublicense
royalties earned, until the later of (1) the duration of
the licensed patent rights which are necessary to manufacture,
use or sell Cleviprex in a country or (2) ten years from
the Companys first commercial sale of Cleviprex in such
country.
F-36
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Under the agreement, the Company is obligated to use
commercially reasonable efforts to develop, market and sell
Cleviprex. The licenses and rights under the agreement remain in
force on a
country-by-country
basis until the Company ceases selling Cleviprex in such country
or the agreement is otherwise terminated. The Company may
terminate the agreement upon 30 days written notice, unless
AstraZeneca, within 20 days of having received the
Companys notice, requests that the Company enter into good
faith discussions to redress its concerns. If the Company cannot
reach a mutually agreeable solution with AstraZeneca within
three months of the commencement of such discussions, the
Company may then terminate the agreement upon 90 days
written notice. Either party may terminate the agreement for
material breach upon 60 days prior written notice, if the
breach is not cured within such 60 days. The Company
recognized royalty expense under the agreement of
$0.7 million in 2010, $0.4 million in 2009 and
$0.04 million in 2008 for Cleviprex sales.
Cangrelor
In December 2003, the Company acquired from AstraZeneca
exclusive license rights to cangrelor for all countries other
than Japan, China, Korea, Taiwan and Thailand. Under the terms
of the agreement, the Company has the rights to the patents,
trademarks, inventories and know-how related to cangrelor. In
June 2010, the Company entered into an amendment to its license
agreement with AstraZeneca. The amendment requires the Company
to commence certain clinical studies of cangrelor, eliminates
the specific development time lines set forth in the license
agreement and terminates certain regulatory assistance
obligations of AstraZeneca. In exchange for the license, the
Company paid an upfront payment of $1.5 million in January
2004 upon entering into the license and $3.0 million in
June 2010 upon entering the amendment to the license. The
Company also agreed to make additional milestone payments of up
to $54.5 million in the aggregate upon reaching agreed upon
regulatory and commercial milestones. To date, the Company has
paid AstraZeneca approximately $4.7 million pursuant to the
license agreement, which includes the $1.5 million upfront
payment, $3.0 million in connection with the amendment of
the agreement and $0.2 million for the transfer of
technology in 2004. The Company is obligated to pay royalties on
a
country-by-country
basis on annual sales of cangrelor, and on any sublicense income
earned, until the later of the duration of the licensed patent
rights which are necessary to manufacture, use or sell cangrelor
in a country ten years from our first commercial sale of
cangrelor in such country. Under the agreement the Company is
obligated to use commercially reasonable efforts to diligently
and expeditiously file NDAs in the United States and in other
agreed upon major markets. The licenses and rights under the
agreement remain in force on a
country-by-country
basis until the Company ceases selling cangrelor in such country
or the agreement is otherwise terminated. The Company may
terminate the agreement upon 30 days written notice,
unless AstraZeneca, within 20 days of having received the
Companys notice, requests that the Company enter into good
faith discussions to redress the Companys concerns. If the
Company cannot reach a mutually agreeable solution with
AstraZeneca within three months of the commencement of such
discussions, the Company may then terminate the agreement upon
90 days written notice. In the event that a change of
control of the Company occurs in which the Company is acquired
by a specified company at a time when that company is developing
or commercializing a specified competitor product AstraZeneca
may terminate the agreement upon 120 days written notice.
Either party may terminate the agreement for material breach
upon 60 days prior written notice if the breach is
not cured within such 60 days.
MDCO-216
In December 2009, the Company entered into an agreement with
Pfizer Inc. (Pfizer) with respect to the compound designated by
Pfizer as ETC-216 (ETC-216), a variant of ApoA-I Milano, a
naturally occurring variant of a protein found in human
high-density lipoprotein. Pursuant to the agreement, Pfizer
granted the Company an exclusive, worldwide, royalty-bearing
license under specified Pfizer patents, patent applications and
know-how to develop, manufacture and commercialize products
containing ETC-216 and improvements to ETC-216 (collectively,
the Products). The Company may sublicense the intellectual
property to third parties, provided that it has complied with
Pfizers right of first negotiation and, in the case of
sublicenses, to unaffiliated third parties in certain countries,
provided that it has first obtained Pfizers consent. The
Company,
F-37
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
itself or through its affiliates or sublicensees, has agreed to
use commercially reasonable efforts to develop at least one
Product and to commercialize any approved Products.
Under the agreement, the Company paid Pfizer an upfront payment
of $10,000,000 and upon the achievement of clinical, regulatory
and sales milestones will pay up to an aggregate of
$410,000,000. The Company has also agreed to make royalty
payments to Pfizer on the sale of the Products by the Company,
its affiliates or sublicensees. The royalties are payable, on a
Product-by-Product
and
country-by-country
basis, until the latest of the expiration of the last patent or
patent application covering the Product, the expiration of any
market exclusivity, and a specified period of time after first
commercial sale of the Product. The Company has also agreed to
pay Pfizer a portion of the consideration received by the
Company or its affiliates in connection with sublicenses. The
Company 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 on sales of MDCO-216.
The Company has agreed to indemnify Pfizer against third party
claims arising from (a) the development and
commercialization of the Products by the Company, its
affiliates, subcontractors or sublicensees, (b) the
negligence or wrongful intentional acts or omissions of the
Company, its affiliates, subcontractors or sublicensees,
(c) a breach of the agreement by the Company, or
(d) claims by a Brewer/Matin Party (as defined in the
agreement with Pfizer) resulting from the agreement or any
agreement or arrangement between the Company and a Brewer/Matin
Party.
The agreement will expire upon expiration of the Companys
obligation to make royalty payments. Each party may terminate
the agreement if (a) the other party breaches its material
obligations under the agreement and fails to cure such breach
during a specified period of time, (b) the other party
become insolvent or bankrupt, or (c) the other party is
subject to a force majeure event for a specified period of time.
Pfizer may also terminate the agreement if the Company provides
written notice to Pfizer that the Company intends to permanently
abandon the development, manufacture and commercialization of
the Products or if the Company otherwise ceases, for a specified
period of time, to use commercially reasonable efforts to
develop, manufacture and commercialize, as applicable, at least
one Product. The Company may terminate the agreement in its
entirety, or on a
Product-by-Product
basis, at any time and for any reason upon prior written notice.
Upon termination of the agreement, the licenses to the Company
terminate. If Pfizer terminates the agreement due to the
Companys uncured breach, bankruptcy, force majeure event,
abandonment of the Products or ceasing to use commercially
reasonable efforts to develop and commercialize at least one
Product, or if the Company terminates the agreement for
convenience, the Company will grant Pfizer a sublicenseable,
royalty-free, perpetual license under any intellectual property
licenseable by the Company that arose from the Companys
development or commercialization of the terminated Products, to
develop, manufacture and commercialize the terminated Products.
This license will be non-exclusive with respect to trademarks
and exclusive with respect to other intellectual property.
|
|
15.
|
Manufacturing
Agreements
|
Lonza
Braine S.A. (formerly UCB Bioproducts)
In December 1999, the Company entered into a commercial supply
agreement with Lonza Braine S.A. (formerly UCB Bioproducts S.A)
for the development and supply of the Angiomax bulk drug
substance. Under the terms of the commercial supply agreement,
Lonza Braine completed development of a modified production
process known as the Chemilog process and filed an amendment in
2001 to its drug master file for regulatory approval of the
Chemilog process by the FDA. The Chemilog process was approved
by the FDA in May 2003. The Company has agreed to purchase a
substantial portion of its Angiomax bulk drug product
manufactured using the Chemilog process from Lonza Braine at
agreed upon prices until the agreement expires in September
2013, subject to automatic renewals of consecutive three-year
periods unless either party provides notice of
F-38
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
non-renewal within one year prior to the expiration of the
initial term or any renewal term. The Company may only terminate
the agreement prior to its expiration in the event of a material
breach by Lonza Braine. Following the expiration of the
agreement or if the Company terminates the agreement prior to
its expiration, Lonza Braine has agreed to transfer the
development technology to the Company. If the Company engages a
third party to manufacture Angiomax using this technology prior
to bivalirudin becoming a generic drug in the United States, the
Company will be obligated to pay Lonza Braine a royalty based on
the amount paid by the Company to the third-party manufacturer.
During 2010, 2009 and 2008 the Company recorded
$25.3 million, $23.3 million and $8.6 million,
respectively, in costs related to Lonza Braines production
of Angiomax bulk drug substance.
Ben Venue
Laboratories, Inc.
On October 23, 1997, the Company entered into a master
agreement with Ben Venue Laboratories, Inc. (Ben Venue) for the
manufacture of the finished drug product of Angiomax. Ben Venue
conducts the fill-finish of Angiomax drug product in the United
States for the Company through purchase order arrangements
agreed upon by the parties and governed by the master agreement.
During 2010, 2009 and 2008, the Company recorded
$5.5 million, $3.4 million and $3.3 million,
respectively, in costs related to Ben Venues manufacture
of finished drug product of Angiomax.
|
|
16.
|
Commitments
and Contingencies
|
The Companys long-term contractual obligations include
commitments and estimated purchase obligations entered into in
the normal course of business. These include commitments related
to purchases of inventory of the Companys products,
research and development service agreements, operating leases
and selling, general and administrative obligations, increases
to the Companys restricted cash in connection with its new
principal office space in Parsippany, New Jersey, and royalty
and milestone payments due.
Future estimated contractual obligations as of December 31,
2010 are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
Obligations
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
Later Years
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Inventory related commitments
|
|
$
|
30,316
|
|
|
$
|
14,669
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
44,985
|
|
Research and development
|
|
|
26,419
|
|
|
|
19,234
|
|
|
|
320
|
|
|
|
119
|
|
|
|
65
|
|
|
|
|
|
|
|
46,157
|
|
Operating leases
|
|
|
8,870
|
|
|
|
8,035
|
|
|
|
6,346
|
|
|
|
5,006
|
|
|
|
4,623
|
|
|
|
34,021
|
|
|
|
66,901
|
|
Selling, general and administrative
|
|
|
3,092
|
|
|
|
1,826
|
|
|
|
216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,134
|
|
Unrecognized tax benefits
|
|
|
1,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
70,588
|
|
|
$
|
43,764
|
|
|
$
|
6,882
|
|
|
$
|
5,125
|
|
|
$
|
4,688
|
|
|
$
|
34,021
|
|
|
$
|
165,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All of the inventory related commitments included above are
non-cancellable. Included within the inventory related
commitments above are purchase commitments to Lonza Braine
totaling $25.3 million for 2011 and $14.7 million for
2012 for Angiomax bulk drug substance. Of the total estimated
contractual obligations for research and development and
selling, general and administrative activities,
$8.9 million is non-cancellable.
The Company leases its principal offices in Parsippany, New
Jersey. The lease covers 173,146 square feet and expires
January 2024. The lease for the Companys old office
facility in Parsippany expires January 2013. In the second half
of 2009, the Company subleased this previous old office space to
two tenants. The first sublease, for the second floor of that
office space, expires in March 2011 and the second sublease,
covering the first floor of the Companys previous office
space, expires in January 2013. 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.
F-39
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Approximately 82% of the total operating lease commitments above
relate to the Companys principal office building in
Parsippany, New Jersey. Also included in total property lease
commitments are automobile leases, computer leases, the
operating lease from the Companys previous office space
and other property leases that the Company entered into while
expanding the its global infrastructure.
Aggregate rent expense under the Companys property leases
was approximately $5.8 million in 2010, $7.5 million
in 2009 and $2.2 million in 2008.
In addition to the amounts shown in the above table, the Company
is contractually obligated to make potential future
success-based development, regulatory and commercial milestone
payments and royalty payments in conjunction with collaborative
agreements or acquisitions it has entered into with
third-parties. These contingent payments include royalty
payments with respect to Angiomax under the Companys
license agreements with Biogen Idec and HRI, royalty and
milestone payments with respect to Cleviprex, contingent cash
payments up to approximately $85.1 million that would be
owed to former Targanta shareholders under the Companys
merger agreement with Targanta and contingent payments with
respect to cangrelor, oritavancin, MDCO-2010 and MDCO-216. These
payments are contingent upon the occurrence of certain future
events and, given the nature of these events, it is unclear
when, if ever, the Company may be required to pay such amounts.
These contingent payments have not been included in the table
above. Further, the timing of any future payment is not
reasonable estimable. In 2010 and 2009, the Company paid
aggregate royalties to Biogen Idec and HRI of $85.5 million
and $77.4 million and royalties to AstraZeneca with respect
to Cleviprex of $0.7 million and $0.4 million.
Litigation
From time to time, the Company is party to legal proceedings in
the course of its business in addition to those described below.
The Company does not, however, expect such other legal
proceedings to have a material adverse effect on the
Companys business, financial condition or results of
operations
727
Patent and 343 Patent Litigations
Teva
Parenteral Medicines, Inc.
In September 2009, the Company was notified that Teva Parenteral
Medicines, Inc. had submitted an ANDA seeking permission to
market its generic version of Angiomax prior to the expiration
of 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, the Company filed
suit against Teva Parenteral Medicines, Inc., Teva
Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries,
Ltd. (collectively, 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, the Company was 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, the
Company filed suit against Teva 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 Teva 727 patent case above.
The judge in the Eastern District of Pennsylvania has
consolidated the Teva 727 and 343 patent cases with the
Pliva 727 and 343 patent cases (discussed below),
the APP 727 and 343 patent cases (discussed below)
and the Hospira 727 and 343 patent cases (discussed
below).
F-40
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Pliva
Hrvatska d.o.o.
In September 2009, the Company was 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, the Company 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. (collectively, 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, the Company was 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, the Company filed suit against Pliva 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 patent case above.
APP
Pharmaceuticals, LLC.
In September 2009, the Company was 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, the Company
filed suit against APP Pharmaceuticals, LLC and APP
Pharmaceuticals, Inc. (together, 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. The Company filed an amended complaint 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, the Company 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, the Company was 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, the Company was 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,
the Company filed suit against APP in the U.S. District
Court 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, the Company 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. On October 14, 2010, the case was
reassigned to the same judge in the Eastern District of
Pennsylvania who is presiding over the above APP 727
patent case and the Teva 727 and 343 patent cases
and the Pliva 727 and 343 patent cases. On the same
day, the APP 343 patent case was consolidated with these
other cases.
Hospira,
Inc.
In July 2010, the Company was notified that Hospira had
submitted two ANDAs seeking permission to market its generic
version of Angiomax prior to the expiration of the 727 and
343 patents. On August 19, 2010, the Company filed
suit against Hospira in the U.S. District Court for the
District of Delaware for infringement of the 727 and
343 patents. On August 25, 2010, the case was
reassigned in lieu of a vacant judgeship to the
U.S. District Court for the Eastern District of
Pennsylvania. Hospiras answer denied infringement of the
727 and 343 patents and raised counterclaims of
non-infringement and invalidity of the
F-41
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
727 and 343 patents. On September 24, 2010, the
Company filed a reply denying the counterclaims raised by
Hospira.
On September 17, 2010, Hospira filed a motion to be
consolidated with the Teva, Pliva and APP cases. On
October 13, 2010, the court denied Hospiras motion to
consolidate. As part of setting the schedule in this case, the
Hospira 727 and 343 case was consolidated with the
above Teva, Pliva and APP cases. No trial date has been set.
Mylan
Pharmaceuticals, Inc.
In January 2011, the Company was notified that Mylan
Pharmaceuticals, Inc. had submitted an ANDA seeking permission
to market its generic version of Angiomax prior to the
expiration of the 727 and 343 patents. On
February 23, 2011, the Company filed suit against Mylan
Inc., Mylan Pharmaceuticals Inc. and Bioniche Pharma USA, LLC
(collectively, Mylan) in the U.S. District Court for the
Northern District of Illinois for infringement of the 727
and 343 patents.
Contingencies
The U.S. Patent and Trademark Office (PTO) rejected the
application under the Hatch-Waxman Act for an extension of the
term of U.S. Patent No. 5,196,404 (the 404
patent), the principal U.S. patent that covers Angiomax
(the patent extension filing), beyond March 23, 2010
because in its view the application was not timely filed. In
February 2011, the Company entered into a settlement agreement
and release with the law firm Wilmer Cutler Pickering Hale and
Dorr LLP (WilmerHale) with respect to all potential claims and
causes of action between the parties related to the 404
patent (See Note 20). The Company has entered into an
agreement with the other law firm involved in the filing of the
application under the
Hatch-Waxman
Act that suspends the statute of limitations on the
Companys claims against them for the filing. The Company
has also 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 term extension application 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 involved in discussions with the
remaining law firm involved in the patent term extension
application filing and is currently in related discussions with
Biogen Idec and HRI with respect to the possible resolution of
potential claims among the parties.
|
|
17.
|
Employee
Benefit Plan
|
The Company has an employee savings and retirement plan which is
qualified under Section 401(k) of the Internal Revenue
Code. The Companys employees may elect to reduce their
current compensation up to the statutorily prescribed limit and
have the amount of such reduction contributed to the 401(k)
plan. Effective March 2010, the Company agreed to make matching
contributions of 50% of employees contributions up to a
maximum of 6% of an employees eligible earnings.
F-42
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
18.
|
Selected
Quarterly Financial Data (Unaudited)
|
The following table presents selected quarterly financial data
for the years ended December 31, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Mar. 31,
|
|
June 30,
|
|
Sept. 30,
|
|
Dec. 31,
|
|
Mar. 31,
|
|
June 30,
|
|
Sept. 30,
|
|
Dec. 31,
|
|
|
2010
|
|
2010
|
|
2010
|
|
2010
|
|
2009
|
|
2009
|
|
2009
|
|
2009
|
|
|
(In thousands, except per share
data)
|
|
Net revenue
|
|
$
|
102,088
|
|
|
$
|
110,135
|
|
|
$
|
105,743
|
|
|
$
|
119,679
|
|
|
$
|
99,217
|
|
|
$
|
104,175
|
|
|
$
|
98,789
|
|
|
$
|
102,060
|
|
Cost of revenue
|
|
|
28,769
|
|
|
|
33,568
|
|
|
|
31,568
|
|
|
|
35,394
|
|
|
|
28,297
|
|
|
|
30,353
|
|
|
|
28,308
|
|
|
|
31,190
|
|
Total operating expenses
|
|
|
62,998
|
|
|
|
59,984
|
|
|
|
52,464
|
|
|
|
68,485
|
|
|
|
78,031
|
|
|
|
67,694
|
|
|
|
69,822
|
|
|
|
95,894
|
|
Net income/(loss)
|
|
|
9,432
|
|
|
|
15,426
|
|
|
|
21,205
|
|
|
|
58,572
|
|
|
|
(3,348
|
)
|
|
|
3,811
|
|
|
|
(3,197
|
)
|
|
|
(73,494
|
)
|
Basic net income/(loss) per common share
|
|
$
|
0.18
|
|
|
$
|
0.29
|
|
|
$
|
0.40
|
|
|
$
|
1.10
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.07
|
|
|
$
|
(0.06
|
)
|
|
$
|
(1.40
|
)
|
Diluted net income/(loss) per common share
|
|
$
|
0.18
|
|
|
$
|
0.29
|
|
|
$
|
0.40
|
|
|
$
|
1.09
|
|
|
$
|
(0.06
|
)
|
|
$
|
0.07
|
|
|
$
|
(0.06
|
)
|
|
$
|
(1.40
|
)
|
|
|
19.
|
Segment
and Geographic Information
|
The Company manages its business and operations as one segment
and is focused on advancing the treatment of acute and intensive
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 segment information provided below is classified
based on the major geographic regions in which the Company
operates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
December 31,
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
2009
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Net revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
413,044
|
|
|
|
94.4
|
%
|
|
$
|
385,939
|
|
|
|
95.5
|
%
|
|
$
|
334,582
|
|
|
|
96.1
|
%
|
Europe
|
|
|
20,126
|
|
|
|
4.6
|
%
|
|
|
13,908
|
|
|
|
3.4
|
%
|
|
|
9,051
|
|
|
|
2.6
|
%
|
Other
|
|
|
4,475
|
|
|
|
1.0
|
%
|
|
|
4,394
|
|
|
|
1.1
|
%
|
|
|
4,524
|
|
|
|
1.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
|
437,645
|
|
|
|
|
|
|
|
404,241
|
|
|
|
|
|
|
|
348,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
December 31,
|
|
|
|
2010
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
117,095
|
|
|
|
98.8
|
%
|
|
$
|
122,968
|
|
|
|
98.4
|
%
|
Europe
|
|
|
1,213
|
|
|
|
1.0
|
%
|
|
|
1,684
|
|
|
|
1.3
|
%
|
Other
|
|
|
220
|
|
|
|
0.2
|
%
|
|
|
353
|
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
$
|
118,528
|
|
|
|
|
|
|
$
|
125,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On February 11, 2011, the Company entered into a Settlement
Agreement and Release (the Settlement Agreement) with WilmerHale
with respect to all potential claims and causes of action
between the parties
F-43
THE
MEDICINES COMPANY
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
related to the 404 patent, the extension of the term of
the 404 patent, any alleged late filing of the request for
an extension of the term of the 404 patent and any efforts
to cure such alleged late filing.
Under the Settlement Agreement, WilmerHale agreed to make
available to the Company up to approximately $232 million,
consisting of approximately $117 million from the proceeds
of professional liability insurance policies and
$115 million of payments from WilmerHale itself. As
described below, a portion of the available funds will be paid
to the Company shortly after entry into the Settlement
Agreement, but most of the available funds would be paid only if
the Company suffers damages in the event that a generic version
of the Companys product bivalirudin is sold in the United
States before June 15, 2015 because the extension of the
404 patent is held invalid on the basis that the
application for the extension was not timely filed. While the
Company believes that the extension of the 404 patent will
be upheld, the court decision ordering the PTO to accept the
extension application as timely filed remains open to future
challenge, including in a pending appeal by a generic company.
Payments by WilmerHale itself would be made only after payments
from its insurance policies are exhausted and cannot exceed
$2.875 million for any calendar quarter.
Pursuant to the Settlement Agreement, WilmerHale has agreed to
pay approximately $18 million from its professional
liability insurance providers to the Company within 60 days
after the date of the Settlement Agreement. The balance of the
approximately $232 million aggregate amount provided in the
Settlement Agreement remains available to pay (1) future
expenses incurred by the Company in continuing to defend the
extension of the 404 patent, and (2) any damages that
may be suffered by the Company in the event that a generic
version of the Companys product bivalirudin is sold in the
United States before June 15, 2015 because the extension of
the 404 patent is held invalid on the basis that the
application for the extension was not timely filed. The
Settlement Agreement contains a formula for determining the
amount of damages suffered, on a quarterly basis, in the event
of generic entry. The Settlement Agreement also contains
provisions under which the Company will seek to recover damages
from third parties potentially liable to the Company and to
reimburse or share with WilmerHale certain damage recoveries
from such third parties.
The Company and WilmerHale also agreed to a mutual release of
claims arising from or relating to the 404 patent, the
extension of the term of the 404 patent, any alleged late
filing of any request for an extension of the term of the
404 patent, any efforts to cure such alleged late filing
or any related matter, other than obligations set forth in the
Settlement Agreement. The Settlement Agreement also contains
provisions including indemnification, confidentiality, dispute
resolution and other customary provisions for an agreement of
this kind.
F-44
INDEX TO
EXHIBITS
|
|
|
|
|
Number
|
|
Description
|
|
|
2
|
.1
|
|
Sale and Purchase Agreement, dated August 4, 2008, between
The Medicines Company (Leipzig) GmbH and Curacyte AG (filed as
Exhibit 2.1 of the registrants current report on
Form 8-K/A,
filed on November 10, 2008)
|
|
2
|
.2
|
|
Agreement and Plan of Merger among the registrant, Boxford
Subsidiary Corporation, and Targanta Therapeutics Corporation,
dated as of January 12, 2009 (filed as Exhibit 2.1 of
the registrants current report on
Form 8-K,
filed on January 14, 2009)
|
|
2
|
.3
|
|
Amendment to Sale and Purchase Agreement dated December 14,
2009 between The Medicines Company (Leipzig) GmbH and Curacyte
AG (filed as Exhibit 2.3 to the registrants annual
report on
Form 10-K
for the year ended December 31, 2009)
|
|
3
|
.1
|
|
Third Amended and Restated Certificate of Incorporation of the
registrant, as amended (filed as Exhibit 4.1 to the
Amendment No. 1 to the registrants registration
statement on
Form 8-A/A,
filed July 14, 2005)
|
|
3
|
.2
|
|
Amended and Restated By-laws of the registrant, as amended
(filed as Exhibit 3.2 to the registrants annual
report on
Form 10-K
for the year ended December 31, 2007)
|
|
10
|
.1
|
|
Amended and Restated Registration Rights Agreement, dated as of
August 12, 1998, as amended, by and among the registrant
and the other parties thereto (filed as Exhibit 10.1 to the
registrants quarterly report on
Form 10-Q
for the quarter ended June 30, 2002)
|
|
10
|
.2
|
|
Lease for 8 Campus Drive dated September 30, 2002 by and
between Sylvan/Campus Realty L.L.C. and the registrant, as
amended by the First Amendment and Second Amendment, (filed as
Exhibit 10.15 to the registrants annual report on
Form 10-K
for the year ended December 31, 2003)
|
|
10
|
.3
|
|
Third Amendment to Lease for 8 Campus Drive dated
December 30, 2004 by and between Sylvan/Campus Realty
L.L.C. and the registrant (filed as Exhibit 10.18 to the
registrants annual report on
Form 10-K
for the year ended December 31, 2004)
|
|
10
|
.4
|
|
Lease for 8 Sylvan Way, Parsippany, NJ dated October 11,
2007 by and between 8 Sylvan Way, LLC and the registrant (filed
as Exhibit 10.32 to the registrants annual report on
Form 10-K
for the year ended December 31, 2007)
|
|
10
|
.5
|
|
Amendment to Lease for 8 Sylvan Way, Parsippany, NJ dated
October 11, 2007 by and between 8 Sylvan Way, LLC and the
registrant (filed as Exhibit 10.40 to the registrants
annual report on
Form 10-K
for the year ended December 31, 2008)
|
|
10
|
.6*
|
|
Employment agreement dated September 5, 1996 by and between
the registrant and Clive Meanwell (filed as Exhibit 10.12
to the registration statement on
Form S-1
filed on May 19, 2000 (registration
no. 333-37404))
|
|
10
|
.7*
|
|
Letter Agreement dated December 1, 2004 by and between the
registrant and John Kelley (filed as Exhibit 10.25 to the
registrants annual report on
Form 10-K
for the year ended December 31, 2004)
|
|
10
|
.8*
|
|
Letter Agreement dated March 2, 2006 by and between the
registrant and Glenn P. Sblendorio, (filed as Exhibit 10.23
to the registrants annual report on
Form 10-K
for the year ended December 31, 2005)
|
|
10
|
.9*
|
|
Severance Agreement, dated February 17, 2009 by and between
Catharine Newberry and the registrant (filed as
Exhibit 10.42 to the registrants annual report on
Form 10-K
for the year ended December 31, 2008)
|
|
10
|
.10*
|
|
Severance Agreement, dated October 22, 2009 by and between
John Kelley and the registrant (filed as Exhibit 10.1 to
the registrants quarterly report on
Form 10-Q
for the quarter ended September 30, 2009)
|
|
10
|
.11*
|
|
Form of Amended and Restated Management Severance Agreement by
and between the registrant and each of Clive Meanwell and Glenn
Sblendorio (filed as Exhibit 10.24 to the registrants
annual report on
Form 10-K
for the year ended December 31, 2008)
|
|
10
|
.12*
|
|
Form of Amended and Restated Management Severance Agreement by
and between the registrant and each of Paul Antinori, William
OConnor and Leslie Rohrbacker (filed as Exhibit 10.25
to the registrants annual report on
Form 10-K
for the year ended December 31, 2008)
|
|
|
|
|
|
Number
|
|
Description
|
|
|
10
|
.13*
|
|
Form of
Lock-Up
Agreement dated as of December 23, 2005 by and between the
registrant and each of its executive officers and directors
(filed as Exhibit 10.27 to the registrants annual
report on
Form 10-K
for the year ended December 31, 2005)
|
|
10
|
.14*
|
|
Summary of Board of Director Compensation (filed as
Exhibit 10.1 to the registrants quarterly report on
Form 10-Q
for the quarter ended March 31, 2007)
|
|
10
|
.15*
|
|
1998 Stock Incentive Plan, as amended (filed as
Exhibit 10.1 to the registration statement on
Form S-1
filed on May 19, 2000 (registration
no. 333-37404))
|
|
10
|
.16*
|
|
Form of stock option agreement under 1998 Stock Incentive Plan
(filed as Exhibit 10.3 to the registrants quarterly
report on
Form 10-Q
for the quarter ended June 30, 2004)
|
|
10
|
.17*
|
|
2000 Employee Stock Purchase Plan, as amended (filed as
Exhibit 10.1 of the registrants registration
statement on
Form S-8,
filed on September 1, 2009)
|
|
10
|
.18*
|
|
2000 Outside Director Stock Option Plan, as amended (filed as
Exhibit 10.1 to the registrants quarterly report on
Form 10-Q
for the quarter ended March 31, 2003)
|
|
10
|
.19
|
|
2001 Non-Officer,
Non-Director
Employee Stock Incentive Plan (filed as Exhibit 99.1 to the
registration statement on
Form S-8
filed December 5, 2001 (registration
no. 333-74612))
|
|
10
|
.20*
|
|
Amended and Restated 2004 Stock Incentive Plan (filed as
Exhibit 99.1 to the registrants registration
statement on
Form S-8,
dated July 3, 2008)
|
|
10
|
.21*
|
|
Form of stock option agreement under 2004 Stock Incentive Plan
(filed as Exhibit 10.22 to the registrants annual
report on
Form 10-K
for the year ended December 31, 2004)
|
|
10
|
.22*
|
|
Form of restricted stock agreement under 2004 Stock Incentive
Plan (filed as Exhibit 10.1 to the registrants
quarterly report on
Form 10-Q
for the quarter ended March 31, 2006)
|
|
10
|
.23*
|
|
2007 Equity Inducement Plan (filed as Exhibit 10.1 to the
registration statement on
Form S-8
filed January 11, 2008 (registration
no. 333-148602))
|
|
10
|
.24*
|
|
Form of stock option agreement under 2007 Equity Inducement Plan
(filed as Exhibit 10.34 to the registrants annual
report on
Form 10-K
for the year ended December 31, 2007)
|
|
10
|
.25*
|
|
Form of restricted stock agreement under 2007 Equity Inducement
Plan (filed as Exhibit 10.35 to the registrants
annual report on
Form 10-K
for the year ended December 31, 2007)
|
|
10
|
.26*
|
|
2009 Equity Inducement Plan (filed as Exhibit 10.1 to the
registration statement on
Form S-8
filed February 24, 2009 (registration number
333-157499))
|
|
10
|
.27*
|
|
Form of stock option agreement under 2009 Equity Inducement Plan
(filed as Exhibit 10.2 to the registrants quarterly
report on
Form 10-Q
for the quarter ended March 31, 2009)
|
|
10
|
.28*
|
|
Form of stock option agreement for employees in Italy under 2009
Equity Inducement Plan (filed as Exhibit 10.3 to the
registrants quarterly report on
Form 10-Q
for the quarter ended March 31, 2009)
|
|
10
|
.29*
|
|
Form of restricted stock agreement under 2009 Equity Inducement
Plan (filed as Exhibit 10.4 to the registrants
quarterly report on
Form 10-Q
for the quarter ended March 31, 2009)
|
|
10
|
.30*
|
|
Summary of Annual Cash Bonus Plan (filed as Exhibit 10.2 to
the registrants quarterly report on
Form 10-Q
for the quarter ended June 30, 2008)
|
|
10
|
.31*
|
|
Summary of Performance Measures under the registrants
Annual Cash Bonus Plan (filed in Item 5.02 of the
registrants current report on Form 8-K, filed on
February 22, 2011)
|
|
10
|
.32
|
|
License Agreement, dated as of June 6, 1990, by and between
Biogen, Inc. and Health Research, Inc., as assigned to the
registrant (filed as Exhibit 10.6 to the registration
statement on
Form S-1
filed on May 19, 2000 (registration
no. 333-37404))
|
|
10
|
.33
|
|
License Agreement dated March 21, 1997, by and between the
registrant and Biogen, Inc. (filed as Exhibit 10.7 to the
registration statement on
Form S-1
filed on May 19, 2000 (registration
no. 333-37404))
|
|
10
|
.34
|
|
License Agreement effective as of March 28, 2003 by and
between AstraZeneca AB and the registrant
|
|
10
|
.35
|
|
Amendment No. 1 to License Agreement dated April 25,
2006 by and between AstraZeneca AB
|
|
10
|
.36
|
|
Amendment No. 2 to License Agreement, dated
October 22, 2008 by and between the registrant and
AstraZeneca AB (filed as Exhibit 10.38 to the
registrants annual report on
Form 10-K
for the year ended December 31, 2008)
|
|
|
|
|
|
Number
|
|
Description
|
|
|
10
|
.37
|
|
License Agreement dated as of December 18, 2003 by and
between AstraZeneca AB and the registrant (filed as
Exhibit 10.18 to the registrants annual report on
Form 10-K
for the year ended December 31, 2003)
|
|
10
|
.38
|
|
Amendment to License Agreement dated July 6, 2007 between
AstraZeneca AB and the registrant (filed as Exhibit 10.4 to
the registrants quarterly report on
Form 10-Q
for the quarter ended September 30, 2007)
|
|
10
|
.39
|
|
License Agreement, dated December 23, 2005 by and between
Targanta Therapeutics Corporation (as successor to InterMune,
Inc.) and Eli Lilly and Company (filed as Exhibit 10.11 to
Targantas registration statement on
Form S-1
(registration
no. 333-142842),
as amended, originally filed with the SEC on May 11, 2007)
|
|
10
|
.40
|
|
Contingent Payment Rights Agreement dated February 25, 2009
between the registrant and American Stock Transfer &
Trust Company (filed as Exhibit 99.1 of the
registrants current report on
Form 8-K,
filed on March 2, 2009)
|
|
10
|
.41
|
|
License Agreement dated as of December 18, 2009 between the
registrant and Pfizer Inc. (filed as Exhibit 10.41 to the
registrants annual report on
Form 10-K
for the year ended December 31, 2009)
|
|
10
|
.42
|
|
Consent and Release Agreement dated as of December 18, 2009
between the registrant and Washington Cardiovascular Associates,
LLC, HDLT LLC, H. Bryan Brewer, Silvia Santamarina-Fojo and
Michael Matin (filed as Exhibit 10.42 to the
registrants annual report on
Form 10-K
for the year ended December 31, 2009)
|
|
10
|
.43
|
|
Chemilog Development and Supply Agreement, dated as of
December 20, 1999, by and between the registrant and UCB
Bioproducts S.A. (filed as Exhibit 10.5 to the registration
statement on
Form S-1
filed on May 19, 2000 (registration
no. 333-37404))
|
|
10
|
.44
|
|
Amended and Restated Distribution Agreement dated
February 28, 2007 between the registrant and Integrated
Commercialization Solutions, Inc. (filed as Exhibit 10.2 to
the registrants quarterly report on
Form 10-Q
for the quarter ended June 30, 2009)
|
|
10
|
.45
|
|
Amendment No. 1 to Amended and Restated Distribution
Agreement dated November 7, 2007 between the registrant and
Integrated Commercialization Solutions, Inc. (filed as
Exhibit 10.3 to the registrants quarterly report on
Form 10-Q
for the quarter ended June 30, 2009)
|
|
10
|
.46
|
|
Amendment No. 2 to Amended and Restated Distribution
Agreement dated October 1, 2008 between the registrant and
Integrated Commercialization Solutions, Inc. (filed as
Exhibit 10.4 to the registrants quarterly report on
Form 10-Q
for the quarter ended June 30, 2009)
|
|
10
|
.47
|
|
Amendment No 3 to the Amended and Restated Distribution
Agreement dated August 12, 2009 between the registrant and
Integrated Commercialization Solutions, Inc. (filed as
Exhibit 10.2 to the registrants quarterly report on
Form 10-Q
for the quarter ended September 30, 2009)
|
|
10
|
.48
|
|
Second Amendment to License Agreement dated as of June 1,
2010 between AstraZeneca AB and the registrant (filed as
Exhibit 10.1 to the registrants quarterly report on
Form 10-Q
for the quarter ended June 30, 2010)
|
|
10
|
.49*
|
|
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)
|
|
10
|
.50*
|
|
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)
|
|
10
|
.51
|
|
First Amendment to lease for 400 Fifth Avenue, Waltham, MA,
dated as of June 30, 2010 by and between ATC Realty Sixteen
Inc. and the registrant (filed as Exhibit 10.1 to the
registrants quarterly report on
Form 10-Q
for the quarter ended September 30, 2010)
|
|
10
|
.52*
|
|
Form of restricted stock agreement under the registrants
Amended and Restated 2004 Stock Incentive Plan (filed as
Exhibit 10.2 to the registrants quarterly report on
Form 10-Q
for the quarter ended September 30, 2010)
|
|
10
|
.53*
|
|
Restricted stock agreement of Clive Meanwell under the
registrants Amended and Restated 2004 Stock Incentive Plan
|
|
|
|
|
|
Number
|
|
Description
|
|
|
10
|
.54
|
|
Second Amended and Restated Distribution Agreement effective as
of October 1, 2010 between the registrant and Integrated
Commercialization Solutions, Inc.
|
|
21
|
|
|
Subsidiaries of the registrant
|
|
23
|
|
|
Consent of Ernst & Young LLP, Independent Registered
Accounting Firm
|
|
31
|
.1
|
|
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
|
|
31
|
.2
|
|
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
|
|
32
|
.1
|
|
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
|
|
32
|
.2
|
|
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
|
|
101
|
.INS
|
|
The following materials from The Medicines Company Annual Report
on
Form 10-K
for the year ended December 31, 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.
|
|
|
|
* |
|
Management contract or compensatory plan or arrangement filed as
an exhibit to this form pursuant to Items 15(a) and 15(c)
of
Form 10-K |
|
|
|
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. |