SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 20, 2002
The Medicines Company
-----------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 000-31191 04-3324394
---------------------------- ----------- ------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
5 Sylvan Way, Suite 200
Parsippany, New Jersey 07054
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (973) 656-1616
Not Applicable
-----------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On May 1, 2002, the Securities and Exchange Commission (the "SEC")
declared effective the Registration Statement on Form S-3 (File No. 333-86762)
(the "Registration Statement") of The Medicines Company (the "Company"), which
permits the Company to issue up to an aggregate of 4,000,000 shares of its
common stock. The prospectus dated May 1, 2002 included in the Registration
Statement is referred to herein as the "Prospectus."
On June 20, 2002, the Company issued a press release announcing a public
offering of 4,000,000 shares of its common stock at a price to the public of
$8.20 per share (the "Shares") pursuant to the Registration Statement. A copy of
the press release is attached to this Current Report on Form 8-K as Exhibit 99.1
and is incorporated herein by this reference.
The Company filed with the SEC on June 21, 2002 the Prospectus together
with a supplement to the Prospectus, dated June 20, 2002, relating to the
issuance and sale of the Shares (the "Prospectus Supplement"). In connection
with the filing of the Prospectus and Prospectus Supplement with the SEC and its
offering of the Shares, the Company is filing the underwriting agreement
relating thereto as Exhibit 1.1 to this Current Report on Form 8-K and a legal
opinion of Hale and Dorr LLP relating to the Shares as Exhibit 5.1 to this
Current Report on Form 8-K.
In connection with the filing of the Prospectus and the Prospectus
Supplement with the SEC, the Company is providing below under the caption "Risk
Factors," an updated description of the risks and uncertainties which could
materially affect the Company's business, financial condition and results of
operations, which were included in the Prospectus Supplement.
RISK FACTORS
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF NET LOSSES, AND WE EXPECT TO CONTINUE TO INCUR NET LOSSES
AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY
We have incurred net losses since our inception, including net losses of
approximately $11.6 million for the three months ended March 31, 2002. As of
March 31, 2002, we had an accumulated deficit of approximately $263.1 million.
We expect to make substantial expenditures to develop and commercialize our
products further, including costs and expenses associated with clinical trials,
regulatory approval and commercialization of products. As a result, we are
unsure when we will become profitable, if at all, and if we do become
profitable, we may not remain profitable for any substantial period of time. If
we fail to achieve profitability 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
Other than Angiomax, our products are in clinical phases of development
and, even if approved by the FDA, are a number of years away from entering the
market. As a result, Angiomax will account for almost all of our revenues for
the foreseeable future. The commercial success of Angiomax will depend upon its
acceptance by physicians, patients and other key decision-makers as a safe,
therapeutic and cost-effective alternative to heparin and other products used in
current practice. If Angiomax is not commercially successful, we will have to
find additional sources of revenues or curtail or cease operations.
FAILURE TO RAISE ADDITIONAL FUNDS IN THE FUTURE MAY AFFECT THE DEVELOPMENT,
MANUFACTURE AND SALE OF OUR PRODUCTS
Our operations to date have generated substantial and increasing needs for
cash. Our negative cash flow from operations is expected to continue into the
foreseeable future. The clinical development and regulatory approval of Angiomax
for additional indications, the development and regulatory approval of our other
product candidates and the acquisition and development of additional product
candidates by us will require a commitment of substantial funds. Our future
capital requirements depend upon many factors and may be significantly greater
than we expect.
As of the date hereof, we believe, based on our current operating plan,
plus anticipated sales of Angiomax and interest income, that our current cash,
cash equivalents and available for sale securities, together with the proceeds
from the offering described in the press release attached to this Current Report
as Exhibit 99.1, will be sufficient to fund our operations for at least 18
months. If our existing resources are insufficient to satisfy our liquidity
requirements due to slower than anticipated sales of Angiomax or otherwise, or
if we acquire additional product candidates, we may need to sell additional
equity or debt securities or seek additional financing through other
arrangements. The sale of additional equity or debt securities may result in
additional dilution to our stockholders, and we cannot be certain that
additional public or private financing will be available in amounts or on terms
acceptable to us, if at all. If we are unable to obtain this additional
financing, we may be required to 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. In addition, in
order to obtain additional financing, we may be required to relinquish rights to
products, product candidates or technologies that we would not otherwise
relinquish.
WE CANNOT EXPAND THE INDICATIONS FOR ANGIOMAX UNLESS WE RECEIVE FDA APPROVAL
FOR EACH ADDITIONAL INDICATION. FAILURE TO EXPAND THESE INDICATIONS WILL LIMIT
THE SIZE OF THE COMMERCIAL MARKET FOR ANGIOMAX
In December 2000, we received approval from the FDA for the use of Angiomax
as an anticoagulant in combination with aspirin in patients with unstable angina
undergoing coronary balloon angioplasty. One of our key objectives is to expand
the indications for which the FDA will approve Angiomax. In order to do this, we
will need to conduct additional clinical trials and obtain FDA approval for each
proposed indication. If we fail to expand the approved indications for the use
of Angiomax, the size of the commercial market for Angiomax will be limited.
FAILURE TO OBTAIN REGULATORY APPROVAL IN FOREIGN JURISDICTIONS WILL PREVENT US
FROM MARKETING ANGIOMAX ABROAD
We intend to market our products in international markets, including
Europe. In order to market our products in the European Union and many other
foreign jurisdictions, we or our distribution agents must obtain separate
regulatory approvals. In February 1998, we submitted a Marketing Authorization
Application, or MAA, to the European Agency for the Evaluations of Medicinal
Products, or the EMEA, for use of Angiomax in unstable angina patients
undergoing angioplasty. Following extended interaction with European regulatory
authorities, the Committee of Proprietary Medicinal Products of the EMEA voted
in October 1999 not to recommend Angiomax for approval for use in angioplasty.
The United Kingdom and Ireland dissented from this decision. We have withdrawn
our application to the EMEA and, as of the date hereof, plan to resubmit an MAA
with the results of our clinical trial program in angioplasty, the REPLACE-2
program, if positive. We may not be able to obtain approval from any or all of
the jurisdictions in which we seek approval to market Angiomax. Obtaining
foreign approvals may require additional trials and additional expense.
THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS MAY BE TERMINATED OR
DELAYED, AND THE COSTS OF DEVELOPMENT AND COMMERCIALIZATION MAY INCREASE, IF
THIRD PARTIES WHO WE RELY ON TO MANUFACTURE AND SUPPORT THE DEVELOPMENT AND
COMMERCIALIZATION OF OUR PRODUCTS DO NOT FULFILL THEIR OBLIGATIONS
Our development and commercialization strategy entails entering into
arrangements with corporate and academic collaborators, contract research
organizations, distributors, third-party manufacturers, licensors, licensees and
others to conduct development work, manage our clinical trials, manufacture our
products and market and sell our products outside of the United States. Although
we manage these services, we do not have the expertise or the resources to
conduct these activities on our own and, as a result, are particularly dependent
on third parties in most areas.
We may not be able to maintain our existing arrangements with respect to
the commercialization of Angiomax or establish and maintain arrangements to
develop and commercialize clevidipine or any additional product candidates or
products on terms that are acceptable to us. Any current or future arrangements
for the development and commercialization of our products may not be successful.
If we are not able to establish or maintain agreements relating to Angiomax,
clevidipine or any additional products on terms which we deem favorable, our
financial condition 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 may not be within our control. Furthermore, our
interests may differ from those of third parties that manufacture or
commercialize our products. Disagreements that may arise with these third
parties could delay or lead to the termination of the development or
commercialization of our product candidates, or result in litigation or
arbitration, which would be time consuming and expensive.
If any third party that manufactures or supports the development or
commercialization of our products breaches or terminates its agreement with us,
or fails to conduct its activities in a timely manner, such breach, termination
or failure could:
- delay or otherwise adversely impact the development or commercialization
of Angiomax, clevidipine, our other product candidates or any additional
product candidates that we may acquire or develop;
- require us to undertake unforeseen additional responsibilities or devote
unforeseen additional resources to the development or commercialization
of our products; or
- result in the termination of the development or commercialization of our
products.
WE ARE DEPENDENT ON A SINGLE SUPPLIER FOR THE PRODUCTION OF ANGIOMAX BULK DRUG
SUBSTANCE AND A DIFFERENT SINGLE SUPPLIER TO CARRY OUT ALL FILL-FINISH
ACTIVITIES FOR ANGIOMAX
We have no experience in manufacturing, and we lack the facilities and
personnel to manufacture products in accordance with FDA regulations. As of the
date hereof, we obtain all of our Angiomax bulk drug substance from one
manufacturer, UCB Bioproducts S.A., and rely on another manufacturer, Ben Venue
Laboratories, Inc., to carry out all fill-finish activities for Angiomax, which
includes final formulation and transfer of the drug into vials where it is then
freeze-dried and sealed.
The FDA requires that all manufacturers of pharmaceuticals for sale in or
from the United States achieve and maintain compliance with the FDA's current
Good Manufacturing Practice, or cGMP, regulations and guidelines. There are a
limited number of manufacturers that operate under cGMP regulations capable of
manufacturing Angiomax. As of the date hereof, we do not have alternative
sources for production of Angiomax bulk drug substance or to carry out
fill-finish activities. If either of our current manufacturers is unable to
carry out its respective manufacturing obligations to our satisfaction, we may
be unable to obtain alternative manufacturing, or obtain such manufacturing on
commercially reasonable terms or on a timely basis. If we were required to
transfer manufacturing processes to other third party manufacturers, we would be
required to satisfy various regulatory requirements, which could cause us to
experience significant delays in receiving an adequate supply of Angiomax. Any
delays in the manufacturing process may adversely impact our ability to meet
commercial demands for Angiomax on a timely basis and supply product for
clinical trials of Angiomax.
IF WE DO NOT SUCCEED IN DEVELOPING A SECOND-GENERATION PROCESS FOR THE
PRODUCTION OF BULK ANGIOMAX DRUG SUBSTANCE, OUR GROSS MARGINS MAY BE BELOW
INDUSTRY AVERAGES
As of the date hereof, we are developing with UCB Bioproducts a
second-generation process for the production of bulk Angiomax drug substance.
This process, for which we have received an approvable letter from the FDA,
involves changes to the early manufacturing steps of our current process in
order to improve our gross margins on the future sales of Angiomax. If
regulatory approval of the process is not obtained or is delayed, then our
ability to improve our gross margins on future sales of Angiomax may be limited.
CLINICAL TRIALS OF OUR PRODUCT CANDIDATES ARE EXPENSIVE AND TIME-CONSUMING, AND
THE RESULTS OF THESE TRIALS ARE UNCERTAIN
Before we can obtain regulatory approvals for the commercial sale of any
product that we wish to develop, we will be required to complete pre-clinical
studies and extensive clinical trials in humans to demonstrate the safety and
efficacy of such product. As of the date hereof, we are conducting clinical
trials of Angiomax for use in the treatment of ischemic heart disease and for
additional potential hospital applications as a procedural anticoagulant. There
are numerous factors that could delay our clinical trials or prevent us from
completing our trials successfully. We, or the FDA, may suspend a clinical trial
at any time on various grounds, including a finding that patients are being
exposed to unacceptable health risks.
The rate of completion of clinical trials depends in part upon the rate of
enrollment of patients. Patient enrollment is a function of many factors,
including the size of the patient population, the proximity of patients to
clinical sites, the eligibility criteria for the trial, the existence of
competing clinical trials and the availability of alternative or new treatments.
In particular, the patient population targeted by some of our clinical trials
may be small. Delays in future planned patient enrollment may result in
increased costs and program delays.
In addition, clinical trials, if completed, may not show any potential
product to be safe or effective. Results obtained in pre-clinical studies or
early clinical trials are not always indicative of results that will be obtained
in later clinical trials. Moreover, data obtained from pre-clinical studies and
clinical trials may be subject to varying interpretations. As a result, the FDA
or other applicable regulatory authorities may not approve a product in a timely
fashion, or at all. Even if regulatory approval to market a product is granted,
the regulatory approval may impose limitations on the indicated use for which
the drug may be marketed.
OUR FAILURE TO ACQUIRE AND DEVELOP ADDITIONAL PRODUCT CANDIDATES OR APPROVED
PRODUCTS WILL IMPAIR OUR ABILITY TO GROW
As part of our growth strategy, we intend to acquire and develop additional
pharmaceutical product candidates or approved products. The success of this
strategy depends upon our ability to identify, select and acquire pharmaceutical
products in late-stage development or that have been approved and that meet the
criteria we have established. Because we neither have, nor intend to establish,
internal scientific research capabilities, we are dependent upon pharmaceutical
and biotechnology companies and other researchers to sell or license product
candidates to us.
Any product candidate we acquire 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 of our 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, non-toxic and effective
or approved by regulatory authorities. In addition, we cannot assure you that
any approved products that we develop or acquire will be:
- manufactured or produced economically;
- commercialized successfully; or
- widely accepted in the marketplace.
In addition, proposing, negotiating and implementing an economically viable
acquisition 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 of product candidates and approved products. We may
not be able to acquire the rights to additional product candidates and approved
products on terms that we find acceptable, or at all.
IF WE BREACH ANY OF THE AGREEMENTS UNDER WHICH WE LICENSE COMMERCIALIZATION
RIGHTS TO PRODUCTS OR TECHNOLOGY FROM OTHERS, WE COULD LOSE LICENSE RIGHTS THAT
ARE IMPORTANT TO OUR BUSINESS
We license commercialization rights to products and technology that are
important to our business, and we expect to enter into additional licenses in
the future. For instance, we acquired our first four products through exclusive
licensing arrangements. Under these licenses we are subject to commercialization
and development, sublicensing, royalty, insurance and other obligations. If we
fail to comply with any of these requirements, or otherwise breach these license
agreements, the licensor may have the right to terminate the license in whole or
to terminate the exclusive nature of the license. In addition, upon the
termination of the license we may be required to license to the licensor the
intellectual property that we developed.
OUR ABILITY TO MANAGE OUR BUSINESS EFFECTIVELY COULD BE HAMPERED IF WE ARE
UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL AND CONSULTANTS
The biopharmaceutical industry has experienced a high rate of turnover of
management personnel in recent years. We are highly dependent on our ability to
attract and retain qualified personnel for the acquisition, development and
commercialization activities we conduct or sponsor. If we lose one or more of
the members of our senior management, including our executive chairman, Dr.
Clive A. Meanwell, or our chief executive officer, David M. Stack, 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 the biotechnology industry with the breadth of skills
and experience required to develop and commercialize products successfully.
Competition to hire from this limited pool is intense, and we may be unable to
hire, train, retain or motivate such additional personnel.
WE FACE SUBSTANTIAL COMPETITION, WHICH MAY RESULT IN OTHERS DISCOVERING,
DEVELOPING OR COMMERCIALIZING COMPETING PRODUCTS BEFORE OR MORE SUCCESSFULLY
THAN WE DO
The biopharmaceutical industry is highly competitive. Our success will
depend on our ability to acquire and develop products and apply technology and
our ability to establish and maintain a market for our products. Potential
competitors in the United States and other countries include major
pharmaceutical and chemical companies, specialized biotechnology firms,
universities and other research institutions. Many of our competitors have
substantially greater research and development capabilities and experience, and
greater manufacturing, marketing and financial resources, than we do.
Accordingly, our competitors may develop or license products or other novel
technologies that are more effective, safer or less costly than existing
products or technologies or products or technologies that are being developed by
us or may obtain FDA approval for products more rapidly than we are able.
Technological development by others may render our products or product
candidates noncompetitive. We may not be successful in establishing or
maintaining technological competitiveness.
BECAUSE THE MARKET FOR THROMBIN INHIBITORS IS COMPETITIVE, OUR PRODUCT MAY NOT
OBTAIN WIDESPREAD USE
We have positioned Angiomax as a replacement for heparin, which is widely
used and inexpensive, for use in patients with ischemic heart disease. Because
heparin is inexpensive and has been widely used for many years, medical
decision-makers may be hesitant to adopt our alternative treatment. In addition,
due to the high incidence and severity of cardiovascular diseases, competition
in the market for thrombin inhibitors is intense and growing. There are a number
of thrombin inhibitors currently on the market, awaiting regulatory approval and
in development, including orally administered agents.
THE LIMITED RESOURCES OF THIRD-PARTY PAYERS MAY LIMIT THE USE OF OUR PRODUCTS
In general, anticoagulant drugs may be classified in three groups: drugs
that directly or indirectly target and inhibit thrombin, drugs that target and
inhibit platelets and drugs that break down fibrin. Because each group of
anticoagulants acts on different components of the clotting process, we believe
that there will be continued clinical work to determine the best combination of
drugs for clinical use. We expect Angiomax to be used with aspirin alone or in
conjunction with other therapies. Although we are not positioning Angiomax as a
direct competitor to platelet inhibitors or fibrinolytic drugs, platelet
inhibitors and fibrinolytic drugs may compete with Angiomax for the use of
hospital financial resources. Many U.S. hospitals receive a fixed reimbursement
amount per procedure for the angioplasties and other treatment therapies they
perform. Because this amount is not based on the actual expenses the hospital
incurs, U.S. hospitals may have to choose among Angiomax, platelet inhibitors
and fibrinolytic drugs.
FLUCTUATIONS IN OUR OPERATING RESULTS COULD AFFECT THE PRICE OF OUR COMMON
STOCK
Our operating results may vary from period to period based on the amount
and timing of sales of Angiomax, the availability and timely delivery of a
sufficient supply of Angiomax, the timing and expenses
of clinical trials, announcements regarding clinical trial results and product
introductions by our competitors, the availability and timing of third-party
reimbursement and the timing of approval for our product candidates. If our
operating results do not match the expectations of securities analysts and
investors as a result of these and other factors, the trading price of our
common stock will likely decrease.
WE MAY UNDERTAKE STRATEGIC ACQUISITIONS IN THE FUTURE AND ANY DIFFICULTIES FROM
INTEGRATING SUCH ACQUISITIONS COULD DAMAGE OUR ABILITY TO ATTAIN OR MAINTAIN
PROFITABILITY
We may acquire additional businesses and products that complement or
augment our existing business. Integrating any newly acquired businesses 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. Moreover, we may need to raise additional funds through public or
private debt or equity financing to acquire any businesses, which may result in
dilution for stockholders and the incurrence of indebtedness.
OUR REVENUES ARE SUBSTANTIALLY DEPENDENT ON A LIMITED NUMBER OF WHOLESALERS TO
WHICH WE SELL ANGIOMAX, AND SUCH REVENUES MAY FLUCTUATE FROM QUARTER TO QUARTER
BASED ON THE BUYING PATTERNS OF THESE WHOLESALERS
We sell Angiomax primarily to a limited number of national medical and
pharmaceutical distributors and wholesalers with distribution centers located
throughout the United States. During the three months ended March 31, 2002,
revenues from the sale of Angiomax to four wholesalers totaled approximately 97%
of our net revenues. Our reliance on this small number of wholesalers could
cause our revenues to fluctuate from quarter to quarter based on the buying
patterns of these wholesalers. In addition, if any of these wholesalers fail to
pay us on a timely basis or at all, our financial position and results of
operations could be materially adversely affected.
RISKS RELATED TO OUR INDUSTRY
IF WE DO NOT OBTAIN FDA APPROVALS FOR OUR PRODUCTS OR COMPLY WITH GOVERNMENT
REGULATIONS, WE MAY NOT BE ABLE TO MARKET OUR PRODUCTS AND MAY BE SUBJECT TO
STRINGENT PENALTIES
Except for Angiomax, which has been approved for sale in the United States
and New Zealand, we do not have another product approved for sale in the United
States or any foreign market. We must obtain approval from the FDA in order to
sell our product candidates in the United States and from foreign regulatory
authorities in order to sell our product candidates in other countries. We must
complete our clinical trials successfully and demonstrate manufacturing
capability before we can file with the FDA for approval to sell our products.
The FDA could require us to repeat clinical trials as part of the regulatory
review process. Delays in obtaining or failure to obtain regulatory approvals
may:
- delay or prevent the successful commercialization of any of our product
candidates;
- diminish our competitive advantage; and
- defer or decrease our receipt of revenues or royalties.
The regulatory review and approval process is lengthy, expensive and
uncertain. Extensive pre-clinical data, clinical data and supporting information
must be submitted to the FDA for each additional indication to obtain such
approvals, and we cannot be certain when we will receive these regulatory
approvals, if ever.
In addition to initial regulatory approval, our products and product
candidates will be subject to extensive and rigorous ongoing domestic and
foreign government regulation. Any approvals, once obtained, may be withdrawn if
compliance with regulatory requirements is not maintained or safety problems are
identified. Failure to comply with these requirements may also subject us to
stringent penalties.
WE MAY NOT BE ABLE TO OBTAIN OR MAINTAIN PATENT PROTECTION FOR OUR PRODUCTS,
AND WE MAY INFRINGE THE PATENT RIGHTS OF OTHERS
The patent positions of pharmaceutical and biotechnology companies like us
are generally uncertain and involve complex legal, scientific and factual
issues. Our success depends significantly on our ability to:
- obtain U.S. and foreign patents;
- protect trade secrets;
- operate without infringing the proprietary rights of others; and
- prevent others from infringing our proprietary rights.
We may not have any patents issued from any patent applications that we own
or license. If patents are granted, the claims allowed may not be sufficiently
broad to protect our technology. In addition, issued patents that we own or
license may be challenged, invalidated or circumvented. Our patents also may not
afford us protection against competitors with similar technology. Because patent
applications in the United States and many foreign jurisdictions are typically
not published until eighteen months after filing, and because publications of
discoveries in the scientific literature often lag behind actual discoveries, we
cannot 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 license U.S. patents and patent applications and
corresponding foreign patents and patent applications relating to Angiomax,
IS-159 and CTV-05. In all, as of the date hereof, we exclusively license nine
issued U.S. patents. The principal U.S. patent that covers Angiomax expires in
2010. The U.S. Patent and Trademark Office has rejected our application for an
extension of the term of the patent beyond 2010 because the application was not
filed on time. We filed the application in connection with FDA approval of
Angiomax. We are exploring an alternative to extend the term of the patent, but
we can provide no assurance that we will be successful. We have not yet filed
any independent patent applications.
We may not hold proprietary rights to some patents related to our product
candidates. In some cases, others may own or control these patents. As a result,
we may be required to obtain licenses under third-party patents to market some
of our product candidates. If licenses are not available to us on acceptable
terms, we will not be able to market these products.
We may become a party to patent litigation or other proceedings regarding
intellectual property rights. The cost to us of any patent litigation or other
proceeding, even if resolved in our favor, could be substantial. If any patent
litigation or other intellectual property proceeding in which we are involved is
resolved unfavorably to us, we may be enjoined from manufacturing or selling our
products without a license from the other party, and we may be held liable for
significant damages. We may not be able to obtain any required license on
commercially acceptable terms, or at all.
IF WE ARE NOT ABLE TO KEEP OUR TRADE SECRETS CONFIDENTIAL, OUR TECHNOLOGY AND
INFORMATION MAY BE USED BY OTHERS TO COMPETE AGAINST US
We rely significantly upon unpatented proprietary technology, information,
processes and know-how. We seek to protect this information by confidentiality
agreements with our employees, consultants and other third-party contractors, as
well as through other security measures. We may not have adequate remedies for
any breach by a party to these confidentiality agreements. In addition, our
competitors may learn or independently develop our trade secrets.
WE COULD BE EXPOSED TO SIGNIFICANT LIABILITY CLAIMS IF WE ARE UNABLE TO OBTAIN
INSURANCE AT ACCEPTABLE COSTS AND ADEQUATE LEVELS OR OTHERWISE PROTECT
OURSELVES AGAINST POTENTIAL PRODUCT LIABILITY CLAIMS
Our business exposes us to potential product liability risks, which are
inherent in the testing, manufacturing, marketing and sale of human healthcare
products. Product liability claims might be made by 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. As of the date hereof, we are covered,
with respect to our commercial sales in the United States and New Zealand and
our clinical trials, by primary product liability insurance in the amount of
$20.0 million per occurrence and $20.0 million annually in the aggregate on a
claims-made basis. This coverage may not be adequate to cover any product
liability claims.
As we 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.
OUR ABILITY TO GENERATE FUTURE REVENUE FROM PRODUCTS WILL DEPEND ON
REIMBURSEMENT AND DRUG PRICING
Acceptable levels of reimbursement of the cost of developing and
manufacturing of drugs and treatments related to those drugs by government
authorities, private health insurers and other organizations will have an effect
on the successful commercialization of, and attracting collaborative partners to
invest in the development of, our product candidates. We cannot be sure that
reimbursement in the United States or elsewhere will be available for any
products we may develop or, if already available, will not be decreased in the
future. If reimbursement is not available or is available only to limited
levels, we may not be able to commercialize our products, and may not be able to
obtain a satisfactory financial return on our products.
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, as well as legislative
proposals to reform health care or reduce government insurance programs, may
result in lower prices for pharmaceutical products, including any products that
may be offered by us in the future. Cost-cutting measures that health care
providers are instituting, and the effect of any health care reform, could
materially adversely affect our ability to sell any products that are
successfully developed by us and approved by regulators. Moreover, we are unable
to predict what additional legislation or regulation, if any, relating to the
health care industry or third-party coverage and reimbursement may be enacted in
the future or what effect such legislation or regulation would have on our
business.
RISKS RELATED OWNERSHIP OF OUR COMMON STOCK
VOLATILITY OF OUR STOCK PRICE COULD CAUSE YOU TO LOSE ALL OR PART OF YOUR
INVESTMENT
The market price of our common stock, like that of the common stock of many
other biotechnology companies, may be highly volatile. The stock market in
general has recently experienced extreme price and volume fluctuations, and this
volatility has affected the market prices of securities of many biotechnology
and pharmaceutical companies for reasons frequently unrelated, or
disproportionate, to the operating performance of those companies. The market
price of our common stock may fluctuate significantly in response to the
following factors, some of which are beyond our control:
- changes in securities analysts' estimates of our financial performance;
- changes in market valuations of similar companies;
- variations in our quarterly operating results;
- acquisitions and strategic partnerships;
- announcements of technological innovations or new commercial products by
us or our competitors;
- disclosure of results of clinical testing or regulatory proceedings;
- changes in our management;
- broad fluctuations in stock market prices and volume; and
- general economic conditions, including inflation and unemployment rates.
Investors may not be able to resell their shares of our common stock
following periods of volatility because of the market's adverse reaction to the
volatility. We cannot assure you that our stock will trade at the same levels as
the stock of other companies in our industry or that the market in general will
sustain its current prices.
FUTURE SALES OF COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD CAUSE OUR STOCK
PRICE TO FALL
Sales of substantial amounts of our common stock in the public market, or
the perception that those sales could occur, could adversely affect the market
price of our common stock and could materially impair our future ability to
raise capital through offerings of our common stock.
OUR OFFICERS AND DIRECTORS AND THEIR AFFILIATES MAY BE ABLE TO CONTROL THE
OUTCOME OF MOST CORPORATE ACTIONS REQUIRING STOCKHOLDER APPROVAL
As of the date hereof, our directors and executive officers and their
affiliates beneficially own approximately 35% of our common stock. As a result,
these stockholders, if they act together, will be able to influence our
management and affairs and all matters requiring stockholder approval, including
the election of directors and approval of significant corporate transactions.
This concentration of ownership may have the effect of delaying or preventing a
change in control of our company and might affect the market price of our common
stock.
OUR CORPORATE DOCUMENTS AND PROVISIONS OF DELAWARE LAW MAY PREVENT A CHANGE IN
CONTROL OR MANAGEMENT THAT STOCKHOLDERS MAY CONSIDER DESIRABLE
Section 203 of the Delaware General Corporation Law and our charter and
by-laws contain provisions that might enable our management to resist a takeover
of our company. 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 you and other
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.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
Exhibit No. Description
----------- -----------
1.1 Underwriting Agreement, dated as of June
20, 2002, by and between the Registrant
and Bear, Stearns & Co. Inc.
5.1 Opinion of Hale and Dorr LLP.
23.1 Consent of Hale and Dorr LLP (included
in Exhibit 5.1).
99.1 Press release dated June 20, 2002.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 25, 2002 THE MEDICINES COMPANY
By: /s/ Steven H. Koehler
------------------------------------------
Steven H. Koehler
Vice President and Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
1.1 Underwriting Agreement, dated as of June
20, 2002, by and between the Registrant
and Bear, Stearns & Co. Inc.
5.1 Opinion of Hale and Dorr LLP.
23.1 Consent of Hale and Dorr LLP (included
in Exhibit 5.1).
99.1 Press release dated June 20, 2002.