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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: December 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______________ to ______________
Commission file number 000-31191
THE MEDICINES COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 04-3324394
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE CAMBRIDGE CENTER
CAMBRIDGE, MASSACHUSETTS 02142
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 225-9099
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of each class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
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 registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. / /
The aggregate market value of voting Common Stock held by
non-affiliates of the registrant was $119,072,129 based on the last reported
sale price of the Common Stock on the Nasdaq National Market on March 28, 2001.
Number of shares of the registrant's class of Common Stock outstanding
as of March 28, 2001: 30,399,002.
DOCUMENTS INCORPORATED BY REFERENCE:
Document Description 10-K Part
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Portions of the Registrant's Proxy Statement for the
2001 Annual Meeting of Stockholders Part III
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PART I
ITEM 1. BUSINESS
OVERVIEW
The Medicines Company, incorporated in the State of Delaware in 1996, acquires,
develops and commercializes biopharmaceutical products that are in late stages
of development or have been approved for marketing. In December 2000, we
received marketing approval from the United States Food and Drug Administration,
or FDA, for Angiomax, our lead product, for use as an anticoagulant in
combination with aspirin in patients with unstable angina undergoing coronary
balloon angioplasty. Coronary angioplasty is a procedure used to restore normal
blood flow in an obstructed artery in the heart. We began selling Angiomax in
the United States in January 2001.
We are also developing Angiomax for additional potential applications for use in
the treatment of ischemic heart disease, a condition which occurs when organs
receive an inadequate supply of oxygen as a result of decreased blood flow. To
date, clinical investigators have administered Angiomax to approximately 12,600
patients in clinical trials in the treatment and prevention of blood clots in a
wide range of hospital applications. We believe that Angiomax will become the
leading replacement for heparin in hospital care. In the United States, heparin
is the most widely-used acute care anticoagulant and is used to treat
approximately five million hospitalized patients per year.
Angiomax directly blocks or inhibits the actions of thrombin, a key component in
the formation and growth of blood clots. By blocking thrombin directly, rather
than indirectly like heparin, Angiomax inhibits the actions of thrombin both in
the clot and in the blood. Angiomax's inhibition of thrombin is reversible,
which means that its thrombin-blocking effect wears off over time, allowing
thrombin to again work in the clotting process. This reversibility is associated
with a reduced risk of bleeding.
In the clinical trials in angioplasty, Angiomax has:
- - reduced the frequency of life-threatening coronary events including heart
attack and the need for emergency coronary procedures;
- - reduced the likelihood of major bleeding and the need for blood
transfusion;
- - demonstrated a predictable anticoagulant response to a specific Angiomax
dose, which enables simplified dosing; and
- - been used in combination with glycoprotien IIb/IIIa, also known as GP
IIb/IIIa, inhibitors and demonstrated no evidence of significant
interactions.
Our strategy is to build a commercial biopharmaceutical operation by acquiring,
developing and commercializing product candidates. We will actively manage the
development and commercialization of these product candidates. Our principal
objectives include:
- - launching Angiomax for use in patients with unstable angina undergoing
coronary balloon angioplasty;
- - developing and commercializing Angiomax as the leading replacement for
heparin for use in the treatment of ischemic heart disease;
- - acquiring additional products with (1) existing clinical data which
provides reasonable evidence of safety and efficacy, (2) an anticipated
time to market of four years or less and (3) potential cost savings to
payors or improved efficiency of patient care; and
- - making the best use of our resources through our relationships with
contract development, manufacturing and sales companies.
We are marketing Angiomax in the United States using a 52 person sales force
contracted from Innovex, Inc., which we manage. We intend to market our other
products in the United States by contracting with external organizations, which
we would manage, or by collaborating with other biopharmaceutical companies.
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ANGIOMAX
In December 2000, we received marketing approval from the FDA for Angiomax for
use as an anticoagulant in combination with aspirin in patients with unstable
angina undergoing coronary balloon angioplasty. We began selling Angiomax in the
United States in January 2001. In September 1999, Angiomax was approved in New
Zealand for use in the treatment of patients undergoing coronary balloon
angioplasty.
We believe Angiomax will be a valuable replacement to heparin, an anticoagulant
used in almost all angioplasty procedures performed in the United States and
administered to a majority of patients treated in hospitals in the United States
for acute coronary syndromes, including heart attack. To date, clinical
investigators have administered Angiomax to approximately 12,600 patients in
clinical trials in the treatment and prevention of blood clots in a wide range
of hospital applications. In clinical trials in angioplasty, use of Angiomax has
resulted in fewer life-threatening coronary events and fewer bleeding events
which reduced the likelihood of the need for blood transfusion. The therapeutic
effect of Angiomax is more predictable than heparin, which enables simplified
dosing. Angiomax's therapeutic benefit is strongest in high-risk patients who
have previously experienced a heart attack or unstable angina.
We believe that Angiomax has additional potential applications for the treatment
of ischemic heart disease. We currently:
- - have a randomized, open-label Phase 3b trial program in angioplasty
underway comparing Angiomax to heparin, with and without GP IIb/IIIa
inhibitors;
- - have a 17,000 patient Phase 3 trial program underway studying the use of
Angiomax for the treatment of patients who have suffered a heart attack,
otherwise known as AMI;
- - have a Phase 3 trial program underway studying the use of Angiomax in the
treatment of patients undergoing angioplasty who experience reduced
platelet count and clotting due to an immunological reaction to heparin,
known as heparin-induced thrombocytopenia and heparin-induced
thrombocytopenia and thrombosis syndrome, or HIT/HITTS;
- - have a Phase 2 trial program underway studying the use of Angiomax as an
anticoagulant in patients undergoing coronary artery bypass graft surgery,
or CABG, without the use of a bypass pump; and
- - plan to commence a Phase 3 trial program to study the use of Angiomax in
patients with unstable angina, a condition in which patients experience
the new onset of severe chest pain, increasingly frequent chest pain or
chest pain that occurs while they are at rest.
Background
Clotting. Normally, blood loss at the site of an injury is limited by the
formation of blood clots, or thrombosis. In general, clotting serves a
life-saving function by reducing bleeding, but sometimes unwanted clots in
arteries can lead to heart attack, stroke or organ failure. A blood clot is a
collection of cross-linked strands of a protein called fibrin that forms a mesh
around activated platelets and red blood cells. Blood clots are formed through
precisely regulated interactions among the blood vessel wall, plasma clotting
factors, including thrombin and fibrinogen, and platelets.
The trigger for the clotting process in an artery is typically a tearing or
spontaneous rupture which exposes cholesterol and fat deposited on a blood
vessel wall to the bloodstream. This may happen without an apparent cause or may
be caused as a direct result of, for example, an angioplasty procedure. In
parallel, the clotting factor, thrombin, is activated, and a thin protective
layer of platelets is deposited at the rupture site. Thrombin and platelets
interact, and thrombin formation, fibrin formation and platelet clumping take
place. A full-blown clot may form rapidly as clot blocks the blood vessel and
may then cut off blood supply to the heart muscle. If this occurs, the muscle
stops working either in part, which is a heart attack, or myocardial infarction,
or completely, which may lead to cardiac arrest as the heart stops beating. This
may result in irreversible damage to the heart or death.
During medical procedures such as coronary angioplasty, the blood clotting
process must be slowed to avoid unwanted clotting in the coronary artery, and
the potential growth or movement of a clot along blood vessels to new sites.
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The trigger for clotting in veins is usually slower than that in arteries. In
general, venous clots are caused by slow blood flow, which typically occurs when
patients are immobilized, such as after surgery and during pregnancy, or when
patients experience changes in the blood as a result of diseases such as cancer.
When a clot develops in large, deep veins, which return blood to the heart by
way of the lungs, this condition is referred to as deep vein thrombosis. In some
cases of deep vein thrombosis, part of the clot may break off and move to the
lungs with potentially fatal results.
Anticoagulation Therapy. Anticoagulation therapy attempts to modify actions of
the components in the blood system that cause clot-forming factors leading to
blood clots. The most important approach to the prevention and management of
arterial and venous clots is diet and exercise. When the risks of clot formation
cannot be avoided, or when medical procedures such as angioplasty almost
guarantee some degree of increased risk of clots, anticoagulation therapy is
indicated. Anticoagulation therapy involves the use of drugs to inhibit one or
more components of the clotting process, thereby reducing the risk of clots.
Anticoagulation therapy is usually started immediately after a diagnosis of
blood clots or after risk factors for clotting are identified. Because
anticoagulation therapy reduces clotting, it also may cause excessive bleeding.
THE CLOTTING PROCESS AND TARGETS FOR ANTICOAGULATION THERAPY
[Chart showing blood clotting mechanism]
To date, three principal components of the clotting process, thrombin, fibrin
and platelets, have been targeted for anticoagulation therapy:
- - The actions of thrombin in the clotting process may be inhibited by
indirect thrombin inhibitors, such as heparin, which act to turn off
coagulation factors and turn on natural anti-clotting factors such as
antithrombin-III, or AT-III. The actions of thrombin in the clotting
process also may be inhibited by direct thrombin inhibitors, which act
directly on thrombin.
- - Fibrin may be dissolved after clotting has occurred by products called
fibrinolytics.
- - The aggregation of platelets in the clotting process may be inhibited by
products called platelet inhibitors, which act on different pathways,
including specific enzyme pathways like the cyclo-oxygenase and the
adenosine diphosphate, or ADP, pathways and surface sites like the GP
IIb/IIIa receptor.
Drugs are currently used alone or in combination with other anticoagulant
therapy to target one or more components of the clotting process. These drugs
have anticoagulant effects but also increase the patient's risk of bleeding.
Excess bleeding is often a risk associated with these drugs due to the high
doses needed to produce anticoagulant effects. In order to reduce this risk,
physicians increasingly use combinations of drugs targeted at different
components of the clotting process at lower doses, which reduce the risk of
thrombosis while minimizing the risk of bleeding.
Indirect Thrombin Inhibitors. In the hospital environment, most patients
undergoing anticoagulation therapy for the prevention and treatment of arterial
and venous thrombosis receive heparin or low molecular weight heparin. In the
United States, approximately five million patients annually receive heparin.
Heparin is a standard component of acute anticoagulation therapy because of the
central role of thrombin in clotting and heparin's rapid anticoagulant effect.
Heparin's properties as an anticoagulant were discovered in 1916. It is prepared
from the intestines of pigs or cows. Heparin is a complex mixture of
animal-derived sugars with variable anticoagulant potencies. The anticoagulant
effects of heparin on any given patient are difficult to predict because heparin
binds non-specifically to human cells and circulating substances in the blood.
For these and other reasons, heparin, as a non-specific, indirect thrombin
inhibitor, presents a variety of clinical challenges including:
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- - Weak effect in clots. Because it is an indirect thrombin inhibitor,
heparin is ineffective on thrombin when clots have formed.
- - Risk of bleeding. Patients who receive heparin have a high incidence of
bleeding. This is particularly the case with patients who are elderly,
female or underweight. Recent clinical trials have shown that bleeding
risk may also be increased when heparin is used in combination with
intravenous platelet inhibitors.
- - Unpredictability. The anticoagulant effect of a given dose of heparin is
unpredictable and therefore requires close monitoring.
- - Adverse reaction risk. Heparin can cause HIT/HITTS, a dangerous
immunological reaction.
- - Diminished effect in sick patients. Heparin's effect may be reduced in the
presence of blood factors found in patients stressed by disease, such as
heart attack patients.
- - Requires other factors for effect. Heparin can only bind to thrombin by
first binding to a blood factor called antithrombin-III, which may be
absent or present in insufficient amounts in some patients.
Physicians are increasingly using low molecular weight heparins as an
alternative to heparin, especially as chronic therapy. In contrast to heparin,
low molecular weight heparins tend to be more specific in their effect and may
be administered once or twice daily by subcutaneous injection on an outpatient
basis. Despite these advantages, low molecular weight heparins exhibit similar
clinical challenges to those of heparin, including a weak effect in clots that
have already formed and a comparable risk of bleeding. In addition, clinicians
are currently unable to monitor the anticoagulant effects of low molecular
weight heparins, making their use in angioplasty problematic.
Angiomax Potential Advantages
Angiomax is a peptide of 20 amino acids that is a quick-acting, direct and
specific inhibitor of thrombin and is administered by intravenous injection.
Angiomax is specific in that it only binds to thrombin and does not bind to any
other blood factors or cells.
Angiomax was engineered based on the biochemical structure of hirudin, a natural
65-amino acid protein anticoagulant. However, the effects of Angiomax are
reversible while the effects of hirudin are not. This reversibility is
associated with a reduced risk of bleeding.
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Angiomax has numerous clinical advantages over heparin including:
- - Effective in clots. Angiomax, as a direct thrombin inhibitor, is equally
effective on thrombin in the clot as well as thrombin circulating in the
blood;
- - Reduced bleeding risk. As a reversible thrombin inhibitor, Angiomax has
consistently shown clinically meaningful reductions in bleeding as
compared to heparin;
- - Predictability. A specified dose of Angiomax results in a predictable
level of anticoagulation;
- - Diminished adverse reaction risk. To date, Angiomax has not caused
dangerous immunological reactions in clinical trials;
- - Effective in sick patients. Angiomax is effective even in the presence of
blood factors found in patients stressed by disease; and
- - Independent of other factors for effect. Unlike heparin, Angiomax's effect
does not require the presence of antithrombin-III or any other factors to
act on thrombin.
Angiomax Potential Applications
We believe that Angiomax will become the leading replacement for heparin in
acute cardiovascular care. We plan to commercialize Angiomax first for use in
patients undergoing coronary balloon angioplasty. In addition, we are developing
Angiomax for use as an alternative to heparin for the treatment of acute
coronary syndromes, with a Phase 3b trial called REPLACE underway in
angioplasty, a Phase 3 trial underway in AMI, a Phase 3 trial underway in
HIT/HITTS, a Phase 2 trial underway in CABG without the use of a bypass pump and
a Phase 3 trial planned in patients with unstable angina. Our development plan
is designed to highlight the clinical benefits of Angiomax initially in broad
patient populations treated with heparin at high risk of clots or bleeding. We
are also investigating other applications of Angiomax as an acute care product.
ANGIOMAX DEVELOPMENT PROGRAMS
[Graph depicting clinical
status of our products and potential indications]
Use of Angiomax in Angioplasty
Angioplasty. Angioplasty is a procedure involving the inflation of a balloon or
deployment of a stent or other device inside an obstructed artery to restore
normal blood flow. The coronary angioplasty procedure itself increases the risk
of coronary clotting potentially leading to myocardial infarction, or MI, urgent
revascularization through repeat angioplasty, or CABG, or death.
Based on the most recently available hospital discharge data, in the United
States, there were approximately 686,000 inpatient angioplasty procedures
performed in 1997 and approximately 55,000 outpatient angioplasty procedures
performed in 1996. We believe approximately one half of patients undergoing
angioplasty in an inpatient hospital setting were admitted through the emergency
room and may be categorized as high risk. Many of these high-risk patients have
previously experienced a heart attack or have unstable angina.
To prevent clotting, anticoagulation therapy is routinely administered to
patients undergoing angioplasty. Heparin is currently used as an anticoagulant
in virtually all patients undergoing angioplasty. In addition, platelet
inhibitors such as aspirin, an ADP inhibitor or a GP IIb/IIIa inhibitor are
often administered.
A segment of patients undergoing angioplasty and receiving anticoagulation
therapy are at risk of significant bleeding. For example, the risk is greater
for patients who are elderly, female or underweight.
Angiomax Clinical Experience in Angioplasty. To date, we and the licensor of
Angiomax, Biogen, have conducted clinical trials of Angiomax in over 6,000
patients undergoing angioplasty. These trials have shown that Angiomax is a
predictable anticoagulant, which can be used in combination with other therapies
and which results in fewer adverse clinical events when compared to heparin.
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ANGIOPLASTY TRIALS OF ANGIOMAX
- --------------------------------------------------------------------------------------------------------------------------
LEAD INVESTIGATORS COMPLETED PATIENTS PHASE TRIAL/STUDY DESCRIPTION
- --------------------------------------------------------------------------------------------------------------------------
E. Topol 1992 291 2 Angiomax dose-ranging trial
- --------------------------------------------------------------------------------------------------------------------------
J. Bittl 1994 4,312 3 Pivotal angioplasty trials comparing
Angiomax with high dose heparin in
unstable angina patients
- --------------------------------------------------------------------------------------------------------------------------
M. Abernathy, 1999 30 3 Interaction study of Angiomax with
P. Aylward Ticlid
- --------------------------------------------------------------------------------------------------------------------------
L. Wallentin 1999 40 3 Trial comparing Angiomax with heparin
in patients switched from low
molecular weight heparin
- --------------------------------------------------------------------------------------------------------------------------
H. White, P. Aylward 2000 26 3 Trial of Angiomax dosing in patients
with normal to moderately impaired
kidney function
- --------------------------------------------------------------------------------------------------------------------------
N. Kleiman 2000 42 3b Interaction study of Angiomax with
Integrilin
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E. Topol, N. Kleiman, 1999 60 3 CACHET-A trial comparing Angiomax
A.M. Lincoff, with heparin in full-dose ReoPro patients
R. Harrington
- --------------------------------------------------------------------------------------------------------------------------
E. Topol, N. Kleiman, 2000 210 3 CACHET-B/C trial comparing Angiomax
A. M. Lincoff, with ReoPro plus heparin in broad
R. Harrington patient group
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R. Califf, K. Mahaffey Ongoing 18 3 Study of Angiomax in HIT/HITTS
patients
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J. Ormiston 2000 49 3b Angiomax single intravenous dose
trial
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J. Ormiston 2000 33 3b Interaction study of Angiomax with
Aggrastat
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A.M. Lincoff Ongoing 1,057 3b REPLACE trial comparing Angiomax to
heparin, with and without GP IIb/IIIa
inhibitors
- --------------------------------------------------------------------------------------------------------------------------
Phase 3 Pivotal Trials in Angioplasty. Two similar, randomized double blind
clinical trials compared the use of Angiomax to heparin in a total of 4,312
patients with unstable angina undergoing coronary balloon angioplasty. High
doses of heparin were used in the trials. When measured seven days after
treatment in the hospital, in comparison to heparin-treated patients in the
trials, Angiomax-treated patients experienced:
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- - 43% fewer clinical events as measured by death, MI, revascularization
procedures or major bleeding;
- - 22% fewer ischemic events as measured by death, revascularization or MI;
and
- - 62% or 65% less bleeding, as measured by a protocol-defined end point of
major bleeding or the transfusion of two or more units of blood,
respectively.
The following table summarizes the combined clinical results for all unstable
angina patients in the pivotal Phase 3 angioplasty trials.
PERCENTAGE
REDUCTION
IN ADVERSE
ANGIOMAX HEPARIN CLINICAL EVENT P-VALUE*
-------- ------- -------------- --------
Number of patients..................................... 2,161 2,151
In hospital up to 7 days
Death, MI, revascularization or major bleeding....... 8.3% 14.5% 43% <0.001
Death, MI or revascularization....................... 6.2% 7.9% 22% 0.039
Major bleeding....................................... 3.5% 9.3% 62% <0.001
Transfusion.......................................... 2.0% 5.7% 65% <0.001
At 90 days
Death, MI or revascularization....................... 15.7% 18.5% 15% 0.012
* The statistical significance of clinical results is determined by a
widely-used statistical method that establishes the p-value of clinical
results. For example, a p-value of less than 0.01 (p<0.01) means that the
chance of the clinical results occurring by accident is less than 1 in 100.
The trials included a prospectively defined and separately stratified group of
741 patients, who had experienced an MI during the two weeks prior to
angioplasty. The benefits of Angiomax as a direct thrombin inhibitor, compared
to heparin as an indirect thrombin inhibitor, were more pronounced for this
group of 741 patients who had experienced an MI during the two weeks prior to
angioplasty. When measured seven days after treatment in the hospital, the
Angiomax-treated patients experienced the following benefits:
- - 64% fewer clinical events as measured by death, MI, revascularization
procedures or major bleeding;
- - 51% fewer ischemic events as measured by death, revascularization or MI;
and
- - 76% or 80% less bleeding, as measured by a protocol-defined major bleeding
or as measured by a transfusion of two or more units of blood.
The following table summarizes the combined clinical results of the group of
patients who had experienced a heart attack or MI during the two weeks prior to
angioplasty in the pivotal Phase 3 angioplasty trials.
PERCENTAGE
REDUCTION
IN ADVERSE
ANGIOMAX HEPARIN CLINICAL EVENTS P-VALUE
-------- ------- --------------- -------
Number of patients.................................... 369 372
In hospital up to 7 days
Death, MI, revascularization or major bleeding...... 6.5% 18.3% 64% <0.001
Death, MI or revascularization...................... 4.9% 9.9% 51% 0.009
Major bleeding...................................... 2.4% 11.8% 80% <0.001
Transfusion......................................... 1.6% 6.7% 76% <0.001
At 90 days
Death, MI or revascularization...................... 11.7% 20.2% 42% <0.003
Recent trends in interventional cardiology have resulted in heparin doses lower
than those used in the Angiomax pivotal Phase 3 trials in angioplasty. We
believe that this trend has been encouraged by the increasing combined use of
platelet inhibitors and heparin in
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angioplasty. In most recent major angioplasty trials with GP IIb/IIIa
inhibitors, lower heparin doses were used than in the Angiomax pivotal Phase 3
trials.
Heparin Dosing in Pivotal Phase 3 Angioplasty Trial. Analyses of data from a
wide array of recent angioplasty trials show that the bleeding rates for the
heparin patients in our trials were not higher than the bleeding rates for other
trials where lower doses of heparin were used. Ischemic event rates for patients
in the Angiomax pivotal Phase 3 trials were lower than for patients receiving
lower doses of heparin without a GP IIb/IIIa inhibitor in other clinical
studies.
CACHET-B/C Trials in Angioplasty. In February 2000, we completed the CACHET-B/C
study, a 210 patient randomized, multicenter study, in angioplasty. The trial
analyzed the use of Angiomax versus low-dose heparin. All heparin patients also
received doses of the GP IIb/IIIa inhibitor ReoPro. Although Angiomax patients
could receive ReoPro under certain circumstances, physicians in the trial opted
not to use ReoPro in 76% of the Angiomax patients.
The CACHET-B/C patient study population was broader than in earlier Angiomax
trials, targeting lower risk patients undergoing angioplasty with expected
stenting. Heparin and Angiomax doses were designed to achieve similar levels of
anticoagulation. Platelet inhibitors Aspirin in combination with Ticlid or
Plavix was used in most patients. As in previous trials, Angiomax provided
predictable levels of dose response anticoagulation.
The combined incidence of death, MI, revascularization or major bleeding
reported within seven days was 3.5% in Angiomax patients and 14.3% in heparin
and ReoPro patients with a p-value of 0.013.
Low platelet count, or thrombocytopenia, was significantly less frequent among
Angiomax patients than among heparin/ ReoPro patients with a p-value of 0.012.
Other adverse events occurred with similar frequency in both groups. Angiomax
showed no apparent pharmacological interaction with ReoPro.
The results of the CACHET-B/C study provides more support for the use of
Angiomax as a foundation anticoagulant for angioplasty. In this study, Angiomax
demonstrated predictable reversible anticoagulation and improved net clinical
benefit over heparin. In addition, by decreasing major bleeds and reducing the
need for revascularization and drug costs, we believe that on average
substantial cost savings are possible for hospitals treating patients with
Angiomax.
Interaction Studies. Specific interaction studies of Angiomax with GP IIb/IIIa
inhibitors ReoPro, Integrilin and Aggrastat have not revealed any drug-drug
interactions.
REPLACE Trial in Angioplasty. In November 2000, we began a randomized,
open-label two-part Phase 3b trial of the use of Angiomax in angioplasty. We
expect that the trial will be conducted at approximately 200 sites in the United
States. The first part of the trial, in which we have enrolled 1,000 patients,
is designed to assess the clinical outcomes and health economics of Angiomax
compared to heparin, with and without GP IIb/IIIa inhibitors. The second part of
the trial, which will include up to 6,000 patients who have been referred for
angioplasty, will include three randomized arms:
- - heparin with a GP IIb/IIIa inhibitor;
- - Angiomax with the provisional use of a GP IIb/IIIa inhibitor at the choice
of the physician; and
- - Angiomax with a GP IIb/IIIa inhibitor.
Angiomax Commercialization Plans for Angioplasty. We began selling Angiomax in
the United States in January 2001 using a 52 person sales force contracted from
Innovex, Inc., which we manage. In December 2000, we signed a master services
agreement and a work order with Innovex under which Innovex agreed to provide
the sales force, a sales territory management system and operational support for
the launch of Angiomax.
We are focusing our Angiomax marketing efforts on interventional cardiologists
and other key clinical decision-makers for Angiomax. Our 52 person sales force
has been configured to target the relatively small number of cardiac
catheterization laboratories in which most of the angioplasty procedures in the
United States are performed.
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We expect Angiomax to provide cost savings to medical decision-makers who use
Angiomax as part of a safe and effective anticoagulant therapy. Many United
States hospitals receive a fixed reimbursement amount for the angioplasties they
perform. Because this amount is not based on the actual expenses the hospital
incurs, the use of Angiomax has the potential to reduce a hospital's cost of
treating an angioplasty patient by reducing bleeding and ischemic events and
reducing the need for other treatment therapies. From 1995 to 1997, the
incremental costs to a hospital averaged the following: approximately $12,000
for an angioplasty patient receiving a 2-unit transfusion; approximately $4,000
for revascularization in the form of a repeat angioplasty; and approximately
$17,000 for an angioplasty patient revascularized by means of coronary artery
bypass graft surgery. Our pricing structure for Angiomax is designed to provide
hospitals with cost savings based on reductions in clinical events and drug
costs.
If Angiomax is approved for use in other indications, such as AMI or unstable
angina, we intend to market Angiomax for these indications in the United States
by supplementing our commercial organization, or by collaborating with other
biopharmaceutical companies.
Acute Myocardial Infarction
Acute myocardial infarction is a leading cause of death. AMI occurs when
coronary arteries, which supply blood to the heart, become completely blocked
with clots. AMI patients are routinely treated with heparin, with and without
fibrinolytics. Heart attack patients are increasingly undergoing angioplasty as
a primary treatment to unblock clotted arteries.
Based on the most recently available hospital discharge data, in 1997 there were
approximately 871,000 AMI patients in the United States who were treated in a
hospital.
Angiomax Clinical Experience in AMI. To date, we and Biogen have conducted
clinical trials comparing Angiomax and heparin in over 16,500 AMI patients.
LEAD INVESTIGATORS COMPLETED PATIENTS PHASE TRIAL DESCRIPTION
- ------------------ --------- -------- ----- ------------------
P. Theroux.......................... 1992 45 2 Dose-ranging trial comparing
Angiomax with heparin administered prior
to a fibrinolytic
P. Theroux.......................... 1993 68 2 Dose-ranging trial comparing
Angiomax with heparin administered prior
to a fibrinolytic
H. White............................ 1996 412 2 HERO-1: Dose-ranging trial
comparing Angiomax with heparin administered
following a fibrinolytic
H. White, R. Califf,
F. Van de Werf,
P. Aylward.......................... Ongoing 16,287 3 HERO-2: Mortality trial comparing
Angiomax with heparin administered
prior to a fibrinolytic in up to
17,000 patients
- --------------
The first two trials compared the effect of two doses of Angiomax with heparin
as therapy administered in advance of streptokinase, a fibrinolytic, in heart
attack patients. The trials were designed to compare the difference in rates of
blood flow following therapy. The third trial, the Hirulog Early
Reperfusion/Occlusion-1 trial, or the HERO-1 trial, was a multi-center,
randomized, double blind comparison involving 412 patients. In this trial,
patients with AMI were administered heparin or one of two doses of Angiomax as
therapy following the administration of streptokinase and aspirin. Blood flow
rates after therapy were evaluated using a standard measure of coronary artery
blood flow.
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The three Phase 2 trials demonstrated that use of Angiomax:
- - resulted in normal blood flow in at least 34% more patients than heparin;
and
- - resulted in substantially less bleeding and the need for fewer
transfusions than heparin.
The following table summarizes the clinical results for AMI patients in the
Phase 2 clinical trials comparing Angiomax to heparin as combined with a
fibrinolytic:
ANGIOMAX HEPARIN PERCENTAGE
PATIENTS PATIENTS IMPROVEMENT P-VALUE
-------- -------- ----------- -------
Theroux Montreal Heart Institute Study 1 (45 patients)
Full blood flow at 90 minutes.......................... 67% 40% 67% 0.08
Theroux Montreal Heart Institute Study 2 (68 patients)
Full blood flow at 90 minutes.......................... 71% 31% 129% 0.006
Transfusion............................................ 5% 31% 84% <0.02
HERO-1 Trial (412 patients)
Full blood flow at 90 minutes.......................... 47% 35% 34% 0.024
Major bleeding......................................... 17% 28% 39% <0.01
- -----------
Based on the results of these Phase 2 trials, we are conducting a worldwide
17,000 patient Phase 3 clinical trial in AMI. In this HERO-2 Phase 3 trial, AMI
patients receive Angiomax or heparin prior to treatment with a fibrinolytic. All
patients receive aspirin and Streptase, a fibrinolytic. This trial is designed
to demonstrate statistically significant improvement in 30-day cumulative
mortality among patients receiving Angiomax, thus establishing Angiomax as the
only direct thrombin inhibitor with mortality benefit compared to heparin in the
management of AMI.
We are coordinating the HERO-2 trial with the Virtual Coordinating Center for
Global Collaborative Cardiovascular Research Organization, commonly referred to
as VIGOUR, an academic consortium of leading cardiologists and their affiliated
institutions established to coordinate the efforts of large global clinical
trials in cardiology. The trial has been approved in 43 countries, has over 500
active sites and is enrolling approximately 800 patients per month. To date,
approximately 16,287 patients have been enrolled in the trial. We expect the
trial to complete enrollment by the first half of 2001.
Following enrollment of approximately 2,000, 5,000, 8,000 and 12,500 patients,
an independent panel, the Drug Safety Monitoring Board, reviewed safety data
from the trial to determine whether there were safety issues that would warrant
modification or early termination of the trial. The Board completed the fourth
planned review in January 2001, and the trial is proceeding without
modification. In contrast, two previous trials using high doses of hirudin in
patients including heart attack patients were stopped early because of excessive
bleeding in the hirudin patients.
Acute Coronary Syndromes/Unstable Angina
Unstable angina is a condition in which patients experience the new onset of
severe chest pain, increasingly frequent chest pain or chest pain that occurs
while they are resting. Unstable angina is caused most often by a rupture of
plaque on an arterial wall that ultimately decreases coronary blood flow but
does not cause complete blockage of the artery. There are approximately 948,000
cases of unstable angina in the United States reported each year. Unstable
angina is often treated in hospitals with anticoagulation therapy that may
include aspirin, indirect thrombin inhibitors such as heparin or low molecular
weight heparin and GP IIb/IIIa inhibitors. Many unstable angina patients undergo
angioplasty or CABG.
Angiomax Clinical Experience in Unstable Angina. To date, we and Biogen have
completed five Phase 2 trials of Angiomax in patients with unstable angina or
who had experienced a less serious form of MI known as non Q-wave MI. These
trials enrolled a total of 630 patients, of whom 553 received various doses of
Angiomax. These studies have demonstrated that Angiomax is an anticoagulant
which can be administered safely in patients with unstable angina.
The largest of these Phase 2 trials was a multicenter, double blind,
placebo-controlled and randomized study in 410 patients with unstable angina or
who had experienced non Q-wave MI. The trial compared the effect of three active
dose levels and one placebo dose level of Angiomax with respect to death, MI,
recurrent angina and major bleeding. Angiomax demonstrated a significant
correlation between dose and anticoagulant effect.
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In comparison to 160 patients treated with placebo doses in the trial, 250
patients treated with active doses of Angiomax experienced:
- - a 68% reduction in death or MI in hospital with a p-value equal to 0.009;
and
- - a 59% reduction in death or MI after six weeks with a p-value equal to
0.014.
Other Indications
We and Biogen have conducted a number of additional clinical trials of Angiomax
for other indications.
HIT/HITTS. Approximately one to three percent of patients who have received
heparin for seven to 14 days experience a condition known as HIT/HITTS. The
underlying mechanism for the condition appears to be an immunological response
to a complex formed by heparin and another factor, resulting in the lowering of
platelet counts, commonly referred to as thrombocytopenia, and in some cases in
arterial or venous clotting, which may result in the need for limb amputation,
or death. Because further administration of heparin is not possible, an
alternative anticoagulant is necessary.
Prior to 1997, Angiomax was administered to a total of 39 HIT/HITTS patients
undergoing angioplasty requiring anticoagulation for invasive coronary
procedures or treatment of thrombosis. For those patients undergoing angioplasty
and other procedures, Angiomax provided adequate anticoagulation, was
well-tolerated and rarely resulted in bleeding complications.
Based upon the encouraging data in 39 patients, we are currently enrolling
patients in a trial designed to evaluate the use of Angiomax for treatment of
HIT/HITTS patients undergoing angioplasty. The trial has enrolled 18 patients to
date and plans to enroll 50 patients in total.
Deep Venous Thrombosis. Thirty-one patients with clots in the veins in their
legs and 222 patients undergoing orthopedic surgical procedures were treated
with Angiomax in two open-label, dose-ranging Phase 2 trials in 1990. Both
studies established that Angiomax was an active and well-tolerated anticoagulant
and that the anticoagulant effects correlated with the dose of Angiomax.
CABG. We have initiated a 100 patient Phase 2 trial of Angiomax comparing
Angiomax to heparin in patients undergoing off pump CABG. The trial was
initiated in November 2000 and 21 patients have been enrolled in the trial to
date.
We are actively considering further development plans to expand the uses of
Angiomax in venous thrombosis and other indications.
Regulatory Status
In December 2000, we received approval from the FDA for the use of Angiomax in
combination with aspirin in patients with unstable angina undergoing coronary
balloon angioplasty. In connection with this approval, the FDA has required us
to complete our ongoing trial evaluating the use of Angiomax for the treatment
of HIT/HITTS patients undergoing angioplasty. Angiomax is intended for use with
aspirin and has been studied only in patients also receiving aspirin.
In February 1998, we submitted a Marketing Authorization Application, or MAA, to
the European Agency for the Evaluation of Medicinal Products, or EMEA, for use
in unstable angina patients undergoing angioplasty. Following extended
interaction with European regulatory authorities, the Committee of Proprietary
Medicinal Products, or CPMP, of the EMEA voted in October 1999 not to recommend
Angiomax for approval in angioplasty. The United Kingdom and Ireland dissented
from this decision. We have withdrawn our application to the EMEA and are in
active dialogue with European regulators to determine our alternative courses of
action including seeking approval of Angiomax in Europe on a country-by-country
basis.
Angiomax was approved in New Zealand in September 1999 for use as an
anticoagulant in patients undergoing coronary balloon angioplasty, and we began
selling Angiomax in New Zealand in June 2000. We have submitted an application
in Canada to market Angiomax for use in unstable angina patients undergoing
angioplasty and are in active dialogue with Canadian regulators.
CTV-05
In 1999, we acquired from GyneLogix, Inc. exclusive worldwide rights to CTV-05,
a strain of bacteria under clinical investigation for a broad range of
applications in the areas of gynecological and reproductive health. We have
entered into a clinical trial agreement with the National Institutes of Allergy
and Infectious Diseases, a division of the National Institutes of Health,
commonly referred to as
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NIH, to conduct a Phase 2 trial of CTV-05, a proprietary biotherapeutic agent
for the treatment of bacterial vaginosis, or BV. BV, the most common
gynecological infection in women of childbearing age, is an imbalance of
naturally occurring organisms in the vagina.
Bacterial Vaginosis
BV develops when certain bacteria normally present in the vagina in low levels
multiply to infectious levels. BV is associated with serious health risks such
as pelvic inflammatory disease, pre-term birth, post-surgical infection and an
increased susceptibility to sexually transmitted diseases, including AIDS. The
standard treatments currently prescribed for BV are oral or topical antibiotics
including metronidazole and clindamycin. These treatments are not optimal,
having significant recurrence rates. Moreover, antibiotic use depletes a
beneficial bacteria called lactobacilli.
CTV-05: Rationale, Product Profile and Clinical Studies
A healthy vagina is principally populated by lactobacilli. The presence of
lactobacilli in the vagina, particularly those that produce hydrogen peroxide
which is active against disease causing bacteria, has been linked to decreased
incidence of BV and other urinary tract and gynecological infections. However,
many women lack sufficient populations of hydrogen peroxide-producing
lactobacilli to maintain vaginal health, making them more susceptible to
infection.
Studies have shown that the CTV-05 strain of lactobacillus is able to restore
the natural balance of the bacteria in the vagina and produce both hydrogen
peroxide and lactic acid, substances which are active against disease-causing
bacteria and serve a protective role. Because of this, CTV-05 has the potential
to improve cure rates when used in conjunction with approved antibiotics, to
prevent BV recurrence and thus to reduce serious health risks.
In the Phase 2 safety and efficacy trial, funded by National Institute of
Health, CTV-05 is administered topically to BV patients. The study is primarily
designed to show whether CTV-05 improves cure rates of BV at 30 days. The study
is the first large trial to look at recurrence rates of BV at 90 days. To date,
we have enrolled over 200 patients in a 400 patient trial at three sites and
expect to conclude the trial in 2001.
Other Indications
Recently completed studies by GyneLogix under a Center for Disease Control and
Prevention grant, have shown that CTV-05 is active against the organisms which
cause yeast infections and gonorrhea. We plan to conduct pilot clinical studies
in these indications.
IS-159
In 1998, we acquired from Immunotech S.A. exclusive worldwide rights to IS-159,
a selective chemical that reacts with receptors found on cerebral blood vessels
and nerve terminals. We are seeking a collaborator to develop IS-159 and do not
intend to initiate further studies of IS-159 until we enter into a collaborative
arrangement.
PRODUCT ACQUISITION STRATEGY
We plan to continue to acquire, develop and commercialize late-stage product
candidates or approved products that make a clinical difference to patients
managed by focused groups of medical decision-makers. Our strategy is to acquire
late-stage development product candidates with an anticipated time to market of
four years or less and existing clinical data which provides reasonable evidence
of safety and efficacy. In addition, we aim to acquire approved products that
can be marketed by our commercial organization. In making our acquisition
decisions we attempt to select products that meet these criteria and achieve
high investment returns by:
- - understanding the market opportunity for initially-targeted uses of the
drug;
- - assessing the investment and development programs that will be necessary
to achieve a marketable product profile in these initial uses; and
- - attempting to structure the design of our development programs to obtain
critical information relating to the clinical and economic performance of
the product early in the development process, so that we can make key
development decisions.
To date, we have implemented this strategy with Angiomax, CTV-05 and IS-159.
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We intend to acquire products and product candidates with possible uses and
markets beyond those on which our initial investment program will be focused. We
plan to acquire other products that will enhance the acute hospital product
franchise we are building around Angiomax. We are also seeking other specialty
anti-infective products and product candidates that will fit into the franchise
we expect to build around CTV-05.
We have assembled a management team with significant experience in drug
development and in drug product launches and commercialization.
MANUFACTURING
We do not intend to build or operate manufacturing facilities but instead intend
to enter into contracts for manufacturing development and/or commercial supply.
Angiomax
All Angiomax bulk drug substance used in non-clinical and clinical work
performed to date has been produced by UCB Bioproducts S.A. by means of a
chemical synthesis process. We have ordered, and for the foreseeable future will
order, Angiomax bulk drug substance from UCB Bioproducts under the validated
manufacturing process. Using this process, UCB Bioproducts has successfully
completed the manufacture of bulk drug substance to meet anticipated commercial
supply requirements in 2001.
Together with UCB Bioproducts, we have developed a second generation chemical
synthesis process to improve the economics of the manufacturing of Angiomax bulk
drug substance. This process, which must be approved by the FDA before it can be
used, is known as the Chemilog process and involves limited changes to the early
manufacturing steps of our current process in order to improve process
economics. We expect the Chemilog process to produce material that is chemically
equivalent to that produced using the current process. UCB Bioproducts has
completed initial development of the process and is currently manufacturing
validation batches.
We have entered into a commercial development and supply agreement with UCB
Bioproducts for production of Angiomax bulk drug substance utilizing the
Chemilog process. Under terms of the agreement, UCB Bioproducts will prepare and
file the necessary drug master file for regulatory approval of the Chemilog
process. If the Chemilog process is successfully developed and regulatory
approval is obtained, we expect this process will result in a reduced cost of
manufacturing.
Ben Venue Laboratories, Inc. has carried out all of our Angiomax fill-finish
activities and has released product for clinical trials and commercial sale. We
have developed reproducible analytical methods and processes for the manufacture
of Angiomax drug product by Ben Venue Laboratories.
CTV-05
To date, GyneLogix has manufactured all CTV-05 material used in clinical trials.
In order to scale up production to produce sufficient materials for later phase
clinical trials, we have entered into a manufacturing arrangement with The Dow
Chemical Company. We are currently in the process of transferring the CTV-05
manufacturing technology to Dow.
STRATEGIC RELATIONSHIPS
In order to develop and commercialize our products, we leverage our resources by
utilizing contract product development, manufacturing and sales companies.
UCB Bioproducts
In December 1999, we entered into a commercial development and supply agreement
with UCB Bioproducts for the development and supply of Angiomax bulk drug
substance. Under the terms of the agreement, UCB Bioproducts is also responsible
for developing the Chemilog process in coordination with us and obtaining
regulatory approval for use of the process. We have agreed to partially fund UCB
Bioproducts' development activities. This funding is due upon the completion by
UCB Bioproducts of development milestones. If UCB Bioproducts successfully
completes each of these development milestones, we anticipate that total
development funding paid by us will equal approximately $9.1 million. Of this
$9.1 million, $7.7 million will be paid to UCB Bioproducts for validation
batches of Angiomax manufactured using the Chemilog process, which we may use
for commercial sale following regulatory approval of the
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Chemilog process. In addition, following successful development and regulatory
approval of the Chemilog process, we have agreed to purchase Angiomax bulk drug
substance exclusively from UCB Bioproducts at agreed upon prices for a period of
seven years from the date of the first commercial sale of Angiomax produced
using the Chemilog process. Following the expiration of the agreement, or if we
terminate the agreement prior to its expiration, UCB Bioproducts will transfer
the development technology to us. If we engage a third party to manufacture
Angiomax for us using this technology, we will be obligated to pay UCB
Bioproducts a royalty based on the amount paid by us to the third-party
manufacturer.
PharmaBio/Quintiles
In August 1996, we entered into a strategic alliance with PharmaBio Development,
Inc., a wholly owned subsidiary of Quintiles Transnational Corp. Under the terms
of the strategic alliance agreement, PharmaBio and any of its affiliates who
work on our projects will, at no cost to us, review and evaluate, jointly with
us, development programs we design related to potential or actual product
acquisitions. The purpose of this collaboration is to optimize the duration,
cost, specifications and quality aspects of such programs. PharmaBio and its
affiliates have also agreed to perform certain other services with respect to
our products, including clinical and non-clinical development services, project
management, project implementation, pharmacoeconomic services, regulatory
affairs and post-marketing surveillance services and statistical, statistical
programming, data processing and data management services. We have agreed to pay
PharmaBio its standard fee for these other services, with certain exceptions for
exceptional performance by PharmaBio.
Innovex
In January 1997, we entered into a consulting agreement with Innovex, Inc., a
subsidiary of Quintiles, which was subsequently superseded by a consulting
agreement we executed with Innovex in December 1998. Pursuant to the terms of
these agreements, Innovex has provided us with consulting services with respect
to pharmaceutical marketing and sales.
In December 2000, we signed a master services agreement and a work order with
Innovex to promote Angiomax. Under the agreement and work order, Innovex has
provided a sales force of 52 sales representatives, a sales territory management
system and operational support for the launch of Angiomax. Under the terms of
the agreement and work order, we have paid Innovex a total of approximately $1.1
million for its services through December 31, 2000.
COMPETITION
The development and commercialization of new drugs is competitive and we will
face competition from major pharmaceutical companies, specialty pharmaceutical
companies and biotechnology companies worldwide. Our competitors may develop
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 FDA
approval for their products more rapidly than we may obtain approval for ours.
Due to the incidence and severity of cardiovascular diseases, the market for
anticoagulant therapies is large and competition is intense and growing. We are
developing Angiomax as an anticoagulant therapy for the treatment of ischemic
heart disease. There are a number of anticoagulant therapies currently on the
market, awaiting regulatory approval or in development.
In general, anticoagulant drugs may be classified in three groups: drugs that
directly or indirectly target and inhibit thrombin or its formation, drugs that
target and inhibit platelets activation and aggregation and drugs that break
down fibrin. Indirect thrombin inhibitors include heparin and low molecular
weight heparins such as Lovenox, Fragmin and pentasaccharide. Direct thrombin
inhibitors include Angiomax, Argatroban, Melagatran and hirudins such as
Refludan. Platelet inhibitors include aspirin, Ticlid and Plavix. GP IIb/IIIa
inhibitors include ReoPro, Integrilin and Aggrastat. Fibrinolytics include
Streptase, Activase, Retevase and TNKase.
Because each group of anticoagulants acts on different clotting factors, we
believe that there will be continued clinical work to determine the best
combination of drugs for clinical use. We plan to position Angiomax as an
alternative to heparin as baseline anticoagulation therapy for use in patients
with ischemic heart disease. We expect Angiomax to be used with aspirin alone or
in conjunction with other fibrinolytic drugs or platelet inhibitors. We will
compete with indirect and direct thrombin inhibitors on the basis of efficacy
and safety, ease of administration and economic value. Heparin's widespread use
and low cost to hospitals will provide a selling challenge.
We do not plan to position Angiomax as a direct competitor to platelet
inhibitors such as ReoPro from Centocor, Inc. and Eli Lilly and Company,
Aggrastat from Merck, Inc. or Integrilin from Cor Therapeutics, Inc. and
Schering-Plough Corporation. Similarly, we do
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not plan to position Angiomax as a competitor to fibrinolytic drugs such as
Streptase from Aventis S.A., Retevase from Centocor, Inc., and Activase and
TNKase from Genentech Inc. Platelet inhibitors and fibrinolytic drugs may,
however, 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 be
forced to use either Angiomax or a platelet inhibitor or fibrinolytic drugs but
not both.
The acquisition or licensing of pharmaceutical products is a competitive area,
and a number of more established companies, which have acknowledged strategies
to license or acquire products, may have competitive advantages as may other
emerging companies taking similar or different approaches to product
acquisition. In addition, a number of established research-based pharmaceutical
and biotechnology companies may have acquired products in late stages of
development to augment their internal product lines. These established companies
may have a competitive advantage over us due to their size, cash flows and
institutional experience.
Many of our competitors will have substantially greater financial, technical 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. Competition may increase further as a result of advances made
in the commercial applicability of technologies and greater availability of
capital for investment in these fields. 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 create value in patient therapy.
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 also rely upon trade secrets, know-how,
continuing technological innovations and licensing opportunities to develop and
maintain our competitive position. We plan to prosecute and defend any patents
or patent applications we acquire or license, as well as any proprietary
technology.
We have exclusively licensed from Biogen patents and applications for patents
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 have exclusively licensed from GyneLogix a
patent and patent applications covering formulations and uses of the
biotherapeutic agent CTV-05 for the treatment of urogenital and reproductive
health. We have also exclusively licensed from Immunotech a patent and patent
applications covering the pharmaceutical IS-159 and its use for the treatment of
acute migraine headache. In each case, we are responsible for prosecuting and
maintaining such patents and patent applications. In all, we exclusively license
10 issued United States patents and a broadly filed portfolio of corresponding
foreign patents and patent applications. We have not yet filed any independent
patent applications. The U.S. patents licensed by us expire at various dates
ranging from March 2010 to April 2017.
The patent positions of pharmaceutical and biotechnology firms like us are
generally 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 applications we acquire or license 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 patent
applications in the United States 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 United States Patent and
Trademark Office to determine priority of invention, or in opposition
proceedings in a foreign patent office, either of which could result in
substantial cost to us, even if the eventual outcome is favorable to us. There
can be no assurance that the patents, if issued, would 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.
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The development of anticoagulants 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 applications are competitive with applications we have acquired or
licensed, or conflict in certain respects with claims made under such
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 and such claims are ultimately
determined to be valid, no assurance can be given that we would 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. No assurance can be given that others will not independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets or disclose such technology, or that
we can 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 provide that all confidential
information developed or made known to the individual during the course of the
individual's relationship with us is to be kept confidential and not disclosed
to third parties except in specific circumstances. In the case of employees, the
agreements provide that all inventions conceived by the individual shall be our
exclusive property. There can be no assurance, however, that these agreements
will provide meaningful protection or adequate remedies for the our trade
secrets in the event of unauthorized use or disclosure of such information.
LICENSE AGREEMENTS
Biogen, Inc.
In March 1997, we entered into an agreement with Biogen for the license of the
anticoagulant pharmaceutical bivalirudin, which we have developed 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 reaching certain Angiomax
sales milestones, including 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 future sales of Angiomax and on any sublicense royalties
earned until the later of (1) 12 years after the date of the first commercial
sale of the product in a country or (2) the date in 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 agreement also stipulates that we use
commercially reasonable efforts to meet certain milestones related to the
development and commercialization of Angiomax, including expending at least
$20.0 million for certain development and commercialization activities, which we
met in 1998. The licenses and rights under the agreement remain in force until
our obligation to pay royalties ceases. Either party may terminate the agreement
for material breach, and we may terminate the agreement for any reason upon 90
days prior written notice.
GyneLogix, Inc.
In August 1999, we entered into an agreement with GyneLogix for the license of
the biotherapeutic agent CTV-05, a strain of human lactobacillus currently under
clinical investigation for applications in the areas of urogenital and
reproductive health. Under the terms of the agreement, we acquired exclusive
worldwide rights to the patents and know-how related to CTV-05. In exchange for
the license, we have paid GyneLogix $400,000 and are obligated to pay up to an
additional $100,000 upon reaching certain development and regulatory milestones
and to fund agreed-upon operational costs of GyneLogix related to the
development of CTV-05 on a monthly basis subject to a limitation of $50,000 per
month. In addition, we are obligated to pay royalties on future sales of CTV-05
and on any sublicense royalties earned until the date on which the product is no
longer covered by a valid claim of the licensed patent rights in a country. The
agreement also stipulates that we must use commercially reasonable efforts in
pursuing the development, commercialization and marketing of CTV-05 to maintain
the license. The licenses and rights under the agreement remain in force until
our obligation to pay royalties ceases. Either party may terminate the agreement
for material breach, and we may terminate the agreement for any reason upon 60
days prior written notice.
Immunotech S.A.
In July 1998, we entered into an agreement with Immunotech for the license of
the pharmaceutical IS-159 for the treatment of acute migraine headache. Under
the terms of the agreement, we acquired exclusive worldwide rights to the
patents and know-how related to IS-159. In exchange for the license, we paid
$1.0 million on the closing date and are obligated to pay up to an additional
$4.5 million upon reaching certain development and regulatory milestones. In
addition, we are obligated to pay royalties on future sales of IS-159 and on any
sublicense royalties earned until the date on which the product is no longer
covered by a valid claim of the licensed patent rights in a country. The
agreement also stipulates that we must use commercially reasonable efforts in
pursuing the development, commercialization and marketing of IS-159 and meet
certain development and regulatory milestones to maintain the license. The
licenses and rights under the agreement remain in force until our obligation to
pay royalties ceases. Either party may terminate the agreement for material
breach, and we may terminate the agreement for any reason upon 60 days prior
written notice.
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GOVERNMENT REGULATION
Government authorities in the United States and other countries extensively
regulate, among other things, the research, development, testing, manufacture,
labeling, promotion, advertising, distribution, and marketing of our products.
In the United States, the FDA regulates drugs under the Federal Food, Drug, and
Cosmetic Act, and, in the case of biologics, also under the Public Health
Service Act, and implementing regulations. Failure to comply with the applicable
U.S. requirements may subject us to administrative or judicial sanctions, such
as the FDA refusal to approve pending applications, warning letters, product
recalls, product seizures, total or partial suspension of production or
distribution, injunctions, and/or criminal prosecution.
The steps required before a drug may be marketed in the United States include:
- - pre-clinical laboratory tests, animal studies and formulation studies;
- - submission to the FDA of an investigational new drug exemption, or IND,
for human clinical testing, which must become effective before human
clinical trials may begin;
- - adequate and well-controlled clinical trials to establish the safety and
efficacy of the drug for each indication;
- - submission to the FDA of an NDA or biologics license application, or BLA;
- - satisfactory completion of an FDA inspection of the manufacturing facility
or facilities at which the drug is produced to assess compliance with
cGMP; and
- - FDA review and approval of the NDA or BLA.
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 raises 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 may not result in the FDA allowing clinical trials to commence.
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 safety, and the effectiveness criteria to be evaluated.
Each protocol must be submitted to the FDA as part of the investigational new
drug exemption.
Clinical trials typically are conducted in three sequential Phases, but the
phases may overlap or be combined. Each trial must be reviewed and approved by
an independent Institutional Review Board before it can begin. Phase 1 usually
involves the initial introduction of the investigational drug into people to
evaluate its safety, dosage tolerance, phamacodynamics, and, if possible, to
gain an early indication of its effectiveness. Phase 2 usually involves trials
in a limited patient population to:
- - evaluate dosage tolerance and appropriate dosage;
- - identify possible adverse effects and safety risks; and
- - evaluate preliminarily the efficacy of the drug for specific indications.
Phase 3 trials usually further evaluate clinical efficacy and test further for
safety by using 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 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.
Assuming successful completion of the required clinical testing, the results of
the preclinical 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
- 17 -
19
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 and the manufacturing facilities are acceptable, the
FDA will issue an approval letter. If the FDA determines the application or
manufacturing facilities are not acceptable, the FDA will 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. 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. 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.
In December 2000, we received marketing approval from the FDA for Angiomax for
use as an anticoagulant in combination with aspirin in patients with unstable
angina undergoing coronary balloon angioplasty.
After regulatory approval of a product is obtained, we are required to comply
with a number of post-approval requirements. For example, as a condition of
approval of an application, the FDA may require postmarketing testing and
surveillance to monitor the drug's safety or efficacy. In the case of Angiomax,
the FDA has required us to complete an ongoing 50 patient trial in which we are
treating patients with HIT/HITTS who need coronary balloon angioplasty.
In addition, 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 inspects
manufacturing facilities to assess compliance with cGMP. Accordingly,
manufacturers must continue to expend time, money, and effort in the area of
production and quality control to maintain compliance with current good
manufacturing practices and other aspects of regulatory compliance.
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 our facilities or
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.
EMPLOYEES
We believe that our success will depend 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.
As of March 28, 2001, we employed 74 persons, of whom 11 hold M.D. and/or
Ph.D. degrees and 16 hold other advanced degrees. Our employees are not
represented by any collective bargaining unit, and we believe our relations with
our employees are good.
ITEM 2. PROPERTIES
We currently lease approximately 9,000 square feet of office space in Cambridge,
Massachusetts and approximately 6,660 square feet of office space in Parsippany,
New Jersey. We believe our current facilities will be sufficient to meet our
needs for the foreseeable future, but that additional space will be available on
commercially reasonable terms to meet space requirements if they arise. We also
have offices in Oxford, United Kingdom and Parnell, Auckland, New Zealand.
ITEM 3. LEGAL PROCEEDINGS
From time to time we have been and expect to continue to be subject to legal
proceedings and claims in the ordinary course of business. We currently are not
a party to any material legal proceeding.
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20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our security holders, through
solicitation of proxies or otherwise, during the fourth quarter of the year
ended December 31, 2000.
EXECUTIVE OFFICERS AND KEY EMPLOYEES
NAME AGE POSITION
- -----------------------------------------------------------------------------------------------------------------
Clive A. Meanwell, M.D., Ph.D.*..........................43 Chief Executive Officer, President and Director
Peyton J. Marshall, Ph.D.*...............................45 Senior Vice President and Chief Financial Officer
Glenn P. Sblendorio, M.B.A.*.............................44 Senior Vice President
David M. Stack*..........................................49 Senior Vice President
John M. Nystrom, Ph.D.*..................................55 Vice President and Chief Technical Officer
David C. Mitchell........................................47 Vice President
Frederick K. Paster, M.Sc., M.B.A........................35 Vice President
Thomas P. Quinn*.........................................42 Vice President
John D. Richards, D.Phil.*...............................44 Vice President
Fred M. Ryan, M.B.A......................................48 Vice President
John W. Villiger, Ph.D.*.................................46 Vice President
- ----------
* Executive Officer
Set forth below is certain information regarding the business experience during
the past five years for each of the above-named persons.
Clive A. Meanwell, M.D., Ph.D. has been our Chief Executive Officer and
President and a director since the inception of our company in July 1996. From
1995 to 1996, Dr. Meanwell was a Partner and Managing Director at MPM Capital
L.P., a venture capital firm. From 1986 to 1995, Dr. Meanwell held various
positions at Hoffmann-La Roche, Inc., a pharmaceutical company, including Senior
Vice President, from 1992 to 1995, Vice President from 1991 to 1992 and Director
of Product Development from 1986 to 1991. Dr. Meanwell was also a member of
Hoffmann-La Roche's pharmaceutical division operating board, its research and
development board and its portfolio management committee. During his tenure as
Director of Product Development, Dr. Meanwell had responsibility at Hoffmann-La
Roche for the development and launch of Neupogen. During his tenure as Vice
President, Worldwide Drug Regulatory Affairs, he had management responsibility
for the regulatory approval of eight new products and nine significant line
extensions of products. Dr. Meanwell also led an initiative at Hoffmann-La Roche
to reengineer the drug development process with the goal of cutting the time and
cost of drug development. Dr. Meanwell received his M.D. and Ph.D. from the
University of Birmingham, United Kingdom.
Peyton J. Marshall, Ph.D. has been a Senior Vice President since January 2000
and our Chief Financial Officer since joining us in October 1997. From 1995 to
October 1997, Dr. Marshall was based in London as a Managing Director and head
of European Corporate Financing and Risk Management Origination at Union Bank of
Switzerland, an investment banking firm. From 1986 to 1995, Dr. Marshall held
various investment banking positions at Goldman Sachs and Company, an investment
banking firm, including head of European product development from 1987 to 1993
and Executive Director, Derivatives Origination from 1993 to 1995. From 1981 to
1986, Dr. Marshall held several product development positions at The First
Boston Corporation, an investment banking firm, and was an Assistant Professor
of Economics at Vanderbilt University. Dr. Marshall received his Ph.D. in
economics from the Massachusetts Institute of Technology.
Glenn P. Sblendorio, M.B.A. has been a Senior Vice President since July 2000,
with primary responsibility for business development. From 1998 to July 2000,
Mr. Sblendorio was the Chief Executive Officer and Managing Director of MPM
Capital Advisors, LLC, an investment bank specializing in healthcare related
transactions. From 1997 to 1998, Mr. Sblendorio served as Managing Director at
Millennium Venture Management, LLC, a strategic consulting firm. From 1996 to
1997, Mr. Sblendorio was the Executive Vice President, Chief Financial Officer
and Treasurer at PlayNet Technologies, a publicly traded internet company that
develops entertainment systems. From 1993 to 1996, Mr. Sblendorio was the Senior
Vice President and Chief Financial Officer for Sony Interactive Entertainment
Inc. From 1981 to 1993, Mr. Sblendorio held several positions at Hoffmann-La
Roche, Inc., including Vice President of Finance & Administration for Roche
Molecular Systems and Controller Europe for the Amgen/Roche venture. Mr.
Sblendorio received his B.A. in accounting from Pace University and his M.B.A.
from Fairleigh Dickinson University. Mr. Sblendorio is also a CPA.
David M. Stack has been a Senior Vice President since April 2000. Under Mr.
Stack's employment agreement with us, Mr. Stack has agreed to devote at least 24
hours per week to our business. Since January 2000, Mr. Stack has also served as
President and General Partner of Stack Pharmaceuticals, Inc., a
commercialization, marketing and strategy consulting firm serving pharmaceutical
companies, and as a Senior Advisor to the Chief Executive Officer of Innovex
Inc., a contract pharmaceutical organization. Mr. Stack served as President and
General Manager of Innovex Inc. from May 1995 to December 1999. From April 1993
to May 1995, Mr. Stack served as Vice President, Business Development and
Marketing at Immunomedics, Inc., a biotechnology company specializing in
monoclonal antibodies in diagnostics and therapeutics. From September 1981 to
March 1993, Mr. Stack was employed by Roche Laboratories, a division of
Hoffmann-La Roche, where he was the Rocephin Product Director from June 1989 to
December 1992 and Director, Business Development and Planning, Infectious
Disease, Oncology and Virology from May 1992 to March 1993. Mr. Stack currently
serves as director of Bio Imaging Laboratories, Inc. Mr. Stack received his B.S.
in biology from Siena College and his B.S. in pharmacy from Albany College of
Pharmacy.
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21
John M. Nystrom, Ph.D. has been a Vice President since October 1998 and our
Chief Technical Officer since December 1999. From July 1979 to October 1998, Dr.
Nystrom was employed by the Arthur D. Little, an international technology and
management consulting firm. During his 19 years with the firm he held numerous
positions consulting to the fine chemical, biotechnology and pharmaceutical
industries. In 1994 he was elected a Vice President of the firm, and his last
position was that of Vice President and Director. Dr. Nystrom currently serves
as a director of Cangene Corp. Dr. Nystrom received his B.S. and Ph.D. in
chemical engineering from the University of Rhode Island.
David C. Mitchell has been a Vice President since December 2000 with a focus on
information technology and information systems. His responsibilities include
planning and implementing worldwide information systems. From February 1999 to
December 2000, Mr. Mitchell was a Vice President of Information Technology for
Innovex Americas. From July 1997 to February 1999, Mr. Mitchell was Director of
Information Technology at NBC. Prior to joining NBC, Mr. Mitchell served as the
Director of Programming and Technology at Walt Disney Pictures and Television
for twelve years. Mr. Mitchell received his Bachelor of Music from Arizona State
University.
Frederick K. Paster, M.Sc., M.B.A. has been a Vice President since September
1999, with a focus on worldwide product partnering, product development strategy
and market/pricing analysis. Mr. Paster is also involved in new product
acquisitions and corporate partnerships. From 1994 until he joined us in
September 1998, Mr. Paster was a Manager with The Boston Consulting Group, a
management consulting firm. From 1990 to 1992, Mr. Paster was located in Germany
and Belgium as European Programs Manager for ESI, a computer software and
services firm. Mr. Paster received his B.S. and M.Sc. degrees in engineering
from the Massachusetts Institute of Technology and received his M.B.A. from the
Harvard Business School.
Thomas P. Quinn has been a Vice President since April 2000, with a focus on the
launch of Angiomax, business development and product in-licensing. Mr. Quinn has
served as a Partner of Stack Pharmaceuticals, Inc. since January 2000 and served
as the Vice President of Marketing of Stack Pharmaceuticals, Inc. from January
2000 through May 2000. From November 1997 to January 2000, Mr. Quinn was Senior
Vice President, Business Development at Innovex. From January 1996 to July 1997,
Mr. Quinn was employed by the Strategic Planning/New Business Development
Department of Bristol-Myers Squibb Inc., a pharmaceutical company, where his
responsibilities included domestic and global portfolio management and franchise
development. From April 1992 to December 1995, Mr. Quinn was involved in the
commercial start-up of the U.S. Therapeutics Division of Boehringer Mannheim
Corporation, a pharmaceutical company.
John D. Richards, D.Phil. joined us in October 1997 and has been a Vice
President since 1999, with a focus on product manufacturing and quality. From
1993 until he joined us in October 1997, Dr. Richards was Director of Process
Development and Manufacturing at Immulogic Pharmaceutical Corporation, a
pharmaceutical company. From 1989 to 1993, Dr. Richards was a Technical Manager
at Zeneca PLC, a pharmaceutical company, where he developed and implemented
processes for the manufacture of peptides as pharmaceutical active
intermediates. In 1986, Dr. Richards helped establish Cambridge Research
Biochemicals, a manufacturer of peptide-based products for pharmaceutical and
academic customers. Dr. Richards received his M.A. and D.Phil. in organic
chemistry from the University of Oxford, United Kingdom, and has carried out
post-doctoral research work at the Medical Research Councils Laboratory of
Molecular Biology in Cambridge, United Kingdom.
Fred M. Ryan, M.B.A. has been a Vice President since April 2000, with a focus on
corporate strategic development, new product acquisitions and Angiomax
commercial development. Under Mr. Ryan's employment agreement with us, Mr. Ryan
has agreed to devote at least 24 hours per week to our business. Since April
2000, Mr. Ryan has also served as a Partner and the Vice President of Business
Development of Stack Pharmaceuticals, Inc. From July 1991 to April 2000, he held
senior management positions with Novartis Pharmaceuticals, Inc. in the United
States in both the Consumer Pharmaceuticals and Prescription Pharmaceuticals
businesses in the areas of Finance, Strategic Planning, Business Development and
Marketing, serving from 1998 to April 2000 as Executive Director Mature Products
responsible for managing sales and marketing activities for a portfolio of
products having annual sales in excess of $500 million. From 1989 to 1991, he
served as Assistant Controller for Alusuisse-Lonza in the United States. From
1985 to 1988, he served as Senior Financial Manager for Ciba Consumer
Pharmaceuticals (Ciba). He received his B.S. and B.A. degrees from Bryant
College and his M.B.A. from Fairleigh Dickinson University.
John W. Villiger, Ph.D. has been a Vice President since March 1997, with a focus
on cardiovascular product development. From December 1986 until he joined us in
March 1997, Dr. Villiger held various positions in product development at
Hoffmann-La Roche, including Head of Global Project Management from 1995 to 1996
and International Project Director from 1991 to 1995. As Head of Global Project
Management, Dr. Villiger was responsible for overseeing the development of
Hoffmann-LaRoche's pharmaceutical portfolio, with management responsibility for
over 50 development programs. As International Project Director, Dr. Villiger
was responsible for the global development of Tolcapone also known as tasmar.
Dr. Villiger received his Ph.D. in neuropharmacology from the University of
Otago.
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22
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
MARKET INFORMATION AND HOLDERS
Our common stock has been quoted on the Nasdaq National Market under the symbol
"MDCO" since August 7, 2000, the date of our initial public offering. The
following table sets forth, for the periods indicated, the high and low intraday
sales prices per share of our common stock as reported on the Nasdaq National
Market.
2000 HIGH LOW
- ---- ---- ---
Third Quarter (since August 7, 2000)................. $ 35.38 $ 16.50
Fourth Quarter....................................... $ 34.75 $ 17.13
2001
- ----
First Quarter (through March 28, 2001)............... $ 20.48 $ 8.75
Mellon Investor Services, LLC is the transfer agent and registrar for our common
stock. As of the close of business on March 28, 2001, we had 108 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.
SALES OF UNREGISTERED SECURITIES
Set forth below is a description of all equity securities sold by us during the
fiscal year ended December 31, 2000 that were not registered under the
Securities Act of 1933. The sales made to investors were made in accordance with
Section 4(2) or Regulation D of the Securities Act. Sales to our employees,
directors and officers were deemed to be exempt from registration under the
Securities Act in reliance on Rule 701 promulgated under Section 3(b) of the
Securities Act as transactions under compensatory benefit plans and contracts
relating to compensation provided under Rule 701.
In March 2000, we issued convertible promissory notes in the aggregate principal
amount of $13.3 million to existing investors. The notes bore interest at a rate
of 8% per year and were redeemable on January 15, 2001. In connection with the
issuance of the notes, we issued common stock purchase warrants to purchase an
aggregate of 2,255,687 shares of common stock with an exercise price of $5.92
per share. The warrants must be exercised by March 2, 2005.
In May 2000, we issued an aggregate of 1,411,000 shares of our series IV
convertible preferred stock to existing investors at a price per share of $4.32,
for a total purchase price of $6.1 million. In conjunction with this issuance,
the outstanding aggregate principal amount of the notes issued in October 1999
and March 2000, and accrued interest thereon, were converted into an aggregate
of 4,535,366 shares of our series IV convertible preferred stock.
In July 2000, we issued a stock dividend on all outstanding shares of series I
convertible preferred stock, series II convertible preferred stock, series III
convertible preferred stock and series IV convertible preferred stock. In
connection with the dividend we issued 187,458 shares of series I convertible
preferred stock, 790,358 shares of series II convertible preferred stock,
629,530 shares series III convertible preferred stock and 84,394 shares of
series IV convertible preferred stock. The dividend covered the period from
August 1, 1999 to July 31, 2000 with respect to the series I, II and III
convertible preferred stock and May 17, 2000 to July 31, 2000 with respect to
the series IV convertible preferred stock.
All outstanding shares of our convertible preferred stock, including accrued
dividends on such stock from August 1, 2000 through August 11, 2000, the date of
the closing of our initial public offering, automatically converted into an
aggregate of 22,381,735 shares of common stock upon the consummation of our
initial public offering.
During the fiscal year ended December 31, 2000, we issued 204,605 shares of
unregistered common stock upon the exercise of stock options under our 1998
stock incentive plan, at a weighted average exercise price per share of $1.26.
Of the 204,605 shares, 4,891 shares were subject to vesting and a repurchase
option. We filed a Registration Statement on Form S-8 on August 31, 2000
registering all shares of common stock issuable under our 1998 stock incentive
plan, 2000 outside director plan and 2000 employee stock purchase plan.
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23
USES OF PROCEEDS FROM SALES OF REGISTERED SECURITIES
In August and September 2000, we completed an initial public offering pursuant
to a Registration Statement on Form S-1. The effective date and Securities and
Exchange Commission file number of the Registration Statement were August 7,
2000 and 333-37404, respectively. In the initial public offering, we sold an
aggregate of 6,900,000 shares of common stock (including an over-allotment
option of 900,000 shares) at $16.00 per share. We received aggregate net
proceeds of approximately $101.4 million, after deducting underwriting discounts
and commissions of approximately $7.7 million and expenses of the offering of
approximately $1.3 million. From August 7, 2000 through December 31, 2000, of
the net proceeds, the Company used approximately $22.1 million for general
corporate purposes, including operations, working capital and capital
expenditures, with the remaining $79.3 million in proceeds invested in cash,
cash equivalents and marketable securities. Of the approximately $22.1 million,
we paid approximately $140,000 to Stack Pharmaceuticals, Inc., and approximately
$1.2 million to Innovex, Inc. David Stack, one of our Senior Vice Presidents, is
also the President and General Partner of Stack Pharmaceuticals and a Senior
Advisor to the Chief Executive Officer of Innovex.
ITEM 6. SELECTED CONSOLIDATED 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 period July 31, 1996 (date of inception) to December 31, 1996
and for the years ended December 31, 1997, 1998, 1999 and 2000. The pro forma
net loss per share data reflects the conversion of our convertible notes, and
accrued interest, and the conversion of our outstanding convertible preferred
stock, and accrued dividends, into common stock upon the closing of our initial
public offering in August 2000. The pro forma net loss per share data does not
include the effect of any options or warrants outstanding. For further
discussion of earnings per share, please see note 8 to the consolidated
financial statements.
PERIOD FROM
INCEPTION
(JULY 31, 1996)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------------------
1996 1997 1998 1999 2000
-------------- ----------- ------------- ------------- -------------
In thousands, except share and per share data
STATEMENTS OF OPERATIONS DATA
Operating expenses
Research and development........................ $ 827 $ 16,044 $ 24,005 $ 30,345 $ 39,572
Selling, general and administrative............. 702 2,421 6,248 5,008 15,034
-------- ----------- ---------- ----------- -----------
Total operating expenses................. 1,529 18,465 30,253 35,353 54,606
-------- ----------- ---------- ----------- -----------
Loss from operations.............................. (1,529) (18,465) (30,253) (35,353) (54,606)
Interest income (expense), net.................... 62 659 1,302 640 (16,686)
-------- ----------- ---------- ----------- -----------
Net loss.......................................... (1,467) (17,806) (28,951) (34,713) (71,292)
Dividends and accretion to redemption value of
redeemable convertible preferred stock.......... (118) (2,018) (3,959) (5,893) (30,343)
-------- ----------- ---------- ----------- -----------
Net loss attributable to common stockholders...... $ (1,585) $ (19,824) $ (32,910) $ (40,606) $ (101,635)
========= ============ =========== ============ ============
Net loss attributable to common stockholders
per common share, basic and diluted............. $ (2.85) $ (4.06) $ (6.03) $ (80.08) $ (8.43)
========== ============ =========== ============ =============
Shares used in computing net loss attributable
to common stockholders per common share,
basic and diluted............................... 557,178 4,887,230 5,454,653 507,065 12,059,275
Unaudited pro forma net loss attributable to
common stockholders per common share, basic
and diluted..................................... $ (1.94) $ (2.10)
Shares used in computing unaudited pro forma
net loss attributable to common stockholders
per common share, basic and diluted............. 17,799,876 24,719,075
AS OF DECEMBER 31,
-----------------------------------------------------
1996 1997 1998 1999 2000
--------- --------- --------- --------- ----------
In thousands
BALANCE SHEET DATA
Cash, cash equivalents, marketable securities and accrued interest
receivable...................................................... $ 3,421 $ 25,416 $ 29,086 $ 7,238 $ 80,718
Working capital (deficit)......................................... 3,174 18,779 24,570 (4,103) 68,023
Total assets...................................................... 3,473 25,595 29,831 7,991 84,363
Convertible notes................................................. -- -- -- 5,776 --
Redeemable convertible preferred stock............................ 4,793 40,306 79,384 85,277 --
Deficit accumulated during the development stage.................. (1,585) (21,409) (54,319) (94,925) (196,560)
Total stockholders' (deficit) equity.............................. (1,582) (21,387) (54,266) (94,558) 69,239
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
We acquire, develop and commercialize biopharmaceutical products that are in
late stages of development or have been approved for marketing. In December
2000, we received marketing approval from the FDA for Angiomax, our lead
product, for use as an anticoagulant in combination with aspirin in patients
with unstable angina undergoing coronary balloon angioplasty. Coronary
angioplasty is a procedure used to restore normal blood flow in an obstructed
artery in the heart. We began selling Angiomax in the United States in January
2001. In August and September 2000, we consummated our initial public offering
resulting in $101.4 million in net proceeds.
Since our inception, we have incurred significant losses and, as of December 31,
2000, had a deficit accumulated during the development stage of $196.6 million.
Most of our expenditures to date have been for research and development
activities, selling, general and administrative expenses and interest expense.
Research and development expenses represent costs incurred for product
acquisition, clinical trials, activities relating to regulatory filings and
manufacturing development efforts. We generally outsource our clinical and
manufacturing development activities to independent organizations to maximize
efficiency and minimize our internal overhead. We expense our research and
development costs as they are incurred. Selling, general and administrative
expenses consist primarily of salaries and related expenses, general corporate
activities and costs associated with initial product marketing activities.
Interest expense consists of costs associated with convertible notes which were
issued to fund our business activities.
We expect to continue to incur operating losses for the foreseeable future as a
result of research and development activities attributable to new and existing
products and costs associated with the commercialization and launch of our
products. In 2001, we expect increased cash outlays for research and development
costs associated with our ongoing clinical trials and manufacturing development
activities. We also expect increased outlays during 2001 for sales, general and
administrative costs related to the commercial launch in the United States of
Angiomax. We will need to generate significant revenues to achieve and maintain
profitability. Through December 31, 2000, we have had no revenues from any
product sales, and we have not achieved profitability on a quarterly or annual
basis.
In March 1997, we acquired exclusive worldwide commercial rights from Biogen,
Inc. to the technology, patents, trademarks, inventories, know-how and all
regulatory and clinical information related to Angiomax. Under the Biogen
license, we paid $2.0 million upon execution of the license agreement and are
obligated to pay up to an additional $8.0 million upon reaching certain Angiomax
sales milestones, including the first sale of Angiomax for certain indications.
In addition, we will pay royalties on future sales of Angiomax and on any
sublicense royalties earned.
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25
In August 1999, we acquired exclusive worldwide rights from GyneLogix, Inc. to
the patents and know-how related to the biotherapeutic agent CTV-05. Under the
GyneLogix license, we have paid $400,000 and are obligated to pay up to an
additional $100,000 upon reaching certain development and regulatory milestones
and to fund agreed-upon operational costs of GyneLogix related to the
development of CTV-05 on a monthly basis subject to a limitation of $50,000 per
month. In addition, we will pay royalties on future sales of CTV-05 and on any
sublicense royalties earned.
In July 1998, we acquired from Immunotech S.A., a wholly-owned subsidiary of
Beckman Coulter, Inc., exclusive worldwide rights to IS-159, which is under
clinical investigation for the treatment of acute migraine headache. Under the
Immunotech license, we paid $1.0 million upon execution of the license agreement
and are obligated to pay up to an additional $4.5 million upon reaching certain
development and regulatory milestones. In addition, we will pay royalties on
future sales of IS-159 and on any sublicense royalties earned. We are seeking a
collaborator to develop IS-159 and do not intend to initiate further studies of
IS-159 until we enter into a collaborative agreement.
During the year ended December 31, 2000, we recorded deferred stock compensation
on the grant of stock options of approximately $17.3 million, representing the
difference between the exercise price of such options and the fair market value
of our common stock at the date of grant of such options. The exercise prices of
these options were below the estimated fair market value of our common stock as
of the date of grant based on the estimated initial public offering price of our
common stock.
We amortize deferred stock compensation over the respective vesting periods of
the individual stock options. We recorded amortization expense for deferred
compensation of approximately $3.7 million for the year ended December 31, 2000.
We expect to record an amortization expense for deferred compensation as
follows, reduced, where applicable, for employee terminations: approximately
$4.2 million for 2001, approximately $3.9 million for 2002, approximately $3.9
million for 2003 and approximately $1.4 million for 2004.
In May 2000, we sold shares of series IV convertible preferred stock. These
shares contained a beneficial conversion feature based on the estimated fair
market value as of the date of such sale of the common stock into which such
shares were convertible. The total amount of such beneficial conversion was
approximately $25.5 million and has been reflected as a dividend in the period
of issuance, the second quarter of 2000. In the year ended December 31, 2000, we
also recorded approximately $19.4 million as interest expense, including the
discount on our convertible notes issued in October 1999 and March 2000.
Through December 31, 2000 we have not generated taxable income. At December 31,
2000, net operating losses available to offset future taxable income for federal
income tax purposes were approximately $122.2 million. If not utilized, federal
net operating loss carryforwards will expire at various dates beginning in 2011
and ending 2020. We have not recognized the potential tax benefit of our net
operating losses in our statements of operations. The future utilization of our
net operating loss carryforwards may be limited pursuant to regulations
promulgated under the Internal Revenue Code of 1986, as amended.
RESULTS OF OPERATIONS
Years Ended December 31, 2000 and 1999
Research and Development Expenses. Research and development expenses increased
30% from $30.3 million in 1999 to $39.6 million in 2000. The increase of $9.3
million was primarily due to the increased enrollment rate of our Phase 3
clinical trial in AMI, called HERO-2 during 2000, initiation in 2000 of a Phase
3b trial in angioplasty called REPLACE and by the recognition of $12.2 million
of research and development costs in connection with the completion of UCB
Bioproduct's manufacture of Angiomax bulk drug substance prior to FDA approval.
The increase in costs was partly offset by reduced development expenses
reflecting our termination of the semilog manufacturing development program with
Lonza AG in the fourth quarter of 1999 and a reduction in development activity
for IS-159 in 2000.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 200% from $5.0 million in 1999 to $15.0
million in 2000. The increase of $10.0 million was primarily due to an increase
in marketing and selling expenses and corporate infrastructure costs arising
from an increase in activity in preparation for the commercial launch of
Angiomax.
Interest Income and Interest Expense. Interest income increased 223% from
$838,000 in 1999 to $2.7 million in 2000. The increase of $1.9 million was
primarily due to interest income arising from investment of the proceeds of our
initial public offering.
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Interest expense was $19.4 million in 2000 and was related to interest charges
and the amortization of the discount on our convertible notes issued in October
1999 and March 2000. The notes were converted into series IV convertible
preferred stock in May 2000, accelerating the remaining unamortized discount.
Years Ended December 31, 1999 and 1998
Research and Development Expenses. Research and development expenses increased
26% from $24.0 million in 1998 to $30.3 million in 1999. The increase of $6.3
million was due to the expansion in 1999 of our clinical development programs,
primarily those relating to our Angiomax HERO-2 Phase 3 clinical trial in AMI
which commenced in late 1998, our IS-159 development program and our Angiomax
trials in angioplasty.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased 20% from $6.2 million in 1998 to $5.0 million
in 1999. The decrease of $1.2 million was primarily due to a decrease in
Angiomax-related marketing expenses.
Interest Income and Interest Expense. Interest income decreased 36% from $1.3
million in 1998 to $838,000 in 1999 due to a lower level of cash and marketable
securities available for investment during 1999 as compared to 1998. Interest
expense was $197,000 in 1999 and related to interest expense and amortization of
the discount on our convertible notes issued in the aggregate principal amount
of $6.0 million in October 1999.
LIQUIDITY AND CAPITAL RESOURCES
In August and September 2000, we received $101.4 million in net proceeds from
the sale of an aggregate of 6,900,000 shares of common stock in our initial
public offering at a price of $16.00 per share. Prior to our initial public
offering, we had financed our operations primarily through the private placement
of equity, convertible debt securities and warrants. Until our initial public
offering, we had received net proceeds of $79.4 million from the private
placement of equity securities, primarily redeemable convertible preferred
stock, and $19.4 million from the issuance of convertible notes and warrants.
As of December 31, 2000, we had $79.3 million in cash, cash equivalents and
marketable securities, as compared to $7.2 million and $28.3 million as of
December 31, 1999 and 1998, respectively.
During 2000, we used net cash of $48.1 million in operating activities. This
consisted of a net loss for the period of $71.3 million, combined with a
decrease in accounts payable of $1.8 million, an increase in inventory of $2.0
million and an increase in accrued interest receivable of $1.3 million, partly
offset by an increase in accrued expenses of $5.7 million, non-cash amortization
of discount on convertible notes of $19.0 million and deferred compensation of
$3.7 million. We spent $42.8 million for investing activities, which consisted
principally of purchases of marketable securities with net proceeds from our
initial public offering. We received $121.1 million from financing activities,
primarily from our initial public offering, which resulted in net proceeds of
$101.4 million, and from the issuance of convertible notes and preferred stock,
which resulted in proceeds of $19.4 million during 2000.
During 1999, we placed an order with UCB Bioprodu