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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended: June 30, 2009
 OR
 o
    
    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
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    04-3324394
(I.R.S. Employer
Identification No.)8 Sylvan Way 
Parsippany, New Jersey
(Address of principal executive offices)
    
    07054
(Zip Code)
 (973) 290-6000
  þ o
  o o
  Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o
  o þ




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##### 



THE MEDICINES COMPANY
  Part I. Financial InformationItem 1    Financial Statements
    
    
    1Item 2    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3   Quantitative and Qualitative Disclosures about Market Risk
    
    
    32Item 4   Controls and Procedures
    
    
    32Part II. Other InformationItem 1A   Risk Factors
    
    
    33Item 4   Submission of Matters to a Vote of Security Holders
    
    
    49Item 5   Other Information
    
    
    50Item 6   Exhibits
    
    
    50Signatures
    
    
    51Exhibit Index
    
    
    52EX-10.1EX-10.2EX-10.3EX-10.4EX-31.1EX-31.2EX-32.1EX-32.2




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Item 1. Financial Statements
 THE MEDICINES COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
 June 30,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    71,153
    
    
    $
    81,018Available for sale securities
    
    
    114,1470
    
    
    
    135,188Accrued interest receivable
    
    
    932
    
    
    
    1,336Accounts receivable, net of allowances of
approximately $4.3 million and $1.9 million
at June 30, 2009 and December 31, 2008,
respectively
    
    
    30,590
    
    
    
    33,657Inventory
    
    
    25,578
    
    
    
    28,229Prepaid expenses and other current assets
    
    
    17,969
    
    
    
    16,402Total current assets
    
    
    260,369
    
    
    
    295,830Fixed assets, net
    
    
    27,200
    
    
    
    27,331Intangible assets, net
    
    
    15,763
    
    
    
    16,349In-process research and development
    
    
    68,400
    
    
    
    Goodwill
    
    
    27,135
    
    
    
    Restricted cash
    
    
    8,491
    
    
    
    5,000Deferred tax assets
    
    
    9,624
    
    
    
    37,657Other assets
    
    
    5,337
    
    
    
    5,237Total assets
    
    $
    422,319
    
    
    $
    387,404LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    11,854
    
    
    $
    12,968Accrued expenses
    
    
    68,475
    
    
    
    61,028Deferred revenue
    
    
    4,517
    
    
    
    9,612Total current liabilities
    
    
    84,846
    
    
    
    83,608Contingent purchase price
    
    
    22,701
    
    
    
    Other liabilities
    
    
    5,650
    
    
    
    5,771Total liabilities
    
    
    113,197
    
    
    
    89,379Commitments and contingenciesStockholders equity:Preferred stock, $1.00 par value per share,
5,000,000 shares authorized; no shares issued
and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value per share,
125,000,000 shares authorized; 52,759,387 and
52,280,006 issued and outstanding at June 30,
2009 and December 31, 2008, respectively
    
    
    53
    
    
    
    52Additional paid-in capital
    
    
    576,778
    
    
    
    565,083Accumulated deficit
    
    
    (267,486
    )
    
    
    (267,948
    )Accumulated other comprehensive (loss) income
    
    
    (223
    )
    
    
    838Total stockholders equity
    
    
    309,122
    
    
    
    298,025Total liabilities and stockholders equity
    
    $
    422,319
    
    
    $
    387,404
  1




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THE MEDICINES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net revenue
    
    $
    104,175
    
    
    $
    86,731
    
    
    $
    203,392
    
    
    $
    166,159Operating expenses:Cost of revenue
    
    
    30,353
    
    
    
    21,939
    
    
    
    58,650
    
    
    
    41,032Research and development
    
    
    21,784
    
    
    
    19,781
    
    
    
    46,221
    
    
    
    38,443Selling, general and administrative
    
    
    45,910
    
    
    
    38,789
    
    
    
    99,504
    
    
    
    74,139Total operating expenses
    
    
    98,047
    
    
    
    80,509
    
    
    
    204,375
    
    
    
    153,614Income (loss) from operations
    
    
    6,128
    
    
    
    6,222
    
    
    
    (983
    )
    
    
    12,545Other income
    
    
    734
    
    
    
    1,805
    
    
    
    1,903
    
    
    
    4,186Income before income taxes
    
    
    6,862
    
    
    
    8,027
    
    
    
    920
    
    
    
    16,731Provision for income taxes
    
    
    (3,051
    )
    
    
    (3,971
    )
    
    
    (458
    )
    
    
    (7,821
    )Net income
    
    $
    3,811
    
    
    $
    4,056
    
    
    $
    462
    
    
    $
    8,910Basic earnings per common share
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    0.01
    
    
    $
    0.17Shares used in computing basic
earnings per common share
    
    
    52,232
    
    
    
    51,834
    
    
    
    52,187
    
    
    
    51,792Diluted earnings per common share
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    0.01
    
    
    $
    0.17Shares used in computing diluted
earnings per common share
    
    
    52,532
    
    
    
    52,441
    
    
    
    52,534
    
    
    
    52,361
 .
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THE MEDICINES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Six Months EndedJune 30,2009
    
    
    2008Cash flows from operating activities:Net (loss) income
    
    $
    462
    
    
    $
    8,910Adjustments to reconcile net (loss) income to net cash used in operating activities:Depreciation and amortization
    
    
    2,767
    
    
    
    1,049Amortization of net premiums and discounts on available for sale securities
    
    
    867
    
    
    
    (360
    )Unrealized foreign currency transaction losses, net
    
    
    318
    
    
    
    Non-cash stock compensation expense
    
    
    10,888
    
    
    
    11,424Loss on disposal of fixed assets
    
    
    11
    
    
    
    Gain on sales of available for sale securities
    
    
    
    
    
    
    (48
    )Deferred tax provision
    
    
    234
    
    
    
    6,585Tax effect of option exercises
    
    
    (83
    )
    
    
    16Adjustment to contingent purchase price
    
    
    481
    
    
    
    Changes in operating assets and liabilities:Accrued interest receivable
    
    
    404
    
    
    
    527Accounts receivable
    
    
    3,546
    
    
    
    503Inventory
    
    
    2,657
    
    
    
    5,912Prepaid expenses and other current assets
    
    
    (891
    )
    
    
    (3,523
    )Other assets
    
    
    
    
    
    
    (44
    )Accounts payable
    
    
    (4,432
    )
    
    
    (2,123
    )Accrued expenses
    
    
    (255
    )
    
    
    (12,745
    )Deferred revenue
    
    
    (5,085
    )
    
    
    Other liabilities
    
    
    (121
    )
    
    
    Net cash provided in operating activities
    
    
    11,768
    
    
    
    16,083Cash flows from investing activities:Purchases of available for sale securities
    
    
    (64,372
    )
    
    
    (88,207
    )Maturities and sales of available for sale securities
    
    
    83,786
    
    
    
    88,095Purchases of fixed assets
    
    
    (34
    )
    
    
    (1,873
    )Acquisition of business, net of cash acquired
    
    
    (38,223
    )
    
    
    Increase in restricted cash
    
    
    (3,000
    )
    
    
    Net cash used in investing activities
    
    
    (21,843
    )
    
    
    (1,985
    )Cash flows from financing activities:Proceeds from issuances of common stock, net
    
    
    890
    
    
    
    1,527Net cash provided by financing activities
    
    
    890
    
    
    
    1,527Effect of exchange rate changes on cash
    
    
    (680
    )
    
    
    (46
    )Increase (decrease) in cash and cash equivalents
    
    
    (9,865
    )
    
    
    15,579Cash and cash equivalents at beginning of period
    
    
    81,018
    
    
    
    88,127Cash and cash equivalents at end of period
    
    $
    71,153
    
    
    $
    103,706Supplemental disclosure of cash flow information:Interest paid
    
    $
    
    
    
    $
    Taxes paid
    
    $
    125
    
    
    $
    1,671Supplemental disclosure of non-cash investing activities:Fixed asset additions included in current liabilities
    
    $
    
    
    
    $
    5
 .
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THE MEDICINES COMPANY
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Nature of Business
 ® ®
 ®
   4




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2. Significant Accounting Policies
 Basis of Presentation
    Use of Estimates
  Cash, Cash Equivalents and Available for Sale Securities
     5




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As of June 30, 2009
    
    
    As of December 31, 2008Carrying
    
    
    Unrealized
    
    
    
    
    
    
    
    
    
    
    Carrying
    
    
    UnrealizedCost
    
    
    Fair Value
    
    
    Value
    
    
    Gain
    
    
    Cost
    
    
    Fair Value
    
    
    Value
    
    
    Gain(in thousands)U.S. government
agency notes
    
    $
    87,406
    
    
    $
    87,715
    
    
    $
    87,715
    
    
    $
    309
    
    
    $
    107,513
    
    
    $
    108,491
    
    
    $
    108,491
    
    
    $
    978Corporate debt
securities
    
    $
    26,314
    
    
    $
    26,432
    
    
    $
    26,432
    
    
    $
    118
    
    
    $
    26,487
    
    
    $
    26,697
    
    
    $
    26,697
    
    
    $
    210Total
    
    $
    113,720
    
    
    $
    114,147
    
    
    $
    114,147
    
    
    $
    427
    
    
    $
    134,000
    
    
    $
    135,188
    
    
    $
    135,188
    
    
    $
    1,188
 Fair Value Measurements
  Level 1
    
    Quoted prices in active markets for identical assets or
liabilities. The Companys Level 1 assets and liabilities consist
of money market investments.Level 2
    
    Observable inputs other than Level 1 prices, such as quoted prices
for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full
term of the assets or liabilities. The Companys Level 2 assets
and liabilities consist of U.S. government agency and corporate
debt securities.Level 3
    
    Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities. The Companys Level 3 assets and liabilities
consist of the contingent purchase price associated with the
Targanta acquisition (Note 7). The fair value of the contingent
purchase price was determined utilizing a probability weighted
discounted financial model.
  SignificantQuoted Prices In
    
    
    Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Balance atAssets and Liabilities
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    June 30, 2009(in thousands)Assets:Money market
    
    $
    46,110
    
    
    $
    
    
    
    $
    
    
    
    $
    46,110U.S. government agency
    
    
    
    
    
    
    87,715
    
    
    
    
    
    
    
    87,715Corporate debt securities
    
    
    
    
    
    
    26,432
    
    
    
    
    
    
    
    26,432Total assets at fair value
    
    $
    46,110
    
    
    $
    114,147
    
    
    $
    
    
    
    $
    160,257Liabilities:Contingent purchase price
    
    $
    
    
    
    $
    
    
    
    $
    22,701
    
    
    $
    22,701Total liabilities at fair value
    
    $
    
    
    
    $
    
    
    
    $
    22,701
    
    
    $
    22,701
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Restricted Cash
  Revenue Recognition
 Product Sales.
    7




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
    
    Product returns. The Companys customers have the right to return any unopened product
during the 18-month period beginning six months prior to the labeled expiration date and
ending 12 months after the labeled expiration date. As a result, in calculating the
accrual for product returns, the Company must estimate the likelihood that product sold
might not be used within six months of expiration and analyze the likelihood that such
product will be returned within 12 months after expiration.In estimating the likelihood of product being returned, the Company relies on information
from ICS and wholesalers regarding inventory levels, measured hospital demand as reported
by third-party sources and internal sales data. The Company also considers the past
buying patterns of ICS and wholesalers, the estimated remaining shelf life of product
previously shipped, the expiration dates of product currently being shipped, price
changes of competitive products and introductions of generic products.At June 30, 2009 and December 31, 2008, the Companys accrual for product returns was
$1.0 million. Included within the accrual at June 30, 2009 and December 31, 2008 was a
reserve of $0.8 million that the Company established for existing inventory at Nycomed
that Nycomed had the right to return at any time. In July 2009, the Company reimbursed
Nycomed $0.8 million for the final amount of inventory held by Nycomed at December 31,
2008. A 10% change in the Companys accrual for Angiomax product returns would have had
an approximate $0.1 million effect on the Companys reported net revenue for the six
months ended June 30, 2009.
    
    Chargebacks and rebates. Although the Company primarily sells products to ICS in the
United States, the Company typically enters into agreements with hospitals, either
directly or through group purchasing organizations acting on behalf of their hospital
members, in connection with the hospitals purchases of products.Based on these agreements, most of the Companys hospital customers have the right to
receive a discounted price for products and volume-based rebates on product purchases. In
the case of discounted pricing, the Company typically provides a credit to ICS, or a
chargeback, representing the difference between ICSs acquisition list price and the
discounted price. In the case of the volume-based rebates, the Company typically pays the
rebate directly to the hospitals.As a result of these agreements, at the time of product shipment, the Company estimates
the likelihood that product sold to ICS might be ultimately sold to a contracting
hospital or group purchasing organization. The Company also estimates the contracting
hospitals or group purchasing organizations volume of purchases.The Company bases its estimates on certain industry data, hospital purchases and the
historic chargeback data it receives from ICS, most of which ICS receives from
wholesalers, which detail historic buying patterns and sales mix for particular hospitals
and group purchasing organizations, and the applicable customer chargeback rates and
rebate thresholds.The Companys allowance for chargebacks was $2.9 million and $1.2 million at June 30,
2009 and December 31, 2008, respectively. A 10% change in the Companys allowance for
chargebacks would have had an approximate $0.3 million effect on the Companys reported
net revenue for the six months ended June 30, 2009. The Companys accrual for rebates was
$0.2 million and $0.4 million at June 30, 2009 and December 31, 2008, respectively. A 10%
change in the Companys accrual for rebates would have had an approximate $0.1 million
effect on the Companys reported net revenue for the six months ended June 30, 2009.
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
    
    Fees-for-service.The Company offers discounts to certain wholesalers and ICS based on
contractually determined rates for certain services. The Company estimates its
fee-for-service accruals and allowances based on historical sales, wholesaler and
distributor inventory levels and the applicable discount rate. The Companys discounts
are accrued at the time of the sale and are typically settled with the wholesalers or ICS
within 60 days after the end of each respective quarter. The Companys fee-for-service
accruals and allowances were $2.5 million and $2.0 million at June 30, 2009 and December
31, 2008, respectively. A 10% change in the Companys fee-for-service accruals and
allowances would have had an approximate $0.3 million effect on the Companys reported
net revenue for the six months ended June 30, 2009.
  International Distributors.
 Revenue from Collaborations.
 Inventory
   June 30,
    
    
    December 31,Inventory
    
    2009
    
    2008(in thousands)Raw materials
    
    $
    7,289
    
    
    $
    10,003Work-in-progress
    
    
    10,175
    
    
    
    10,334Finished goods
    
    
    8,114
    
    
    
    7,892Total
    
    $
    25,578
    
    
    $
    28,229
  9




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Fixed Assets
  Impairment of Long-Lived Assets
  Goodwill and Indefinite-lived Intangible Assets
  Research and Development
  Stock-Based Compensation
     Translation of Foreign Currencies
  10




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Segments and Geographic Information
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Net revenue:United States
    
    $
    99,716
    
    
    $
    84,454
    
    
    $
    195,727
    
    
    $
    161,338Europe
    
    
    3,268
    
    
    
    1,401
    
    
    
    5,776
    
    
    
    2,734Other
    
    
    1,191
    
    
    
    876
    
    
    
    1,889
    
    
    
    2,087Total net revenue
    
    
    104,175
    
    
    
    86,731
    
    
    
    203,392
    
    
    
    166,159
 June 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Long-lived assets:United States
    
    $
    141,652
    
    
    $
    47,308Europe
    
    
    1,714
    
    
    
    1,609Other
    
    
    467
    
    
    
    Total long-lived assets
    
    $
    143,833
    
    
    $
    48,917
 11




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Income Taxes
     Reclassifications
  Recent Accounting Pronouncements
    12




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3. Net Income per Share
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands, except per share amounts)Basic and dilutedNet income
    
    $
    3,811
    
    
    $
    4,056
    
    
    $
    462
    
    
    $
    8,910Weighted average common shares outstanding, basic
    
    
    52,748
    
    
    
    52,020
    
    
    
    52,610
    
    
    
    51,972Less: unvested restricted common shares outstanding
    
    
    516
    
    
    
    186
    
    
    
    423
    
    
    
    180Net weighted average common shares outstanding, basic
    
    
    52,232
    
    
    
    51,834
    
    
    
    52,187
    
    
    
    51,792Plus: net effect of dilutive stock options and
restricted common shares
    
    
    300
    
    
    
    607
    
    
    
    347
    
    
    
    569Weighted average common shares outstanding, diluted
    
    
    52,532
    
    
    
    52,441
    
    
    
    52,534
    
    
    
    52,361Earnings per share, basic
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    0.01
    
    
    $
    0.17Earnings per share, diluted
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    0.01
    
    
    $
    0.17
  Three Months Ended June 30,
    
    Six Months Ended June 30,2009
    
    2008
    
    2009
    
    2008(in thousands)Weighted average options outstanding
    
    
    11,516
    
    
    
    10,152
    
    
    
    11,312
    
    
    
    9,577Weighted average options included in
computation of diluted earnings per share
    
    
    343
    
    
    
    2,670
    
    
    
    457
    
    
    
    2,247Weighted average options considered
anti-dilutive and excluded from the
computation of diluted earnings per share
    
    
    11,173
    
    
    
    7,482
    
    
    
    10,855
    
    
    
    7,330Weighted average restricted shares outstanding
    
    
    516
    
    
    
    186
    
    
    
    423
    
    
    
    180Weighted average restricted shares included
in computation of diluted earnings per share
    
    
    161
    
    
    
    186
    
    
    
    165
    
    
    
    180Weighted average restricted shares considered
anti-dilutive and excluded from the
computation of earnings per share
    
    
    355
    
    
    
    
    
    
    
    258
    
    
    
    
 13




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4. Comprehensive (Loss) Income
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,Comprehensive Income
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Net income
    
    $
    3,811
    
    
    $
    4,056
    
    
    $
    462
    
    
    $
    8,910Unrealized loss on available for sale securities
    
    
    (157
    )
    
    
    (634
    )
    
    
    (761
    )
    
    
    (144
    )Foreign currency translation adjustment
    
    
    (1
    )
    
    
    (32
    )
    
    
    (300
    )
    
    
    (39
    )Comprehensive income/(loss)
    
    $
    3,653
    
    
    $
    3,390
    
    
    $
    (599
    )
    
    $
    8,727
 5. Income Taxes
  
 6. Investment
  7. Acquisitions
 Targanta Therapeutics
  14




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
    
    If the Company or a MDCO Affiliated Party (meaning an affiliate of the Company, a
successor or assigns of the Company, or a licensee or collaborator of the Company)
obtains approval from the European Agency for the Evaluation of Medical Products (EMEA)
for a MAA for oritavancin for the treatment of cSSSI on or before December 31, 2013, then
former Targanta shareholders will be entitled to receive a cash payment equal to (1)
$1.00 per share if such approval is granted on or before December 31, 2009, (2) $0.75 per
share if such approval is granted between January 1, 2010 and June 30, 2010, or (3) $0.50
per share if such approval is granted between July 1, 2010 and December 31, 2013, a
payment of approximately $21.0 million in the aggregate, approximately $15.8 million in
the aggregate, or approximately $10.5 million in the aggregate, respectively.
    
    If the Company or a MDCO Affiliated Party obtains final approval from the FDA for a
new drug application (NDA), for oritavancin for the treatment of cSSSI (1) within 40
months after the date the first patient is enrolled in a Phase III clinical trial of
cSSSI that is initiated by the Company or a MDCO Affiliate Party after the date of the
Companys merger agreement with Targanta and (2) on or before December 31, 2013, then
former Targanta shareholders will be entitled to receive a cash payment equal to $0.50
per share, or approximately $10.5 million in the aggregate.
    
    If the Company obtains final FDA approval for an NDA for the use of oritavancin for
the treatment of cSSSI administered by a single dose intravenous infusion (1) within 40
months after the date the first patient is enrolled in a Phase III clinical trial of
cSSSI that is initiated by the Company or a MDCO Affiliated Party after the date of the
Companys merger agreement with Targanta and (2) on or before December 31, 2013, then
former Targanta shareholders will be entitled to receive a cash payment equal to $0.70
per share, or approximately $14.7 million in the aggregate. This payment may become
payable simultaneously with the payment described in the previous bullet above.
    
    If aggregate net sales of oritavancin in four consecutive calendar quarters ending on
or before December 31, 2021 reach or exceed $400 million, each former Targanta
shareholder will be entitled to receive a cash payment equal to $2.35 per share, or
approximately $49.4 million in the aggregate.
  (in thousands)Acquired assets:Cash and cash equivalents
    
    $
    4,815Available for sale securities
    
    
    397Prepaid expenses & other current assets
    
    
    999Fixed assets, net
    
    
    1,960In-process research and development
    
    
    68,400Goodwill
    
    
    27,135Other assets
    
    
    71Total assets
    
    
    103,777Liabilities assumed:Accounts payable
    
    
    3,280Accrued expenses
    
    
    6,976Contingent purchase price
    
    
    23,183Deferred tax liability
    
    
    27,799Other liabilities
    
    
    556Total liabilities
    
    
    61,794Total cash purchase price paid upon acquisition
    
    $
    41,983
 15




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##### Table of Contents



Project
    
    (in thousands)cSSSI
    
    $
    54,800Bacteremia
    
    
    5,900Anthrax
    
    
    4,500C Difficile
    
    
    3,200Total
    
    $
    68,400
   Three Months Ended June 30,
    
    Six Months Ended June 30,2009
    
    2008
    
    2009
    
    2008(in thousands, except per share amounts)Net revenue
    
    $
    104,175
    
    
    $
    86,731
    
    
    $
    203,392
    
    
    $
    166,159Income (loss) from operations
    
    
    6,149
    
    
    
    6,222
    
    
    
    (11,633
    )
    
    
    (22,400
    )Net income (loss)
    
    
    3,760
    
    
    
    4,152
    
    
    
    (10,706
    )
    
    
    (25,325
    )Basic and diluted loss per share:Basic earnings (loss) per share
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    (0.21
    )
    
    $
    (0.49
    )Shares used in computing basic
earnings (loss) per common
share
    
    
    52,232
    
    
    
    51,834
    
    
    
    52,187
    
    
    
    51,792Diluted earnings (loss) per share
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    (0.20
    )
    
    $
    (0.48
    )Shares used in computing diluted
earnings (loss) per common
share
    
    
    52,533
    
    
    
    52,441
    
    
    
    52,534
    
    
    
    52,361
 16




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##### Table of Contents



Curacyte Discovery
  
  (in thousands)Acquired Assets:Total current assets
    
    $
    1,970Fixed assets
    
    
    1,273Other assets
    
    
    51In-process research and development
    
    
    21,373Total acquired assets
    
    
    24,667Acquired Liabilities:Total current liabilities
    
    
    (1,004
    )Total purchase price
    
    $
    23,663
  8. Nycomed Agreements
   17




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##### Table of Contents



9. Intangible Assets and Goodwill
  As of June 30, 2009
    
    
    As of December 31, 2008Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetWeighted Average
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingUseful Life
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    Amount(in thousands)Identifiable
intangible assetsCustomer
relationships
    
    8 years
    
    $
    7,457
    
    
    $
    575
    
    
    $
    6,882
    
    
    $
    7,457
    
    
    $
    288
    
    
    $
    7,169Distribution
agreements
    
    8 years
    
    
    4,448
    
    
    
    342
    
    
    
    4,106
    
    
    
    4,448
    
    
    
    171
    
    
    
    4,277Trademarks
    
    8 years
    
    
    3,024
    
    
    
    233
    
    
    
    2,791
    
    
    
    3,024
    
    
    
    116
    
    
    
    2,908Cleviprex
milestones
    
    13 years
    
    
    2,000
    
    
    
    16
    
    
    
    1,984
    
    
    
    2,000
    
    
    
    5
    
    
    
    1,995Total
    
    9 years
    
    $
    16,929
    
    
    $
    1,166
    
    
    $
    15,763
    
    
    $
    16,929
    
    
    $
    580
    
    
    $
    16,349
  18




---



##### Table of Contents



As of June 30, 2009
    
    
    As of December 31, 2008Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    Amount(in thousands)Intangible assets
not subject to
amortization:In-process
research and
development
    
    $
    68,400
    
    
    $
    
    
    
    $
    68,400
    
    
    $
    
    
    
    $
    
    
    
    $
    Total
    
    $
    68,400
    
    
    $
    
    
    
    $
    68,400
    
    
    $
    
    
    
    $
    
    
    
    $
    
  June 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Balance at beginning of period
    
    $
    
    
    
    $
    Goodwill acquired during the year
    
    
    27,135
    
    
    
    Balance at end of period
    
    $
    27,135
    
    
    $
    
  10. Relocation of Principal Offices
  11. Contingencies
  19




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 You should read the following discussion and analysis of our financial condition and results
of operations together with our financial statements and accompanying notes included elsewhere in
this quarterly report. In addition to the historical information, the discussion in this quarterly
report contains certain forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated by the forward-looking statements due to our
critical accounting estimates discussed below and important factors set forth in this quarterly
report, including under Risk Factors in Part II, Item 1A of this quarterly report.
 Overview
 Our Business
 ® ® ®
    20




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##### Table of Contents



Distribution and Sales
      21




---



##### Table of Contents



Targanta Acquisition
  
    
    If we or a MDCO Affiliated Party (meaning an affiliate of ours, a successor or
assigns of ours, or a licensee or collaborator of ours) obtain approval from the European
Agency for the Evaluation of Medical Products, or EMEA for a MAA for oritavancin for the
treatment of cSSSI on or before December 31, 2013, then former Targanta shareholders will
be entitled to receive a cash payment equal to (1) $1.00 per share if such approval is
granted on or before December 31, 2009, (2) $0.75 per share if such approval is granted
between January 1, 2010 and June 30, 2010, or (3) $0.50 per share if such approval is
granted between July 1, 2010 and December 31, 2013, a payment of approximately $21.0
million in the aggregate, approximately $15.8 million in the aggregate, or approximately
$10.5 million in the aggregate, respectively.
    
    If we or a MDCO Affiliated Party obtain final approval from the FDA for a NDA for
oritavancin for the treatment of cSSSI (1) within 40 months after the date the first
patient is enrolled in a Phase III clinical trial of cSSSI that is initiated by us or a
MDCO Affiliated Party after the date of our merger agreement with Targanta and (2) on or
before December 31, 2013, then former Targanta shareholders will be entitled to receive a
cash payment equal to $0.50 per share, or approximately $10.5 million in the aggregate.
    
    If we obtain final FDA approval for an NDA for the use of oritavancin for the
treatment of cSSSI administered by a single dose intravenous infusion (1) within 40
months after the date the first patient is enrolled in a Phase III clinical trial of
cSSSI that is initiated by us or a MDCO Affiliated Party after the date of our merger
agreement with Targanta and (2) on or before December 31, 2013, then former Targanta
shareholders will be entitled to receive a cash payment equal to $0.70 per share, or
approximately $14.7 million in the aggregate. This payment may become payable
simultaneously with the payment described in the previous bullet above.
    
    If aggregate net sales of oritavancin in four consecutive calendar quarters ending
on or before December 31, 2021 reach or exceed $400 million, then former Targanta
shareholders will be entitled to receive a cash payment equal to $2.35 per share, or
approximately $49.4 million in the aggregate.
   Curacyte Acquisition
  
 22




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##### Table of Contents



Application of Critical Accounting Estimates
   
    
    the nature of the estimate or assumption is material due to the level of subjectivity
and judgment necessary to account for highly uncertain matters or the susceptibility of
such matters to change; and
    
    the impact of the estimates and assumptions on financial condition or operating
performance is material.
  Results of Operations
 Three Months Ended June 30, 2009 and 2008
 Net Revenue.
 Net Revenue
 Three Months Ended June 30,% of Total
    
    
    
    
    
    
    % of Total2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue(in thousands)
    
    
    
    
    
    
    (in thousands)Net RevenueAngiomax and CleviprexU.S net revenue
    
    $
    99,716
    
    
    
    96
    %
    
    $
    84,454
    
    
    
    97
    %AngiomaxInternational net revenue
    
    
    4,459
    
    
    
    4
    %
    
    
    876
    
    
    
    1
    %Revenue from collaborations, net
    
    
    
    
    
    
    
    
    
    
    1,401
    
    
    
    2
    %Total net revenue
    
    $
    104,175
    
    
    
    100
    %
    
    $
    86,731
    
    
    
    100
    %
 23




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##### Table of Contents



Cost of Revenue.
 Cost of Revenue
 Three Months Ended June 30,% of Total
    
    
    
    
    
    
    % of Total2009
    
    
    Cost
    
    
    2008
    
    
    Cost(in thousands)
    
    
    
    
    
    
    (in thousands)Cost of RevenueManufacturing
    
    $
    6,650
    
    
    
    22
    %
    
    $
    5,284
    
    
    
    24
    %Royalty
    
    
    20,430
    
    
    
    67
    %
    
    
    13,434
    
    
    
    61
    %Logistics
    
    
    3,273
    
    
    
    11
    %
    
    
    3,221
    
    
    
    15
    %Total Cost of Revenue
    
    $
    30,353
    
    
    
    100
    %
    
    $
    21,939
    
    
    
    100
    %
 Research and Development Expenses.
  24




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##### Table of Contents



Research and Development Spending
 Three Months Ended June 30,% of
    
    
    
    
    
    
    % of2009
    
    
    Total R&D
    
    
    2008
    
    
    Total R&D(in thousands)
    
    
    
    
    
    
    (in thousands)Research and DevelopmentAngiomaxClinical trials
    
    $
    1,073
    
    
    
    5
    %
    
    $
    1,859
    
    
    
    9
    %Manufacturing development
    
    
    1,270
    
    
    
    6
    %
    
    
    1,405
    
    
    
    7
    %Administrative and headcount costs
    
    
    1,546
    
    
    
    7
    %
    
    
    889
    
    
    
    5
    %Total Angiomax
    
    
    3,889
    
    
    
    18
    %
    
    
    4,153
    
    
    
    21
    %CleviprexClinical trials
    
    
    1,873
    
    
    
    9
    %
    
    
    114
    
    
    
    1
    %Manufacturing development
    
    
    330
    
    
    
    2
    %
    
    
    605
    
    
    
    3
    %Administrative and headcount costs
    
    
    1,123
    
    
    
    5
    %
    
    
    1,622
    
    
    
    8
    %Total Cleviprex
    
    
    3,326
    
    
    
    16
    %
    
    
    2,341
    
    
    
    12
    %CangrelorClinical trials
    
    
    8,007
    
    
    
    37
    %
    
    
    8,568
    
    
    
    43
    %Manufacturing development
    
    
    737
    
    
    
    3
    %
    
    
    193
    
    
    
    1
    %Administrative and headcount costs
    
    
    1,087
    
    
    
    5
    %
    
    
    1,343
    
    
    
    7
    %Total Cangrelor
    
    
    9,831
    
    
    
    45
    %
    
    
    10,104
    
    
    
    51
    %CU2010Clinical trials
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Manufacturing development
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Administrative and headcount
    
    
    860
    
    
    
    4
    %
    
    
    
    
    
    
    0
    %Total CU2010
    
    
    860
    
    
    
    4
    %
    
    
    
    
    
    
    0
    %OritavancinClinical trials
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Manufacturing development
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Administrative and headcount
    
    
    1,201
    
    
    
    5
    %
    
    
    
    
    
    
    0
    %Total Oritavancin
    
    
    1,201
    
    
    
    5
    %
    
    
    
    
    
    
    0
    %Other
    
    
    2,677
    
    
    
    12
    %
    
    
    3,183
    
    
    
    16
    %Total
    
    $
    21,784
    
    
    
    100
    %
    
    $
    19,781
    
    
    
    100
    %
 Angiomax
   Cleviprex
   25




---



##### Table of Contents



Cangrelor
   CU2010
  Oritavancin
  Other
    26




---



##### Table of Contents




    
    the scope, rate of progress and cost of our clinical trials and other research and development activities;
    
    future clinical trial results;
    
    the terms and timing of any collaborative, licensing and other arrangements that we may establish;
    
    the cost and timing of regulatory approvals;
    
    the cost and timing of establishing and maintaining sales, marketing and distribution capabilities;
    
    the cost of establishing and maintaining clinical and commercial supplies of our product candidates;
    
    the effect of competing technological and market developments; and
    
    the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
 Selling, General and Administrative Expenses.
 Other Income.
 Benefit (Provision) for Income Tax.
  Six Months Ended June 30, 2009 and 2008
 Net Revenue.
 27




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##### Table of Contents



Net Revenue
 Six Months Ended June 30,% of Total
    
    
    
    
    
    % of TotalNet Revenue
    
    2009
    
    Revenue
    
    2008
    
    Revenue(in thousands)
    
    
    
    
    
    (in thousands)Angiomax and CleviprexU.S. sales
    
    $
    195,727
    
    
    
    96
    %
    
    $
    161,338
    
    
    
    97
    %AngiomaxInternational net revenue
    
    
    7,665
    
    
    
    4
    %
    
    
    2,087
    
    
    
    1
    %Revenue from collaborations, net
    
    
    
    
    
    
    0
    %
    
    
    2,734
    
    
    
    2
    %Total net revenue
    
    $
    203,392
    
    
    
    100
    %
    
    $
    166,159
    
    
    
    100
    %
    Cost of Revenue.
  Cost of Revenue
 Six Months Ended June 30,% of Total
    
    
    
    
    
    
    % of TotalCost of Revenue
    
    2009
    
    
    Cost
    
    
    2008
    
    
    Cost(in thousands)
    
    
    
    
    
    
    (in thousands)Manufacturing
    
    $
    12,845
    
    
    
    22
    %
    
    $
    10,122
    
    
    
    25
    %Royalty
    
    
    39,620
    
    
    
    68
    %
    
    
    25,691
    
    
    
    62
    %Logistics
    
    
    6,185
    
    
    
    10
    %
    
    
    5,219
    
    
    
    13
    %Total Cost of Revenue
    
    $
    58,650
    
    
    
    100
    %
    
    $
    41,032
    
    
    
    100
    %
 28




---



##### Table of Contents



Research and Development Expenses.
  Research and Development Spending
 Six Months Ended June 30,% of
    
    
    
    
    
    
    % ofResearch and Development
    
    2009
    
    
    Total R&D
    
    
    2008
    
    
    Total R&D(in thousands)
    
    
    
    
    
    
    (in thousands)AngiomaxClinical trials
    
    $
    1,714
    
    
    
    4
    %
    
    $
    2,777
    
    
    
    7
    %Manufacturing development
    
    
    3,634
    
    
    
    8
    %
    
    
    1,885
    
    
    
    5
    %Administrative and headcount costs
    
    
    2,609
    
    
    
    6
    %
    
    
    1,400
    
    
    
    4
    %Total Angiomax
    
    
    7,957
    
    
    
    18
    %
    
    
    6,062
    
    
    
    16
    %CleviprexClinical trials
    
    
    3,553
    
    
    
    8
    %
    
    
    890
    
    
    
    2
    %Manufacturing development
    
    
    616
    
    
    
    1
    %
    
    
    1,488
    
    
    
    4
    %Administrative and headcount costs
    
    
    2,900
    
    
    
    6
    %
    
    
    2,522
    
    
    
    7
    %Total Cleviprex
    
    
    7,069
    
    
    
    15
    %
    
    
    4,900
    
    
    
    13
    %CangrelorClinical trials
    
    
    16,934
    
    
    
    37
    %
    
    
    17,645
    
    
    
    46
    %Manufacturing development
    
    
    1,988
    
    
    
    4
    %
    
    
    1,149
    
    
    
    3
    %Administrative and headcount costs
    
    
    2,352
    
    
    
    5
    %
    
    
    2,502
    
    
    
    6
    %Total Cangrelor
    
    
    21,274
    
    
    
    46
    %
    
    
    21,296
    
    
    
    55
    %CU2010Acquisition Related IPR&D
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Manufacturing development
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Administrative and headcount costs
    
    
    1,880
    
    
    
    4
    %
    
    
    
    
    
    
    0
    %Total CU2010
    
    
    1,880
    
    
    
    4
    %
    
    
    
    
    
    
    0
    %OritavancinClinical trials
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Manufacturing development
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Administrative and headcount
    
    
    1,920
    
    
    
    4
    %
    
    
    
    
    
    
    0
    %Total Oritavancin
    
    
    1,920
    
    
    
    4
    %
    
    
    
    
    
    
    0
    %Other
    
    
    6,121
    
    
    
    13
    %
    
    
    6,185
    
    
    
    16
    %Total
    
    $
    46,221
    
    
    
    100
    %
    
    $
    38,443
    
    
    
    100
    %
 Angiomax
  29




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##### Table of Contents



Cleviprex
  Cangrelor
  CU2010
  Oritavancin
  Other
  Selling, General and Administrative Expenses.
 Other Income.
 30




---



##### Table of Contents



Provision for Income Tax.
 Liquidity and Capital Resources
 Sources of Liquidity.
 Cash Flows.
    Funding Requirements.
 
    
    the extent to which Angiomax is commercially successful globally;
    
    the extent to which Cleviprex is commercially successful in the United States;
    
    the extent to which we can successfully establish a commercial infrastructure outside
the United States;
    
    the expansion of our sales force in connection with the expansion of our sales and
marketing efforts in Europe and the sale of Cleviprex in the United States;
    
    our plan to continue to evaluate possible acquisitions of development-stage products,
approved products, or businesses and possible additional strategic or licensing
arrangements with companies that fit within our growth strategy, such as our acquisitions
of Curacyte Discovery and Targanta;
    
    the progress, level and timing of our research and development activities related to
our clinical trials with respect to Angiomax, Cleviprex, cangrelor, oritavancin and
CU2010;
    
    the cost and outcomes of regulatory submissions and reviews, including our efforts to
obtain approval of Cleviprex outside the United States and New Zealand and approval of
our product candidates globally;
    
    the continuation or termination of third-party manufacturing or sales and marketing
arrangements;
    
    the size, cost and effectiveness of our sales and marketing programs globally;
    
    the impact of competition from competitive products and generic versions of Angiomax
and those competitive products;
 31




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##### Table of Contents




    
    the success of obtaining regulatory approval of oritavancin and the extent of the
commercial success of oritavancin, if and when it is approved, which could result in cash
payments to former Targanta shareholders; and
    
    our ability to defend and enforce our intellectual property rights.
  Contractual Obligations
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
   
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  32




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 Part II. Other Information
 
 Item 1A. Risk Factors
 Investing in our common stock involves a high degree of risk. You should carefully consider
the risks and uncertainties described below in addition to the other information included or
incorporated by reference in this quarterly report. If any of the following risks actually occur,
our business, financial condition or results of operations would likely suffer. In that case, the
trading price of our common stock could fall. An updated description of the risk factors associated
with our business is set forth below.
 Risks Related to Our Financial Results
 We have a history of net losses and may not maintain profitability on an annual basis
  Our business is very dependent on the commercial success of Angiomax
  
    
    its continued acceptance by regulators, physicians, patients and other key
decision-makers as a safe, therapeutic and cost-effective alternative to heparin and
other products used in current practice or currently being developed;
    
    our ability to further develop Angiomax for use in additional patient populations
and the clinical data we generate to support expansion of the product label, including
our ability to obtain EMEA approval of Angiox for the treatment of STEMI patients
undergoing PCI;
    
    the overall number of PCI procedures performed;
    
    our ability sell and market of Angiox in Europe;
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
    
    the impact of competition from competitive products and generic versions of
Angiomax and those competitive products; and
    
    the extent to which we and our international distributors are successful in
marketing Angiomax.
   Our revenue has been substantially dependent on our sole source distributor, ICS, and a
limited number of domestic wholesalers and international distributors involved in the sale of our
products, and such revenue may fluctuate from quarter to quarter based on the buying patterns of
such distributor, wholesalers and distribution partners
    Failure to achieve our revenue targets or raise additional funds in the future may require us
to delay, reduce the scope of, or eliminate one or more of our planned activities
  
    
    the extent to which Angiomax is commercially successful globally;
    
    the extent to which Cleviprex is commercially successful in the United States;
    
    the extent to which we can successfully establish a commercial infrastructure
outside the United States;
    
    the expansion of our sales force in connection with the expansion of our sales and
marketing efforts in Europe and the sale of Cleviprex in the United States;
    
    our plan to continue to seek possible acquisitions of development-stage products,
approved products, or businesses and possible additional strategic or licensing
arrangements with companies that fit within our growth strategy, such as our acquisitions
of Curacyte Discovery and Targanta;
 34




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
    
    the progress, level and timing of our research and development activities related
to our clinical trials with respect to Angiomax, Cleviprex, cangrelor, oritavancin and
CU2010;
    
    the cost and outcomes of regulatory submissions and reviews, approval of Cleviprex
outside the United States and New Zealand and approval of our product candidates
globally;
    
    the continuation or termination of third-party manufacturing or sales and marketing
arrangements;
    
    the size, cost and effectiveness of our sales and marketing programs globally;
    
    the impact of competition from competitive products and generic versions of
Angiomax and those competitive products;
    
    the success of obtaining regulatory approval of oritavancin and the extent of the
commercial success of oritavancin, if and when it is approved, which could result in the
cash payment to former Targanta shareholders; and
    
    our ability to defend and enforce our intellectual property rights.
  Risks Related to Commercialization
 Angiomax competes with all categories of anticoagulant drugs, which may limit the use of Angiomax
   Because the market for thrombin inhibitors is competitive, Angiomax may not obtain widespread
use
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Cleviprex competes with all categories of IV antihypertensive, or IV-AHT, drugs, which may
limit the use of Cleviprex
   Because the IV-AHT market is competitive and many of the IV-AHT drugs with which we expect
Cleviprex to compete have been widely used in patient care for many years and are generic, our
product may not obtain widespread use
  The market for Cleviprex will depend significantly on its inclusion on hospital formularies
  Near-term growth in our sales of Angiomax and Cleviprex is dependent on acceptance by
physicians, patients and other key decision-makers of clinical data
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We face substantial competition, which may result in others discovering, developing or
commercializing competing products before or more successfully than we do
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Our ability to generate future revenue from products will be affected by our ability to
develop our global operations
  
    
    continue to improve operating, administrative, and information systems;
    
    accurately predict future personnel and resource needs to meet contract
commitments;
    
    track the progress of ongoing projects; and
    
    attract and retain qualified management, sales, professional, scientific and
technical operating personnel.
  Our future growth depends, in part, on our ability to penetrate foreign markets, particularly
in Europe. However, we have limited experience marketing, servicing and distributing our products
and otherwise conducting our business outside the United States, where we are subject to additional
regulatory burdens and other risks
  
    
    our customers ability to obtain reimbursement for procedures using our products in
foreign markets;
    
    the burden of complying with complex and changing foreign legal, tax, accounting
and regulatory requirements;
    
    language barriers and other difficulties in providing long-range customer support
and service;
    
    longer accounts receivable collection times;
    
    significant currency fluctuations;
    
    reduced protection of intellectual property rights in some foreign countries; and
    
    the interpretation of contractual provisions governed by foreign laws in the event
of a contract dispute.
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Our ability to generate future revenue from products will be affected by reimbursement and
drug pricing
    We must comply with federal, state and foreign laws and regulations relating to the health
care business, and, if we do not fully comply with such laws and regulations, we could face
substantial penalties
  
    
    the Federal Anti-Kickback Law, which prohibits persons from knowingly and willfully
soliciting, offering, receiving or providing remuneration, directly or indirectly, in
cash or in kind, to induce either the referral of an individual or furnishing or
arranging for a good or service for which payment may be made under federal health care
programs such as Medicare and Medicaid;
    
    other Medicare laws and regulations that prescribe the requirements for coverage
and payment for services performed by our customers, including the amount of such
payment;
    
    the Federal False Claims Act, which imposes civil and criminal liability on
individuals and entities who submit, or cause to be submitted, false or fraudulent claims
for payment to the government; and
    
    the Federal False Statements Act, which prohibits knowingly and willfully
falsifying, concealing or covering up a material fact or making any materially false
statement in connection with delivery of or payment for health care benefits, items or
services.
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We could be exposed to significant liability if we are unable to obtain insurance at
acceptable costs and adequate levels or otherwise protect ourselves against potential product
liability claims
    Risks Related to Regulatory Matters
 If we do not obtain regulatory approvals for our product candidates, we will not be able to
market our product candidates and our ability to generate additional revenue could be materially
impaired
  
    
    delay or prevent the successful commercialization of any of our product candidates;
    
    diminish our competitive advantage; and
    
    defer or decrease our receipt of revenue.
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We cannot expand the indications for which we are marketing Angiomax unless we receive
regulatory approval for each additional indication. Failure to expand these indications will limit
the size of the commercial market for Angiomax
  Clinical trials of product candidates are expensive and time-consuming, and the results of
these trials are uncertain
   
    
    our clinical trials may produce negative or inconclusive results, and we may
decide, or regulators may require us, to conduct additional clinical trials which even if
undertaken cannot ensure we will gain approval;
    
    data obtained from pre-clinical testing and clinical trials may be subject to
varying interpretations, which could result in the FDA or other regulatory authorities
deciding not to approve a product in a timely fashion, or at all;
    
    the cost of clinical trials may be greater than we currently anticipate;
    
    regulators or institutional review boards may not authorize us to commence a
clinical trial or conduct a clinical trial at a prospective trial site;
    
    we, or the FDA or other regulatory authorities, might suspend or terminate a
clinical trial at any time on various grounds, including a finding that participating
patients are being exposed to unacceptable health risks. For example, we have in the past
voluntarily suspended enrollment in one of our clinical trials to review an interim
analysis of safety data from the trial; and
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
    
    the effects of our product candidates may not be the desired effects or may include
undesirable side effects or the product candidates may have other unexpected
characteristics.
  If we or our contract manufacturers fail to comply with the extensive regulatory requirements
to which we, our contract manufacturers and our products are subject, our products could be subject
to restrictions or withdrawal from the market and we could be subject to penalties
  
    
    delay in approving or refusal to approve a product;
    
    product recall or seizure;
    
    suspension or withdrawal of an approved product from the market;
    
    interruption of production;
    
    operating restrictions;
    
    warning letters;
    
    injunctions;
    
    fines and other monetary penalties;
    
    criminal prosecutions; and
    
    unanticipated expenditures.
 Risks Related to our Dependence on Third Parties for Manufacturing, Research and Development, and
Distribution Activities
 We depend on single suppliers for the production of Angiomax, Cleviprex, cangrelor and
oritavancin bulk drug substance and a limited number of suppliers to carry out all fill-finish
activities
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The development and commercialization of our products may be terminated or delayed, and the
costs of development and commercialization may increase, if third parties on whom we rely to
manufacture and support the development and commercialization of our products do not fulfill their
obligations
     43




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
    
    delay or otherwise adversely impact the manufacturing, development or
commercialization of Angiomax, Cleviprex, cangrelor, oritavancin, CU2010 or any
additional products that we may acquire or develop;
    
    require us to seek a new collaborator or undertake unforeseen additional
responsibilities or devote unforeseen additional resources to the manufacturing,
development or commercialization of our products; or
    
    result in the termination of the development or commercialization of our products.
 Use of third-party manufacturers may increase the risk that we will not have appropriate
supplies of our product candidates
  
    
    reliance on the third party for regulatory compliance and quality assurance;
    
    the possible breach of the manufacturing agreement by the third party; and
    
    the possible termination or nonrenewal of the agreement by the third party, based
on its own business priorities, at a time that is costly or inconvenient for us.
   In order to satisfy regulatory authorities, we may need to reformulate the way in which our
oritavancin bulk drug substance is created to remove animal source product
   If we use hazardous and biological materials in a manner that causes injury or violates
applicable law, we may be liable for damages
  44




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Risks Related to Our Intellectual Property
 A breach of any of the agreements under which we license commercialization rights to products
or technology from others could cause us to lose license rights that are important to our business
or subject us to claims by our licensors
  If we are unable to obtain or maintain patent protection for the intellectual property
relating to our products, the value of our products will be adversely affected
  
    
    obtain and maintain U.S. and foreign patents, including defending those patents
against adverse claims;
    
    secure patent term extension for the patents covering our approved products;
    
    protect trade secrets;
    
    operate without infringing the proprietary rights of others; and
    
    prevent others from infringing our proprietary rights.
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We may be unable to utilize the Chemilog process if Lonza Braine breaches our agreement
  If we are not able to keep our trade secrets confidential, our technology and information may
be used by others to compete against us
  If we infringe or are alleged to infringe intellectual property rights of third parties, it
will adversely affect our business
  46




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Risks Related to Growth and Employees
 If we fail to acquire and develop additional product candidates or approved products it will
impair our ability to grow
    
    
    manufactured or produced economically;
    
    successfully commercialized; or
    
    widely accepted in the marketplace.
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We may undertake strategic acquisitions in the future and any difficulties from integrating
such acquisitions could damage our ability to attain or maintain profitability
  We may not be able to manage our business effectively if we are unable to attract and retain
key personnel and consultants
  Risks Related to Our Common Stock
 Fluctuations in our operating results could affect the price of our common stock
  Our stock price has been and may in the future be volatile. This volatility may make it
difficult for you to sell common stock when you want or at attractive prices
  
    
    changes in securities analysts estimates of our financial performance;
    
    changes in valuations of similar companies;
    
    variations in our operating results;
    
    acquisitions and strategic partnerships;
    
    announcements of technological innovations or new commercial products by us or our
competitors;
    
    disclosure of results of clinical testing or regulatory proceedings by us or our
competitors;
    
    the timing, amount and receipt of revenue from sales of our products and margins on
sales of our products;
    
    governmental regulation and approvals;
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
    
    developments in patent rights or other proprietary rights;
    
    changes in our management; and
    
    general market conditions.
  Our corporate governance structure, including provisions in our certificate of incorporation
and by-laws and Delaware law, may prevent a change in control or management that security holders
may consider desirable
   
 Item 4. Submission of Matters to a Vote of Security Holders
  BrokerNon-Proposal
    
    For
    
    Against/Withheld
    
    Abstentions
    
    VotesTo elect Armin M.
Kessler to serve as
a class 3 director
until the 2011
annual meeting of
stockholders
    
    
    46,418,180
    
    
    
    3,023,927
    
    
    
    
    
    
    
    To elect Robert G.
Savage to serve as
a class 3 director
until the 2011
annual meeting of
stockholders
    
    
    46,707,624
    
    
    
    2,734,483
    
    
    
    
    
    
    
    To elect Melvin K.
Spigelman to serve
as a class 3
director until the
2011 annual meeting
of stockholders
    
    
    48,817,754
    
    
    
    624,353
    
    
    
    
    
    
    
    To approve an
amendment to the
2000 Employee Stock
Purchase Plan to
increase the number
of shares of common
stock authorized
for issuance under
such plan from
505,500 shares to
805,500 shares
    
    
    44,919,750
    
    
    
    1,523,533
    
    
    
    157,574
    
    
    
    2,841,250To ratify the
appointment of
Ernst & Young LLP
as our independent
registered public
accounting firm for
the year ended
December 31, 2009
    
    
    49,129,934
    
    
    
    303,935
    
    
    
    8,237
    
    
    
    
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Item 5. Other Information
  
    
    a minimum global sales revenue for Angiomax;
    
    with regards to Cleviprex, minimum sales revenue and formulary adoption in the United
States and having the EU regulatory filing accepted in the first quarter of 2009;
    
    CHAMPION program principal results known to the company by October 2009;
    
    with regards to CU2010, complete Phase Ia study and begin enrollment in Phase Ib study
in the fourth quarter of 2009 and identify and test back up compound by the end of 2009;
    
    close the acquisition of Targanta in the first quarter of 2009, integrate the business
by the second quarter of 2009 and initiate and achieve certain enrollment numbers for the
oritavancin Phase III by the end of 2009;
    
    identify new business ventures that will provide certain projected revenue for 2011; and
    
    a minimum non-GAAP earnings per share for 2009.
 
 Item 6. Exhibits
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SIGNATURES
  THE MEDICINES COMPANYDate: August 10, 2009
    By:

/s/
Glenn P. SblendorioGlenn P. SblendorioExecutive Vice President and Chief Financial
Officer (Principal Financial and Accounting Officer) 51




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EXHIBIT INDEX
 Exhibit Number
    
    Description10.1
    
    Summary of Performance Measures under registrants Cash Bonus Plan10.2
    
    Amended and Restated Distribution Agreement dated February 28,
2007 between the registrant and Integrated Commercialization
Solutions, Inc.10.3
    
    Amendment No. 1 to Amended and Restated Distribution Agreement
dated November 7, 2007 between the registrant and Integrated
Commercialization Solutions, Inc.10.4
    
    Amendment No. 2 to Amended and Restated Distribution Agreement
dated October 1, 2008 between the registrant and Integrated
Commercialization Solutions, Inc.31.1
    
    Chairman and Chief Executive Officer Certification pursuant to
Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Chief Financial Officer Certification pursuant to Rule 13a-14(a)
of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Chairman and Chief Executive Officer Certification pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Chief Financial Officer Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 
 
    
    Confidential treatment requested as to certain portions, which portions have been omitted and
filed separately with the Securities and Exchange Commission. 52