##### Table of Contents



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: September 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
    
    04-3324394(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)8 Sylvan WayParsippany, New Jersey
    
    07054(Address of principal executive offices)
    
    (Zip Code)
 (973) 290-6000
  þ o
  o o
  Large accelerated filer þ   
    Accelerated filer o
    Non-accelerated filer o
    Smaller reporting company o(Do not check if a smaller reporting company)
  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
    
    
    17Item 3 - Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4 - Controls and Procedures
    
    
    34Part II. Other InformationItem 1 - Legal Proceedings
    
    
    34Item 1A - Risk Factors
    
    
    34Item 5 - Other Information
    
    
    35Item 6 - Exhibits
    
    
    52Signatures
    
    
    52Exhibit Index
    
    
    53EX-10.1EX-10.2EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



Item 1. Financial Statements
 THE MEDICINES COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 September 30,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    51,925
    
    
    $
    81,018Available for sale securities
    
    
    120,095
    
    
    
    135,188Accrued interest receivable
    
    
    868
    
    
    
    1,336Accounts receivable, net of allowances of
approximately $4.9 million and $1.9 million
at September 30, 2009 and December 31, 2008,
respectively
    
    
    44,717
    
    
    
    33,657Inventory
    
    
    19,440
    
    
    
    28,229Prepaid expenses and other current assets
    
    
    15,712
    
    
    
    16,402Total current assets
    
    
    252,757
    
    
    
    295,830Fixed assets, net
    
    
    26,210
    
    
    
    27,331Intangible assets, net
    
    
    15,471
    
    
    
    16,349In-process research and development
    
    
    69,500
    
    
    
    Goodwill
    
    
    26,035
    
    
    
    Restricted cash
    
    
    7,169
    
    
    
    5,000Deferred tax assets
    
    
    4,958
    
    
    
    37,657Other assets
    
    
    7,325
    
    
    
    5,237Total assets
    
    $
    409,425
    
    
    $
    387,404LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    5,576
    
    
    $
    12,968Accrued expenses
    
    
    61,798
    
    
    
    61,028Deferred revenue
    
    
    3,323
    
    
    
    9,612Total current liabilities
    
    
    70,697
    
    
    
    83,608Contingent purchase price
    
    
    22,741
    
    
    
    Other liabilities
    
    
    5,667
    
    
    
    5,771Total liabilities
    
    
    99,105
    
    
    
    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; 52,876,824
and 52,280,006 issued and outstanding at
September 30, 2009 and December 31, 2008,
respectively
    
    
    53
    
    
    
    52Additional paid-in capital
    
    
    581,286
    
    
    
    565,083Accumulated deficit
    
    
    (270,684
    )
    
    
    (267,948
    )Accumulated other comprehensive (loss) income
    
    
    (335
    )
    
    
    838Total stockholders equity
    
    
    310,320
    
    
    
    298,025Total liabilities and stockholders equity
    
    $
    409,425
    
    
    $
    387,404
  1




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##### Table of Contents



THE MEDICINES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
 (unaudited)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net revenue
    
    $
    98,789
    
    
    $
    88,126
    
    
    $
    302,181
    
    
    $
    254,285Operating expenses:Cost of revenue
    
    
    28,308
    
    
    
    22,089
    
    
    
    86,958
    
    
    
    63,121Research and development
    
    
    22,464
    
    
    
    44,075
    
    
    
    68,685
    
    
    
    82,518Selling, general and administrative
    
    
    47,358
    
    
    
    42,865
    
    
    
    146,863
    
    
    
    117,004Total operating expenses
    
    
    98,130
    
    
    
    109,029
    
    
    
    302,506
    
    
    
    262,643Income (loss) from operations
    
    
    659
    
    
    
    (20,903
    )
    
    
    (325
    )
    
    
    (8,358
    )Other income
    
    
    151
    
    
    
    1,070
    
    
    
    2,055
    
    
    
    5,256Income (loss) before income taxes
    
    
    810
    
    
    
    (19,833
    )
    
    
    1,730
    
    
    
    (3,102
    )(Provision for) benefit from income taxes
    
    
    (4,007
    )
    
    
    6,616
    
    
    
    (4,465
    )
    
    
    (1,205
    )Net loss
    
    $
    (3,197
    )
    
    $
    (13,217
    )
    
    $
    (2,735
    )
    
    $
    (4,307
    )Basic earnings per common share
    
    $
    (0.06
    )
    
    $
    (0.25
    )
    
    $
    (0.05
    )
    
    $
    (0.08
    )Diluted earnings per common share
    
    $
    (0.06
    )
    
    $
    (0.25
    )
    
    $
    (0.05
    )
    
    $
    (0.08
    )Weighted average number of common shares outstanding:Basic
    
    
    52,298
    
    
    
    51,941
    
    
    
    52,225
    
    
    
    51,842Diluted
    
    
    52,298
    
    
    
    51,941
    
    
    
    52,225
    
    
    
    51,842
 .
 2




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##### Table of Contents



THE MEDICINES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months EndedSeptember 30,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (2,735
    )
    
    $
    (4,307
    )Adjustments to reconcile net loss to net cash (used in) provided by operating
activities:Depreciation and amortization
    
    
    4,331
    
    
    
    1,916Acquired in-process research and development
    
    
    
    
    
    
    21,373Amortization of net premiums and discounts on available for sale securities
    
    
    1,460
    
    
    
    (254
    )Unrealized foreign currency transaction losses, net
    
    
    559
    
    
    
    127Non-cash stock compensation expense
    
    
    15,328
    
    
    
    17,375Loss on disposal of fixed assets
    
    
    11
    
    
    
    Gain on sales of available for sale securities
    
    
    
    
    
    
    (48
    )Deferred tax provision
    
    
    4,900
    
    
    
    754Tax effect of option exercises
    
    
    (928
    )
    
    
    193Adjustment to contingent purchase price (see note 8)
    
    
    (442
    )
    
    
    Changes in operating assets and liabilities:Accrued interest receivable
    
    
    468
    
    
    
    260Accounts receivable
    
    
    (10,547
    )
    
    
    (15,686
    )Inventory
    
    
    8,944
    
    
    
    9,930Prepaid expenses and other current assets
    
    
    1,283
    
    
    
    (5,976
    )Other assets
    
    
    
    
    
    
    Accounts payable
    
    
    (10,725
    )
    
    
    (2,698
    )Accrued expenses
    
    
    (8,988
    )
    
    
    (20,318
    )Deferred revenue
    
    
    (6,319
    )
    
    
    10,005Other liabilities
    
    
    (104
    )
    
    
    Net cash (used in) provided by operating activities
    
    
    (3,504
    )
    
    
    12,646Cash flows from investing activities:Purchases of available for sale securities
    
    
    (108,883
    )
    
    
    (118,228
    )Maturities and sales of available for sale securities
    
    
    121,510
    
    
    
    124,352Purchases of fixed assets
    
    
    (287
    )
    
    
    (3,624
    )Acquisition of intangible assets
    
    
    
    
    
    
    (2,000
    )Investment in pharmaceutical company
    
    
    
    
    
    
    (5,000
    )Acquisition of business, net of cash acquired
    
    
    (37,229
    )
    
    
    (23,534
    )Decrease in restricted cash
    
    
    (1,709
    )
    
    
    Net cash used in investing activities
    
    
    (26,598
    )
    
    
    (28,034
    )Cash flows from financing activities:Proceeds from issuances of common stock, net
    
    
    1,803
    
    
    
    5,525Net cash provided by financing activities
    
    
    1,803
    
    
    
    5,525Effect of exchange rate changes on cash
    
    
    (794
    )
    
    
    93Decrease in cash and cash equivalents
    
    
    (29,093
    )
    
    
    (9,770
    )Cash and cash equivalents at beginning of period
    
    
    81,018
    
    
    
    88,127Cash and cash equivalents at end of period
    
    $
    51,925
    
    
    $
    78,357Supplemental disclosure of cash flow information:Interest paid
    
    $
    
    
    
    $
    Taxes paid
    
    $
    354
    
    
    $
    2,435Supplemental disclosure of non-cash investing activities:Fixed asset additions included in current liabilities
    
    $
    
    
    
    $
    201
 .
 3




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##### Table of Contents



THE MEDICINES COMPANY
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 ® ® ® ®
 1. Nature of Business
 ® ®
 2. Significant Accounting Policies
  Basis of Presentation
    4




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##### Table of Contents



Use of Estimates
  Revenue Recognition
 Product Sales
      
    
    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 September 30, 2009 and December 31, 2008, the Companys accrual for product returns
was $0.2 million and $1.0 million, respectively. Included within the accrual at 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 product
returns would have had less than a $0.1 million effect on the
Companys reported net revenue for the nine months ended September 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 $2.8 million and $1.2 million at
September 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 nine months ended September 30, 2009. The Companys accrual for
rebates was nil and $0.4 million at September 30, 2009 and December 31, 2008, respectively.
    
    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 $3.2 million and $2.0 million at September 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 nine months ended September 30, 2009.
  International Distributors
 Revenue from Collaborations
 Subsequent Events
  Recent Accounting Pronouncements
      5




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##### Table of Contents



3. Stock-Based Compensation
    4. Earnings (Loss) per Share
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands, except per share amounts)Basic and dilutedNet loss
    
    $
    (3,197
    )
    
    $
    (13,217
    )
    
    $
    (2,735
    )
    
    $
    (4,307
    )Weighted average common shares outstanding, basic
    
    
    52,789
    
    
    
    52,136
    
    
    
    52,671
    
    
    
    52,027Less: unvested restricted common shares outstanding
    
    
    491
    
    
    
    195
    
    
    
    446
    
    
    
    185Net weighted average common shares outstanding, basic
    
    
    52,298
    
    
    
    51,941
    
    
    
    52,225
    
    
    
    51,842Plus: net effect of dilutive stock options and
restricted common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares outstanding, diluted
    
    
    52,298
    
    
    
    51,941
    
    
    
    52,225
    
    
    
    51,842Loss per share, basic
    
    $
    (0.06
    )
    
    $
    (0.25
    )
    
    $
    (0.05
    )
    
    $
    (0.08
    )Loss per share, diluted
    
    $
    (0.06
    )
    
    $
    (0.25
    )
    
    $
    (0.05
    )
    
    $
    (0.08
    )
  6




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##### Table of Contents



Three Months Ended September 30,
    
    Nine Months Ended September 30,2009
    
    2008
    
    2009
    
    2008(in thousands)Weighted average options outstanding
    
    
    11,392
    
    
    
    10,611
    
    
    
    11,339
    
    
    
    9,924Weighted average options included in
computation of diluted earnings per
share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average options considered
anti-dilutive and excluded from the
computation of diluted earnings per
share
    
    
    11,392
    
    
    
    10,611
    
    
    
    11,339
    
    
    
    9,924Weighted average restricted shares
outstanding
    
    
    491
    
    
    
    195
    
    
    
    446
    
    
    
    185Weighted average restricted shares
included in computation of diluted
earnings per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average restricted shares
considered anti-dilutive and excluded
from the computation of earnings per
share
    
    
    491
    
    
    
    195
    
    
    
    446
    
    
    
    185
 5. Comprehensive (Loss) Income
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,Comprehensive Loss
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Net loss
    
    $
    (3,197
    )
    
    $
    (13,217
    )
    
    $
    (2,735
    )
    
    $
    (4,307
    )Unrealized loss on available for sale securities
    
    
    (244
    )
    
    
    (680
    )
    
    
    (1,004
    )
    
    
    (824
    )Foreign currency translation adjustment
    
    
    132
    
    
    
    30
    
    
    
    (168
    )
    
    
    (9
    )Comprehensive loss
    
    $
    (3,309
    )
    
    $
    (13,867
    )
    
    $
    (3,907
    )
    
    $
    (5,140
    )
 6. Income Taxes
   7




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##### Table of Contents



7. Investment
  8. Acquisitions
 Targanta Therapeutics Corporation
   
    
    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.
 8




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##### Table of Contents




    
    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
    
    
    69,500Goodwill
    
    
    26,035Other 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
     9




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##### Table of Contents



Project
    
    (in thousands)cSSSI
    
    $
    54,000Bacteremia
    
    
    5,900Anthrax
    
    
    6,400C Difficile
    
    
    3,200Total
    
    $
    69,500
   Three Months Ended September 30,
    
    Nine Months Ended September 30,2009
    
    2008
    
    2009
    
    2008(in thousands, except per share amounts)Net revenue
    
    $
    98,789
    
    
    $
    88,126
    
    
    $
    302,181
    
    
    $
    254,285Income (loss) from operations
    
    
    659
    
    
    
    (33,275
    )
    
    
    (10,995
    )
    
    
    (55,675
    )Net income (loss)
    
    
    (3,197
    )
    
    
    (25,685
    )
    
    
    (13,851
    )
    
    
    (50,635
    )Basic and diluted loss per share:Basic earnings (loss) per share
    
    $
    (0.06
    )
    
    $
    (0.49
    )
    
    $
    (0.27
    )
    
    $
    (0.98
    )Diluted earnings (loss) per share
    
    $
    (0.06
    )
    
    $
    (0.49
    )
    
    $
    (0.27
    )
    
    $
    (0.98
    )Weighted average number of common shares outstanding:Basic
    
    
    52,298
    
    
    
    51,941
    
    
    
    52,225
    
    
    
    51,842Diluted
    
    
    52,298
    
    
    
    51,941
    
    
    
    52,225
    
    
    
    51,842
  Curacyte Discovery GmbH
  
  10




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##### Table of Contents



(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
  9. Nycomed Agreements
      11




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10. Cash, Cash Equivalents and Available for Sale Securities
    As of September 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
    
    $
    107,557
    
    
    $
    107,697
    
    
    $
    107,697
    
    
    $
    140
    
    
    $
    107,513
    
    
    $
    108,491
    
    
    $
    108,491
    
    
    $
    978Corporate debt
securities
    
    $
    12,356
    
    
    $
    12,398
    
    
    $
    12,398
    
    
    $
    42
    
    
    $
    26,487
    
    
    $
    26,697
    
    
    $
    26,697
    
    
    $
    210Total$
    119,913
    
    
    $
    120,095
    
    
    $
    120,095
    
    
    $
    182
    
    
    $
    134,000
    
    
    $
    135,188
    
    
    $
    135,188
    
    
    $
    1,188
 Restricted Cash
  12




---



##### Table of Contents



11. Inventory
   September 30,
    
    
    December 31,Inventory
    
    2009
    
    
    2008(in thousands)Raw materials
    
    $
    4,444
    
    
    $
    10,003Work-in-progress
    
    
    7,150
    
    
    
    10,334Finished goods
    
    
    7,846
    
    
    
    7,892Total
    
    $
    19,440
    
    
    $
    28,229
  12. Intangible Assets and Goodwill
  As of September 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(1)
    
    8 years
    
    $
    7,457
    
    
    $
    718
    
    
    $
    6,739
    
    
    $
    7,457
    
    
    $
    288
    
    
    $
    7,169Distribution
agreements(1)
    
    8 years
    
    
    4,448
    
    
    
    428
    
    
    
    4,020
    
    
    
    4,448
    
    
    
    171
    
    
    
    4,277Trademarks(1)
    
    8 years
    
    
    3,024
    
    
    
    291
    
    
    
    2,733
    
    
    
    3,024
    
    
    
    116
    
    
    
    2,908Cleviprex
milestones(2)
    
    13 years
    
    
    2,000
    
    
    
    21
    
    
    
    1,979
    
    
    
    2,000
    
    
    
    5
    
    
    
    1,995Total
    
    9 years
    
    $
    16,929
    
    
    $
    1,458
    
    
    $
    15,471
    
    
    $
    16,929
    
    
    $
    580
    
    
    $
    16,349
 
 (1)
    
    The Company amortizes intangible assets related to Angiox based on the ratio
of annual forecasted revenue compared to total forecasted revenue from the sale of Angiox
through the end of its patent life.(2)
    
    The Company amortizes intangible assets related to the Cleviprex approval over the
remaining life of the patent.  13




---



##### Table of Contents



As of September 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
    
    $
    69,500
    
    
    $
    
    
    
    $
    69,500
    
    
    $
    
    
    
    $
    
    
    
    $
    Total
    
    $
    69,500
    
    
    $
    
    
    
    $
    69,500
    
    
    $
    
    
    
    $
    
    
    
    $
    
  September 30,
    
    
    December 31,2009
    
    
    2008(in thousands)Balance at beginning of period
    
    $
    
    
    
    $
    Goodwill acquired during the year
    
    
    26,035
    
    
    
    Balance at end of period
    
    $
    26,035
    
    
    $
    
  13. 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 8). The fair value of the contingent
purchase price was determined utilizing a probability weighted
discounted financial model.
 14




---



##### Table of Contents



SignificantQuoted Prices In
    
    
    Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    Inputs
    
    
    Balance atAssets and Liabilities
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    September 30, 2009(in thousands)Assets:Money market
    
    $
    31,364
    
    
    $
    
    
    
    $
    
    
    
    $
    31,364U.S. government agency
    
    
    
    
    
    
    107,697
    
    
    
    
    
    
    
    107,697Corporate debt securities
    
    
    
    
    
    
    12,398
    
    
    
    
    
    
    
    12,398Total assets at fair value
    
    $
    31,364
    
    
    $
    120,095
    
    
    $
    
    
    
    $
    151,459Liabilities:Contingent purchase price
    
    $
    
    
    
    $
    
    
    
    $
    22,741
    
    
    $
    22,741Total liabilities at fair value
    
    $
    
    
    
    $
    
    
    
    $
    22,741
    
    
    $
    22,741
  Level 3(in thousands)Balance at December 31, 2008
    
    $
    Contingent purchase price related to acquisition of Targanta
    
    
    23,183Fair value adjustment to contingent purchase price included
in net loss
    
    
    (442
    )Balance at September 30, 2009
    
    $
    22,741
 14. Segment and Geographic Information
   Three Months Ended September 30,
    
    
    
    
    
    
    Nine Months Ended September 30,2009
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    2009
    
    
    
    
    
    
    2008(in thousands)Net revenue:United States
    
    $
    93,317
    
    
    
    94.5
    %
    
    $
    84,979
    
    
    
    96.4
    %
    
    $
    289,044
    
    
    
    95.6
    %
    
    $
    246,317
    
    
    
    96.9
    %Europe
    
    
    2,915
    
    
    
    2.9
    %
    
    
    2,247
    
    
    
    2.6
    %
    
    
    8,692
    
    
    
    2.9
    %
    
    
    4,981
    
    
    
    1.9
    %Other
    
    
    2,557
    
    
    
    2.6
    %
    
    
    900
    
    
    
    1.0
    %
    
    
    4,445
    
    
    
    1.5
    %
    
    
    2,987
    
    
    
    1.2
    %Total net revenue
    
    
    98,789
    
    
    
    
    
    
    
    88,126
    
    
    
    
    
    
    
    302,181
    
    
    
    
    
    
    
    254,285
 September 30,
    

    
    
    
    

    
    December 31,2009
    

    
    
    
    
    
    2008(in thousands)Long-lived assets:United States
    
    $
    142,399
    
    
    
    98.5
    %
    
    $
    47,308
    
    
    
    96.7
    %Europe
    
    
    1,750
    
    
    
    1.2
    %
    
    
    1,609
    
    
    
    3.3
    %Other
    
    
    392
    
    
    
    0.3
    %
    
    
    
    
    
    
    
    %Total long-lived assets
    
    $
    144,541
    
    
    
    
    
    
    $
    48,917
 15




---



##### Table of Contents



15. Relocation of Principal Offices
  16. Contingencies
   17. Subsequent Events
  16




---



##### 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
 ® ®
 ®
   17




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##### Table of Contents



Distribution and Sales
     18




---



##### 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 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.
  19




---



##### Table of Contents



Curacyte Discovery Acquisition
  
  Licensing Arrangement with Eagle
  Results of Operations
 Three Months Ended September 30, 2009 and 2008
 Net Revenue:
  Net Revenue
 Three Months Ended September 30,Change
    
    
    Change2009
    
    
    2008
    
    
    $
    
    
    %(in thousands)
    
    
    (in thousands)
    
    
    (in thousands)Net RevenueAngiomax and CleviprexU.S net revenue
    
    $
    93,317
    
    
    $
    84,979
    
    
    $
    8,338
    
    
    
    9.8
    %AngiomaxInternational net revenue
    
    
    5,472
    
    
    
    2,556
    
    
    
    2,916
    
    
    
    114.1
    %Revenue from collaborations, net
    
    
    
    
    
    
    591
    
    
    
    (591
    )
    
    
    (100
    )%Total net revenue
    
    $
    98,789
    
    
    $
    88,126
    
    
    $
    10,663
    
    
    
    12.1
    %
 20




---



##### Table of Contents



Cost of Revenue:
  Cost of Revenue
 Three Months Ended September 30,% of Total
    
    
    
    
    
    
    % of Total2009
    
    
    Cost
    
    
    2008
    
    
    Cost(in thousands)
    
    
    
    
    
    
    (in thousands)Cost of RevenueManufacturing
    
    $
    6,830
    
    
    
    24
    %
    
    $
    5,269
    
    
    
    24
    %Royalty
    
    
    18,755
    
    
    
    66
    %
    
    
    13,747
    
    
    
    62
    %Logistics
    
    
    2,723
    
    
    
    10
    %
    
    
    3,073
    
    
    
    14
    %Total Cost of Revenue
    
    $
    28,308
    
    
    
    100
    %
    
    $
    22,089
    
    
    
    100
    %
 Research and Development Expenses:
  21




---



##### Table of Contents



Research and Development Spending
 Three Months Ended September 30,% of
    
    
    
    
    
    
    % of2009
    
    
    Total R&D
    
    
    2008
    
    
    Total R&D(in thousands)
    
    
    
    
    
    
    (in thousands)Research and DevelopmentAngiomaxClinical trials
    
    $
    1,008
    
    
    
    5
    %
    
    $
    1,253
    
    
    
    3
    %Manufacturing development
    
    
    2,896
    
    
    
    13
    %
    
    
    968
    
    
    
    2
    %Administrative and headcount costs
    
    
    926
    
    
    
    4
    %
    
    
    1,035
    
    
    
    2
    %Total Angiomax
    
    
    4,830
    
    
    
    22
    %
    
    
    3,256
    
    
    
    7
    %CleviprexClinical trials
    
    
    563
    
    
    
    3
    %
    
    
    925
    
    
    
    2
    %Manufacturing development
    
    
    744
    
    
    
    3
    %
    
    
    322
    
    
    
    1
    %Administrative and headcount costs
    
    
    1,158
    
    
    
    5
    %
    
    
    1,301
    
    
    
    3
    %Total Cleviprex
    
    
    2,465
    
    
    
    11
    %
    
    
    2,548
    
    
    
    6
    %CangrelorClinical trials
    
    
    2,796
    
    
    
    12
    %
    
    
    10,907
    
    
    
    25
    %Manufacturing development
    
    
    512
    
    
    
    2
    %
    
    
    623
    
    
    
    1
    %Administrative and headcount costs
    
    
    1,036
    
    
    
    5
    %
    
    
    1,192
    
    
    
    3
    %Total Cangrelor
    
    
    4,344
    
    
    
    19
    %
    
    
    12,722
    
    
    
    29
    %CU2010Clinical trials
    
    
    833
    
    
    
    4
    %
    
    
    
    
    
    
    0
    %Manufacturing development
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Administrative and headcount
    
    
    742
    
    
    
    3
    %
    
    
    386
    
    
    
    1
    %Acquisition related in-process
research and development
    
    
    
    
    
    
    0
    %
    
    
    21,373
    
    
    
    48
    %Government subsidy
    
    
    (1,024
    )
    
    
    (4
    )%
    
    
    
    
    
    
    0
    %Total CU2010
    
    
    551
    
    
    
    3
    %
    
    
    21,759
    
    
    
    49
    %OritavancinClinical trials
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Manufacturing development
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Administrative and headcount
    
    
    2,542
    
    
    
    11
    %
    
    
    
    
    
    
    0
    %Total Oritavancin
    
    
    2,542
    
    
    
    11
    %
    
    
    
    
    
    
    0
    %Other
    
    
    7,732
    
    
    
    34
    %
    
    
    3,790
    
    
    
    9
    %Total
    
    $
    22,464
    
    
    
    100
    %
    
    $
    44,075
    
    
    
    100
    %
 Angiomax
  22




---



##### Table of Contents



Cleviprex
   Cangrelor
   CU2010
  Oritavancin
  23




---



##### Table of Contents



Other
    
    
    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:
 Three Months Ended September 30,Change
    
    Change2009
    
    2008
    
    $
    
    %(in thousands)Selling,
general and
administrative
expenses
    
    $
    47,358
    
    
    $
    42,865
    
    
    $
    4,493
    
    
    
    10.5
    %
 24




---



##### Table of Contents



Other Income:
 Three Months Ended September 30,Change
    
    Change2009
    
    2008
    
    $
    
    %(in thousands)Other income
    
    $
    151
    
    
    $
    1,070
    
    
    $
    (919
    )
    
    
    (85.9
    )%
  (Provision for) benefit from Income Tax:
 Three Months Ended September 30,Change
    
    Change2009
    
    2008
    
    $
    
    %(in thousands)(Provision
for ) benefit
from income tax
    
    $
    (4,007
    )
    
    $
    6,616
    
    
    $
    10,623
    
    
    
    160.6
    %
  Nine Months Ended September 30, 2009 and 2008
 Net Revenue:
  25




---



##### Table of Contents



Net Revenue
 Nine Months Ended September 30,Change
    
    
    ChangeNet Revenue
    
    2009
    
    
    2008
    
    
    $
    
    
    %(in thousands)Angiomax and CleviprexU.S. sales
    
    $
    289,044
    
    
    $
    246,317
    
    
    $
    42,727
    
    
    
    17.3
    %AngiomaxInternational net revenue
    
    
    13,137
    
    
    
    4,644
    
    
    
    8,493
    
    
    
    182.9
    %Revenue from collaborations, net
    
    
    
    
    
    
    3,324
    
    
    
    (3,324
    )
    
    
    (100
    )%Total net revenue
    
    $
    302,181
    
    
    $
    254,285
    
    
    $
    47,896
    
    
    
    18.8
    %
    Cost of Revenue:
   Cost of Revenue
 Nine Months Ended September 30,% of Total
    
    
    
    
    
    
    % of TotalCost of Revenue
    
    2009
    
    
    Cost
    
    
    2008
    
    
    Cost(in thousands)
    
    
    
    
    
    
    (in thousands)Manufacturing
    
    $
    19,675
    
    
    
    23
    %
    
    $
    15,391
    
    
    
    24
    %Royalty
    
    
    58,375
    
    
    
    67
    %
    
    
    39,438
    
    
    
    63
    %Logistics
    
    
    8,908
    
    
    
    10
    %
    
    
    8,292
    
    
    
    13
    %Total Cost of Revenue
    
    $
    86,958
    
    
    
    100
    %
    
    $
    63,121
    
    
    
    100
    %
 26




---



##### Table of Contents



Research and Development Expenses:
   Research and Development Spending
 Nine Months Ended September 30,% of
    
    
    
    
    
    
    % ofResearch and Development
    
    2009
    
    
    Total R&D
    
    
    2008
    
    
    Total R&D(in thousands)
    
    
    
    
    
    
    (in thousands)AngiomaxClinical trials
    
    $
    2,722
    
    
    
    4
    %
    
    $
    4,030
    
    
    
    5
    %Manufacturing development
    
    
    6,530
    
    
    
    10
    %
    
    
    2,853
    
    
    
    3
    %Administrative and headcount costs
    
    
    3,536
    
    
    
    5
    %
    
    
    2,436
    
    
    
    3
    %Total Angiomax
    
    
    12,788
    
    
    
    19
    %
    
    
    9,319
    
    
    
    11
    %CleviprexClinical trials
    
    
    4,116
    
    
    
    6
    %
    
    
    1,815
    
    
    
    2
    %Manufacturing development
    
    
    1,360
    
    
    
    2
    %
    
    
    1,811
    
    
    
    2
    %Administrative and headcount costs
    
    
    4,059
    
    
    
    6
    %
    
    
    3,822
    
    
    
    5
    %Total Cleviprex
    
    
    9,535
    
    
    
    14
    %
    
    
    7,448
    
    
    
    9
    %CangrelorClinical trials
    
    
    19,730
    
    
    
    29
    %
    
    
    28,551
    
    
    
    35
    %Manufacturing development
    
    
    2,500
    
    
    
    3
    %
    
    
    1,773
    
    
    
    2
    %Administrative and headcount costs
    
    
    3,388
    
    
    
    5
    %
    
    
    3,694
    
    
    
    4
    %Total Cangrelor
    
    
    25,618
    
    
    
    37
    %
    
    
    34,018
    
    
    
    41
    %CU2010Clinical trials
    
    
    833
    
    
    
    1
    %
    
    
    
    
    
    
    0
    %Manufacturing development
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Administrative and headcount costs
    
    
    2,621
    
    
    
    4
    %
    
    
    386
    
    
    
    1
    %Acquisition related in-process
research and development
    
    
    
    
    
    
    0
    %
    
    
    21,373
    
    
    
    26
    %Government subsidy
    
    
    (1,024
    )
    
    
    (1
    )%
    
    
    
    
    
    
    0
    %Total CU2010
    
    
    2,430
    
    
    
    4
    %
    
    
    21,759
    
    
    
    27
    %OritavancinClinical trials
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Manufacturing development
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %Administrative and headcount
    
    
    4,461
    
    
    
    6
    %
    
    
    
    
    
    
    0
    %Total Oritavancin
    
    
    4,461
    
    
    
    6
    %
    
    
    
    
    
    
    0
    %Other
    
    
    13,853
    
    
    
    20
    %
    
    
    9,974
    
    
    
    12
    %Total
    
    $
    68,685
    
    
    
    100
    %
    
    $
    82,518
    
    
    
    100
    %
 27




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##### Table of Contents



Angiomax
  Cleviprex
  Cangrelor
  CU2010
  Oritavancin
  Other
  28




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##### Table of Contents



Selling, General and Administrative Expenses:
 Nine Months Ended September 30,Change
    
    Change2009
    
    2008
    
    $
    
    %(in thousands)Selling,
general and
administrative
expenses
    
    $
    146,863
    
    
    $
    117,004
    
    
    $
    29,859
    
    
    
    25.5
    %
  Other Income:
 Nine Months Ended September 30,Change
    
    Change2009
    
    2008
    
    $
    
    %(in thousands)Other income
    
    $
    2,055
    
    
    $
    5,256
    
    
    $
    (3,201
    )
    
    
    (60.9
    )%
  Provision for Income Tax:
 Nine Months Ended September 30,Change
    
    Change2009
    
    2008
    
    $
    
    %(in thousands)Provision for income tax
    
    $
    4,465
    
    
    $
    1,205
    
    
    $
    3,260
    
    
    
    270.5
    %
  29




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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, CU2010 and
a ready-to-use formulation of Argatroban;
    
    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;
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
    
    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 cash
payments to former Targanta shareholders; and
    
    our ability to defend and enforce our intellectual property rights.
  Certain Contingencies
  Contractual Obligations
  31




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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.
  Income Taxes
  
    
    our deferred tax assets primarily relate to net operating losses incurred by us, the
oldest of which will not expire until 2018;
    
    we were in a cumulative U.S. income position for the year ended December 31, 2008;
    
    our most recent projections of pre-tax income support the carrying value of the
existing deferred tax assets;
    
    after adjusting for specific non-recurring business development transactions such as
the Nycomed and Curacyte acquisitions, which we believe are not indicative of future
operating results, our adjusted cumulative income for the year ended December 31, 2008
would have been significant and would have approximated its planned net income for those
periods;
    
    during the third quarter of 2008, our second product, Cleviprex, was approved for
sale in the United States and we expect Cleviprex to generate revenue well past the
expiration of the principal patent covering Angiomax;
    
    while unsettled, if legislative actions in Congress provide the U.S. Patent and
Trademark Office with discretion to consider patent extension applications filed late
unintentionally under the Hatch-Waxman Act, we expect future operations and profit
levels during the period of Angiomax exclusivity to be positively impacted;
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
    
    we have a limited history of sustained profitability in part as a result of the
Targanta and Curacyte acquisitions;
    
    Angiomax market exclusivity ends in September 2010;
    
    the commercial success of our product candidates is not assured; and
    
    if legislative actions in Congress do not provide the U.S. Patent and Trademark
Office with discretion to consider patent extension applications filed late
unintentionally under the Hatch-Waxman Act, we expect future operations and profit
levels during the period of Angiomax exclusivity to be negatively impacted.
  Off-Balance Sheet Transactions
  Effect of Recent Accounting Pronouncements
  Forward-Looking Information
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  33




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Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 Part II. Other Information
 
 Item 1. Legal Proceedings
  Teva Parenteral Medicines, Inc.
   34




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##### Table of Contents



Pliva Hrvatska d.o.o.
   APP Pharmaceuticals, LLC
   
 Item 1A. Risk Factors
 Investing in our common stock involves a high degree of risk. You should carefully consider
the risks and uncertainties described below in addition to the other information included or
incorporated by reference in this quarterly report. If any of the following risks actually occur,
our business, financial condition or results of operations would likely suffer. In that case, the
trading price of our common stock could fall.
 An updated description of the risk factors associated with our business is set forth below.
These risk factors have been updated from those included in our Annual Report on Form 10-K , to,
among other things, update the risk factor regarding the dependency of near-term growth in Angiomax
sales on acceptance of clinical data, the risk factor related to our ability to obtain and maintain
patent protection for the intellectual property relating to our products, and the risk factor
regarding our ability to acquire and develop additional product candidates or approved product.
 Risks Related to Our Financial Results
 We have a history of net losses and may not maintain profitability on an annual basis
  35




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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 to sell and market Angiox in Europe;
    
    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
  36




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
    
    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 and our licensing arrangement for the rights to a
ready-to-use formulation of Argatroban;
    
    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.
  37




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##### Table of Contents



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
   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
  38




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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
   We face substantial competition, which may result in others discovering, developing or
commercializing competing products before or more successfully than we do
  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.
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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.
  Our ability to generate future revenue from products will be affected by reimbursement and
drug pricing
    40




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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.
  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
    41




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Risks Related to Regulatory Matters
 If we do not obtain regulatory approvals for our product candidates, we will not be able to
market our product candidates and our ability to generate additional revenue could be materially
impaired
  
    
    delay or prevent the successful commercialization of any of our product candidates;
    
    diminish our competitive advantage; and
    
    defer or decrease our receipt of revenue.
  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
  42




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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
    
    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
  43




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##### Table of Contents




    
    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
     44




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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
     
    
    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.
 45




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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
  46




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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.
   47




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48




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##### Table of Contents



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
    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
  49




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##### Table of Contents




    
    manufactured or produced economically;
    
    successfully commercialized; or
    
    widely accepted in the marketplace.
  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
  50




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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;
    
    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
  51




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Item 5. Other Information
  
    
    a lump sum payment equal to two years of his current annual base salary, less all
applicable statutory tax withholdings and deductions;
    
    for the shorter of a period of twelve months after the termination date or until Mr.
Kelley commences employment with a new employer, reimbursement of COBRA health insurance
premiums actually paid by Mr. Kelley and payment for reasonable outplacement services; and
    
    accelerated vesting of all stock options that Mr. Kelley held immediately prior to
termination which would have vested within two year after the termination date if Mr. Kelley
had continued to be employed by us during such two-year period.
  
 Item 6. Exhibits
  
 52




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##### Table of Contents



SIGNATURES
  THE MEDICINES COMPANYDate: November 9, 2009
    By:
    /s/ Glenn P. SblendorioGlenn P. SblendorioExecutive Vice President and Chief Financial
Officer (Principal Financial and Accounting
Officer) 53




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EXHIBIT INDEX
 Exhibit Number
    
    Description10.1
    
    Severance Agreement dated October 22, 2009 by and between
John P. Kelley and the registrant10.2
    
    Amendment No 3 to the Amended and Restated Distribution
Agreement dated August 12, 2009 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. 54