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The Medicines Company Reports Fourth-Quarter and Full Year 2018 Business and Financial Results

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  • Continued progress in inclisiran's development, with no material
    safety issues to date, paves the way for topline pivotal trial
    readouts expected in 3Q
  • Inclisiran's unique profile, vast global market opportunity and
    long-dated exclusivity set the stage for significant shareholder value
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The Medicines Company (NASDAQ:MDCO) today reported its financial
results for the fourth quarter and full year ended December 31, 2018.

"During 2018 we successfully restructured our business and executed on
our development plan for inclisiran, a first-in-class drug candidate
with the potential to deliver potent, durable, and consistent lowering
of LDL-C levels via twice-a-year dosing. 2019 is an exciting year for
The Medicines Company, as we count down to topline Phase 3 ORION program
results in the third quarter and subsequent NDA and MAA submissions,"
said Mark Timney, Chief Executive Officer of The Medicines Company.

Fourth quarter 2018 highlights and recent developments include the
following:

  • In January 2019, the Independent Data Monitoring Committee (IDMC) for
    the ongoing inclisiran Phase III clinical trials conducted its fifth
    planned review of un-blinded safety and efficacy data from the trials,
    and recommended that they continue as designed and conducted, without
    modification. At the time of the IDMC's review, more than 2,450
    patient years of safety data had been accumulated, with substantially
    all randomized patients having received three doses of inclisiran or
    placebo, and more than 2,000 patients having completed their 60-day
    follow up after the third dose of study medication.
  • In December 2018, the Company announced and subsequently completed its
    offering of $172.5 million aggregate principal amount of 3.50%
    convertible senior notes due 2024 (inclusive of the over-allotment
    option). The net proceeds from the offering (inclusive of the full
    exercise of the over-allotment option) were $166.7 million, after
    deducting the commissions and the Company's offering expenses,
    significantly enhancing the company's capital position.

Fourth-Quarter 2018 Financial Summary from Continuing Operations

On a GAAP basis, loss from continuing operations in the fourth quarter
of 2018 was $44.3 million, or $0.60 per share, compared to a loss of
$159.4 million, or $2.19 per share, in the fourth quarter of 2017.
Included in loss from continuing operations for the fourth quarter of
2018 was a non-cash, mark-to-market reduction in fair value of
approximately $10.5 million associated with the Company's common stock
ownership in Melinta Therapeutics, Inc. (Melinta), offset by a $21.6
million gain from the sale of pre-clinical products associated with our
infectious disease business. On a non-GAAP basis, adjusted loss(1)
from continuing operations in the fourth quarter of 2018 was $45.6
million, or $0.62(1) per share, compared to a loss of $44.4
million, or $0.61(1) per share, in the fourth quarter of 2017.

Full Year 2018 Financial Summary from Continuing Operations

On a GAAP basis, loss from continuing operations for the full year 2018
was $235.2 million, or $3.20 per share, compared to a loss of $607.7
million, or $8.40 per share, for the full year 2017. Included in loss
from continuing operations for 2018 were non-cash, mark-to-market
reduction in fair value of approximately $51.9 million associated with
the Company's common stock ownership in Melinta; restructuring charges
of $11 million; and a $5.1 million non-cash impairment charge related to
fixed assets associated with the early-stage infectious disease
products, partially offset by a $21.6 million gain from the sale of
pre-clinical products associated with our infectious disease business,
and a $7.0 million gain from the sale of the Company's rights to branded
Angiomax in the United States to Sandoz Inc. On a non-GAAP basis,
adjusted loss (1) from continuing operations for 2018 was
$199.8 million, or $2.72(1) per share, compared to a loss of
$142.4 million, or $1.97(1) per share, for 2017.

(1) Adjusted net loss and adjusted loss per share from
continuing operations are non-GAAP financial performance measures with
no standardized definitions under U.S. GAAP. For further information and
a detailed reconciliation, refer to the "Non-GAAP Financial Performance
Measures" and "Reconciliations of GAAP to Adjusted Loss From Continuing
Operations and Adjusted Loss per Share" sections of this press release.

Full Year 2018 Financial Summary from Discontinued Operations

In the first quarter of 2018, the Company completed the sale of its
infectious disease business, consisting of the products Vabomere™,
Orbactiv® and Minocin® IV as well as line
extensions of those products, for $270 million in upfront consideration
(including Melinta common stock then valued at $55 million) and deferred
payments, tiered royalty payments of 5% to 25% on worldwide net sales of
Vabomere, Orbactiv and Minocin IV, and the assumption by Melinta of all
royalty, milestone and other payment obligations relating to those
products.

Net income from discontinued operations for the full year 2018 was
$112.1 million, compared to a net loss of $100.7 million for the full
year 2017. Net income from discontinued operations for 2018 included a
pre-tax gain of approximately $169.0 million from the sale of the
Company's infectious disease business to Melinta.

At December 31, 2018, the Company had $238.3 million in cash and cash
equivalents, compared to $151.4 million at the end of 2017.

Fourth-Quarter 2018 Conference Call and Webcast Information

The Company will host a conference call and webcast today, February 27,
2019 at 8:30 a.m., Eastern Standard Time, to discuss its fourth-quarter
and full-year 2018 financial results and provide clinical and
operational updates. The dial-in information to access the call is as
follows:

U.S./Canada:       (877) 407-0312
International: (201) 389-0899
Conference ID: 13687492
 

A taped replay of the conference call will be available after the call
concludes, and may be accessed by telephone as follows:

U.S./Canada:       (877) 660-6853
International: (201) 612-7415
Conference ID: 13687492
 

A live audio webcast of the conference call may be accessed in the "Investors"
section of The Medicines Company
website. An archived webcast will
be available after the call concludes.

About Inclisiran

Inclisiran is an investigational GalNAc-conjugated RNA interference
therapeutic, which inhibits the synthesis of PCSK9 protein in liver
cells, thereby reducing liver cell LDL receptor turnover, and lowering
plasma LDL-C.

The Medicines Company and Alnylam Pharmaceuticals, Inc. (Alnylam) are
collaborating in the advancement of inclisiran pursuant to their 2013
agreement. Under the terms of the agreement, Alnylam completed certain
pre-clinical studies and the Phase I clinical study, with The Medicines
Company leading and funding the development of inclisiran from Phase II
forward, as well as potential commercialization.

Commercial opportunity

In the US alone, 67.5 million individuals are estimated to have
sufficient cardiovascular risk to warrant lipid-lowering therapy. 27.5
million of these individuals are at a significantly elevated risk,
either because of confirmed cardiovascular disease or LDL-C levels above
190 mg/dl. Of this higher risk group, 15.1 million are currently treated
with lipid-lowering therapies, but only one out of five (or 2.4
million) is successfully reaching LDL-C targets with current therapies.
This implies a population of at least 12.7 million Americans who could
benefit from inclisiran, a first in class therapy with the potential to
deliver potent, durable and consistent lowering of LDL-C levels via
twice-a-year dosing.

About The Medicines Company

The Medicines Company is a biopharmaceutical company driven by an
overriding purpose – to save lives, alleviate suffering and contribute
to the economics of healthcare. The Company's goal is to create
transformational solutions to address the most pressing healthcare needs
facing patients, physicians, and providers in cardiovascular care. The
Company is headquartered in Parsippany, New Jersey. For more
information, please visit www.themedicinescompany.com
and follow us on Twitter @MDCONews.

Forward-Looking Statements

Statements contained in this press release about The Medicines Company
that are not purely historical, and all other statements that are not
purely historical, may be deemed to be forward-looking statements for
purposes of the safe harbor provisions under The Private Securities
Litigation Reform Act of 1995. Without limiting the foregoing, the words
"believes," "anticipates," "plans," "expects," "should," and
"potential," and similar expressions, are intended to identify
forward-looking statements. These forward-looking statements involve
known and unknown risks and uncertainties that may cause the Company's
actual results, levels of activity, performance or achievements to be
materially different from those expressed or implied by these
forward-looking statements. Important factors that may cause or
contribute to such differences include the ability of the Company to
effectively develop inclisiran; whether inclisiran will advance in the
clinical trials process on a timely basis or at all, or succeed in
achieving its specified endpoints; whether the Company will make
regulatory submissions for inclisiran on a timely basis; whether its
regulatory submissions will receive approvals from regulatory agencies
on a timely basis or at all; the extent of the commercial success of
inclisiran, if approved; the strength, durability and life of the
Company's patent protection for inclisiran and whether the Company will
be successful in extending exclusivity; and such other factors as are
set forth in the risk factors detailed from time to time in the
Company's periodic reports and registration statements filed with the
Securities and Exchange Commission (SEC), including, without limitation,
the risk factors detailed in the Company's Current Report on Form 8-K
filed with the SEC on December 12, 2018, which are incorporated herein
by reference. The Company specifically disclaims any obligation to
update these forward-looking statements.

NON-GAAP FINANCIAL PERFORMANCE MEASURES

In addition to financial information prepared in accordance with U.S.
GAAP, this press release also contains adjusted loss from continuing
operations and adjusted loss per share from continuing operations
attributable to The Medicines Company. The Company believes these
measures provide investors and management with supplemental information
relating to operating performance and trends that facilitate comparisons
between periods and with respect to projected information.

Adjusted loss from continuing operations excludes share-based
compensation expense, amortization of acquired intangible assets, asset
impairment charges, inventory adjustments, restructuring charges,
charges and gains associated with product discontinuance, changes in
contingent purchase price, milestone payments, legal settlements,
changes in short-term investments and non-cash interest expense. The
Company believes these non-GAAP financial measures help indicate
underlying trends in the Company's business and are important in
comparing current results with prior period results and understanding
projected operating performance. Non-GAAP financial measures provide the
Company and its investors with an indication of the Company's baseline
performance before items that are considered by the Company not to be
reflective of the Company's ongoing results. See the attached
"Reconciliations of GAAP to Adjusted Loss from Continuing Operations and
Adjusted Loss per Share" for explanations of the amounts excluded and
included to arrive at adjusted net loss and adjusted loss per share
amounts for the three- and twelve-months ended December 31, 2018 and
2017.

These adjusted measures are non-GAAP and should be considered in
addition to, but not as a substitute for, the information prepared in
accordance with U.S. GAAP. The Company strongly encourages investors to
review its consolidated financial statements and publicly-filed reports
in their entirety and cautions investors that the non-GAAP measures used
by the Company may differ from similar measures used by other companies,
even when similar terms are used to identify such measures.

         

THE MEDICINES COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

(In thousands, except per share amounts)

 
Three Months Ended
December 31,
Year Ended
December 31,
2018     2017 2018     2017
Net revenues $ $ 8,595 $ 6,138 $ 44,789
Operating expenses:
Cost of revenues 697 20,438 7,255 47,193
Asset impairment charges 63,000 5,073 392,097
Research and development 29,611 55,600 133,007 138,370
Selling, general and administrative (4,576)   29,644   52,214   132,225  
Total operating expenses 25,732   168,682   197,549   709,885  
Loss from operations (25,732 ) (160,087 ) (191,411 ) (665,096 )
Co-promotion and license income 266 5,266 1,019 7,549
Loss on short-term investment (10,465 ) (51,881 )
Interest expense (12,913 ) (11,811 ) (49,411 ) (48,564 )
Other income 1,039   248   5,580   1,840  
Loss from continuing operations before income taxes (47,805 ) (166,384 )

(286,104

) (704,271 )
Benefit from income taxes 3,513   6,968   50,888   96,576  
Loss from continuing operations (44,292 ) (159,416 ) (235,216 ) (607,695 )
Income (loss) from discontinued operations, net of tax 1,818   (18,846 ) 112,060   (100,678 )
Net loss $ (42,474 ) $ (178,262 ) $ (123,156 ) $ (708,373 )
 
Basic (loss) earnings per common share:
Loss from continuing operations $ (0.60 ) $ (2.19 ) $ (3.20 ) $ (8.40 )

Earnings (loss) from discontinued operations

0.02   (0.26 ) 1.52   (1.39 )
Basic loss per share $ (0.58)   $ (2.45 ) $ (1.68 ) $ (9.79 )
 
Diluted (loss) earnings per common share:
Loss from continuing operations $ (0.60 ) $ (2.19 ) $ (3.20 ) $ (8.40 )
Earnings (loss) from discontinued operations 0.02   (0.26 ) 1.52   (1.39 )
Diluted loss per share $ (0.58 ) $ (2.45 ) $ (1.68 ) $ (9.79 )
 
Weighted average number of common shares outstanding:
Basic 73,593 72,950 73,571 72,356
Diluted 73,593 72,950 73,571 72,356
 
           

THE MEDICINES COMPANY

BALANCE SHEET ITEMS

UNAUDITED

(In thousands)

         
December 31, 2018 December 31, 2017
Cash and cash equivalents $ 238,310 $ 151,359
Short-term investment $ 2,627 $
Total assets $ 841,686 $ 872,983
Convertible senior notes (due 2022, 2023 and 2024) $ 792,752 $ 649,198
The Medicines Company stockholders' (deficit) equity $ (22,264 ) $ 24,914
 
           

THE MEDICINES COMPANY

RECONCILIATIONS OF GAAP TO ADJUSTED LOSS FROM CONTINUING
OPERATIONS AND ADJUSTED LOSS PER SHARE

UNAUDITED

(In thousands, except per share amounts)

 
Three Months Ended
December 31,
Year Ended
December 31,
2018     2017 2018     2017
Loss from continuing operations $ (44,292 ) $ (159,416 ) $ (235,216 ) $ (607,695 )
Before tax adjustments:
Cost of product revenues:
Share-based compensation expense (1) 67 110 178 722
Amortization of acquired intangible assets (2) 4,486
Inventory adjustments (3) 14,661 (407 ) 11,348
Restructuring charges (4) (7 ) 565 (55 )
Market withdrawal of Ionsys (5) 8,458
Asset impairment charges
Asset Impairment (6) 5,073
Market withdrawal of Ionsys (5) 264,097
Discontinuance of MDCO 700 (7) 65,000
Impairment of contingent purchase price (8) 63,000 63,000
Research and development:
Share-based compensation expense (1) 841 556 4,409 2,906
Restructuring charges (4) (20 ) 1,435 3,080 1,794
Milestone charges (9) 20,000 20,000
Market withdrawal of Ionsys (5) 1,032
Selling, general and administrative:
Share-based compensation expense (1) 3,806 6,332 13,375 25,886
Restructuring charges (4) 223 2,341 7,355 3,348
Additional severance charges (10) 854 854
Changes in contingent purchase price (11) (258 ) 692
Gain on sale of pre-clinical ID products (12) (21,556 ) (21,556 )
Gain on sale of assets (13) (7,025 )
One-time facility charges (14) 685 685
Legal settlements (15) 3,550
Market withdrawal of Ionsys (5) 3,434
Discontinuance of MDCO 700 (7) (14,701 )
Other:
Non-cash interest expense (16) 7,389 6,543 27,915 26,868
Change in short-term investments (17) 10,010 48,652
Net loss tax adjustments (18) (3,623 )   (51,030 ) (22,988 )
Loss from continuing operations - Adjusted $ (45,616 ) $ (44,445 ) $ (199,801 ) $ (142,368 )
 
Loss from continuing operations per share - Adjusted
Basic $ (0.62 ) $ (0.61 ) $ (2.72 ) $ (1.97 )
Diluted $ (0.62 ) $ (0.61 ) $ (2.72 ) $ (1.97 )
Weighted average number of common shares outstanding:
Basic 73,593 72,950 73,571 72,356
Diluted 73,593 72,950 73,571 72,356
 
 
Explanation of Adjustments:
(1)   Excludes share-based compensation of $4,714 and $6,998 for the three
months ended December 31, 2018 and 2017 and $17,962 and $29,514 for
the year ended December 31, 2018 and 2017 because these expenses are
substantially dependent on changes in the market price of the
Company's common stock.
(2) Excludes amortization of intangible assets resulting from the
Incline Therapeutics transaction.
(3) Excludes all non-cash inventory adjustments.
(4) Excludes restructuring charges related to workforce reorganization
initiated in the first quarter 2018 and the sale of the non-core
cardiovascular products to Chiesi USA, Inc.
(5) Excludes charges associated with the voluntary discontinuation and
withdrawal of Ionsys from the market in the United States and
cessation of related commercial activities in 2017.
(6) Excludes non-cash asset impairment charges associated with the
pre-clinical infectious disease products.
(7) Excludes costs associated with the decision to discontinue the
MDCO-700 program.
(8) Excludes impairment of fair value of the contingent purchase price
related to the discontinuation of Raplixa by Mallinckrodt plc.
(9) Excludes upfront milestone payment for the first patient dosing in a
pivotal study of inclisiran.
(10) Excludes additional severance costs for employees excluded from the
initial restructuring plan.
(11) Excludes changes in fair value of the contingent price related to
the acquisition of Rempex Pharmaceuticals, Inc. that were not
included in the sale to Melinta.
(12) Excludes gain from the sale of pre-clinical infectious disease
products.
(13) Excludes gain from the sale of the Angiomax business in the United
States.
(14) Excludes one-time non cash charges associated with the Parsippany
facility.
(15) Excludes net loss from one-time legal settlements in 2018.
(16) Excludes non-cash interest expense which is in excess of the actual
interest expense paid on the convertible senior notes.
(17) Excludes changes in fair value with our investment in Melinta net of
guaranteed payment accretion associated with the sale of our
infectious disease business.
(18) Excludes the estimated non-cash tax effect related to adjustments
above.
 

In addition to the financial information prepared in accordance with
U.S. GAAP, this press release also contains adjusted financial measures
that the Company believes provide investors and management with
supplemental information relating to operating performance and trends
that facilitate comparisons between periods and with respect to
projected information.
These adjusted measures should be
considered in addition to, but not as a substitute for, the information
prepared in accordance with U.S. GAAP. The Company strongly encourages
investors to review its consolidated financial statements and publicly
filed reports in their entirety and cautions investors that the non-GAAP
measures used by the Company may differ from similar measures used by
other companies, even when similar terms are used to identify such
measures.

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