Edgar Filing: MEDICINES CO /DE

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 2003

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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THE MEDICINES COMPANY
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE 04-3324394
(State of Incorporation) (I.R.S. Employer
Identification Number)

FIVE SYLVAN WAY, SUITE 200
PARSIPPANY, NEW JERSEY 07054
(973) 656-1616
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
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CLIVE A. MEANWELL
EXECUTIVE CHAIRMAN
THE MEDICINES COMPANY
FIVE SYLVAN WAY, SUITE 200
PARSIPPANY, NEW JERSEY 07054
(973) 656-1616
(Name, Address, Including Zip Code, And Telephone Number,
Including Area Code, of Agent For Service)
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COPIES TO:

STUART M. FALBER, ESQ. PATRICK O'BRIEN, ESQ.
HALE AND DORR LLP ROPES & GRAY
60 STATE STREET ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02109 BOSTON, MASSACHUSETTS 02110
(617) 526-6000 (617) 951-7000

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE

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PROPOSED
AMOUNT PROPOSED MAXIMUM MAXIMUM
TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF SHARES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE

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Common Stock, $0.001 par value per
share................................. 4,600,000 $18.97 $87,262,000 $7,060
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(1) Includes 600,000 shares that the underwriters have the option to purchase to
cover over-allotments, if any.

(2) Estimated solely for purposes of calculating the amount of the registration
fee pursuant to Rule 457(c) under the Securities Act of 1933 and based upon
the average of the high and low sale prices reported on the Nasdaq National
Market on March 3, 2003.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
SHALL DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PROSPECTUS (Subject to Completion)
Issued March 5, 2003
4,000,000 Shares

[THE MEDICINES COMPANY LOGO]
COMMON STOCK
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THE MEDICINES COMPANY IS OFFERING 4,000,000 SHARES OF ITS COMMON STOCK.

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OUR COMMON STOCK IS QUOTED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL
"MDCO." ON FEBRUARY 28, 2003, THE REPORTED LAST SALE PRICE OF OUR COMMON STOCK
ON THE NASDAQ NATIONAL MARKET WAS $18.94 PER SHARE.

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INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7.
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PRICE $ A SHARE

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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS THE MEDICINES COMPANY
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Per Share....................................... $ $ $
Total........................................... $ $ $

The Medicines Company has granted the underwriters the right to purchase up to
an additional 600,000 shares of common stock to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares to purchasers on , 2003.

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Joint Bookrunning Managers

MORGAN STANLEY BEAR, STEARNS & CO. INC.
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CIBC WORLD MARKETS
, 2003

TABLE OF CONTENTS

PAGE
----

Prospectus Summary.................... 3
The Offering.......................... 5
Summary Consolidated Financial Data... 6
Risk Factors.......................... 7
Special Note Regarding Forward-Looking
Statements.......................... 17
Use of Proceeds....................... 17
Price Range of Common Stock........... 18
Dividend Policy....................... 18
Capitalization........................ 19
Dilution.............................. 20
Selected Consolidated Financial
Data................................ 21

PAGE
----

Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 29
Management............................ 48
Principal Stockholders................ 52
Underwriters.......................... 55
Legal Matters......................... 57
Experts............................... 57
Where You Can Find More Information... 58
Incorporation of Certain Information
by Reference........................ 58
Index to the Consolidated Financial
Statements.......................... F-1

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In this prospectus, the terms "we," "our," and "us" refer to The Medicines
Company and its subsidiaries, unless otherwise specified. You should rely only
on the information contained in this prospectus. We have not authorized anyone
to provide you with information different from that contained or incorporated by
reference in this prospectus. We are offering to sell, and seeking offers to
buy, shares of our common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding us and the common stock being sold in this offering,
including the "Risk Factors" section and our financial statements and
accompanying notes, which are included elsewhere in this prospectus.

THE MEDICINES COMPANY

We are a specialty pharmaceutical company with growing revenue from sales
of our first product, Angiomax, a direct thrombin inhibitor used as an
anticoagulant in patients undergoing coronary angioplasty. The United States
Food and Drug Administration, or FDA, approved Angiomax for use as an
anticoagulant in combination with aspirin in patients with unstable angina
undergoing coronary angioplasty in December 2000, and we began selling the
product in the United States in January 2001. Our total net revenue was $14.2
million in 2001 and $38.3 million in 2002, generated almost entirely from sales
of Angiomax in the United States. During 2003, we expect to increase our U.S.
sales force from 86 to 97 people in order to meet anticipated further increases
in customer demand.

In the fall of 2002, we completed a 6,002 patient post-marketing Phase 3b/4
clinical trial of Angiomax in coronary angioplasty called REPLACE-2. The
REPLACE-2 study was designed to evaluate Angiomax as the foundation
anticoagulant for coronary angioplasty within the context of modern therapeutic
products and technologies, including coronary stents. Based on 30-day patient
follow-up results, Angiomax met all of the primary and secondary objectives of
the trial. Since the results were announced in November 2002, additional
hospitals have granted Angiomax formulary approval and hospital demand for the
product has increased, and we expect that these trends will continue. The
Journal of the American Medical Association published the results of REPLACE-2
on February 19, 2003.

We believe that Angiomax has the potential to become a broadly applied
intravenous anticoagulant as a replacement for heparin in the treatment of
arterial thrombosis, a condition involving the formation of blood clots in
arteries. Arterial thrombosis is associated with life-threatening conditions
such as ischemic heart disease, peripheral vascular disease and stroke, all of
which result from decreased blood flow and diminished supply of oxygen to vital
organs. In particular, we are evaluating Angiomax for additional uses in open
vascular surgery such as coronary artery bypass graft surgery, or CABG, in
medical conditions that require urgent treatment such as unstable angina, in
patients with heparin allergy, in children and in peripheral angioplasty.

We are evaluating clevidipine as an intravenous drug for the short-term
control of high blood pressure in patients undergoing cardiac surgery. We have
commenced a study in patients undergoing cardiac surgery comparing clevidipine
with nitroglycerin, a drug that is typically used to control high blood pressure
in patients undergoing cardiac surgery, and plan to commence a Phase 3 clinical
trial program in 2003. If we gain approval from the FDA to market clevidipine,
we anticipate selling it with our existing U.S. sales force.

often driven by the occurrence of treatment complications. Products that are
more effective, safe and predictable, which require shorter periods of treatment
or are easier to use than current products, may reduce the length of hospital
stay and, as a direct result, lower total costs. We believe that products with
such attributes are attractive to hospital business management, physicians,
pharmacists and other care staff. We also believe that promising, well-developed
products which fit this profile may be acquired on reasonable terms from larger
pharmaceutical companies in the process of refining their own product
portfolios. We may also acquire rights to such products from smaller companies
seeking competent development and/or commercial collaborations in this
specialized area of medicine.

We believe that our concentration on hospital care enables us to be highly
competitive in terms of the products we can acquire from others, our development
and regulatory processes, the information and services we provide to our
customers and the level of resources we can commit to potential customers. This
concentration has allowed us to develop in-depth know-how related to the
practice of acute hospital care, and gain valuable insights into procurement
processes, usage patterns, caregiver-preferences and the evaluation of products
by our customers. We believe we can focus successfully on this specialty market
without hiring a large sales force and incurring the substantial fixed overhead
costs associated with such personnel and without needing to build or acquire
manufacturing infrastructure.

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We were incorporated in Delaware in July 1996, and our principal executive
offices are located at Five Sylvan Way, Suite 200, Parsippany, New Jersey 07054.
Our telephone number is (973) 656-1616, and our website address is
www.themedicinescompany.com. The contents of our website are not part of this
prospectus, and our internet address is included in this document as an inactive
textual reference only. We own or have rights to various trademarks and
tradenames used in our business, including The Medicines Company name and logo
and Angiomax(R). All other trademarks and tradenames used in this prospectus are
the property of their respective owners.

THE OFFERING

Common stock offered by The
Medicines Company........... 4,000,000 shares

Common stock to be outstanding
after this offering......... 44,813,692 shares

Use of proceeds............... To fund the further clinical development and
commercialization of Angiomax; to fund research
and development of clevidipine; to provide
working capital; and for general corporate
purposes. See "Use of Proceeds."

Nasdaq National Market
symbol........................ MDCO

The foregoing information is based on the number of shares outstanding as
of February 21, 2003.

This number does not take into account:

- 4,908,463 shares of common stock reserved for issuance pursuant to
outstanding stock options at a weighted average exercise price of $11.86
per share;

- 1,685,486 shares of common stock reserved for future awards under our
stock plans; and

- 1,092,895 shares of common stock reserved for issuance pursuant to
outstanding common stock purchase warrants at an exercise price of $5.92
per share.

In addition, except as otherwise noted, all information in this prospectus
assumes no exercise of the underwriters' over-allotment option.

SUMMARY CONSOLIDATED FINANCIAL DATA

The following is a summary of financial data included elsewhere in this
prospectus. You should read the following data with the more detailed
information contained in "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and the accompanying notes appearing
elsewhere in this prospectus. The pro forma net loss per share data reflect the
conversion of our outstanding convertible notes and accrued interest, and the
conversion of our outstanding redeemable convertible preferred stock and accrued
dividends, into common stock upon the closing of our initial public offering in
August 2000. The net loss per share data and the pro forma net loss per share
data do not include the effect of any options or warrants outstanding.

YEAR ENDED DECEMBER 31,
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1998 1999 2000 2001 2002
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(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

STATEMENTS OF OPERATIONS DATA:
Net revenue.............................. $ -- $ -- $ -- $ 14,248 $ 38,301
Operating expenses:
Cost of revenue........................ -- -- -- 2,110 10,284
Research and development............... 24,005 30,345 39,572 32,768 37,951
Selling, general and administrative.... 6,248 5,008 15,034 36,567 36,808
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Total operating expenses................. 30,253 35,353 54,606 71,445 85,043
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Loss from operations..................... (30,253) (35,353) (54,606) (57,197) (46,742)
Other income (expense), net.............. 1,302 640 (16,686) 2,313 911
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Net loss................................. (28,951) (34,713) (71,292) (54,884) (45,831)
Dividends and accretion to redemption
value of redeemable convertible
preferred stock........................ (3,959) (5,893) (30,343) -- --
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Net loss attributable to common
stockholders........................... $ (32,910) $(40,606) $ (101,635) $ (54,884) $ (45,831)
========= ======== ========== ========== ==========
Net loss attributable to common
stockholders per common share, basic
and diluted............................ $ (6.03) $ (80.08) $ (8.43) $ (1.67) $ (1.23)
========= ======== ========== ========== ==========
Shares used in computing net loss
attributable to common stockholders per
common share, basic and diluted........ 5,454,653 507,065 12,059,275 32,925,968 37,209,931
Unaudited pro forma net loss attributable
to common stockholders per common
share, basic and diluted............... $ (1.94) $ (2.10) $ (1.67) $ (1.23)
Shares used in computing unaudited pro
forma net loss attributable to common
stockholders per common share, basic
and diluted............................ 17,799,876 24,719,075 32,925,968 37,209,931

The as adjusted balance sheet data below reflect our sale of 4,000,000 shares of
common stock in this offering assuming a public offering price of $18.94 per
share, the last reported sale price of our common stock on the Nasdaq National
Market on February 28, 2003, after deducting underwriting discounts and
commissions and all estimated offering expenses that are payable by us.

AS OF DECEMBER 31, 2002
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ACTUAL AS ADJUSTED
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(IN THOUSANDS)

BALANCE SHEET DATA:
Cash, cash equivalents, available for sale securities and
accrued interest receivable............................... $ 43,638 $ 114,502
Working capital............................................. 54,172 125,036
Total assets................................................ 75,300 146,164
Accumulated deficit......................................... (297,275) (297,275)
Total stockholders' equity.................................. 53,934 124,798

RISK FACTORS

You should carefully consider the risks described below and all other
information contained in this prospectus before making an investment decision.
Investing in our common stock involves a high degree of risk, and you may lose
all or part of your investment.

RISKS RELATED TO OUR BUSINESS

WE HAVE A HISTORY OF NET LOSSES, AND WE EXPECT TO CONTINUE TO INCUR ADDITIONAL
NET LOSSES AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY

We have incurred net losses since our inception, including net losses of
approximately $45.8 million for the year ended December 31, 2002. As of December
31, 2002, we had an accumulated deficit of approximately $297.3 million. We
expect to make substantial expenditures to further develop and commercialize our
products, including costs and expenses associated with clinical trials,
regulatory approval and commercialization. We will need to generate
significantly greater revenues to achieve and then maintain profitability.
However, we remain unsure as to when we will become profitable, if at all. And,
if we do become profitable, we may not remain profitable for any substantial
period of time. If we fail to achieve profitability within the time frame
expected by investors or securities analysts, the market price of our common
stock may decline.

OUR BUSINESS IS VERY DEPENDENT ON THE COMMERCIAL SUCCESS OF ANGIOMAX

Angiomax is our only commercial product and, we expect, will account for
almost all of our revenues for the foreseeable future. The commercial success of
Angiomax will depend upon its 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. If Angiomax is not commercially successful, we will have to find
additional sources of funding or curtail or cease operations.

NEAR-TERM GROWTH IN OUR SALES OF ANGIOMAX IS HIGHLY DEPENDENT ON PHYSICIAN
ACCEPTANCE OF THE REPLACE-2 TRIAL

In the fall of 2002, we completed a 6,002 patient post-marketing Phase 3b/4
clinical trial of Angiomax in coronary angioplasty called REPLACE-2. In November
2002, the principal investigators of the clinical trial announced that, based on
30-day patient follow-up results, Angiomax met all of the primary and secondary
objectives of the trial. We believe that the near-term commercial success of
Angiomax will depend upon the extent to which physicians, patients and other key
decision-makers accept the results of the REPLACE-2 trial. Since the results
were announced, additional hospitals have granted Angiomax formulary approval
and hospital demand for the product has increased. We cannot be certain,
however, that these trends will continue. Some commentators have challenged
various aspects of the trial design of REPLACE-2, the conduct of the study and
the analysis and interpretation of the results from the study, including how we
define bleeding and the clinical relevance of types of ischemic events. If
physicians, patients and other key decision-makers do not accept the trial
results, adoption of Angiomax may suffer, and our business will be materially
adversely affected.

We are continuing to follow the patients involved in the REPLACE-2 trial
for six-month and one-year follow-up periods and are conducting a detailed cost
analysis study to examine per-patient total hospital resource consumption at
U.S. clinical trial sites. If the extended follow-up data are less favorable
than the 30-day patient follow-up data announced to date, or if the cost
analysis is less favorable than we expect, physician adoption of Angiomax may be
adversely affected.

WE CANNOT EXPAND THE INDICATIONS FOR WHICH WE ARE MARKETING ANGIOMAX UNLESS WE
RECEIVE FDA APPROVAL FOR EACH ADDITIONAL INDICATION. FAILURE TO EXPAND THESE
INDICATIONS WILL LIMIT THE SIZE OF THE COMMERCIAL MARKET FOR ANGIOMAX

In December 2000, we received approval from the FDA for the use of Angiomax
as an anticoagulant in combination with aspirin in patients with unstable angina
undergoing coronary angioplasty. One of our key objectives is to expand the
indications for which Angiomax is approved for marketing by the FDA. In order to
market Angiomax for these expanded indications, we will need to complete our
clinical trials that are currently underway, conduct additional clinical trials,
obtain positive results from those trials and obtain FDA approval for such
proposed indications. If we are unsuccessful in expanding the approved
indications for the use of Angiomax, the size of the commercial market for
Angiomax will be limited.

IF WE DO NOT SUCCEED IN OBTAINING TIMELY APPROVAL FOR A SECOND-GENERATION
PROCESS FOR THE PRODUCTION OF ANGIOMAX BULK DRUG SUBSTANCE, WE MAY NOT BE ABLE
TO SUPPLY OUR CUSTOMERS

All Angiomax bulk drug substance used to date has been produced by UCB
Bioproducts S.A. by means of a chemical synthesis process. Using this validated
manufacturing process, UCB Bioproducts has completed the manufacture of bulk
drug substance to meet our anticipated commercial supply requirements through
the third quarter of 2003. We do not currently intend to purchase any additional
product manufactured using this process.

We have developed, with UCB Bioproducts, a second-generation process for
the production of Angiomax bulk drug substance, which is referred to as the
Chemilog process. This process involves changes to the early manufacturing steps
of our current process and, we expect, will reduce our Angiomax manufacturing
costs in the future. We received approvable letters from the FDA with respect to
the Chemilog process on March 14, 2002 and December 12, 2002. In August 2002, we
responded to the March 2002 approvable letter. In the December 2002 approvable
letter to us and in a corresponding letter to UCB Bioproducts, the FDA requested
additional data. In February 2003, we submitted what we believe to be the
additional data requested by the FDA from us. Concurrently, UCB Bioproducts
submitted what we believe to be the additional data requested by the FDA from
UCB Bioproducts. If the FDA does not approve the Chemilog process by July 2003,
we would expect to consider purchasing additional product produced using our
current process, but potentially on less favorable terms. This product would
likely not be available for a significant period of time, and we could be forced
to reject or limit customer orders for Angiomax until such product is available.
In such event, sales of Angiomax would suffer and our business would be
materially adversely affected.

FAILURE TO OBTAIN REGULATORY APPROVAL IN FOREIGN JURISDICTIONS WILL PREVENT US
FROM MARKETING ANGIOMAX ABROAD

We intend to market Angiomax through distribution partners in international
markets, including Europe. In order to market Angiomax in the European Union and
many other foreign jurisdictions, we or our distribution partners must obtain
separate regulatory approvals. Obtaining foreign approvals may require
additional trials and expense. In February 1998, we submitted a Marketing
Authorization Application, or MAA, to the European Agency for the Evaluation of
Medicinal Products, or the EMEA, for use of Angiomax in unstable angina patients
undergoing coronary angioplasty. Following extended interaction with European
regulatory authorities, the Committee of Proprietary Medicinal Products of the
EMEA, or CPMP, voted in October 1999 not to recommend Angiomax for approval in
coronary angioplasty. We withdrew our application to the EMEA in 1999 and plan
to resubmit an MAA with the results of the REPLACE-2 trial. We may not be able
to obtain approval or may be delayed in obtaining approval from any or all of
the jurisdictions in which we seek approval to market Angiomax.

THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS MAY BE TERMINATED OR
DELAYED, AND THE COSTS OF DEVELOPMENT AND COMMERCIALIZATION MAY INCREASE, IF
THIRD PARTIES WHO WE RELY ON TO MANUFACTURE AND SUPPORT THE DEVELOPMENT AND
COMMERCIALIZATION OF OUR PRODUCTS DO NOT FULFILL THEIR OBLIGATIONS

Our development and commercialization strategy entails entering into
arrangements with corporate and academic collaborators, contract research
organizations, distributors, third-party manufacturers, licensors, licensees and
others to conduct development work, manage our clinical trials, manufacture our
products and market and sell our products outside of the United States. We do
not have the expertise or the resources to conduct such activities on our own
and, as a result, are particularly dependent on third parties in most areas.

We may not be able to maintain our existing arrangements with respect to
the commercialization of Angiomax or establish and maintain arrangements to
develop and commercialize clevidipine or any additional product candidates or
products we may acquire on terms that are acceptable to us. Any current or
future arrangements for development and commercialization may not be successful.
If we are not able to establish or maintain agreements relating to Angiomax,
clevidipine or any additional products we may acquire on terms which we deem
favorable, our results of operations would be materially adversely affected.

Third parties may not perform their obligations as expected. The amount and
timing of resources that third parties devote to developing, manufacturing and
commercializing our products are not within our control. Furthermore, our
interests may differ from those of third parties that manufacture or
commercialize our products. Disagreements that may arise with these third
parties could delay or lead to the termination of the development or
commercialization of our product candidates, or result in litigation or
arbitration, which would be time consuming and expensive.

If any third party that manufactures or supports the development or
commercialization of our products breaches or terminates its agreement with us,
or fails to conduct its activities in a timely manner, such breach, termination
or failure could:

-- delay or otherwise adversely impact the development or
commercialization of Angiomax, clevidipine, our other product
candidates or any additional product candidates that we may acquire
or develop;

-- require us to undertake unforeseen additional responsibilities or
devote unforeseen additional resources to the development or
commercialization of our products; or

-- result in the termination of the development or commercialization of
our products.

FAILURE TO RAISE ADDITIONAL FUNDS IN THE FUTURE MAY AFFECT THE DEVELOPMENT,
MANUFACTURE AND SALE OF OUR PRODUCTS

Our operations to date have generated a substantial need for cash, and this
negative cash flow from operations may persist. Our ability to generate positive
operating cash flow is highly dependent on our ability to achieve our revenue
targets. The clinical development and regulatory approval of Angiomax for
additional indications, the clinical development and regulatory approval of
clevidipine and the acquisition and development of additional product candidates
by us will require a commitment of substantial funds. Our future capital
requirements are dependent upon many factors and may be significantly greater
than we expect.

that additional public or private financing will be available in amounts or on
terms acceptable to us, if at all. If we are unable to obtain this additional
financing, we may be required to delay, reduce the scope of, or eliminate one or
more of our planned research, development and commercialization activities,
which could harm our financial condition and operating results. In addition, in
order to obtain additional financing, we may be required to relinquish rights to
products, product candidates or technologies that we would not otherwise
relinquish.

WE DEPEND ON A SINGLE SUPPLIER FOR THE PRODUCTION OF ANGIOMAX BULK DRUG
SUBSTANCE AND A DIFFERENT SINGLE SUPPLIER TO CARRY OUT ALL FILL-FINISH
ACTIVITIES FOR ANGIOMAX

We do not manufacture any of our products and do not plan to develop any
capacity to manufacture them. Currently, we obtain all of our Angiomax bulk drug
substance from one manufacturer, UCB Bioproducts, and rely on another
manufacturer, Ben Venue Laboratories, Inc., to carry out all fill-finish
activities for Angiomax, which includes final formulation and transfer of the
drug into vials where it is then freeze-dried and sealed. The terms of our
agreement with UCB Bioproducts require us to purchase a substantial portion of
our Angiomax bulk drug product from UCB Bioproducts which could hinder our
ability to obtain an additional supplier for Angiomax.

The FDA requires that all manufacturers of pharmaceuticals for sale in or
from the United States achieve and maintain compliance with the FDA's current
Good Manufacturing Practice, or cGMP, regulations and guidelines. There are a
limited number of manufacturers that operate under cGMP regulations capable of
manufacturing Angiomax. We do not currently have alternative sources for
production of Angiomax bulk drug substance or to carry out fill-finish
activities. In the event that either of our current manufacturers is unable to
carry out its respective manufacturing obligations, we may be unable to obtain
alternative manufacturing, or obtain such manufacturing on commercially
reasonable terms or on a timely basis. If we were required to transfer
manufacturing processes to other third party manufacturers, we would be required
to satisfy various regulatory requirements, which could cause us to experience
significant delays in receiving an adequate supply of Angiomax. Any delays in
the manufacturing process may adversely impact our ability to meet commercial
demands for Angiomax on a timely basis and supply product for clinical trials of
Angiomax.

WE DO NOT OWN THE TECHNOLOGY UNDERLYING THE CHEMILOG PROCESS, AND MAY BE
UNABLE TO UTILIZE THE CHEMILOG PROCESS IF UCB BIOPRODUCTS BREACHES OUR
AGREEMENT

Our agreement with UCB Bioproducts for the supply of Angiomax bulk drug
substance provides that UCB Bioproducts owns all of the proprietary technology
that was used to develop and that is employed in the Chemilog process. Although
the agreement requires that UCB Bioproducts transfer this technology to a
secondary supplier of Angiomax bulk drug substance or to us or an alternate
supplier at the expiration of this agreement, if UCB Bioproducts fails or is
unable to transfer successfully this technology, we would be unable to employ
the Chemilog process to manufacture our Angiomax bulk drug substance, which
could increase our manufacturing costs in the future.

CLINICAL TRIALS OF OUR PRODUCT CANDIDATES ARE EXPENSIVE AND TIME-CONSUMING,
AND THE RESULTS OF THESE TRIALS ARE UNCERTAIN

Before we can obtain regulatory approvals to market any product for a
particular indication, we will be required to complete pre-clinical studies and
extensive clinical trials in humans to demonstrate the safety and efficacy of
such product for such indication. We are evaluating Angiomax in clinical trials
for additional uses in open vascular surgery such as CABG, in medical conditions
that require urgent treatment such as unstable angina, in patients with heparin
allergy, in children and in peripheral angioplasty. There are numerous factors
that could delay our clinical trials or prevent us from completing our trials
successfully. We, or the FDA, may suspend a clinical trial at any time on
various grounds, including a finding that patients are being exposed to
unacceptable health risks.

The rate of completion of clinical trials depends in part upon the rate of
enrollment of patients. Patient enrollment is a function of many factors,
including the size of the patient population, the proximity of patients to
clinical sites, the eligibility criteria for the trial, the existence of
competing clinical trials and the availability of alternative or new treatments.
In particular, the patient population targeted by some of our clinical trials
may be small. Delays in future planned patient enrollment may result in
increased costs and program delays.

In addition, clinical trials, if completed, may not show a product
candidate to be safe or effective for the intended use. Results obtained in
pre-clinical studies or early clinical trials are not always indicative of
results that will be obtained in later clinical trials. Moreover, data obtained
from pre-clinical studies and clinical trials may be subject to varying
interpretations. As a result, the FDA or other applicable regulatory authorities
may not approve a product in a timely fashion, or at all. Even if regulatory
approval to market a product is granted, the regulatory approval may impose
limitations on the indicated use for which the product may be marketed.

OUR FAILURE TO ACQUIRE AND DEVELOP ADDITIONAL PRODUCT CANDIDATES OR APPROVED
PRODUCTS WILL IMPAIR OUR ABILITY TO GROW

As part of our growth strategy, we intend to acquire and develop additional
product candidates or approved products. The success of this strategy depends
upon our ability to identify, select and acquire pharmaceutical products that
meet the criteria we have established. Because we neither have, nor intend to
establish, internal scientific research capabilities, we are dependent upon
pharmaceutical and biotechnology companies and other researchers to sell or
license product candidates to us.

Any product candidate we acquire will require additional research and
development efforts prior to commercial sale, including extensive pre-clinical
and/or clinical testing and approval by the FDA and corresponding foreign
regulatory authorities. All product candidates are prone to the risks of failure
inherent in pharmaceutical product development, including the possibility that
the product candidate will not be safe, non-toxic and effective or approved by
regulatory authorities. In addition, we cannot assure you that any approved
products that we develop or acquire will be:

-- manufactured or produced economically;

-- successfully commercialized; or

-- widely accepted in the marketplace.

In addition, proposing, negotiating and implementing an economically viable
acquisition is a lengthy and complex process. Other companies, including those
with substantially greater financial, marketing and sales resources, may compete
with us for the acquisition of product candidates and approved products. We may
not be able to acquire the rights to additional product candidates and approved
products on terms that we find acceptable, or at all.

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

We license rights to products and technology that are important to our
business, and we expect to enter into additional licenses in the future. For
instance, we have exclusively licensed the patents and patent applications
relating to Angiomax from Biogen, Inc. Under our agreement with Biogen, we are
subject to commercialization and development, sublicensing, royalty, patent
prosecution and maintenance, insurance and other obligations. If we exercise our
option to acquire an exclusive license to clevidipine from AstraZeneca PLC, we
will be subject to similar obligations with respect to clevidipine. Any failure
by us to comply with any of these obligations or any other breach by us of these
license agreements could give the licensor the right to terminate the license in
whole, terminate the exclusive nature of the license or bring a claim against us
for damages. Any such termination or claim, particularly relating to our
agreement with Biogen, could have a material adverse effect on our business.
Even if we contest any such

termination or claim and are ultimately successful, our stock price could
suffer. In addition, upon any termination of a license agreement, we may be
required to license to the licensor any related intellectual property that we
developed.

WE MAY NOT BE ABLE TO MANAGE OUR BUSINESS EFFECTIVELY IF WE ARE UNABLE TO
ATTRACT AND RETAIN KEY PERSONNEL AND CONSULTANTS

Our industry has experienced a high rate of turnover of management
personnel in recent years. We are highly dependent on our ability to attract and
retain qualified personnel for the acquisition, development and
commercialization activities we conduct or sponsor. If we lose one or more of
the members of our senior management, including our executive chairman, Dr.
Clive A. Meanwell, or our chief executive officer, David M. Stack, or other key
employees or consultants, our ability to implement successfully our business
strategy could be seriously harmed. Our ability to replace these key employees
may be difficult and may take an extended period of time because of the limited
number of individuals in our industry with the breadth of skills and experience
required to develop and commercialize products successfully. Competition to hire
from this limited pool is intense, and we may be unable to hire, train, retain
or motivate such additional personnel.

BECAUSE THE MARKET FOR THROMBIN INHIBITORS IS COMPETITIVE, OUR PRODUCT MAY NOT
OBTAIN WIDESPREAD USE

We have positioned Angiomax as a replacement for heparin, which is a widely
used, inexpensive, generic drug used in patients with arterial thrombosis.
Because heparin is inexpensive and has been widely used for many years,
physicians and medical decision-makers may be hesitant to adopt Angiomax. In
addition, due to the high incidence and severity of cardiovascular diseases,
competition in the market for thrombin inhibitors is intense and growing. There
are a number of direct and indirect thrombin inhibitors currently on the market,
awaiting regulatory approval and in development, including orally administered
agents. The thrombin inhibitors on the market include products for use in the
treatment of patients with a clinical condition known as heparin-induced
thrombocytopenia and thrombosis syndrome, or HIT/HITTS, patients with unstable
angina and patients with deep vein thrombosis.

ANGIOMAX MAY COMPETE WITH ALL GROUPS OF ANTICOAGULANT DRUGS, INCLUDING PLATELET
INHIBITORS AND FIBRINOLYTIC DRUGS, WHICH MAY LIMIT THE USE OF ANGIOMAX

In general, anticoagulant drugs may be classified into four groups: drugs
that directly target and inhibit thrombin, drugs that indirectly target and
inhibit thrombin, drugs that target and inhibit platelets and drugs that break
down fibrin. Because each group of anticoagulants acts on different components
of the clotting process, we believe that there will be continued clinical work
to determine the best combination of drugs for clinical use. We expect Angiomax
to be used with aspirin alone or in conjunction with platelet inhibitors or
fibrinolytic drugs. Although platelet inhibitors and fibrinolytic drugs may be
complementary to Angiomax, we recognize that Angiomax may compete with these and
other anticoagulant drugs to the extent Angiomax and any of these anticoagulant
drugs are approved for the same indication.

In addition, platelet inhibitors and fibrinolytic drugs may compete with
Angiomax for the use of hospital financial resources. For example, many U.S.
hospitals receive a fixed reimbursement amount per procedure for the
angioplasties and other treatment therapies they perform. Because this amount is
not based on the actual expenses the hospital incurs, hospitals may be forced to
use either Angiomax or platelet inhibitors or fibrinolytic drugs but not
necessarily several of the drugs together.

WE FACE SUBSTANTIAL COMPETITION, WHICH MAY RESULT IN OTHERS DISCOVERING,
DEVELOPING OR COMMERCIALIZING COMPETING PRODUCTS BEFORE OR MORE SUCCESSFULLY
THAN WE DO

Our industry is highly competitive. Our success will depend on our ability
to acquire and develop products and apply technology, and our ability to
establish and maintain markets for our products. Potential competitors in the
United States and other countries include major pharmaceutical and chemical

companies, specialized pharmaceutical companies and biotechnology firms,
universities and other research institutions. Many of our competitors have
substantially greater research and development capabilities and experience, and
greater manufacturing, marketing and financial resources, than we do.
Accordingly, our competitors may develop or license products or other novel
technologies that are more effective, safer or less costly than existing
products or technologies or products or technologies that are being developed by
us or may obtain FDA approval for products more rapidly than we are able.
Technological development by others may render our products or product
candidates noncompetitive. We may not be successful in establishing or
maintaining technological competitiveness.

FLUCTUATIONS IN OUR OPERATING RESULTS COULD AFFECT THE PRICE OF OUR COMMON
STOCK

Our operating results may vary from period to period based on the amount
and timing of sales of Angiomax, the availability and timely delivery of a
sufficient supply of Angiomax, the timing and expenses of clinical trials,
announcements regarding clinical trial results and product introductions by us
or our competitors, the availability and timing of third-party reimbursement and
the timing of regulatory approvals. If our operating results do not match the
expectations of securities analysts and investors as a result of these and other
factors, the trading price of our common stock will likely decrease.

WE MAY UNDERTAKE STRATEGIC ACQUISITIONS IN THE FUTURE AND ANY DIFFICULTIES FROM
INTEGRATING SUCH ACQUISITIONS COULD DAMAGE OUR ABILITY TO ATTAIN OR MAINTAIN
PROFITABILITY

We may acquire additional businesses and products that complement or
augment our existing business. Integrating any newly acquired business or
product could be expensive and time-consuming. We may not be able to integrate
any acquired business or product successfully or operate any acquired business
profitably. Moreover, we may need to raise additional funds through public or
private debt or equity financing to acquire any businesses, which may result in
dilution for stockholders and the incurrence of indebtedness.

OUR REVENUES ARE SUBSTANTIALLY DEPENDENT ON A LIMITED NUMBER OF WHOLESALERS TO
WHICH WE SELL ANGIOMAX, AND SUCH REVENUES MAY FLUCTUATE FROM QUARTER TO QUARTER
BASED ON THE BUYING PATTERNS OF THESE WHOLESALERS

We sell Angiomax primarily to a limited number of national medical and
pharmaceutical distributors and wholesalers with distribution centers located
throughout the United States. During the year ended December 31, 2002, revenues
from the sale of Angiomax to three wholesalers totaled approximately 94% of our
net revenues. Our reliance on this small number of wholesalers could cause our
revenues to fluctuate from quarter to quarter based on the buying patterns of
these wholesalers. In addition, if any of these wholesalers fail to pay us on a
timely basis or at all, our financial position and results of operations could
be materially adversely affected.

RISKS RELATED TO OUR INDUSTRY

IF WE DO NOT OBTAIN FDA APPROVALS FOR OUR PRODUCTS OR COMPLY WITH GOVERNMENT
REGULATIONS, WE MAY NOT BE ABLE TO MARKET OUR PRODUCTS AND MAY BE SUBJECT TO
STRINGENT PENALTIES

Except for Angiomax, which has been approved for sale in the United States
for use as an anticoagulant in patients undergoing coronary angioplasty and
which has been approved for sale in Canada, Israel and New Zealand for
indications similar to those approved by the FDA, we do not have a product
approved for sale in the United States or any foreign market. We must obtain
approval from the FDA in order to sell our product candidates in the United
States and from foreign regulatory authorities in order to sell our product
candidates in other countries. We must successfully complete our clinical trials
and demonstrate manufacturing capability before we can file with the FDA for
approval to sell our products. The FDA could require us to repeat clinical
trials as part of the regulatory review process. Delays in obtaining or failure
to obtain regulatory approvals may:

-- delay or prevent the successful commercialization of any of our
product candidates;

-- diminish our competitive advantage; and

-- defer or decrease our receipt of revenues or royalties.

The regulatory review and approval process is lengthy, expensive and
uncertain. Extensive pre-clinical data, clinical data and supporting information
must be submitted to the FDA for each additional indication to obtain such
approvals, and we cannot be certain when we will receive these regulatory
approvals, if ever.

In addition to initial regulatory approval, our product and product
candidates will be subject to extensive and rigorous ongoing domestic and
foreign government regulation of, among other things, the research, development,
testing, manufacture, labeling, promotion, advertising, distribution and
marketing of our products and product candidates. Any approvals, once obtained,
may be withdrawn if compliance with regulatory requirements is not maintained or
safety problems are identified. Failure to comply with these requirements may
also subject us to stringent penalties.

WE MAY NOT BE ABLE TO OBTAIN OR MAINTAIN PATENT PROTECTION FOR OUR PRODUCTS,
AND WE MAY INFRINGE THE PATENT RIGHTS OF OTHERS

The patent positions of pharmaceutical companies like us are generally
uncertain and involve complex legal, scientific and factual issues. Our success
depends significantly on our ability to:

-- obtain and maintain U.S. and foreign patents;

-- protect trade secrets;

-- operate without infringing the proprietary rights of others; and

-- prevent others from infringing our proprietary rights.

We may not have any patents issued from any patent applications that we own
or license. If patents are granted, the claims allowed may not be sufficiently
broad to protect our technology. In addition, issued patents that we own or
license may be challenged, invalidated or circumvented. Our patents also may not
afford us protection against competitors with similar technology. Because patent
applications in the United States and many foreign jurisdictions are typically
not published until eighteen months after filing and because publications of
discoveries in the scientific literature often lag behind actual discoveries, we
cannot be certain that others have not filed or maintained patent applications
for technology used by us or covered by our pending patent applications without
our being aware of these applications.

We exclusively license U.S. patents and patent applications and
corresponding foreign patents and patent applications relating to Angiomax from
Biogen. In particular, we exclusively license six issued U.S. patents relating
to Angiomax. The principal U.S. patent that covers Angiomax expires in 2010. The
U.S. Patent and Trademark Office has rejected our application for an extension
of the term of the patent beyond 2010 because the application was not filed on
time. We are exploring an alternative to extend the term of the patent, but we
can provide no assurance that we will be successful. We have not yet filed any
independent patent applications.

We may not hold proprietary rights to some patents related to our product
candidates. In some cases, others may own or control these patents. As a result,
we may be required to obtain licenses under third-party patents to market some
of our product candidates. If licenses are not available to us on acceptable
terms, we will not be able to market these products.

We may become a party to patent litigation or other proceedings regarding
intellectual property rights. The cost to us of any patent litigation or other
proceeding, even if resolved in our favor, could be substantial. If any patent
litigation or other intellectual property proceeding in which we are involved is
resolved unfavorably to us, we may be enjoined from manufacturing or selling our
products without a license from the other party, and we may be held liable for
significant damages. We may not be able to obtain any required license on
commercially acceptable terms, or at all.

IF WE ARE NOT ABLE TO KEEP OUR TRADE SECRETS CONFIDENTIAL, OUR TECHNOLOGY AND
INFORMATION MAY BE USED BY OTHERS TO COMPETE AGAINST US

We rely significantly upon unpatented proprietary technology, information,
processes and know-how. We seek to protect this information by confidentiality
agreements with our employees, consultants and other third-party contractors, as
well as through other security measures. We may not have adequate remedies for
any breach by a party to these confidentiality agreements. In addition, our
competitors may learn or independently develop our trade secrets.

WE COULD BE EXPOSED TO SIGNIFICANT LIABILITY CLAIMS IF WE ARE UNABLE TO OBTAIN
INSURANCE AT ACCEPTABLE COSTS AND ADEQUATE LEVELS OR OTHERWISE PROTECT
OURSELVES AGAINST POTENTIAL PRODUCT LIABILITY CLAIMS

Our business exposes us to potential product liability risks, which are
inherent in the testing, manufacturing, marketing and sale of human healthcare
products. Product liability claims might be made by patients in clinical trials,
consumers, health care providers or pharmaceutical companies or others that sell
our products. These claims may be made even with respect to those products that
are manufactured in licensed and regulated facilities or otherwise possess
regulatory approval for commercial sale.

These claims could expose us to significant liabilities that could prevent
or interfere with the development or commercialization of our products. Product
liability claims could require us to spend significant time and money in
litigation or pay significant damages. Currently, we are covered, with respect
to our commercial sales in the United States, Israel and New Zealand and our
clinical trials, by primary product liability insurance in the amount of $20.0
million per occurrence and $20.0 million annually in the aggregate on a
claims-made basis. This coverage may not be adequate to cover any product
liability claims.

As we commercialize our products, we may wish to increase our product
liability insurance. Product liability coverage is expensive. In the future, we
may not be able to maintain or obtain such product liability insurance on
reasonable terms, at a reasonable cost or in sufficient amounts to protect us
against losses due to product liability claims.

OUR ABILITY TO GENERATE FUTURE REVENUE FROM PRODUCTS WILL DEPEND ON
REIMBURSEMENT AND DRUG PRICING

Acceptable levels of reimbursement of drug treatments by government
authorities, private health insurers and other organizations will have an effect
on our ability to successfully commercialize, and attract collaborative partners
to invest in the development of, product candidates. We cannot be sure that
reimbursement in the United States or elsewhere will be available for any
products we may develop or, if already available, will not be decreased in the
future. If reimbursement is not available or is available only to limited
levels, we may not be able to commercialize our products, and may not be able to
obtain a satisfactory financial return on our products.

Third-party payers increasingly are challenging prices charged for medical
products and services. Also, the trend toward managed health care in the United
States and the changes in health insurance programs, as well as legislative
proposals to reform health care or reduce government insurance programs, may
result in lower prices for pharmaceutical products, including any products that
may be offered by us. Cost-cutting measures that health care providers are
instituting, and the effect of any health care reform, could materially
adversely affect our ability to sell any products that are successfully
developed by us and approved by regulators. Moreover, we are unable to predict
what additional legislation or regulation, if any, relating to the health care
industry or third-party coverage and reimbursement may be enacted in the future
or what effect such legislation or regulation would have on our business.

RISKS RELATED TO THIS OFFERING

VOLATILITY OF OUR STOCK PRICE COULD CAUSE YOU TO LOSE ALL OR PART OF YOUR
INVESTMENT

The market price of our common stock, like that of the common stock of many
other pharmaceutical and biotechnology companies, may be highly volatile. The
stock market in general has recently

experienced extreme price and volume fluctuations, and this volatility has
affected the market prices of securities of many pharmaceutical and
biotechnology companies for reasons frequently unrelated, or disproportionate,
to the operating performance of those companies. The market price of our common
stock may fluctuate significantly in response to the following factors, some of
which are beyond our control:

-- changes in securities analysts' estimates of our financial
performance;

-- changes in market valuations of similar companies;

-- variations in our quarterly operating results;

-- acquisitions and strategic partnerships;

-- announcements of technological innovations or new commercial products
by us or our competitors;

-- disclosure of results of clinical testing or regulatory proceedings;

-- changes in our management;

-- the outbreak of war or a significant terrorist attack;

-- broad fluctuations in stock market prices and volume; and

-- general economic conditions, including inflation and unemployment
rates.

Investors may not be able to resell their shares of our common stock
following periods of volatility because of the market's adverse reaction to the
volatility. We cannot assure you that our stock will trade at the same levels as
the stock of other companies in our industry or that the market in general will
sustain its current prices.

FUTURE SALES OF COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD CAUSE OUR STOCK
PRICE TO FALL

Sales of substantial amounts of our common stock in the public market after
the completion of this offering, or the perception that those sales could occur,
could adversely affect the market price of our common stock and could materially
impair our future ability to raise capital through offerings of our common
stock.

WE MAY ALLOCATE THE NET PROCEEDS FROM THIS OFFERING IN WAYS WITH WHICH YOU MAY
NOT AGREE

Our business plan is general in nature and is subject to change based upon
changing conditions and opportunities. Our management has broad discretion in
applying the net proceeds we estimate we will receive in this offering. Because
the net proceeds are not required to be allocated to any specific investment or
transaction, you cannot determine at this time the value or propriety of our
application of the proceeds. Moreover, you will not have the opportunity to
evaluate the economic, financial or other information on which we base our
decisions on how to use our proceeds. As a result, you and other stockholders
may not agree with our decisions.

OUR CORPORATE DOCUMENTS AND PROVISIONS OF DELAWARE LAW MAY PREVENT A CHANGE IN
CONTROL OR MANAGEMENT THAT STOCKHOLDERS MAY CONSIDER DESIRABLE

Section 203 of the Delaware General Corporation Law and our charter and
by-laws contain provisions that might enable our management to resist a takeover
of our company. These provisions could have the effect of delaying, deferring,
or preventing a change in control of us or a change in our management that
stockholders may consider favorable or beneficial. These provisions could also
discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. These
provisions could also limit the price that investors might be willing to pay in
the future for shares of our common stock.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus and the documents we incorporate by reference into this
prospectus include forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements, other than statements
of historical facts, included or incorporated in this prospectus regarding our
strategy, future operations, financial position, future revenues, projected
costs, prospects, plans and objectives of management are forward-looking
statements. The words "anticipates," "believes," "estimates," "expects,"
"intends," "may," "plans," "projects," "will," "would" and similar expressions
are intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words.

Our forward-looking statements are subject to a number of known and unknown
risks and uncertainties, many of which are beyond our control. Although we
believe these statements are accurate, we cannot guarantee future results,
levels of activity, performance or achievements, and you should not place undue
reliance on our forward-looking statements. Our actual results could differ
materially from the results discussed in our forward-looking statements. Many
important factors could cause or contribute to these differences, including but
not limited to the factors discussed in the section of this prospectus entitled
"Risk Factors." You should read this entire prospectus carefully, particularly
"Risk Factors," before you make an investment decision. We do not assume any
obligation to update any forward-looking statements.

USE OF PROCEEDS

We estimate that our net proceeds from the sale of 4,000,000 shares of
common stock offered by us, assuming a public offering price of $18.94 per
share, will be approximately $70.9 million after deducting the underwriting
discounts and commissions and all estimated offering expenses that are payable
by us. If the underwriters exercise their over-allotment option in full, we
estimate that our net proceeds will be approximately $81.5 million.

We anticipate using the net proceeds from this offering as follows:

-- to fund further clinical development and commercialization of
Angiomax;

-- to fund research and development of clevidipine; and

-- to provide working capital and for general corporate purposes.

We cannot estimate precisely the allocation of the net proceeds from the
offering among these uses, and we will retain broad discretion over the use of
the net proceeds. The amounts and timing of the expenditures may vary
significantly depending on numerous factors, such as the progress of our
research and development efforts, technological advances and the competitive
environment for Angiomax. We also may use a portion of the net proceeds to
acquire additional products consistent with our strategy, although we have not
allocated any portion of the net proceeds for any specific acquisition.

Pending the use of the net proceeds, we intend to invest the net proceeds
in short-term, interest-bearing, investment-grade securities or guaranteed
obligations of the United States or its agencies.

PRICE RANGE OF COMMON STOCK

Our common stock is quoted on the Nasdaq National Market under the symbol
"MDCO." The following table sets forth, for the periods indicated, the range of
high and low bid information per share of our common stock, as reported on the
Nasdaq National Market.

COMMON STOCK
PRICE
----------------
HIGH LOW
------ ------

YEAR ENDED DECEMBER 31, 2001
First Quarter............................................... $20.48 $ 8.75
Second Quarter.............................................. 22.05 9.10
Third Quarter............................................... 22.20 4.52
Fourth Quarter.............................................. 12.15 4.81

YEAR ENDED DECEMBER 31, 2002
First Quarter............................................... 14.81 9.86
Second Quarter.............................................. 14.33 7.40
Third Quarter............................................... 12.50 7.22
Fourth Quarter.............................................. 17.50 9.45

YEAR ENDING DECEMBER 31, 2003
First Quarter (through February 28, 2003)................... $19.14 $15.20

On February 28, 2003, the last reported sale price of our common stock on
the Nasdaq National Market was $18.94 per share. As of the close of business on
February 21, 2003, we had 231 holders of record of our common stock.

DIVIDEND POLICY

We have never declared or paid cash dividends on our common stock. We
anticipate that we will retain all of our future earnings, if any, for use in
the expansion and operation of our business and do not anticipate paying cash
dividends in the foreseeable future. Payment of future dividends, if any, will
be at the discretion of our board of directors.

CAPITALIZATION

The table below sets forth the following information:

-- our actual capitalization as of December 31, 2002; and

-- our capitalization as adjusted to give effect to the sale by us of
4,000,000 shares of common stock assuming a public offering price of
$18.94 per share in this offering, after deducting underwriting
discounts and commissions and all estimated offering expenses payable
by us.

You should read the following table in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and accompanying notes included elsewhere
in this prospectus.

AS OF DECEMBER 31, 2002
-----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)

Cash and cash equivalents, available for sale securities and
accrued interest receivable............................... $ 43,638 $ 114,502
========= =========
Stockholders' 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, 75,000,000 shares
authorized; 39,894,285 shares issued and outstanding,
actual; 43,894,285 shares issued and outstanding, as
adjusted.................................................. 40 44
Additional paid-in capital.................................. 354,239 425,099
Deferred stock compensation................................. (3,126) (3,126)
Accumulated deficit......................................... (297,275) (297,275)
Accumulated other comprehensive income, principally foreign
currency translation...................................... 56 56
--------- ---------
Total stockholders' equity.................................. 53,934 124,798
--------- ---------
Total capitalization........................................ $ 53,934 $ 124,798
========= =========

This table excludes the following shares as of December 31, 2002:

-- 4,838,657 shares of common stock reserved for issuance pursuant to
outstanding stock options at a weighted average exercise price of
$11.57 per share;

-- 1,834,751 shares of common stock reserved for future awards under our
stock plans; and

-- 2,373,975 shares of common stock reserved for issuance pursuant to
outstanding common stock purchase warrants at an exercise price of
$5.92 per share.

DILUTION

Our net tangible book value as of December 31, 2002 was $53.9 million or
$1.35 per share. Net tangible book value per share is determined by dividing our
net tangible book value, which is our total tangible assets less total
liabilities, by the number of outstanding shares of common stock. After giving
effect to the receipt of the proceeds from this offering, assuming a public
offering price of $18.94 per share, and after deducting the underwriting
discounts and commissions and all estimated offering expenses payable by us, our
net tangible book value as of December 31, 2002 would have been approximately
$124.8 million, or $2.84 per share. This represents an immediate increase in pro
forma net tangible book value of $1.49 per share to existing stockholders and an
immediate dilution of $16.10 per share to new investors purchasing shares at the
assumed public offering price. The following table illustrates the per share
dilution:

Assumed public offering price per share..................... $ 18.94
Net tangible book value per share as of December 31,
2002................................................... $ 1.35
Increase per share attributable to new investors.......... $ 1.49
Net tangible book value per share after offering............ $ 2.84
-------
Dilution per share to new investors......................... $ 16.10
=======

As of December 31, 2002, there were options outstanding to purchase a total
of 4,838,657 shares of common stock at a weighted average exercise price of
$11.57 per share and common stock purchase warrants outstanding to purchase a
total of 2,373,975 shares of common stock at an exercise price of $5.92 per
share. To the extent that any of these options or warrants are exercised and
shares are issued, there will be further dilution to new public investors.

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements, including the
accompanying notes, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus.

We have derived the statements of operations data for the five-year period
ended December 31, 2002 and the balance sheet data as of December 31, 1998,
1999, 2000, 2001 and 2002 from our consolidated financial statements and related
notes, which have been audited by Ernst & Young LLP, independent auditors.

The pro forma net loss per share data reflect the conversion of our
outstanding convertible notes and accrued interest, and the conversion of our
outstanding redeemable convertible preferred stock and accrued dividends, into
common stock upon the closing of our initial public offering in August 2000. The
net loss per share data and the pro forma net loss per share data do not include
the effect of any options or warrants outstanding.

YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1998 1999 2000 2001 2002
---------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

STATEMENTS OF OPERATIONS DATA:
Net revenue................................ $ -- $ -- $ -- $ 14,248 $ 38,301
Operating expenses
Cost of revenue.......................... -- -- -- 2,110 10,284
Research and development................. 24,005 30,345 39,572 32,768 37,951
Selling, general and administrative...... 6,248 5,008 15,034 36,567 36,808
---------- ----------- ----------- ----------- -----------
Total operating expenses.............. 30,253 35,353 54,606 71,445 85,043
---------- ----------- ----------- ----------- -----------
Loss from operations....................... (30,253) (35,353) (54,606) (57,197) (46,742)
Other income (expense), net................ 1,302 640 (16,686) 2,313 911
---------- ----------- ----------- ----------- -----------
Net loss................................... (28,951) (34,713) (71,292) (54,884) (45,831)
Dividends and accretion to redemption value
of redeemable convertible preferred
stock.................................... (3,959) (5,893) (30,343) -- --
---------- ----------- ----------- ----------- -----------
Net loss attributable to common
stockholders............................. $ (32,910) $ (40,606) $ (101,635) $ (54,884) $ (45,831)
========== =========== =========== =========== ===========
Net loss attributable to common
stockholders per common share, basic and
diluted.................................. $ (6.03) $ (80.08) $ (8.43) $ (1.67) $ (1.23)
========== =========== =========== =========== ===========
Shares used in computing net loss
attributable to common stockholders per
common share, basic and diluted.......... 5,454,653 507,065 12,059,275 32,925,968 37,209,931
Unaudited pro forma net loss attributable
to common stockholders per common share,
basic and diluted........................ $ (1.94) $ (2.10) $ (1.67) $ (1.23)
Shares used in computing unaudited pro
forma net loss attributable to common
stockholders per common share, basic and
diluted.................................. 17,799,876 24,719,075 32,925,968 37,209,931

AS OF DECEMBER 31,
-----------------------------------------------------------
1998 1999 2000 2001 2002
-------- -------- --------- --------- ---------
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and cash equivalents, available for
sale securities and accrued interest
receivable............................... $ 29,086 $ 7,238 $ 80,718 $ 54,016 $ 43,638
Working capital (deficit).................. 24,570 (4,103) 68,023 59,744 54,172
Total assets............................... 29,831 7,991 84,363 78,674 75,300
Convertible notes.......................... -- 5,776 -- -- --
Redeemable convertible preferred stock..... 79,384 85,277 -- -- --
Accumulated deficit........................ (54,319) (94,925) (196,560) (251,444) (297,275)
Total stockholders' (deficit) equity....... (54,266) (94,558) 69,239 61,121 53,934

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 "Selected Consolidated
Financial Data" and our financial statements and accompanying notes included
elsewhere in this prospectus. In addition to the historical information, the
discussion in this prospectus 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 factors including,
but not limited to, those set forth under "Risk Factors" and elsewhere in this
prospectus.

OVERVIEW

We are a specialty pharmaceutical company with growing revenue from sales
of our first product, Angiomax, a direct thrombin inhibitor used as an
anticoagulant in patients undergoing coronary angioplasty. The FDA approved
Angiomax for use as an anticoagulant in combination with aspirin in patients
with unstable angina undergoing coronary angioplasty in December 2000, and we
began selling the product in the United States in January 2001. Our total net
revenue was $14.2 million in 2001 and $38.3 million in 2002, generated almost
entirely from sales of Angiomax in the United States.

Since our inception we have generated significant losses. We expect to
continue to spend significant amounts on the development of our products and on
the sales and marketing of Angiomax in 2003 and thereafter. In 2003, we plan on
increasing our sales and marketing expenses by approximately 10%, in connection
with anticipated increased customer demands, including expenses related to a
planned increase in the size of our sales force from 86 to 97 persons. We also
plan to continue to invest in clinical studies to expand the use of Angiomax and
to develop new products. Additionally, we plan to continue to evaluate possible
acquisitions of development-stage or approved products that would fit within our
growth strategy. Accordingly, we will need to generate significantly greater
revenues to achieve and then maintain profitability.

Since the announcement of the results of our REPLACE-2 clinical trial,
additional hospitals have granted Angiomax formulary approval and hospital
demand for the product has increased, and we expect that these trends will
continue. In the fourth quarter of 2002, based on data obtained from an industry
third-party, the number of hospitals purchasing Angiomax increased by
approximately 25% as compared to the third quarter of 2002 and the number of
hospitals purchasing four or more boxes of Angiomax increased by approximately
25% as compared to the third quarter of 2002.

Most of our expenditures to date have been for research and development
activities and selling, general and administrative expenses. Research and
development expenses represent costs incurred for product acquisition, clinical
trials, activities relating to regulatory filings and manufacturing development
efforts. We outsource our clinical trials and manufacturing development
activities to independent organizations to maximize efficiency and minimize our
internal overhead. We expense our research and development costs as they are
incurred. Selling, general and administrative expenses consist primarily of
salaries and related expenses, general corporate activities and costs associated
with promotion and marketing activities.

In connection with our initial public offering, during the year ended
December 31, 2000, we recorded deferred stock compensation on the grant of stock
options of approximately $17.3 million, representing the difference between the
exercise price of such options and the fair market value of our common stock at
the date of grant of such options. The exercise prices of these options were
below the estimated fair market value of our common stock as of the date of
grant based on the estimated price of our common stock in our initial public
offering. No additional deferred compensation was recorded during 2001 and 2002
because all of the exercise prices of all grants of stock options during this
period were at the fair market value of our common stock on the date of grant.

We have not generated taxable income to date. At December 31, 2002, net
operating losses available to offset future taxable income for federal income
tax purposes were approximately $218.0 million. If not utilized, federal net
operating loss carryforwards will expire at various dates beginning in 2011 and
ending in 2022. We have not recognized the potential tax benefit of our net
operating losses in our balance sheets or statements of operations. The future
utilization of our net operating loss carryforwards may be limited based upon
changes in ownership pursuant to regulations promulgated under the Internal
Revenue Code of 1986, as amended.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect our reported assets and liabilities,
revenues and expenses, and other financial information. Actual results may
differ significantly from these estimates under different assumptions and
conditions. In addition, our reported financial condition and results of
operations could vary due to a change in the application of a particular
accounting standard.

We regard an accounting estimate underlying our financial statements as a
"critical accounting estimate" if the accounting estimate requires us to make
assumptions about matters that are highly uncertain at the time of estimation
and if different estimates that reasonably could have been used in the current
period, or changes in the estimate that are reasonably likely to occur from
period to period, would have had a material effect on the presentation of
financial condition, changes in financial condition, or results of operations.

Our significant accounting policies are more fully described in Note 2 to
our consolidated financial statements. Not all of these significant accounting
policies, however, require management to make difficult, complex or subjective
judgments or estimates. Our management has discussed our accounting policies
with the audit committee of our board of directors, and we believe that our
estimates relating to revenue recognition and inventory described below fit the
definition of "critical accounting estimates."

REVENUE RECOGNITION

Product Sales. We sell our products primarily to wholesalers and
distributors, who, in turn, sell to hospitals. We recognize revenue from product
sales in accordance with generally accepted accounting principles in the United
States, including the guidance in Staff Accounting Bulletin 101. Revenue from
product sales is recognized when there is persuasive evidence of an arrangement,
delivery has occurred, the price is fixed and determinable, and collectibility
is reasonably assured. However, because our products are sold with limited
rights of return, our recognition of revenue from product sales is also subject
to Statement of Financial Accounting Standards No. 48, or SFAS 48, "Revenue
Recognition When Right of Return Exists." Under SFAS 48, revenue is recognized
when the price to the buyer is fixed, the buyer is obligated to pay us and the
obligation to pay is not contingent on resale of the product, the buyer has
economic substance apart from us, we have no obligation to bring about the sale
of the product and the amount of returns can be reasonably estimated.

We record allowances for product returns, rebates and discounts at the time
of sale, and report revenue net of such allowances. We must make significant
judgments and estimates in determining these allowances. If actual results
differ, we will likely be required to make adjustments to these allowances in
the future:

-- Our customers have the right to return any unopened product with less
than six months to the labeled expiration date, provided that the
product is returned within 12 months of the labeled expiration date.
As a result, we must estimate the likelihood that product sold to
wholesalers might remain in their inventory to within six months of
expiration, and whether the wholesalers might decide to return the
product. We base our estimates on information from customers,
industry data, historic patterns of returns and on the expiration
dates of product being shipped.

-- Certain hospitals purchasing our products from wholesalers have the
right to receive a discounted price and a volume-based rebate if they
participate in a group purchasing organization that has a contract
with us. We must estimate the likelihood that product sold to
wholesalers might be ultimately sold to a participating hospital. We
base our estimates on information from customers, industry data,
historic patterns of discounts and customer rebate thresholds.

Collaborations. Revenue from collaborative agreements with partners may
include non-refundable fees or milestone payments. We record these payments as
deferred revenue until contractual performance obligations have been satisfied,
and we recognize these payments ratably over the term of these agreements. When
the period of deferral cannot be specifically identified from the contract, we
must estimate the period based upon other critical factors contained within the
contract. We review these estimates at least annually, which could result in a
change in the deferral period.

INVENTORIES

We record inventory upon the transfer of title from our vendors. Inventory
is stated at the lower of cost or market value with cost determined using a
weighted average of costs. We expensed all costs associated with the manufacture
of Angiomax bulk drug product and finished product to which the title
transferred to us prior to FDA approval of Angiomax and of its original
manufacturing process as research and development. In December 2000, we received
FDA approval for Angiomax and its original manufacturing process. Any Angiomax
bulk drug product manufactured according to its original manufacturing process
to which we took title after FDA approval is recorded as inventory. Together
with UCB Bioproducts, we have developed, but not yet received FDA approval of, a
second generation chemical synthesis process, the Chemilog process, for the
manufacture of Angiomax bulk drug substance. All Angiomax bulk drug product
manufactured using the Chemilog process to which we have taken title to date has
been expensed as research and development. We review the inventory for slow
moving or obsolete amounts based on expected revenues. If actual revenues are
less than expected, we may be required to make allowances for excess amounts in
the future.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2002 AND 2001

Net Revenue. Net revenue increased 169% to $38.3 million in 2002 as
compared to $14.2 million for 2001. Virtually all the revenue was from U.S.
sales of Angiomax, which we commercially launched during the first quarter of
2001. The growth in 2002 was due primarily to increased use of Angiomax by
existing hospital customers and penetration to new hospitals. Since we announced
the results of REPLACE-2 in November 2002, additional hospitals have granted
Angiomax formulary approval and hospital demand for the product has increased.

In 2002, we received $1.5 million from Nycomed Danmark A/S as a
non-refundable distributor fee. This payment has been recorded as deferred
revenue and is being recognized ratably over the term of our agreement with
Nycomed, which we currently estimate to be twelve years.

Cost of Revenue. Cost of revenue in 2002 was $10.3 million, or 27% of net
revenue, compared to $2.1 million, or 15% of net revenue in 2001. Cost of
revenue in 2002 consisted of expenses in connection with the manufacture of the
Angiomax sold, which represented 58% of the 2002 cost of revenue, royalty
expenses under our agreement with Biogen which represented 27% of the 2002 cost
of revenue and the logistics costs of selling Angiomax, such as distribution,
storage, and handling, which represented 14% of the 2002 cost of revenue. Prior
to obtaining FDA approval for Angiomax and its original manufacturing process,
all costs of manufacturing Angiomax were expensed as research and development
costs. In late 2000, after obtaining FDA approval for Angiomax and its original
manufacturing process, we began recording the costs of manufacturing Angiomax as
a cost of revenue rather than as research and development expense. As a result,
our cost of manufacturing as a percentage of net revenue increased substantially
in 2002 as we sold a higher percentage of product manufactured after the date of
FDA approval of Angiomax.

During 2002, we took delivery of drug material manufactured using the
Chemilog process, which we expensed as research and development. The Chemilog
process must be approved by the FDA before it can be used to produce Angiomax
for sale to the public. Since the Chemilog process has not yet received FDA
approval, we have expensed all costs of manufacturing Angiomax using the
Chemilog process as research and development. If we receive FDA approval of the
Chemilog process by July 2003, we expect to begin selling in the third or fourth
quarter of 2003 Angiomax produced by the Chemilog process whose cost of
manufacturing was previously expensed. As a result, we expect our cost of
manufacturing as a percentage of product revenue will remain at current levels
early in the year and then, subject to FDA approval of the Chemilog process,
decrease substantially by the end of 2003.

We have partially funded development activities relating to the Chemilog
process, paying total development expenses through December 31, 2002 of
approximately $12.1 million, which includes validation and process batch costs
of approximately $4.8 million and $6.7 million incurred in 2001 and 2002,
respectively, and approximately $600,000 of other development costs. We expensed
all of these development costs as research and development in the appropriate
period. Subject to FDA approval of the Chemilog process, we expect to be able to
sell the validation and process batches of Angiomax produced using the Chemilog
process. We are committed to purchase during 2003 approximately $9.7 million of
additional drug material manufactured using the Chemilog process. To the extent
UCB Bioproducts transfers title to this drug material to us prior to FDA
approval of the Chemilog process, we will expense these costs as research and
development.

Research and Development Expenses. Research and development expenses
increased 16% to $38.0 million for 2002, from $32.8 million for 2001. Over
ninety percent of the 2002 expenses related to Angiomax development activities,
of which sixty percent were associated with REPLACE-2. The increase in research
and development expenses was primarily due to higher clinical development costs
of $11.6 million relating to our REPLACE-2 trial and $1.5 million in higher
manufacturing development cost incurred in connection with our receipts of
Angiomax manufactured using the Chemilog process. These higher costs were partly
offset by the absence of clinical development costs of the HERO-2 trial program,
our Phase 3 trial of Angiomax in acute myocardial infarction, or AMI, that we
completed in 2001, and other development programs savings.

We have a number of clinical trial programs currently underway, or about to
commence, for expanding the applications of Angiomax for use as an intravenous
anticoagulant in the treatment of arterial thrombosis. The funding for Angiomax,
our main product, has represented and will continue to represent a significant
portion of research and development spending. For 2002 and 2001, research and
development expenses related to Angiomax included the costs of clinical trials,
development manufacturing costs for the bulk drug product and the cost
associated with preparation of U.S. and worldwide marketing applications. The
amount of future research and development expenses associated with Angiomax are
not reasonably certain as these costs are dependent upon the regulatory process
and the timing for obtaining marketing approval for other applications of the
product in the United States and other countries. We currently plan to expend
approximately $30 million to $35 million on research and development in 2003, of
which about 80% is planned for Angiomax.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 1% to $36.8 million for 2002, from $36.6
million for 2001. The increase in selling, general and administrative expenses
of $241,000 was primarily due to additional sales expense related to the
promotion of Angiomax, offset in part by lower marketing expenses.

Noncash Stock Compensation. We amortize the deferred stock compensation
that was recorded in 2000 over the respective vesting periods of the individual
stock options. We recorded amortization expense for deferred compensation of
approximately $4.1 million and $3.3 million for the years ended December 31,
2001 and 2002, respectively. We expect to record amortization expense for the
deferred compensation of approximately $2.3 million in 2003 and approximately
$800,000 in 2004. In 2002, we accelerated the vesting of stock options held by
terminated employees in connection with their termination

agreements, which resulted in $500,000 in non-cash compensation expense. The
amortization and non-cash compensation expense is included in our operating
expenses in the consolidated statements of operations.

Other Income and Expense. Interest income decreased 70% to $944,000 for
2002, from $3.2 million for 2001. The decrease in interest income of $2.3
million was primarily due to lower cash and available for sale securities
balances and lower available interest rates on securities. For 2002, interest
income was attributable to the investment of the remaining proceeds of our sales
of shares of common stock in a private placement in May 2001 and in a public
offering in 2002. In 2001, interest income was primarily attributable to the
investment of the remaining proceeds of our initial public offering in August
and September 2000.

We had interest expense of $33,000 during 2002 associated with the draw
down of our revolving line of credit at the end of March 2002. We terminated the
revolving line of credit in August 2002. We had no interest expense for 2001. In
2001, we liquidated our $3.0 million principal investment in Southern California
Edison 5 7/8% bonds, recognizing a loss of $850,000 on the sale.

YEARS ENDED DECEMBER 31, 2001 AND 2000

Net Revenue. We had net revenue of $14.2 million in 2001 from sales of
Angiomax. We had no net revenue in 2000.

Cost of Revenue. Cost of revenue in 2001 was $2.1 million, or 15% of net
revenue. The cost of revenue in 2001 consisted of expenses in connection with
the manufacture of the Angiomax sold which represented 12% of the 2001 cost of
revenue, the logistics costs of selling Angiomax such as distribution, storage,
and handling, which represented 38% of the 2001 cost of revenue, and royalty
expenses under our agreements with Biogen which represented 50% of the 2001 cost
of revenue.

Research and Development Expenses. Research and development expenses
decreased 17% from $39.6 million in 2000 to $32.8 million in 2001. Eighty-eight
percent of the 2001 expenditures related to Angiomax development activities, of
which 32% were associated with REPLACE-2 and 28% were related to our HERO-2
trial program. The decrease in research and development expenses of $6.8 million
was primarily due to higher manufacturing development costs related to UCB
Bioproduct's manufacture of Angiomax bulk drug product in 2000, which was
expensed prior to FDA approval, and to lower clinical development costs
associated with the completion in 2001 of the HERO-2 trial program, our Phase 3
clinical trial in AMI. Partly offsetting this decrease in research and
development costs were higher costs related to our trials in angioplasty called
REPLACE-1 and REPLACE-2 and higher development costs related to the Chemilog
process.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 143% to $36.6 million in 2001 from $15.0
million in 2000. The increase in selling, general and administrative expenses of
$21.5 million was primarily due to an increase in marketing and selling expenses
and corporate infrastructure costs arising from an increase in activity relating
to the commercial launch of Angiomax in 2001, including the addition of sales
personnel.

Other Income and Expense. Interest income increased 19% to $3.2 million in
2001 from $2.7 million in 2000. The increase in interest income of $459,000 was
primarily due to interest income arising from the investment of the proceeds of
our initial public offering in August and September 2000 and from the investment
of the proceeds from our sale of 4.0 million shares of our common stock in a
private placement in May 2001.

We had no interest expense in 2001. Interest expense of $19.4 million in
2000 was related to interest charges and amortization of the discount on our
convertible notes issued in October 1999 and March 2000.

During the second quarter of 2001, we liquidated our $3.0 million principal
investment in Southern California Edison 5 7/8% bonds, recognizing a loss of
$850,000 on the sale.

Noncash Stock Compensation. We amortize the deferred stock compensation
that was recorded in 2000 over the respective vesting periods of the individual
stock options. We recorded amortization expense

for deferred compensation of approximately $3.7 million and $4.1 million for the
years ended December 31, 2000 and 2001, respectively. The amortization expense
is included in our operating expenses in the consolidated statements of
operations.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity. Since our inception, we have financed our operations
through the sale of common and preferred stock, sales of convertible promissory
notes and warrants, interest income and revenues from sales of Angiomax.

In August and September 2000, we received $101.4 million in net proceeds
from the sale of common stock in our initial public offering. Since our initial
public offering, we have received an additional $41.8 million in net proceeds in
May 2001 from the sale of 4.0 million shares of our common stock in a private
placement and $30.9 million in net proceeds in June 2002 from the sale of 4.0
million shares of our common stock in a public offering. Prior to our initial
public offering, we had received net proceeds of $79.4 million from the private
placement of equity securities, primarily redeemable convertible preferred
stock, and $19.4 million from the issuance of convertible notes and warrants.

In March 2002, we entered into a collaboration agreement with Nycomed.
Under the agreement, Nycomed paid us an initial non-refundable fee of $1.5
million and agreed to pay up to $2.5 million in additional milestones based on
regulatory approvals in Europe. In addition, Nycomed purchased 79,428 shares of
our common stock for a total purchase price of approximately $1.0 million.

In March 2002, we entered into a loan and security agreement with Comerica
Bank-California. The agreement allowed us to borrow up to $10.0 million. The
agreement was terminated in August 2002.

Cash Flows. As of December 31, 2002, we had $36.8 million in cash and cash
equivalents, as compared to $53.9 million as of December 31, 2001. The major
uses of cash during 2002 include net cash used for operating activities of $45.1
million and net cash used in investing activities of $6.9 million, partly offset
by $34.9 million received from financing activities.

We used net cash of $45.1 million in operating activities during 2002. This
use of cash consisted of a net loss of $45.8 million and an increase in accounts
receivable of $9.5 million and a decrease in accounts payable of $516,000,
partly offset by a decrease in inventory of $2.4 million and increases in
accrued expenses of $2.9 million, deferred revenue of $1.4 million, non-cash
stock compensation of $3.8 million, and depreciation of $555,000. The increase
in accounts receivable can be attributed to the higher sales levels.

During 2002, we used $6.9 million in cash in net investing activities,
which consisted principally of the purchase of available for sale securities.

Cash provided by financing activities of $34.9 million during 2002
consisted primarily of the proceeds of the public offering of 4.0 million shares
of our common stock in June 2002 which resulted in net proceeds of $30.9
million. In addition, Nycomed purchased 79,428 shares of our common stock for a
total purchase price of approximately $1.0 million and employees purchased stock
related to option exercises and our employee stock purchase plan for aggregate
net proceeds to us of approximately $3.0 million.

Funding Requirements. We expect to devote substantial resources to our
research and development efforts and to our sales, marketing and manufacturing
programs associated with the commercialization of our products. Our funding
requirements will depend on numerous factors including:

-- whether Angiomax is commercially successful;

-- the progress, level and timing of our research and development
activities related to our additional clinical trials with respect to
Angiomax and to our other product candidates;

-- the cost and outcomes of regulatory reviews;

-- the continuation or termination of third party manufacturing or sales
and marketing arrangements;

-- the cost and effectiveness of our sales and marketing programs;

-- the status of competitive products;

-- our ability to defend and enforce our intellectual property rights;
and

-- the establishment of additional strategic or licensing arrangements
with other companies or acquisitions.

We believe, based on our current operating plan, which includes anticipated
revenues from Angiomax and interest income, and the proceeds of this offering,
that our current cash, cash equivalents and available for sale securities will
be sufficient to fund our operations for the foreseeable future. However, we
expect to periodically assess our financing alternatives and access the capital
markets opportunistically. In addition, if our existing resources are
insufficient to satisfy our liquidity requirements due to slower than
anticipated revenues from Angiomax or otherwise, or if we acquire additional
product candidates, we may need to sell additional equity or debt securities or
seek additional financing through other arrangements. Any sale of additional
equity or debt securities may result in additional dilution to our stockholders,
and we cannot be certain that additional public or private financing will be
available in amounts or on terms acceptable to us, if at all. If we are unable
to obtain this additional financing, we may be required to delay, reduce the
scope of, or eliminate one or more of our planned research, development and
commercialization activities, which could harm our financial condition and
operating results.

CONTRACTUAL OBLIGATIONS

Our long-term contractual commitments consist of operating leases for our
facilities in Parsippany, New Jersey and Cambridge, Massachusetts, which expire
in January 2013 and August 2003, respectively. Future annual minimum payments
under these operating leases are:

MINIMUM OPERATING LEASE OBLIGATION

YEAR(S) AMOUNT
------------------------------------------------------------ ----------

2003........................................................ $ 808,000
2004........................................................ 526,000
2005........................................................ 492,000
2006........................................................ 495,000
2007........................................................ 503,000
Later years................................................. 2,689,000
----------
Total operating lease obligation.................. $5,513,000
==========

In addition to amounts accrued or payable as of December 31, 2002, we have
commitments to make payments to UCB Bioproducts of a total of $9.7 million
during 2003 for Angiomax bulk drug substance to be produced using the Chemilog
process. We also have $1.9 million in contractual commitments for 2003 related
to research and development activities.

BUSINESS

OVERVIEW

We are a specialty pharmaceutical company with growing revenue from sales
of our first product, Angiomax, a direct thrombin inhibitor used as an
anticoagulant in patients undergoing coronary angioplasty. The FDA approved
Angiomax for use as an anticoagulant in combination with aspirin in patients
with unstable angina undergoing coronary angioplasty in December 2000, and we
began selling the product in the United States in January 2001. Our total net
revenue was $14.2 million in 2001 and $38.3 million in 2002, generated almost
entirely from sales of Angiomax in the United States.

We believe that Angiomax has the potential to become a broadly applied
intravenous anticoagulant as a replacement for heparin in the treatment of
arterial thrombosis. Arterial thrombosis is associated with life-threatening
conditions such as ischemic heart disease, peripheral vascular disease and
stroke, all of which result from decreased blood flow and diminished supply of
oxygen to vital organs. In particular, we are evaluating Angiomax for additional
uses in open vascular surgery such as CABG, in medical conditions that require
urgent treatment such as unstable angina, in patients with heparin allergy, in
children and in peripheral angioplasty.

Our core strategy is to help hospitals alleviate the growing pressure to
treat patients more efficiently, including the demands to improve the
effectiveness and safety of treatment while minimizing the cost. We implement
this strategy by acquiring and developing products in late stages of their
clinical development or after they have been approved for marketing. Cost of
treatment in hospitals is predominantly driven by length of patient stay, while
length of stay is often driven by the occurrence of treatment complications.
Products that are more effective, safe and predictable, which require shorter
periods of treatment or are easier to use than current products, may reduce the
length of hospital stay and, as a direct result, lower total costs. We believe
that products with such attributes are attractive to hospital business
management, physicians, pharmacists and other care staff. We also believe that
promising, well-developed products which fit this profile may be acquired on
reasonable terms from larger pharmaceutical companies in the process of refining
their own product portfolios. We may also acquire rights to such products from
smaller companies seeking competent development and/or commercial collaborations
in this specialized area of medicine.

ANGIOMAX

Overview

In December 2000, we received marketing approval from the FDA for Angiomax
for use as an anticoagulant in combination with aspirin in patients with
unstable angina undergoing coronary balloon angioplasty. We began selling
Angiomax in the United States in January 2001. Angiomax was approved in New
Zealand in 1999 and in Canada and Israel in 2002 for indications similar to
those approved by the

FDA. We are selling Angiomax in New Zealand and Israel and expect to begin
selling Angiomax in Canada in the second quarter of 2003.

We believe Angiomax, as a direct thrombin inhibitor, is a valuable
replacement for heparin, the anticoagulant that historically has been used in
almost all angioplasty procedures. Heparin is also used in most major cardiac
and vascular surgical procedures in the United States and administered to a
majority of patients treated in hospitals in the United States for acute
coronary syndromes, including heart attack.

As of February 21, 2003, clinical investigators had administered Angiomax
to more than 16,000 patients in clinical trials for the treatment and prevention
of blood clots in a wide range of hospital applications. In clinical trials in
angioplasty, the use of Angiomax compared to heparin resulted in fewer ischemic
complications and fewer bleeding events, including a reduction in the need for
blood transfusion. In addition, in these trials, Angiomax demonstrated that its
therapeutic effect is more predictable than heparin, which enables simplified
dosing.

We believe that Angiomax has the potential to become a broadly applied
intravenous anticoagulant as a replacement for heparin in the treatment of
arterial thrombosis. In particular, we are evaluating Angiomax in clinical
trials for additional uses in open vascular surgery such as CABG, in medical
conditions that require urgent treatment such as unstable angina, in patients
with heparin allergy, in children and in peripheral angioplasty.

Background

Clotting. Normally, blood loss at the site of an injury is limited by the
formation of blood clots, in a process called coagulation. A blood clot is a
collection of cross-linked strands of the protein fibrin, which is made as a
result of coagulation and forms a mesh around activated platelets and red blood
cells. Blood clots are formed through precisely regulated interactions among the
blood vessel wall, plasma clotting factors, including thrombin and fibrinogen,
and platelets. Current literature suggests that the clotting process is a series
of overlapping phases in which groups of clotting factors are intertwined with
platelets, red blood cells and endothelial cells that line the blood vessels. In
general, clotting serves a life-saving function by reducing bleeding; however,
unwanted clots in arteries can lead to heart attack, stroke or organ failure.

The trigger for the clotting process in an artery is typically a tearing or
spontaneous rupture of plaque, which are deposits of cholesterol, fat and dead
cells that build up under a protective layer of cells, known as endothelial
cells, on a blood vessel wall. When the plaque ruptures, substances released
from cells and plaque that are not normally exposed to the bloodstream come into
contact with the bloodstream. This may happen without an apparent cause or may
be caused as a direct result of, for example, an angioplasty procedure. This
contact triggers the clotting process. In parallel interdependent processes, a
small amount of the clotting factor thrombin is produced and a thin protective
layer of platelets is deposited at the rupture site.

Thrombin has long been recognized as a key factor in the clotting process.
Thrombin is technically a type of enzyme called a protease, like several other
clotting factors. However, thrombin not only converts fibrinogen into the fibrin
strands that hold a clot together, but thrombin also helps to amplify its own
production by activating other clotting factors. Importantly, thrombin also
provides signals, like a hormone does, to various cell types such as platelets
and endothelial cells to initiate responses in coagulation, inflammation, and
possibly other important physiological processes. Thrombin directly activates
platelets, by producing effects through means of surface receptors on the
platelets called protease-activated receptors, or PARs, that provide binding
sites for the effector molecule. PARs carry a hidden message that is unmasked by
the action of the protease, for example, thrombin. Activation of the PAR then
transmits the signal to the platelet, which becomes activated.

In addition to being a powerful platelet activator through its action on
platelets, thrombin can also recruit more platelets to the site of injury.
Activated platelets not only help close the rupture, but the activated
platelet's membrane becomes a docking site for other clotting factors. The
clotting factors can

assemble and much more efficiently produce very large amounts of thrombin. The
thrombin produces fibrin, strands of protein that interweave and enmesh the
platelets into a thrombus, or clot. The clotting factors on the platelets within
the clot continue to produce large amounts of thrombin after the clot is formed,
and the clot can continue to grow.

As a clot blocks the blood vessel, it may then cut off blood supply to the
heart muscle, the brain or other organs. A heart attack, also known as a
myocardial infarction or MI, occurs if a clot blocks blood supply to the heart
muscle, and the muscle stops working either in part or completely. This may
result in irreversible damage to the heart or death.

During medical procedures such as coronary angioplasty, the blood clotting
process must be slowed to avoid unwanted clotting in the coronary artery and the
potential growth of clots or the movement of a clot or portions of it downstream
in the blood vessels to new sites.

Anticoagulation Therapy. Anticoagulation therapy attempts to modify
actions of the components in the blood system that activate clot-forming factors
leading to blood clots. When the risks of clot formation cannot be avoided, or
when medical procedures such as angioplasty give rise to an increased risk of
clot formation, anticoagulation therapy is warranted. Anticoagulation therapy
has typically involved the use of drugs to inhibit one or more components of the
clotting process, thereby reducing the risk of clot formation. Anticoagulation
therapy is usually started immediately after a diagnosis of blood clots, or
after risk factors for clotting are identified. Because anticoagulation therapy
reduces clotting, it also may cause excessive bleeding.

Current anticoagulation therapy for angioplasty focuses on the principal
components of the clotting process: thrombin, platelets and fibrin.

-- The actions of thrombin in the clotting process may be inhibited by
direct thrombin inhibitors, such as Angiomax, which act directly on
thrombin. Because thrombin activates platelets, direct thrombin
inhibitors also prevent platelet clumping. The actions of thrombin in
the clotting process may also be inhibited by indirect thrombin
inhibitors, such as heparin, which act to turn off clotting factors
and turn on natural anti-clotting factors such as antithrombin-III,
or AT-III.

-- The aggregation of platelets in the clotting process may be inhibited
by products called platelet inhibitors, which act on different
pathways leading to platelet activation, including specific enzyme
pathways like the cyclo-oxygenase and the adenosine diphosphate, or
ADP, pathways. Two important agents that prevent platelet activation
are aspirin and a class of platelet inhibitors that can be
administered orally and are referred to as thienopyridines, such as
clopidogrel. The use of platelet inhibitors that block activation is
considered important therapy.

-- Other types of platelet inhibitors attempt to block the clumping, or
aggregation of platelets by blocking surface sites, like the
glycoprotein IIb/IIIa, or GP IIb/IIIa, receptor, on the platelet that
allow them to attach to fibrin and each other. The GP IIb/IIIa
inhibitors, although effective at inhibiting platelet aggregation, do
not prevent platelet activation. In fact, many studies have found
that use of these agents, especially at low levels, are associated
with an increase in markers of platelet activation.

-- Fibrin may be dissolved after clotting has occurred by products
called fibrinolytics.

Drugs are currently used alone or in combination with other anticoagulant
therapies to target one or more components of the clotting process. Because of
the interdependence of clotting factors and platelets, drugs that target one or
the other may have effects on the other. For example, a drug that targets
thrombin may have an antiplatelet effect. However, possibly due to the critical,
central role of thrombin, while anti-thrombin drugs have been used alone in
angioplasty, the use of antiplatelet drugs without anti-thrombin drugs generally
has not been successful.

Disadvantages of Heparin Therapies

In the hospital environment, most patients undergoing anticoagulation
therapy for the prevention and treatment of arterial and venous thrombosis
receive heparin or low molecular weight heparin. In the United States, over 12
million hospitalized patients annually receive heparin therapy. Heparin is a
standard component of acute anticoagulation therapy because of the central role
of thrombin in the clotting process and heparin's rapid anticoagulant effect.

Heparin's properties as an anticoagulant were discovered in 1916. It is
prepared from the intestines of pigs or lungs of cows. Heparin is a complex
mixture of animal-derived proteins with variable anticoagulant potencies. The
anticoagulant effects of heparin on any given patient are difficult to predict
because heparin binds non-specifically to human cells and circulating substances
in the blood. For these and other reasons, heparin, as a non-specific, indirect
thrombin inhibitor, presents a variety of clinical challenges including:

-- Weak effect in clots. Because it is an indirect thrombin inhibitor,
heparin is variably effective on thrombin that is bound to clots. In
addition, large amounts of thrombin continue to be produced from
within the clot after clot formation.

-- Activation of platelets. Studies have shown that heparin enhances
the clumping of platelets in unstable angina patients. Heparin
activates platelets by binding to the GP IIb/IIIa receptor on the
platelet surface, and has been shown to decrease the platelet
inhibitory effects of GP IIb/IIIa platelet inhibitors.

-- Increased risk of bleeding. Patients who receive heparin have a high
incidence of bleeding. This is particularly the case with patients
who are elderly, female or have low body weight. Recent clinical
trials have shown that bleeding risk may also be increased when
heparin is used in combination with intravenous platelet inhibitors.

-- Unpredictability. A specified dose of heparin provides an
unpredictable level of anticoagulation. As a result of this
unpredictability, use of heparin requires close monitoring.

-- Risk of clinical immune reaction. Heparin may cause the formation of
antibodies, which antibodies may be associated with HIT/HITTS, which
is characterized by reduced platelet counts and potentially by
widespread, life-threatening blood clots.

-- Diminished effect in high-risk patients. Heparin's effect may be
reduced in patients who have suffered a prior heart attack and in
patients with unstable angina.

-- Indirect thrombin inhibition. Heparin can only bind to thrombin by
first binding to AT-III which may be absent or present in
insufficient amounts in some patients. AT-III deficiency can be
severe and unpredictable in infants and children.

Heparin derivatives, such as low molecular weight heparins, were developed
to attempt to diminish some of these disadvantages. Low molecular weight
heparins are administered once or twice daily by subcutaneous injection.
Although they tend to be more predictable than heparin in their effect, low
molecular weight heparins exhibit similar clinical challenges to those of
heparin, including a weak effect in a clot that has already formed and a
comparable risk of bleeding. The effects of low molecular weight heparins are
only partially reversible, making their use in surgery or in patients that may
be candidates for surgery impractical.

Angiomax Advantages

Angiomax is a synthetic peptide of 20 amino acids that is a rapid-acting,
direct and specific inhibitor of thrombin and is administered by intravenous
injection. Angiomax is specific in that it only binds to thrombin and does not
bind to or activate any other blood factors or cells.

Angiomax was engineered based on the biochemical structure of hirudin, a
natural 65-amino acid protein anticoagulant. However, the binding of Angiomax to
thrombin is "naturally" reversible because thrombin slowly breaks down the
Angiomax molecule, releasing it from binding, while hirudin remains

intact and tightly bound to thrombin. This natural reversibility is associated
with a reduced risk of bleeding.

Angiomax has numerous pharmacological and clinical advantages over heparin
including:

-- Effective in clot-bound thrombin. Angiomax, as a direct thrombin
inhibitor, is equally effective on thrombin in the clot as well as
thrombin circulating in the blood.

-- Inhibition of platelets. Angiomax directly inhibits thrombin which
also inhibits platelet activation through inhibition of platelet
activating receptors, such as the PAR receptors, on the surface of
platelets.

-- Reduced bleeding risk. As a reversible thrombin inhibitor, Angiomax
has consistently shown clinically meaningful reductions in bleeding
compared to heparin.

-- Predictability. As a synthetic peptide, a specified dose of Angiomax
results in a predictable level of anticoagulation.

-- Effective in high-risk patients. Angiomax has been shown to be
effective in patients having suffered prior heart attacks and
patients with acute coronary syndromes.

-- Reduced incidence of thrombocytopenia. Angiomax has been shown to
result in a significant reduction in thrombocytopenia, or lower
platelet counts, an immunogenic disorder associated with heparin.

Use of Angiomax in Coronary Angioplasty

Coronary angioplasty has transformed the management of symptomatic arterial
disease in the last 10 years. The procedure is used to restore normal blood flow
in arteries that supply blood to the heart. In the year 2000, more than one
million coronary angioplasty procedures with or without stenting were performed
in the United States. The coronary angioplasty procedure itself increases the
risk of coronary clotting, potentially leading to MI, CABG, or death.

To prevent clotting, anticoagulation therapy is routinely administered to
patients undergoing angioplasty. Heparin has historically been used as an
anticoagulant in virtually all patients undergoing angioplasty. In addition,
platelet inhibitors such as aspirin, an ADP inhibitor such as Plavix or a GP
IIb/ IIIa inhibitor are often administered to augment heparin.

Clinical Trials in Coronary Angioplasty

We invest significantly in the development of clinical data on the mode of
action and clinical effects of Angiomax in procedures including coronary
angioplasty and stenting.

In almost all of our investigations to date, we have compared Angiomax to
heparin, which until relatively recently was the only injectable anticoagulant
for use in coronary angioplasty, or combinations of drugs including heparin.
Angiomax has been tested against heparin in eight comparative trials and found
to reduce significantly the risk of arterial thrombosis and of bleeding. These
data formed the basis for FDA approval in late 2000 and of our marketing
programs in 2001 and 2002. In 2002, we conducted REPLACE-2 to evaluate Angiomax
as the foundation anticoagulant for angioplasty within the context of modern
therapeutic products and technologies, including coronary stents.

Trials in Angioplasty Performed Prior to REPLACE-2. More than 6,000
patients were studied in various clinical studies of Angiomax in coronary
angioplasty prior to the REPLACE-2 trial. Based on a pooled analysis of Angiomax
patient data for all of these trials, Angiomax-treated patients, as compared to
heparin-treated patients, experienced, when measured seven days after treatment
in the hospital:

-- 43% fewer clinical events as measured by death, MI, revascularization
procedures or major bleeding;

-- 24% fewer ischemic events as measured by death, revascularization or
MI; and

-- 63% fewer events involving major bleeding.

These pooled data have been accepted for presentation by the American
College of Cardiology in March 2003.

REPLACE-2 Trial in Angioplasty. We completed patient enrollment for the
REPLACE-2 trial in September 2002, only 10 months after start-up in November
2001. The trial was a randomized, double blind study involving 6,002 patients
who were referred for angioplasty in 233 clinical sites in the United States and
eight other countries. In November 2002, the principal investigators reported
30-day patient follow-up results of the trial.

The trial was designed to evaluate whether the use of Angiomax with
provisional use of GP IIb/IIIa inhibitors provides clinical outcomes relating to
rates of ischemic and bleeding events that are superior to heparin alone and the
same as, or non-inferior to, the current standard of low-dose weight-adjusted
heparin plus GP IIb/IIIa inhibitors. These outcomes were designed to be assessed
using formal statistical tests for superiority and non-inferiority.

REPLACE-2 employed two randomized arms:

-- heparin with a GP IIb/IIIa inhibitor, which was either Integrilin or
ReoPro; and

-- Angiomax with the provisional use of a GP IIb/IIIa inhibitor, which
was either Integrilin or ReoPro, if deemed necessary by the physician
during the procedure.

The trial also evaluated the Angiomax regimen against heparin alone using a
historical control arm. The heparin historical control arm of the study was
calculated using an average of the event rates from the EPISTENT and ESPRIT
trials, which were previous angioplasty trials of other companies in which
heparin alone was compared to heparin plus a GP IIb/IIIa inhibitor.

The primary objective of REPLACE-2 was to demonstrate superiority versus
heparin and non-inferiority to heparin plus a GP IIb/IIIa inhibitor for the
quadruple composite endpoint of death, MI, urgent revascularization or major
bleeding. The secondary objectives of REPLACE-2 included superiority versus
heparin and non-inferiority to heparin plus a GP IIb/IIIa inhibitor for a triple
composite endpoint of death, MI or urgent revascularization.

Based on 30-day patient follow-up results, Angiomax met all primary and
secondary objectives for the study:

-- The primary quadruple composite endpoint of death, MI, urgent
revascularization or major bleeding at 30 days was met:

-- Angiomax was superior to heparin alone.

-- Angiomax was non-inferior to heparin plus a GP IIb/IIIa inhibitor.

-- The secondary triple composite endpoint of death, MI or urgent
revascularization at 30 days was met:

-- Angiomax was superior to heparin alone.

-- Angiomax was non-inferior to heparin plus a GP IIb/IIIa inhibitor.

-- The Angiomax treatment group demonstrated a significant decrease in
bleeding complications and thrombocytopenia as compared to heparin
plus a GP IIb/IIIa inhibitor.

7.2% of the patients in the Angiomax treatment group received a GP IIb/IIIa
inhibitor on a provisional basis.

Notably, 97% of patients achieved desired anticoagulation targets with the
initial dose of Angiomax versus only 88% with heparin plus a GP IIb/IIIa
inhibitor, resulting in 12% of the patients with heparin plus a GP IIb/IIIa
inhibitor having to receive multiple doses of heparin. The average patient
duration of

infusion was only 44 minutes with Angiomax versus 12 to 18 hours for patients
treated with heparin plus a GP IIb/IIIa inhibitor, which may facilitate earlier
release from the hospital for patients on Angiomax.

The study is continuing beyond these 30-day results, evaluating patient
outcomes for two additional periods indicated in the study protocol: death, MI
or urgent revascularization within six months following angioplasty and death
within one year following angioplasty. We expect to report on these results
later in 2003.

In addition to the objectives described above, the REPLACE-2 trial has a
protocol-defined total hospital resource cost comparison at U.S. clinical trial
sites, which is currently being analyzed, designed to evaluate whether use of
Angiomax plus provisional GP IIb/IIIa inhibitors instead of the combination of
heparin plus a GP IIb/IIIa inhibitor would reduce the costs of antithrombotic
drug therapy and the total cost of care. We expect to report the results of this
pharmacoeconomic analysis later in 2003. We expect these results to show that
medical decision-makers who use Angiomax as part of a safe and effective
anticoagulant therapy will reduce the cost of treating an angioplasty patient
not only by reducing pharmacy acquisition costs, but also by reducing bleeding
and other complications, and reducing the need for other drugs and devices such
as closure devices. We believe the reduction of a hospital's cost of treating an
angioplasty patient is significant because many U.S. hospitals receive a fixed
reimbursement amount for the angioplasties they perform, which amount is not
based on the actual expenses the hospital incurs.

We estimate, based on REPLACE-2 30-day follow-up dosing and administration
data for each of the treatment arms, using wholesale drug acquisition costs, a
difference of more than $400 per patient in pharmacy acquisition cost in favor
of the Angiomax regimen, after taking into account the provisional use of GP
IIb/IIIa inhibitors, versus the heparin plus a GP IIb/IIIa inhibitor regimen.

We intend to submit a supplement for FDA review to update the product
labeling to include the previously reported REPLACE-2 data. In addition, we will
use the REPLACE-2 results as the basis for regulatory updates and submissions in
international markets, including Europe.

Angiomax Commercial Operations in Coronary Angioplasty. We are selling
Angiomax in the United States with a hospital sales force of 86 people as of
February 21, 2003. We expect to increase the size of this sales force to 97 in
early 2003 to meet anticipated increasing customer demands. Our sales force has
been configured to target, as potential hospital customers, the approximately
700 hospitals with cardiac catheterization laboratories in the United States
that perform 500 or more coronary angioplasties per year. Our development,
medical, marketing and sales professionals are qualified and trained to deal
with complex scientific, treatment, pharmacy and economic questions on a
day-to-day basis.

We are focusing our Angiomax marketing efforts on interventional
cardiologists and other key clinical decision-makers at these cardiac
catheterization laboratories. We use educational programs, preceptorships in
leading medical centers, publications, and other targeted marketing techniques
in efforts to increase Angiomax sales. We believe our ability to deliver
relevant, advanced and reliable educational programs to our customers and our
concentrated customer base provides us with significant market presence even in
the highly competitive sub-segments of the hospital market such as cardiology.
We work collaboratively with a number of prominent hospitals and teaching
institutions around the United States who share our mission to educate our
customers in the appropriate use of our products as part of modern practice and
who provide independent guidance to their colleagues.

We sell Angiomax primarily to a limited number of national medical and
pharmaceutical distributors and wholesalers with distribution centers located
throughout the United States, including AmerisourceBergen Drug Company, McKesson
Corporation and Cardinal Health, Inc., each of which accounted for more than 10%
of our revenues for the year ended December 31, 2002. These wholesalers and
distributors then sell to hospitals. If Angiomax is approved for use in other
indications, we intend to market Angiomax for these indications in the United
States by supplementing our commercial organization, or by collaborating with
other health care companies.

We market, sell and distribute Angiomax in New Zealand and Israel through
distribution partners, and we expect to begin selling Angiomax in Canada in the
second quarter of 2003 through a distribution

partner. In addition, we have agreements with other distribution partners for
future sales of Angiomax that cover more than 56 additional countries, including
an exclusive collaboration with Nycomed Danmark A/S for the distribution and
promotion of Angiomax in 35 countries, including 12 countries in the European
Union. We have not received approval to market Angiomax in any of these
countries.

Angiomax Potential Applications

We believe that Angiomax is the leading replacement for heparin in
angioplasty and can become the leading replacement for heparin in the treatment
of arterial thrombosis. In particular, we are evaluating Angiomax for additional
uses in open vascular surgery such as CABG, in medical conditions that require
urgent treatment such as unstable angina, in patients with heparin allergy, in
children and in peripheral angioplasty. If we are able to obtain regulatory
approval in these additional indications, we believe that Angiomax could be
marketed to customers across a spectrum of hospital-based acute cardiovascular
care--in coronary angioplasty, vascular surgery and urgent medical treatment.

At present, we:

-- have recently completed enrollment in a Phase 3 trial program
studying the use of Angiomax in the treatment of HIT/HITTS patients
undergoing coronary angioplasty, the results of which we expect to
report in 2003;

-- are conducting a Phase 2/3 trial program studying the use of Angiomax
as an anticoagulant in patients undergoing CABG, with and without the
use of a bypass pump, and in HIT/HITTS patients undergoing CABG, with
and without the use of a bypass pump;

-- plan to start a randomized Phase 3 trial program to study the use of
Angiomax in patients presenting to the emergency department with
acute coronary syndromes who may be medically managed or ultimately
treated in the catheterization laboratory or operating room;

-- are conducting a Phase 2 trial program to study the use of Angiomax
in neonates and infants up to six months old with active thrombosis;
and

-- are supporting a number of investigations, including clinical
studies, of Angiomax in patients undergoing percutaneous peripheral
angioplasties.

Use of Angiomax in Vascular Surgery. Heparin is used widely as an
anticoagulant in major surgical procedures. Many surgery patients, however,
develop antibodies to heparin as a result of their exposure to heparin. Heparin
antibody positivity is the major marker for the development of HIT/HITTS. Even
absent the clinical condition of HIT/HITTS, the presence of heparin antibodies
alone has been associated with an increased risk of death or major complications
after CABG. In addition, the effects of heparin are routinely reversed with
protamine, the use of which has been associated with an allergic reaction and a
subsequent increase in the risk of death or major complications.

Clinical publications have cited several different rates of CABG patients
who are heparin antibody positive, ranging from 25% to 50%. Clinical data
indicate that heparin antibody positive patients have a significant increase in
major complications of CABG, resulting in increased hospital stay or death.
Based on hospital reimbursement data, in the United States in 2000 there were
nearly 400,000 CABG procedures performed.

Surgeons conduct CABG either on-pump or off-pump. On-pump CABG is conducted
with the use of a cardiac pulmonary bypass machine, a device that pumps the
patient's blood while the heart is stopped and the surgery is conducted. For
off-pump CABG, physicians slow the heartbeat and stop the heart only briefly
during the surgery, and therefore do not use a bypass machine.

We are conducting Phase 3 studies in both on- and off-pump CABG, and
assuming positive results, we intend to submit the data from these studies to
the FDA for consideration of marketing Angiomax in patients, including patients
who are heparin antibody positive, undergoing CABG. We have completed a 100
patient Phase 2 trial of Angiomax comparing Angiomax to heparin in patients
undergoing off-pump

CABG. Patients in the trial who received Angiomax experienced more rapid and
consistent anticoagulation, a similar level of bleeding and significant
improvement in graft patency. We expect the principal investigator to publish
the Phase 2 data in a medical journal in 2003.

Use of Angiomax in Urgent Medical Treatment. Ischemic heart disease
patients are subject to chest pain that results from a range of conditions, from
unstable angina to acute myocardial infarction. The severe onset of these
cardiac conditions is collectively referred to as acute coronary syndromes, or
ACS. Some ACS patients enter the hospital by way of the emergency department and
are triaged to be medically managed with pharmacotherapy and observation,
scheduled for an angioplasty procedure, and/or scheduled for CABG.

Unstable angina is a condition in which patients experience the new onset
of severe chest pain, increasingly frequent chest pain or chest pain that occurs
while they are resting. Unstable angina is caused most often by a rupture of
plaque on an arterial wall that results in clot formation and ultimately
decreases coronary blood flow but does not cause complete blockage of the
artery. Unstable angina is often medically managed in the emergency department
with anticoagulation therapy that may include aspirin, indirect thrombin
inhibitors such as heparin or low molecular weight heparin and GP IIb/IIIa
inhibitors. Many unstable angina patients also undergo coronary angioplasty or
CABG depending on the severity of the disease.

AMI is a leading cause of death in ischemic heart disease patients. AMI
occurs when coronary arteries, which supply blood to the heart, become
completely blocked by a clot. AMI patients are routinely treated with heparin,
with and without fibrinolytics, in combination with GP IIb/IIIa inhibitors. AMI
patients are increasingly undergoing angioplasty as a primary treatment to
unblock clogged arteries.

Based on hospital reimbursement data, in the United States in 2000 there
were approximately 1,882,000 patients hospitalized for acute coronary syndromes,
including 900,000 unstable angina patients and 982,000 patients with heart
attacks of varying severity.

Angiomax has been the subject of five Phase 2 trials in patients with
unstable angina or who had experienced a less serious form of MI known as non
Q-wave MI. These trials enrolled a total of 630 patients, of whom 553 received
various doses of Angiomax. These studies have demonstrated that Angiomax is an
anticoagulant that can be administered safely in patients with unstable angina.

The largest of these Phase 2 trials was a multicenter, double blind,
placebo-controlled and randomized study in 410 patients with unstable angina or
who had experienced non Q-wave MI. The trial compared the effect of three active
dose levels and one placebo dose level of Angiomax with respect to death, MI,
recurrent angina and major bleeding. Angiomax demonstrated a significant
correlation between dose and anticoagulant effect.

In comparison to 160 patients treated with placebo doses in the trial, 250
patients treated with active doses of Angiomax experienced:

-- a 68% reduction in death or MI in the hospital; and

-- a 59% reduction in death or MI after six weeks.

The company from which we licensed Angiomax, Biogen, commenced a Phase 3
trial in 1994, the TIMI-8 trial, in unstable angina patients comparing Angiomax
to heparin. The trial was discontinued after enrolling 133 patients when Biogen
discontinued the Angiomax development program. Analysis of the data from the
discontinued study showed the combined incidence of death, MI, or major bleeding
reported in hospital within fourteen days of admission was 2.9% in Angiomax
patients and 13.8% in heparin patients.

In 2001, we completed a 17,000 patient randomized Phase 3 clinical trial in
AMI in 46 countries. In this Phase 3 trial, which we refer to as the HERO-2
trial, patients with AMI who were candidates for thrombolytic treatment with
streptokinase received Angiomax or heparin. All patients in the trial also
received aspirin and Streptase, a fibrinolytic. Clinical results were assessed
30 days after treatment. The trial assessed second heart attacks, or
reinfarction, based on both adjudication by a panel of experts and

direct observation by the sites in the trial. In comparison to heparin-treated
patients in the trials, Angiomax-treated patients experienced:

- no significant difference in mortality, the primary endpoint of the
trial;

- 22% fewer second heart attacks; and

- no significant difference in hemorrhagic stroke and transfusions.

The results of the HERO-2 trial were published in The Lancet in December
2001.

Use of Angiomax in Other Indications

Angiomax has been the subject of a number of additional clinical trials for
other indications.

HIT/HITTS. Approximately one to three percent of patients who have
received heparin experience HIT/HITTS. The underlying mechanism for the
condition appears to be an immunological response to a complex formed by heparin
and another factor, resulting in thrombocytopenia, and in some cases in arterial
or venous clotting, which may result in death or the need for limb amputation.
In order to treat a HIT/HITTS patient, an alternative anticoagulant is necessary
because further administration of heparin is not possible.

Prior to 1997, Angiomax was administered to a total of 39 HIT/HITTS
patients undergoing angioplasty requiring anticoagulation for invasive coronary
procedures or treatment of thrombosis. For those patients undergoing angioplasty
and other procedures, Angiomax provided adequate anticoagulation, was
well-tolerated and rarely resulted in bleeding complications. In the approval
letter for Angiomax, the FDA required us to complete our trial designed to
evaluate the use of Angiomax for treatment of HIT/HITTS patients undergoing
angioplasty. That trial has recently completed enrollment and we expect to
report the results of the trial in the second quarter of 2003.

We are also conducting a Phase 3 trial program studying the use of Angiomax
as an anticoagulant in HIT/HITTS patients undergoing CABG, with and without the
use of a bypass pump.

Neonates and Infants (AT-III deficiency). Heparin can only bind to
thrombin by first binding to an anti-clotting factor called AT-III, which may be
absent or present in insufficient amounts in some patients. AT-III deficiency is
often severe or unpredictable in infants and children, making the treatment and
prevention of thrombosis especially difficult. We have commenced a Phase 2 trial
program in neonates and infants up to six months old requiring intravenous
anticoagulation due to active thrombosis.

Regulatory Status

In December 2000, we received approval from the FDA for the use of Angiomax
in combination with aspirin in patients with unstable angina undergoing coronary
angioplasty. In connection with this approval, the FDA required us to complete
our ongoing trial evaluating the use of Angiomax for the treatment of HIT/HITTS
patients undergoing angioplasty. Patient enrollment for this trial has been
completed and, assuming the results are positive, we expect to submit the
results to the FDA in 2003 for expanded labeling indications. We have received
approval to market Angiomax stored at controlled room temperature which allows
stocking of Angiomax in cardiac catheterization laboratories and other parts of
a hospital where the issue of refrigeration was problematic.

We intend to submit a supplement for FDA review to update the product
labeling to include the 30-day REPLACE-2 data.

With our European partner, Nycomed, we plan to submit in 2003 an MAA to the
EMEA for Angiomax for use in patients undergoing coronary angioplasty. In
February 1998, an MAA was submitted that we subsequently withdrew. The
withdrawal followed extensive discussions with the Committee of Proprietary
Medicinal Products, or the CPMP, relating to the relevance of the clinical data
presented to EMEA to then current European medical practice. We believe that the
results of the REPLACE-2 program address the issues raised by CPMP.

Angiomax was approved in New Zealand in September 1999 for use in the
treatment of patients undergoing coronary angioplasty. Angiomax was approved in
Canada in October 2002 and Israel in June 2002 for use in unstable angina
patients undergoing coronary angioplasty. We plan to file applications for
marketing authorization in several Latin American countries including Argentina,
Brazil, Mexico and Venezuela.

CLEVIDIPINE

In March 2002, we entered into a study and exclusive option agreement with
AstraZeneca relating to the further study, licensing, development and
commercialization of clevidipine, an intravenous compound for the short-term
control of high blood pressure in patients undergoing cardiac surgery. Blood
pressure control is important in patients undergoing surgery or other
interventional procedures in a hospital. These patients are often treated with
multiple medications, which may increase the duration of the patients' stay in
the intensive care unit. We plan to commence Phase 3 clinical trials in 2003 in
patients undergoing cardiac surgery to investigate the potential of clevidipine
to simplify and improve the treatment of these patients.

Clevidipine belongs to a well-known class of drugs called calcium channel
blockers, which are used to control high blood pressure. Clevidipine acts by
selectively relaxing the smooth muscle cells that line small arteries, resulting
in widening of the artery opening and reduction of blood pressure within the
artery. Unlike some other blood pressure reducing agents, including some other
calcium channel blockers, clevidipine does not appear, based on animal studies,
to have effects on the coronary arteries or the veins, and has not been
associated with quickening of the heart rate in anesthetized patients. Moreover,
clevidipine has been shown in clinical trials to improve the pumping performance
of the heart.

Prior to our agreement with AstraZeneca, AstraZeneca conducted Phase 2
clinical trials of clevidipine. These clinical trials demonstrated that
clevidipine acts to reduce blood pressure rapidly after intravenous infusion.
Clevidipine is metabolized rapidly by enzymes in the blood, which results in the
drug being cleared from the blood stream in a short period of time. Therefore,
the effects of clevidipine are short-lived, and in clinical trials it has been
possible to demonstrate reductions in blood pressure that are dose-dependent and
that cease rapidly after stopping clevidipine infusions.

We believe that attributes of clevidipine demonstrated in clinical trials
to date, namely rapid, titratable onset of effect on blood pressure, simple
preparation and administration, arterial selectivity and rapid metabolism and
elimination, could potentially benefit patients with high blood pressure
undergoing surgical procedures and patients with severely elevated blood
pressure that requires rapid reduction.

We have commenced a study in patients undergoing cardiac surgery comparing
clevidipine with nitroglycerin, a drug that is typically used to control high
blood pressure in patients undergoing cardiac surgery, and plan to commence a
Phase 3 program in 2003. We believe that clevidipine can be efficiently sold by
our U.S. sales force to hospital customers, including Angiomax customers, when
and if clevidipine is approved for sale by the FDA.

CTV-05

In 1999, we acquired from GyneLogix, Inc. exclusive worldwide rights to
CTV-05, a strain of bacteria under clinical investigation for a broad range of
applications in the areas of gynecological and reproductive health. We entered
into a clinical trial agreement with the National Institutes of Allergy and
Infectious Diseases, a division of the National Institutes of Health, to conduct
a Phase 2 trial of CTV-05 for the treatment of bacterial vaginosis.

In the Phase 2 safety and efficacy trial, the results of which were
announced in April 2002, treatment with CTV-05 did not improve clinical cure
rates at 30 days, the primary endpoint of the trial. Based on that result, we
determined not to make further expenditures related to CTV-05.

In December 2002, we sublicensed our rights to develop CTV-05 to Osel, Inc.
We believe that this arrangement will allow us to participate financially in the
success of CTV-05 if Osel is successful in

developing this potentially beneficial bacteria, while at the same time
minimizing our expenditures and allowing us to focus on other opportunities more
directly related to our core goals.

IS-159

In 1998, we acquired from Immunotech S.A. exclusive worldwide rights to
IS-159, a selective chemical that reacts with receptors found on cerebral blood
vessels and nerve terminals. Having determined not to devote further resources
to development of IS-159, we terminated our license of IS-159 in January 2003.

PRODUCT ACQUISITION STRATEGY

We have assembled a management team with significant experience in drug
development and in drug product launches and commercialization.

We plan to continue to seek to acquire and develop late-stage product
candidates or products approved for marketing that help alleviate the growing
pressures on U.S. hospitals to treat patients more efficiently. With regard to
product candidates, we look for an anticipated time to market of four years or
less and existing clinical data which provides reasonable evidence of safety and
efficacy, together with the potential to reduce a patient's hospital stay. In
addition, we aim to acquire approved products that can be marketed in hospitals
by our commercial organization. In making our acquisition decisions, we attempt
to achieve high investment returns by:

-- understanding the market opportunity and potential cost savings for
initially-targeted uses of the drug;

-- assessing the investment and development programs that will be
necessary to achieve a marketable product profile in these initial
uses; and

-- attempting to structure the design of our development programs to
obtain critical information relating to the clinical and economic
performance of the product early in the development process, so that
we can make key development decisions.

MANUFACTURING

We do not build or operate manufacturing facilities but instead contract
for manufacturing development and/or commercial supply.

Angiomax

In December 1999, we entered into a commercial development and supply
agreement with UCB Bioproducts for the development and supply of Angiomax bulk
drug substance. All Angiomax bulk drug substance used to date has been produced
by UCB Bioproducts at its facility by means of a chemical synthesis process.
Using this validated manufacturing process, UCB Bioproducts has completed the
manufacture of bulk drug substance to meet our anticipated commercial supply
requirements through the third quarter of 2003. We do not currently intend to
purchase any additional product manufactured using this process.

Together with UCB Bioproducts, we have developed a second-generation
chemical synthesis process to improve the economics of manufacturing Angiomax
bulk drug substance. This process, which must be approved by the FDA before it
can be used, is known as the Chemilog process and involves limited changes to
the early manufacturing steps of our current process in order to improve process
economics. We expect the Chemilog process to produce material that is chemically
equivalent to that produced using the current process. UCB Bioproducts has
completed development of the Chemilog process and has manufactured validation
and production batches, which have been submitted to the FDA for approval. We
received approvable letters from the FDA on March 14, 2002 and December 12,
2002. In August 2002, we responded to the March 2002 approvable letter. In the
December 2002 approvable letter to us and in a

corresponding letter to UCB Bioproducts, the FDA requested additional data. In
February 2003, we submitted what we believe to be the additional data requested
by the FDA from us. Concurrently, UCB Bioproducts submitted what we believe to
be the additional data requested by the FDA from UCB Bioproducts. Subject to
receipt of FDA approval, we expect to sell Angiomax produced using the Chemilog
process in the third or fourth quarter of 2003.

We have agreed that, assuming successful development and regulatory
approval of the Chemilog process, we would purchase a substantial portion of our
Angiomax bulk drug substance exclusively from UCB Bioproducts at agreed upon
prices for a period of seven years from the date of the first commercial sale of
Angiomax produced under the Chemilog process. Following the expiration of the
agreement, which automatically renews for consecutive three year periods unless
either party provides notice of non-renewal within one year prior to the
expiration of the initial term or any renewal term, or if we terminate the
agreement prior to its expiration, UCB Bioproducts has agreed to transfer the
development technology to us. We may only terminate the agreement prior to its
expiration in the event of a material breach by UCB Bioproducts. If we engage a
third party to manufacture Angiomax for us using this technology during the
first ten years following the date of the first commercial sale of Angiomax
produced under the Chemilog process, we will be obligated to pay UCB Bioproducts
a royalty based on the amount paid by us to the third-party manufacturer.

We have developed reproducible analytical methods and processes for the
fill-finish of Angiomax drug product by Ben Venue Laboratories. Ben Venue
Laboratories has carried out all of our Angiomax fill-finish activities.

Clevidipine

Astra Production Chemicals has manufactured all clevidipine bulk drug
which, after testing and release by Astra Hassle, has been used in clinical
trials. Both Astra Production Chemicals and Astra Hassle are divisions of
AstraZeneca. The manufacturing process for bulk drug is currently being
transferred to PharmEco, a Johnson Matthey Company, for scale up and manufacture
for Phase 3 clinical trials and commercial supplies. Fresenius Kabi L.P., using
its formulation technology, has manufactured all finished drug product and has
also carried out release testing and clinical packaging.

COMPETITION

The development and commercialization of new drugs is competitive, and we
face competition from major pharmaceutical companies, specialty pharmaceutical
companies and biotechnology companies worldwide. Our competitors may develop or
license products or other novel technologies that are more effective, safer or
less costly than any that have been or are being developed by us, or may obtain
FDA approval for their products more rapidly than we may obtain approval for
ours.

Due to the incidence and severity of cardiovascular diseases, the market
for anticoagulant therapies is large and competition is intense. We are
evaluating Angiomax for additional uses in open vascular surgery such as CABG,
in medical conditions that require urgent treatment such as unstable angina, in
patients with heparin allergy, in children and in peripheral angioplasty. There
are a number of anticoagulant therapies currently on the market, awaiting
regulatory approval or in development for these uses.

In general, anticoagulant drugs may currently be classified into four
groups according to their interaction with clotting mechanisms.

Direct thrombin inhibitors

Direct thrombin inhibitors act directly on thrombin, inhibiting the action
of thrombin in the clotting process. Because thrombin activates platelets,
direct thrombin inhibitors also prevent platelet aggregation. Direct thrombin
inhibitors include Angiomax, Refludan from Berlex Laboratories and Argatroban
from GlaxoSmithKline, Texas Biotechnology Corporation and Mitsubishi Chemical
Corp. Both Refludan and

Argatroban are approved for use in the treatment of patients with HIT/HITTS.
Argatroban is also approved for use in patients with HIT/HITTS undergoing
angioplasty.

Indirect thrombin inhibitors

Heparin and low molecular weight heparins act by first binding to AT-III.
Heparin is manufactured and distributed by a number of companies as a generic
product. Low molecular weight heparin products include Lovenox from Aventis
Pharmaceuticals, Inc. and Fragmin from Pharmacia Corporation and The Upjohn
Company. Very short molecules of heparin, called pentasaccharide sequences,
include Arixtra from Sanofi-Synthelabo Inc. Heparin is widely used in patients
with ischemic heart disease. Low molecular weight heparins have been approved
for use in the treatment of patients with unstable angina and are being
developed for use in angioplasty and vascular surgery. Arixtra has been approved
for use in the treatment and prevention of deep vein thrombosis and is being
developed for arterial thrombosis.

Platelet inhibitors

Platelet inhibitors, such as GP IIb/IIIa inhibitors, block the aggregation
of platelets by blocking surface sites on the platelets that allow the platelets
to attach to fibrin and to each other. GP IIb/IIIa inhibitors include ReoPro
from Eli Lilly and Company and Johnson & Johnson/Centocor, Inc., Integrilin from
Millennium Pharmaceuticals, Inc. and Schering-Plough Corporation, and Aggrastat
from Merck & Co., Inc. ReoPro is approved and marketed for angioplasty in a
broad range of patients. Integrilin is approved and marketed for angioplasty and
for the management of acute coronary syndromes. Aggrastat is approved for the
management of acute coronary syndromes.

Fibrinolytics

Fibrinolytics, or thrombolytics, dissolve fibrin in clots that have already
formed. Fibrinolytics include Streptase from Aventis, Retevase from Johnson &
Johnson/Centocor, TNKase from Genentech, Inc., and Abbokinase from Abbott
Laboratories. These products are approved for use in the treatment of AMI,
stroke and/or peripheral vascular arterial blockages.

We position Angiomax as an alternative to heparin as baseline
anticoagulation therapy for use in patients with arterial thrombosis. In this
regard, we expect Angiomax to be used with aspirin alone or in conjunction with
other platelet inhibitors or fibrinolytic drugs and to compete with heparin and
the low molecular weight heparin products.

In addition, although platelet inhibitors and fibrinolytic drugs may be
complementary to Angiomax, Angiomax may compete with platelet inhibitors and
fibrinolytic drugs for the use of hospital financial resources. For example,
many U.S. hospitals receive a fixed reimbursement amount per procedure for the
angioplasties and other treatment therapies they perform. Because this amount is
not based on the actual expenses the hospital incurs, hospitals may be forced to
use either Angiomax or a platelet inhibitor or fibrinolytic drugs but not
necessarily several of the drugs together.

In each case, we will compete with other anticoagulant drugs on the basis
of efficacy, safety, ease of administration and economic value.

We face potential competition from products that currently are in clinical
development. One such potential competitor is an oral indirect thrombin
inhibitor, Exanta, for which AstraZeneca is conducting a Phase 3 development
study for use in the prevention of deep venous thrombosis after orthopedic
surgery. In addition, development studies of Exanta are ongoing in the
prevention of stroke in patients with atrial fibrilation. We believe that
Exanta's use in these indications will not have an effect upon our planned
positioning for Angiomax.

The acquisition or licensing of pharmaceutical products is a competitive
area, and a number of more established companies, which have acknowledged
strategies to license or acquire products, may have competitive advantages as
may emerging companies taking similar or different approaches to product

acquisition. These established companies may have a competitive advantage over
us due to their size, cash flows and institutional experience.

Many of our competitors will have substantially greater financial,
technical and human resources than we have. Additional mergers and acquisitions
in the pharmaceutical industry may result in even more resources being
concentrated in our competitors. Competition may increase further as a result of
advances made in the commercial applicability of technologies and greater
availability of capital for investment in these fields. Our success will be
based in part on our ability to build and actively manage a portfolio of drugs
that addresses unmet medical needs and creates value in patient therapy.

RESEARCH AND DEVELOPMENT

Company-sponsored research and development expenses totaled $38.0 million
in 2002, $32.8 million in 2001 and $39.6 million in 2000. The funding for
Angiomax has represented and will continue to represent a significant portion of
our research and development spending.

PATENTS, PROPRIETARY RIGHTS AND LICENSES

Our success will depend in part on our ability to protect the products we
acquire or license by obtaining and maintaining patent protection both in the
United States and in other countries. We rely upon trade secrets, know-how,
continuing technological innovations, contractual restrictions and licensing
opportunities to develop and maintain our competitive position. We plan to
prosecute and defend any patents or patent applications we acquire or license,
as well as any proprietary technology.

In all, as of February 21, 2003, we exclusively licensed nine issued United
States patents and a broadly filed portfolio of corresponding foreign patents
and patent applications. We have not yet filed any independent patent
applications. The U.S. patents licensed by us are currently set to expire at
various dates ranging from March 2010, in the case of the principal patent
relating to Angiomax, to April 2017.

We have exclusively licensed from Biogen patents and applications for
patents covering Angiomax and Angiomax analogs and other novel anticoagulants as
compositions of matter, and processes for using Angiomax and Angiomax analogs
and other novel anticoagulants. We are responsible for prosecuting and
maintaining patents and patent applications relating to Angiomax. Under an
exclusive option agreement, we may license exclusively from AstraZeneca, except
in Japan, patents and patent applications covering formulations and uses of
clevidipine, a compound used to control blood pressure. AstraZeneca would
prosecute and maintain any patents and patent applications that we license
relating to clevidipine, and we would reimburse AstraZeneca for expenses it
incurs in connection with the prosecution and maintenance of the patents or
patent applications. We have exclusively licensed patents and applications
relating to CTV-05 from GyneLogix. Subsequently, we licensed our CTV-05 rights
to Osel on an exclusive basis. Osel has assumed our obligation to prosecute and
maintain the related patents and patent applications.

The patent positions of pharmaceutical and biotechnology firms like us can
be uncertain and involve complex legal, scientific and factual questions. In
addition, the coverage claimed in a patent application can be significantly
reduced before the patent is issued. Consequently, we do not know whether any of
the applications we acquire or license will result in the issuance of patents
or, if any patents are issued, whether they will provide significant proprietary
protection or will be challenged, circumvented or invalidated. Because unissued
U.S. patent applications filed prior to November 29, 2000 and patent
applications filed within the last 18 months are maintained in secrecy until
patents issue, and since publication of discoveries in the scientific or patent
literature often lags behind actual discoveries, we cannot be certain of the
priority of inventions covered by pending patent applications. Moreover, we may
have to participate in interference proceedings declared by the United States
Patent and Trademark Office to determine priority of invention, or in opposition
proceedings in a foreign patent office, either of which could result in
substantial cost to us, even if the eventual outcome is favorable to us. There
can be no assurance that the patents, if issued, would be held valid by a court
of competent jurisdiction. An adverse outcome could subject us to significant
liabilities to third parties, require disputed rights to be licensed from third
parties or require us to cease using such technology.

The development of anticoagulants is intensely competitive. A number of
pharmaceutical companies, biotechnology companies, universities and research
institutions have filed patent applications or received patents in this field.
Some of these applications could be competitive with applications we have
acquired or licensed, or could conflict in certain respects with claims made
under such applications. Such conflict could result in a significant reduction
of the coverage of the patents we have acquired or licensed, if issued, which
would have a material adverse effect on our business, financial condition and
results of operations. In addition, if patents are issued to other companies
that contain competitive or conflicting claims and such claims are ultimately
determined to be valid, no assurance can be given that we would be able to
obtain licenses to these patents at a reasonable cost, or develop or obtain
alternative technology.

We also rely on trade secret protection for our confidential and
proprietary information. No assurance can be given that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets or disclose such
technology, or that we can meaningfully protect our trade secrets. We have a
number of trademarks that we consider important to our business. These
trademarks are protected by registration in the United States and other
countries in which our products are marketed.

It is our policy to require our employees, consultants, outside scientific
collaborators, sponsored researchers and other advisors to execute
confidentiality agreements upon the commencement of employment or consulting
relationships with us. These agreements provide that all confidential
information developed or made known to the individual during the course of the
individual's relationship with us is to be kept confidential and not disclosed
to third parties except in specific circumstances. In the case of employees, the
agreements provide that all inventions conceived by the individual shall be our
exclusive property. There can be no assurance, however, that these agreements
will provide meaningful protection or adequate remedies for the our trade
secrets in the event of unauthorized use or disclosure of such information

LICENSE AGREEMENTS

Biogen, Inc.

In March 1997, we entered into an agreement with Biogen for the license of
the anticoagulant pharmaceutical bivalirudin, which we have developed as
Angiomax. Under the terms of the agreement, we acquired exclusive worldwide
rights to the technology, patents, trademarks, inventories and know-how related
to Angiomax. In exchange for the license, we paid $2.0 million on the closing
date and are obligated to pay up to an additional $8.0 million upon reaching
certain Angiomax sales milestones, which are the first commercial sales of
Angiomax for the treatment of AMI in the United States and Europe. In addition,
we are obligated to pay royalties on future sales of Angiomax and on any
sublicense royalties on a country-by-country basis earned until the later of (1)
12 years after the date of the first commercial sales of the product in a
country or (2) the date on which the product or its manufacture, use or sale is
no longer covered by a valid claim of the licensed patent rights in such
country. Under the terms of the agreement, the royalty rate due to Biogen on
sales increases with growth in annual sales of Angiomax. The agreement also
stipulates that we use commercially reasonable efforts to meet certain
milestones related to the development and commercialization of Angiomax,
including expending at least $20 million for certain developmental and
commercialization activities, which we met in 1998. The license and rights under
the agreement remain in force until our obligation to pay royalties ceases.
Either party may terminate the agreement for material breach by the other party,
if the material breach is not cured within 90 days after written notice. In
addition, we may terminate the agreement for any reason upon 90 days prior
written notice. Through February 14, 2003, we have paid a total of approximately
$3.9 million in royalties relating to Angiomax under our agreement with Biogen.

AstraZeneca PLC

In March 2002, we entered into a study and exclusive option agreement with
AstraZeneca relating to the further study, licensing, development and
commercialization of the intravenous blood pressure control

pharmaceutical, clevidipine. Under the terms of the agreement, we agreed to
conduct a pilot study of clevidipine, which we have begun. The agreement
provides that upon the conclusion of the pilot study within 15 months of the
date AstraZeneca provided samples of clevidipine to us, we may acquire, and if
the results of the pilot study meet or exceed a benchmark set forth in the
agreement AstraZeneca may require us to acquire, exclusive worldwide rights
(except for Japan) to the know-how, patents and trademarks relating to
clevidipine. We believe that we will complete the pilot study by the end of the
15-month period. If we do not complete the pilot study by the end of such
period, AstraZeneca may have the right to terminate the agreement. If we license
the product, we plan to develop clevidipine as a short acting blood pressure
control agent for use in hospital setting. In exchange for the license we would
pay $1.0 million upon entering into the license and up to an additional $5.0
million upon reaching certain regulatory milestones. In addition, we will be
obligated to pay royalties on a country-by-country basis on future annual sales
of clevidipine, and on any sublicense royalties earned, until the later of (1)
the duration of the licensed patent rights which are necessary to manufacture,
use or sell clevidipine in a country or (2) ten years from our first commercial
sale of clevidipine in such country. The licenses and rights under the agreement
remain in force until we cease selling clevidipine in any country or the
agreement is otherwise terminated. We may terminate the agreement upon 30 days
written notice, unless AstraZeneca, within 20 days of having received our
notice, requests that we enter into good faith discussions to redress our
concerns. If we cannot reach a mutually agreeable solution with AstraZeneca
within three months of the commencement of such discussions, we may then
terminate the agreement upon 90 days written notice. Either party may terminate
the agreement for material breach upon 60 days prior written notice, if the
breach is not cured within such 60 days.

GOVERNMENT REGULATION

Government authorities in the United States and other countries extensively
regulate, among other things, the research, development, testing, manufacture,
labeling, promotion, advertising, distribution and marketing of our products. In
the United States, the FDA regulates drugs under the Federal Food, Drug, and
Cosmetic Act, and, in the case of biologics, also under the Public Health
Service Act, and implementing regulations. Failure to comply with the applicable
U.S. requirements may subject us to administrative or judicial sanctions, such
as a refusal by the FDA to approve pending applications, warning letters,
product recalls, product seizures, total or partial suspension of production or
distribution, injunctions, and/or criminal prosecution.

The steps required before a drug may be marketed in the United States
include:

-- pre-clinical laboratory tests, animal studies and formulation
studies;

-- submission to the FDA of an investigational new drug exemption, or
IND, for human clinical testing, which must become effective before
human clinical trials may begin;

-- adequate and well-controlled clinical trials to establish the safety
and efficacy of the drug for each indication;

-- submission to the FDA of a new drug application, or NDA, or biologics
license application, or BLA;

-- satisfactory completion of an FDA inspection of the manufacturing
facility or facilities at which the drug is produced to assess
compliance with current good manufacturing practices, or cGMP; and

-- FDA review and approval of the NDA or BLA.

Pre-clinical tests include laboratory evaluations of product chemistry,
toxicity and formulation, as well as animal studies. The results of the
pre-clinical tests, together with manufacturing information and analytical data,
are submitted to the FDA as part of an IND, which must become effective before
human clinical trials may begin. An IND will automatically become effective 30
days after receipt by the FDA, unless before that time the FDA raises concerns
or questions about issues such as the conduct of the trials

as outlined in the IND. In such a case, the IND sponsor and the FDA must resolve
any outstanding FDA concerns or questions before clinical trials can proceed.
Submission of an IND does not necessarily result in the FDA allowing clinical
trials to commence.

Clinical trials involve the administration of the investigational drug to
human subjects under the supervision of qualified investigators. Clinical trials
are conducted under protocols detailing the objectives of the study, the
parameters to be used in monitoring safety, and the effectiveness criteria to be
evaluated. Each protocol must be submitted to the FDA as part of the
investigational new drug exemption.

Clinical trials typically are conducted in three sequential phases, but the
phases may overlap or be combined. Each trial must be reviewed and approved by
an independent Institutional Review Board before it can begin. Phase 1 usually
involves the initial introduction of the investigational drug into people to
evaluate its safety, dosage tolerance, pharmacodynamics, and, if possible, to
gain an early indication of its effectiveness. Phase 2 usually involves trials
in a limited patient population to:

-- evaluate dosage tolerance and appropriate dosage;

-- identify possible adverse effects and safety risks; and

-- evaluate preliminarily the efficacy of the drug for specific
indications.

Phase 3 trials usually further evaluate clinical efficacy and test further
for safety by using the drug in its final form in an expanded patient
population. We cannot guarantee that Phase 1, Phase 2 or Phase 3 testing will be
completed successfully within any specified period of time, if at all.
Furthermore, we or the FDA may suspend clinical trials at any time on various
grounds, including a finding that the subjects or patients are being exposed to
an unacceptable health risk.

Assuming successful completion of the required clinical testing, the
results of the preclinical studies and of the clinical studies, together with
other detailed information, including information on the manufacture and
composition of the drug, are submitted to the FDA in the form of an NDA or BLA
requesting approval to market the product for one or more indications. Before
approving an application, the FDA usually will inspect the facility or the
facilities at which the drug is manufactured, and will not approve the product
unless cGMP compliance is satisfactory. If the FDA determines the application
and the manufacturing facilities are acceptable, the FDA will issue an approval
letter. If the FDA determines the application or manufacturing facilities are
not acceptable, the FDA will outline the deficiencies in the submission and
often will request additional testing or information. Notwithstanding the
submission of any requested additional information, the FDA ultimately may
decide that the application does not satisfy the regulatory criteria for
approval. After approval, certain changes to the approved product, such as
adding new indications, manufacturing changes, or additional labeling claims are
subject to further FDA review and approval. The testing and approval process
requires substantial time, effort and financial resources, and we cannot be sure
that any approval will be granted on a timely basis, if at all.

After regulatory approval of a product is obtained, we are required to
comply with a number of post-approval requirements. For example, as a condition
of approval of an application, the FDA may require postmarketing testing and
surveillance to monitor the drug's safety or efficacy. In the case of Angiomax,
the FDA required us to complete our 50 patient trial designed to evaluate the
use of Angiomax for treatment of HIT/HITTS patients who need coronary
angioplasty.

In addition, holders of an approved NDA or BLA are required to report
certain adverse reactions and production problems, if any, to the FDA, and to
comply with certain requirements concerning advertising and promotional labeling
for their products. Also, quality control and manufacturing procedures must
continue to conform to cGMP after approval, and the FDA periodically inspects
manufacturing facilities to assess compliance with cGMP. Accordingly,
manufacturers must continue to expend time, money, and

effort in the area of production and quality control to maintain compliance with
current good manufacturing practices and other aspects of regulatory compliance.

We use and will continue to use third-party manufacturers to produce our
products in clinical and commercial quantities, and we cannot be sure that
future FDA inspections will not identify compliance issues at our facilities or
at the facilities of our contract manufacturers that may disrupt production or
distribution, or require substantial resources to correct. In addition,
discovery of problems with a product may result in restrictions on a product,
manufacturer, or holder of an approved NDA or BLA, including withdrawal of the
product from the market. Also, new government requirements may be established
that could delay or prevent regulatory approval of our products under
development.

We are also subject to foreign regulatory requirements governing human
clinical trials and marketing approval for pharmaceutical products which we sell
outside the United States. The requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary widely from country to
country. Whether or not we obtain FDA approval, we must obtain approval of a
product by the comparable regulatory authorities of foreign countries before
manufacturing or marketing the product in those countries. The approval process
varies from country to country and the time required for these approvals may
differ substantially from that required for FDA approval. Clinical trials in one
country may not be accepted by other countries, and approval in one country may
not result in approval in any other country. For clinical trials conducted
outside the United States, the clinical stages generally are comparable to the
phases of clinical development established by the FDA.

EMPLOYEES

We believe that our success will depend greatly on our ability to identify,
attract and retain capable employees. We have assembled a management team with
significant experience in drug development and commercialization.

As of February 21, 2003, we employed 147 persons. Our employees are not
represented by any collective bargaining unit, and we believe our relations with
our employees are good.

FACILITIES

We entered into a lease for approximately 17,000 square feet of office
space in Parsippany, New Jersey that we plan to occupy in March 2003, with a
term expiring in January 2013. We currently occupy 12,000 square feet of office
space in Parsippany, New Jersey, under two leases that will terminate upon our
relocation in March 2003. In addition, we lease approximately 9,000 square feet
of office space in Cambridge, Massachusetts under a lease expiring in August
2003. We are currently reviewing plans for replacement space in Massachusetts.
We believe our current facilities will be sufficient to meet our needs for the
foreseeable future, except as previously noted, and that additional space will
be available on commercially reasonable terms to meet space requirements if they
arise. We also have offices in Oxford, United Kingdom and Parnell, Auckland, New
Zealand.

MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

Our executive officers, directors and key employees and their respective
ages are as follows:

NAME AGE POSITION
---- --- --------

Clive A. Meanwell, M.D., Ph.D.*........... 45 Executive Chairman and Chairman of the
Board of Directors
David M. Stack*........................... 51 Chief Executive Officer, President and
Director
Steven H. Koehler, M.B.A.*................ 52 Vice President and Chief Financial Officer
Gary Dickinson............................ 51 Vice President
Sonja Barton Loar, Pharm. D., M.M. ....... 42 Vice President
David C. Mitchell......................... 49 Vice President
Stephanie Plent, M.D. .................... 41 Vice President
John D. Richards, D.Phil.*................ 46 Vice President
Fred M. Ryan, M.B.A. ..................... 51 Vice President
Peter Teuber, Ph.D.*...................... 44 Vice President
John W. Villiger, Ph.D. .................. 47 Vice President
Leonard Bell, M.D......................... 44 Director
Stewart J. Hen, M.B.A., M.S. ............. 36 Director
M. Fazle Husain, M.B.A.(1)................ 38 Director
T. Scott Johnson, M.D.(1)................. 55 Director
Armin M. Kessler, Dh.c.(1)(2)............. 64 Director
Nicholas J. Lowcock, M.B.A.(2)............ 39 Director
James E. Thomas, M.Sc.(2)................. 42 Director

------------
* Executive Officer

(1) Member of Audit Committee

(2) Member of the Compensation Committee

Set forth below is certain information regarding the business experience
during the past five years for each of the above-named persons.

Clive A. Meanwell, M.D., Ph.D. has been a director since the inception of
our company in July 1996 and has served as our Executive Chairman since
September 2001. From 1996 to September 2001, Dr. Meanwell served as our Chief
Executive Officer and President. From 1995 to 1996, Dr. Meanwell was a Partner
and Managing Director at MPM Capital L.P., a venture capital firm. From 1986 to
1995, Dr. Meanwell held various positions at Hoffmann-La Roche, Inc., a
pharmaceutical company, including Senior Vice President from 1992 to 1995, Vice
President from 1991 to 1992 and Director of Product Development from 1986 to
1991. Dr. Meanwell currently serves as a director of Endo Pharmaceuticals Inc.
Dr. Meanwell received an M.D. and a Ph.D. from the University of Birmingham,
United Kingdom.

David M. Stack has been our President and Chief Executive Officer and a
director since September 2001. From April 1, 2000 to September 2001, Mr. Stack
served as a Senior Vice President. From January 2000 to September 2001, Mr.
Stack also served as President and General Partner of Stack Pharmaceuticals,
Inc., a commercialization, marketing and strategy consulting firm serving
healthcare companies, and, from January 2000 to December 2001, as a Senior
Advisor to the Chief Executive Officer of Innovex Inc., a contract
pharmaceutical organization. Mr. Stack served as President and General Manager
of Innovex Inc. from May 1995 to December 1999. Mr. Stack currently serves as a
director of BioImaging Technologies, Inc. Mr. Stack received a B.S. in biology
from Siena College and a B.S. in pharmacy from Albany College of Pharmacy.

Steven H. Koehler, M.B.A. has been our Vice President and Chief Financial
Officer since April 2002. From March 2002 to April 2002, Mr. Koehler served as
our Vice President, Finance and Business Administration. From July 2001 to March
2002, Mr. Koehler was Vice President, Finance and Chief Financial Officer of
Vion Pharmaceuticals, Inc., a biotechnology company which develops cancer
treatments. From April 1999 to July 2001, Mr. Koehler served as Vice President,
Finance and Administration and as a member of the executive board of Knoll
Pharmaceuticals, Inc., a wholly owned subsidiary of BASF Corporation, the U.S.
subsidiary of a transnational chemical and life sciences company. From June 1997
to April 1999, Mr. Koehler was Vice President, Finance and Controlling for Knoll
AG in Ludwigshafen, Germany, the former global pharmaceutical subsidiary of BASF
AG. From November 1995 to June 1997, he served as Vice President, Value Based
Management for Knoll AG. Mr. Koehler was Vice President, Finance and Treasurer
for Boots Pharmaceuticals, Inc. from 1993 until its acquisition by Knoll in
1995. Mr. Koehler is a Certified Public Accountant. Mr. Koehler received a B.A.
degree from Duke University and an M.B.A. degree from the Kellogg Graduate
School of Management, Northwestern University.

Gary Dickinson has been a Vice President since April 2001 with a focus on
human resources activities. From March 2000 to April 2001, Mr. Dickinson was the
Vice President of Human Resources of Elementis Specialties, Inc., a specialty
chemicals manufacturing firm. From January 1997 to April 2001, Mr. Dickinson was
the Senior Director of Human Resources of Bristol-Myers Squibb Company, a
pharmaceuticals firm. Mr. Dickinson holds a B.A. from the University of
Sheffield, United Kingdom.

Sonja Barton Loar, Pharm. D., M.M., has been a Vice President since June
2000 with a focus on Regulatory Affairs. Dr. Loar joined us in June 2000 as the
Senior Director of Regulatory Affairs. Prior to joining us, Dr. Loar spent eight
years at Interneuron Pharmaceuticals, Inc., most recently as Vice President of
Regulatory Affairs. Prior to this, Dr. Loar was in international regulatory
affairs with Searle Pharmaceuticals Inc., a pharmaceutical company, and worked
in clinical research at DuPont Critical Care. Dr. Loar holds a Doctor of
Pharmacy from the University of Nebraska, after which she completed a two-year
hospital pharmacy residency at the University of Kentucky. In addition, Dr. Loar
holds a Masters of Management from the Kellogg Graduate School of Management,
Northwestern University.

David C. Mitchell has been a Vice President since December 2000 with a
focus on information technology and information systems. From February 1999 to
December 2000, Mr. Mitchell was the Vice President of Information Technology for
Innovex Americas, Inc., a subsidiary of Innovex Inc., a contract pharmaceutical
company. From July 1997 to October 1998, Mr. Mitchell was Director of
Information Technology at NBC Broadcasting. From 1985 to July 1997, Mr. Mitchell
served as the Director of Information and Technology at the Walt Disney Company.
Mr. Mitchell received a Bachelor of Music from Arizona State University.

Stephanie Plent, M.D., has been a Vice President since July 2002 with a
focus on medical policy and economics. Dr. Plent joined us in July 2000. Prior
to joining us, Dr. Plent spent six years as Medical Director for Disease
Management, Aetna US Healthcare Inc., an insurance company, and before that as a
consultant in the Health Care Practice at Arthur D. Little Inc., a consulting
firm. Dr. Plent received her medical degree from the Royal Free Hospital School
of Medicine, United Kingdom.

John D. Richards, D.Phil. joined us in October 1997 and has been a Vice
President since 1999, with a focus on product manufacturing and quality. From
1993 until he joined us in October 1997, Dr. Richards was Director of Process
Development and Manufacturing at Immulogic Pharmaceutical Corporation, a
pharmaceutical company. From 1989 to 1993, Dr. Richards was a Technical Manager
at Zeneca PLC, a pharmaceutical company, where he developed and implemented
processes for the manufacture of peptides as pharmaceutical active
intermediates. In 1986, Dr. Richards helped establish Cambridge Research
Biochemicals, a manufacturer of peptide-based products for pharmaceutical and
academic customers. Dr. Richards received an M.A. and a D.Phil. in organic
chemistry from the University of Oxford, United Kingdom, and has carried out
post-doctoral research work at the Medical Research Councils Laboratory of
Molecular Biology in Cambridge, United Kingdom.

Fred M. Ryan, M.B.A. has been a Vice President since April 2000, with a
focus on corporate strategic development, new product acquisitions and Angiomax
commercial development. From April 2000 to September 2001, Mr. Ryan also served
as a Partner and the Vice President of Business Development of Stack
Pharmaceuticals, Inc. From July 1991 to April 2000, he held senior management
positions with Novartis Pharmaceuticals Corporation, a pharmaceutical company,
in the United States in the areas of Finance, Strategic Planning, Business
Development and Marketing, serving from 1998 to April 2000 as Executive Director
Mature Products responsible for managing sales and marketing activities for a
portfolio of products having annual sales in excess of $500 million. He received
a B.S. and a B.A. degrees from Bryant College and his M.B.A. from Fairleigh
Dickinson University.

Peter Teuber, Ph.D. has been a Vice President since June 2001 with a focus
on product development. From February 1990 to May 2001, Dr. Teuber held
positions at Roche Pharmaceuticals, Inc., a global pharmaceutical company,
working on product development, strategic marketing and business development. He
led the development and global marketing team working on XELODA(R), an oral
treatment, from the product's first human trials through the initial New Drug
Application filings, two supplemental filings and approval in the United States,
Europe and over 70 other countries. In addition, at Roche Dr. Teuber acted as
the head of project management and served as a member of the global regulatory
management team. Dr. Teuber received a Ph.D., in Pharmacy from the University of
Basel in Switzerland.

John W. Villiger, Ph.D. has been a Vice President since March 1997, with a
focus on cardiovascular product development. From December 1986 until he joined
us in March 1997, Dr. Villiger held various positions in product development at
Hoffmann-La Roche, Inc., a global pharmaceutical company, including Head of
Global Project Management from 1995 to 1996 and International Project Director
from 1991 to 1995. As Head of Global Project Management, Dr. Villiger was
responsible for overseeing the development of Hoffmann-LaRoche's pharmaceutical
portfolio, with management responsibility for over 50 development programs. As
International Project Director, Dr. Villiger was responsible for the global
development of Tolcapone, also known as tasmar. Dr. Villiger received a Ph.D. in
neuropharmacology from the University of Otago.

Leonard Bell, M.D. has been a director since May 2000. From January 1992 to
March 2002, Dr. Bell served as the President and Chief Executive Officer,
Secretary and Treasurer of Alexion Pharmaceuticals, Inc., a pharmaceutical
company. Since March 2002, Dr. Bell has served as the Chief Executive Officer,
Secretary and Treasurer of Alexion Pharmaceuticals, Inc. Since 1993, Dr. Bell
has served as an Adjunct Assistant Professor of Medicine and Pathology at the
Yale University School of Medicine. From 1991 to 1992, Dr. Bell was an Assistant
Professor of Medicine and Pathology and co-Director of the Program in Vascular
Biology at the Yale University School of Medicine. From 1990 to 1992, Dr. Bell
was an attending physician at the Yale-New Haven Hospital and an Assistant
Professor in the Department of Internal Medicine at the Yale University School
of Medicine. Dr. Bell was the recipient of the Physician Scientist Award from
the National Institutes of Health and Grant-in-Aid from the American Heart
Association. Dr. Bell is the recipient of various honors and awards from
academic and professional organizations and his work has resulted in more than
45 scientific publications, invited presentations and patent applications. Dr.
Bell is an invited Member of the State of Connecticut Governor's Council on
Economic Competitiveness and Technology and a director of Connecticut United for
Research Excellence, Inc. He also served as a director of the Biotechnology
Research and Development Corporation from 1993 to 1997. Dr. Bell currently also
serves as a director of Alexion Pharmaceuticals, Inc. Dr. Bell received an A.B.
from Brown University and an M.D. from the Yale University School of Medicine.

Stewart J. Hen, M.B.A., M.S. has been a director since February 2001. Since
January 2003, Mr. Hen has been a Managing Director of Warburg Pincus LLC, a
private equity investment firm. From May 2000 to January 2003, Mr. Hen was a
Vice President of Warburg Pincus LLC. Mr. Hen focuses on investments in the
emerging life sciences area, including biotechnology, specialty pharmaceuticals,
drug delivery and diagnostics. From 1996 to May 2000, Mr. Hen was a consultant
at McKinsey & Company, a consulting firm, where he advised pharmaceutical and
biotechnology companies on a range of strategic management issues. Mr. Hen
served at Merck & Company, a pharmaceutical company, from 1991 to 1994 in
manufacturing operations. Mr. Hen currently also serves as a director of
Synaptic Pharmaceuticals Corp.
50

Mr. Hen received a B.S. in chemical engineering from the University of Delaware,
an M.S. in chemical engineering from the Massachusetts Institute of Technology
and an M.B.A. from The Wharton School of the University of Pennsylvania.

M. Fazle Husain, M.B.A. has been a director since September 1998. Since
1987, Mr. Husain has been employed by Morgan Stanley & Co. Incorporated, an
investment banking firm, and is currently a Managing Director. Mr. Husain is
also a Managing Director of Morgan Stanley Venture Capital III, Inc. Mr. Husain
focuses primarily on investments in the health care industry, including health
care services, medical technology and health care information technology. He
currently also serves as a director of Allscripts Healthcare Solutions, Inc.,
Healthstream, Inc., Cross Country, Inc. and several privately held companies.
Mr. Husain received an Sc.B. degree in chemical engineering from Brown
University and an M.B.A. from the Harvard Graduate School of Business
Administration.

T. Scott Johnson, M.D. has been a director since September 1996. In July
1999, Dr. Johnson founded JSB Partners, L.P., an investment bank focusing on
mergers and acquisitions, private financings and corporate alliances within the
health care sector. From September 1991 to July 1999, Dr. Johnson served as a
founder and managing director of MPM Capital, L.P., a venture capital firm. Dr.
Johnson received both a B.S. and an M.D. from the University of Alabama.

Armin M. Kessler, Dh.c. has been a director since October 1998. Dr. Kessler
joined us after a 35-year career in the pharmaceutical industry, which included
senior management positions at Sandoz Pharma Ltd., Basel, Switzerland, United
States and Japan (now Novartis Pharma AG) and, most recently, at Hoffmann-La
Roche, Basel where he was Chief Operating Officer and Head of the Pharmaceutical
Division until 1995. Dr. Kessler currently also serves as a director of Spectrum
Pharmaceuticals, Inc. and Gen-Probe Incorporated. Dr. Kessler received degrees
in physics and chemistry from the University of Pretoria, a degree in chemical
engineering from the University of Cape Town, a law degree from Seton Hall and
an honorary doctorate in business administration from the University of
Pretoria.

Nicholas J. Lowcock, M.B.A. has been a director since December 2000, and he
previously served as a director from September 1996 until December 1998. Mr.
Lowcock has served as a Managing Director of Warburg Pincus LLC, a private
equity investment firm, since January 2000. Since October 2002, Mr. Lowcock has
also been a member of the Executive Management Group of Warburg Pincus LLC. Mr.
Lowcock has been a member of Warburg Pincus LLC since 1994 and previously served
as a Vice President. From 1992 to 1994, Mr. Lowcock was a consultant with the
Boston Consulting Group. Mr. Lowcock currently also serves as a director of
several privately held companies. Mr. Lowcock is also a director of Project Hope
U.K., a charity devoted to improving healthcare in developing nations. Mr.
Lowcock received a B.A. in Experimental Psychology from Oxford University and an
M.B.A. from The Wharton School of the University of Pennsylvania.

James E. Thomas, M.Sc. has been a director since September 1996. Since
March 2001, Mr. Thomas has served as Managing Partner of Thomas, McNerney &
Partners, LLC, a health care private equity investment fund. From 1989 to June
2000, Mr. Thomas served in various capacities, including from 1994 to 2000, as a
Partner and Managing Director, at E.M. Warburg, Pincus & Co., LLC, a private
equity investment firm. From 1984 to 1989, Mr. Thomas was a Vice President of
Goldman Sachs International, an investment banking firm, in London. Mr. Thomas
currently also serves as a director of Transkaryotic Therapies, Inc. and Wright
Medical Group. Mr. Thomas received a B.Sc. in finance and economics from The
Wharton School of the University of Pennsylvania and an M.Sc. in economics from
the London School of Economics.

PRINCIPAL STOCKHOLDERS

The following table presents information we know regarding the beneficial
ownership of our common stock as of January 31, 2003 for each person, entity or
group of affiliated persons whom we know to beneficially own more than 5% of our
common stock. The table also sets forth such information for our directors and
named executive officers, individually, and our directors and executive officers
as a group.

Beneficial ownership is determined in accordance with the rules of the SEC.
Except as indicated by footnote, to our knowledge, the persons named in the
table have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them. Common stock purchase warrants and
options to purchase shares of common stock that are exercisable within 60 days
of January 31, 2003 are deemed to be beneficially owned by the person holding
such options for the purpose of computing ownership of such person, but are not
treated as outstanding for the purpose of computing the ownership of any other
person. Applicable percentage of beneficial ownership is based on 39,935,531
shares of common stock outstanding as of January 31, 2003 and 43,935,531 shares
of common stock to be outstanding after completion of this offering.

Unless otherwise indicated in the footnotes, the address of each of the
individuals named below is: c/o The Medicines Company, Five Sylvan Way, Suite
200, Parsippany, New Jersey 07054.

NUMBER OF PERCENTAGE PERCENTAGE
SHARES BENEFICIALLY BENEFICIALLY
BENEFICIALLY OWNED OWNED
BENEFICIAL OWNER: OWNED BEFORE OFFERING AFTER OFFERING
--------------------------------------- ------------ --------------- --------------

Wellington Management Company, LLP(1).. 5,357,240 13.4% 12.2%
Biotech Growth N.V.(2)................. 3,656,425 9.0% 8.2%
T. Rowe Price Associates, Inc.(3)...... 2,996,810 7.5% 6.8%
Mutuelles AXA(4)....................... 2,096,430 5.2% 4.8%
QFinance, Inc.(5)...................... 2,062,520 5.2% 4.7%
Clive A. Meanwell(6)................... 616,608 1.5% 1.4%
David M. Stack(7)...................... 249,264 * *
Steven H. Koehler(8)................... 55,125 * *
John M. Nystrom(9)..................... 2,205 * *
John D. Richards(10)................... 32,153 * *
Peter Teuber(11)....................... 65,180 * *
Leonard Bell(12)....................... 15,343 * *
Stewart J. Hen(13)..................... 1,657,019 4.1% 3.8%
M. Fazle Husain(14).................... 230,613 * *
T. Scott Johnson(15)................... 84,824 * *
Armin M. Kessler(16)................... 91,311 * *
Nicholas J. Lowcock(17)................ 1,657,852 4.1% 3.8%
James E. Thomas(18).................... 67,543 * *
All directors and executive officers as
a group (12 persons)................. 3,181,234 7.8 7.1

------------
* Represents beneficial ownership of less than 1%.

(1) Includes shares owned by various investors for which Wellington Management
Company, LLP serves as investment advisor with shared power to direct
investments and/or to vote the shares. The shares were acquired by
Wellington Trust Company, NA, a wholly owned subsidiary of Wellington
Management Company, LLP. The address of Wellington Trust Company, NA and
Wellington Management Company, LLP is 75 State Street, Boston,
Massachusetts 02109. This information is based on a Schedule 13G/A filed by
Wellington Management Company, LLP with the SEC on February 12, 2003.

(footnotes on next page)
52

(2) Consists of warrants to purchase 675,925 shares and 2,980,500 shares owned
directly by Biotech Growth N.V. with respect to which BB Biotech AG and
Biotech Growth N.V. share voting and dispositive power. Biotech Growth N.V.
is a wholly owned subsidiary of BB Biotech AG. The address of Biotech
Growth N.V. is Calle 53, Urbanizacion Obarrio, Torre Swiss Bank, Piso 16,
Panama City, Zona 1, Republic of Panama. This information is based on a
Schedule 13G/A filed by BB Biotech AG on behalf of Biotech Growth N.V. with
the SEC on February 14, 2003.

(3) Includes shares owned by various individual and institutional investors for
which T. Rowe Price Associates, Inc. serves as investment advisor with
power to direct investments and/or sole power to vote the shares. For
purposes of the reporting requirements of the Securities Exchange Act of
1934, T. Rowe Price Associates, Inc. is deemed to be a beneficial owner of
such shares; however, T. Rowe Price Associates, Inc. expressly disclaims
that it is, in fact, the beneficial owner of such shares. The address of T.
Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland
21202. This information is based on a Schedule 13G/A filed by T. Rowe Price
Associates, Inc. with the SEC on February 4, 2003.

(4) Includes 8,000 shares owned directly by AXA Rosenberg Investment Management
LLC, a wholly owned subsidiary of AXA, 1,977,330 shares held by Alliance
Capital Management L.P., a majority owned subsidiary of AXA Financial,
Inc., on behalf of unaffiliated third-party client discretionary investment
advisory accounts and 111,100 shares owned by The Equitable Life Assurance
Society of the United States, a wholly owned subsidiary of AXA Financial,
Inc. Mutelles AXA, a group of companies consisting of AXA Conseil Vie
Assurance Mutuelle, AXA Assurances I.A.R.D. Mutuelle, AXA Assurance Vie
Mutuelle and AXA Courtage Assurance Mutuelle, is the parent holding company
of AXA. AXA is the parent holding company of AXA Financial, Inc. For
purposes of the reporting requirements of the Securities Exchange Act of
1934, as amended, Mutelles AXA (and each company of the group thereof) and
AXA are deemed to be beneficial owners of such shares; however, each
expressly disclaims that it is, in fact, the beneficial owner of such
shares. The address of AXA Conseil Vie Assurance Mutuelle, AXA Assurances
I.A.R.D. Mutuelle and AXA Assurance Vie Mutuelle is 370, rue Saint Honore,
75001 Paris, France. The address of AXA Courtage Assurance Mutuelle is 26,
rue Louis le Grand, 75002 Paris, France. The address of AXA is 25, avenue
Matignon, 75008 Paris, France. The address of AXA Financial, Inc. is 1290
Avenue of the Americas, New York, New York 10104. This information is based
on a Schedule 13G filed by AXA Conseil Vie Assurance Mutuelle, AXA
Assurances I.A.R.D. Mutuelle, AXA Assurance Vie Mutuelle, AXA Courtage
Assurance Mutuelle, AXA and AXA Financial, Inc. with the SEC on February
12, 2003.

(5) Consists of shares owned directly by QFinance, Inc. with respect to which
Quintiles Transnational Corp. and QFinance, Inc. share voting and
dispositive power. QFinance, Inc. is a wholly owned subsidiary of Quintiles
Transnational Corp. The address of QFinance, Inc. is c/o Quintiles
Transnational Corp., 4709 Creekstone Drive, Suite 200, Durham, North
Carolina 27703. This information is based on a Schedule 13G/A filed by
Quintiles Transnational Corp. and QFinance, Inc. with the SEC on February
14, 2003.

(6) Includes warrants to purchase 59,143 shares and options to purchase 354,879
shares. Excludes 350,000 shares subject to a pre-paid variable forward
sales contract, pursuant to which Dr. Meanwell pledged 350,000 shares to
secure a future obligation to deliver a maximum of 350,000 shares in
February 2006.

(7) Includes options to purchase 244,264 shares.

(8) Includes options to purchase 53,125 shares.

(9) Includes 1,100 shares held by one of Dr. Nystrom's children. Dr. Nystrom
disclaims beneficial ownership of the shares held by his child.

(10) Includes options to purchase 25,053 shares.

(11) Includes options to purchase 65,105 shares.

(12) Consists of options to purchase 15,343 shares. The address of Dr. Bell is
c/o Alexion Pharmaceuticals, Inc., 352 Knotter Drive, Chesire, Connecticut
06410.

(13) Consists of options to purchase 15,418 shares held by Mr. Hen and 1,641,601
shares held by Warburg, Pincus Ventures, L.P. Warburg, Pincus & Co. is the
sole general partner of Warburg, Pincus Ventures, L.P. Warburg, Pincus
Ventures, L.P. is managed by Warburg Pincus LLC. Mr. Hen is a member of
Warburg Pincus LLC and a general partner of Warburg, Pincus & Co. Mr. Hen
may be deemed to have an indirect pecuniary interest (within the meaning of
Rule 16a-1 under the Securities Exchange Act of 1934, as amended) in an
indeterminate portion of the shares beneficially owned by Warburg, Pincus
Ventures, L.P. Mr. Hen disclaims beneficial ownership of all of the shares
owned by the Warburg Pincus entities. The address of Mr. Hen is

c/o Warburg Pincus LLC, 466 Lexington Avenue, New York, NY 10017. This
information is based on a Schedule 13D/A filed by Warburg Pincus LLC with
the SEC on December 12, 2002.

(14) Includes options to purchase 5,001 shares held by Mr. Husain, 190,737
shares held by Morgan Stanley Venture Partners III, L.P., 18,272 shares
held by Morgan Stanley Venture Investors III, L.P., and 8,343 shares held
by The Morgan Stanley Venture Partners Entrepreneur Fund, L.P. Mr. Husain
is a Managing Member of Morgan Stanley Venture Partners III, LLC, which is
the general partner of each of the Morgan Stanley funds described above.
Mr. Husain disclaims such beneficial ownership except to the extent of his
pecuniary interest therein.

(15) Includes 5,000 shares held by Dr. Johnson as trustee, warrants to purchase
13,744 shares held by Dr. Johnson and options to purchase 5,001 shares held
by Dr. Johnson. The address of Dr. Johnson is c/o JSB Partners, Damonmill
Square 6A, Concord, Massachusetts 01742.

(16) Includes 3,000 shares held by Dr. Kessler's wife, warrants to purchase
33,796 shares held by Dr. Kessler and options to purchase 19,601 shares
held by Dr. Kessler.

(17) Consists of options to purchase 16,251 shares held by Mr. Lowcock and
1,641,601 shares held by Warburg, Pincus Ventures, L.P. Warburg, Pincus &
Co. is the sole general partner of Warburg, Pincus Ventures, L.P. Warburg,
Pincus Ventures, L.P. is managed by Warburg Pincus LLC. Mr. Lowcock is a
member of Warburg Pincus LLC and a general partner of Warburg, Pincus & Co.
Mr. Lowcock may be deemed to have an indirect pecuniary interest (within
the meaning of Rule 16a-1 under the Securities Exchange Act of 1934, as
amended) in an indeterminate portion of the shares beneficially owned by
Warburg, Pincus Ventures, L.P. Mr. Lowcock disclaims beneficial ownership
of all of the shares owned by the Warburg Pincus entities. The address of
Mr. Lowcock is c/o Warburg Pincus LLC, 466 Lexington Avenue, New York, NY
10017. This information is based on a Schedule 13D/A filed by Warburg
Pincus LLC with the SEC on December 12, 2002.

(18) Includes options to purchase 15,343 shares. The address of Mr. Thomas is
Woods End Road, New Canaan, Connecticut 06840.

UNDERWRITERS

Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Bear, Stearns & Co. Inc. and CIBC World
Markets Corp. are acting as representatives, have severally agreed to purchase,
and we have agreed to sell to them, severally, the number of shares indicated
below:

NUMBER OF
NAME SHARES
------------------------------------------------------------ ---------

Morgan Stanley & Co. Incorporated...........................
Bear, Stearns & Co. Inc. ...................................
CIBC World Markets Corp. ...................................

---------
Total.................................................. 4,000,000
=========

The underwriters are offering the shares of common stock subject to their
acceptance of the shares from us and subject to prior sale. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered by this prospectus are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The underwriters are obligated to take and pay for all of the
shares of common stock offered by this prospectus if any such shares are taken.
However, the underwriters are not required to take or pay for the shares covered
by the underwriters' over-allotment option described below.

The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price listed on the cover
page of this prospectus and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price.
Any underwriter may allow, and such dealers may reallow, a concession not in
excess of $ a share to other underwriters or to certain dealers. After
the initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representatives.

We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of 600,000
additional shares of common stock at the public offering price listed on the
cover page of this prospectus, less underwriting discounts and commissions. The
underwriters may exercise this option solely for the purpose of covering
overallotments, if any, made in connection with the offering of the shares of
common stock offered by this prospectus. To the extent the option is exercised,
each underwriter will become obligated, subject to certain conditions, to
purchase about the same percentage of the additional shares of common stock as
the number listed next to the underwriter's name in the preceding table bears to
the total number of shares of common stock listed next to the names of all
underwriters in the preceding table. If the underwriters' option is exercised in
full, the total price to the public would be $ , the total
underwriters' discounts and commissions would be $ and total proceeds
to us would be $ .

Our common stock is quoted on the Nasdaq National Market under the symbol
"MDCO."

We have agreed that, without the prior written consent of Morgan Stanley &
Co. Incorporated on behalf of the underwriters, we will not, during the period
ending 90 days after the date of this prospectus:

dispose of directly or indirectly, any shares of common stock or any
securities convertible into or exercisable or exchangeable for common
stock, or

-- enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of
the common stock,

whether any transaction described above is to be settled by delivery of common
stock or such other securities, in cash or otherwise.

The restrictions described in the preceding paragraph do not apply to:

-- the sale of shares to the underwriters, or

-- the issuance by us of shares of common stock upon the exercise of an
option or a warrant or the conversion of a security outstanding on
the date of this prospectus of which the underwriters have been
advised in writing.

Our officers and directors have each agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, they
will not, during the period ending 90 days after the date of this prospectus:

-- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose
of directly or indirectly, any shares of common stock or any
securities convertible into or exercisable or exchangeable for common
stock, or

-- enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of
the common stock,

whether any transaction described above is to be settled by delivery of common
stock or such other securities, in cash or otherwise.

The restrictions described in the preceding paragraph do not apply to:

-- any shares of our common stock acquired in the open market after the
completion of this offering,

-- the transfer of any shares of our common stock or securities
convertible into common stock as a gift, subject to specified
conditions including that the recipient of the gift agree to the
restrictions described above,

-- any shares of common stock to be sold pursuant to a sales plan,
outstanding as of the date of this prospectus, established in
accordance with Rule 10b5-1 of the Exchange Act, or

-- transfers of our common stock or any security convertible into common
stock to limited partners or to any trust for the direct or indirect
benefit of stockholders or their immediate family, as long as the
transfer of the trust agrees to be bound by the restrictions set
forth above.

In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may sell more shares
than they are obligated to purchase under the underwriting agreement, creating a
short position. A short sale is "covered" if the short position is no greater
than the number of shares available for purchase by the underwriters under the
over-allotment option. The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing shares in the open market. In
determining the source of shares to close out a covered short sale, the
underwriters will consider, among other things, the open market price of shares
compared to the price available under the over-allotment option. The
underwriters may also sell shares in excess of the over-allotment option,
creating a "naked" short position. The underwriters must close out any naked
short position by purchasing shares in the open market. A naked short position
is more likely to be created if the underwriters are concerned that there may be
downward pressure on the price of the common stock in the open market after
pricing that could adversely affect investors who purchase in the offering. In
addition, to cover over-allotments or to stabilize

the price of the common stock, the underwriters may bid for, and purchase,
shares of the common stock in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a dealer
for distributing the common stock in the offering, if the syndicate repurchases
previously distributed common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities
and may end any of these activities at any time.

We and the underwriters have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act.

M. Fazle Husain, a member of our board of directors, is a Managing Director
of Morgan Stanley & Co. Incorporated. Mr. Husain is also a managing member of
Morgan Stanley Venture Partners III, L.L.C., which is an affiliate of Morgan
Stanley & Co. Incorporated and the general partner of three investment funds
which collectively hold 120,183 shares of our common stock as of March 4, 2003,
or approximately 0.3% of our common stock after the offering (0.3% if the
over-allotment option granted to the underwriters is exercised in full).

From time to time, the representatives have provided, and continue to
provide, investment banking and other services to us.

We paid CIBC World Markets Corp. an aggregate of $250,000 during the last
year for consulting services related to strategic acquisitions.

In November 2002, Clive A. Meanwell entered into a pre-paid variable
forward sales contract with Bear Stearns Bank plc, an affiliate of Bear, Stearns
& Co. Inc., pursuant to which Dr. Meanwell pledged 350,000 shares of our common
stock to secure a future obligation to deliver a maximum of 350,000 shares of
common stock in February 2006. In exchange for his agreement, Dr. Meanwell
received $4,103,190. The actual number of shares that Dr. Meanwell is obligated
to deliver in February 2006 will vary based on the average closing price of our
common stock during the seven week period prior to the contract settlement date.

TRANSFER AGENT AND REGISTRAR

Mellon Investor Services, 85 Challenger Road, Ridgefield Park, NJ 07660, is
the transfer agent for our common stock.

LEGAL MATTERS

Certain legal matters with respect to the validity of the shares of common
stock offered will be passed upon for us by Hale and Dorr LLP, Boston,
Massachusetts. Partners of Hale and Dorr LLP beneficially own an aggregate of
18,844 shares of our common stock and warrants exercisable for 1,554 additional
shares of common stock. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Ropes & Gray, Boston, Massachusetts.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 2002 and 2001, and for each of the three
years in the period ended December 31, 2002, as set forth in their report. We
have included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-3 with the SEC in
connection with this offering. In addition, we file annual, quarterly and
current reports, proxy statements and other documents with the SEC under the
Securities Exchange Act of 1934, as amended, or the Exchange Act. You may read
and copy any document we file at the SEC's public reference room at Judiciary
Plaza Building, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You
should call 1-800-SEC-0330 for more information on the public reference room.
Our SEC filings are also available to you on the SEC's internet site at
http://www.sec.gov.

This prospectus is part of a registration statement that we filed with the
SEC. The registration statement contains more information than this prospectus
regarding us and our common stock, including certain exhibits and schedules. You
can obtain a copy of the registration statement from the SEC at the address
listed above or from the SEC's internet site.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The SEC requires us to incorporate into this prospectus information that we
file with the SEC in other documents. This means that we can disclose important
information to you by referring to other documents that contain that
information. The information incorporated by reference is considered to be part
of this prospectus. We incorporate by reference the documents listed below and
any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this prospectus and prior to the
termination of this offering. Information that we file with the SEC in the
future and incorporate by reference in this prospectus automatically updates and
supercedes previously filed information, as applicable. The following documents
filed with the SEC (File No. 0-31191), pursuant to the Exchange Act, are
incorporated herein by reference:

(1) Our Annual Report on Form 10-K for the fiscal year ended December
31, 2002, filed with the SEC on March 5, 2003.

(2) Our Current Report on Form 8-K, filed with the SEC on February
13, 2003.

(3) All of our filings pursuant to the Exchange Act after the date of
filing the initial registration statement and prior to effectiveness of the
registration statement.

(4) The description of our common stock contained in our Registration
Statement on Form 8-A, filed with the SEC and declared effective on July
28, 2000.

We will provide without charge to each person to whom a copy of this
prospectus is delivered, upon written or oral request of any such person, a copy
of any or all of the documents which are incorporated herein by reference.
Requests should be directed to The Medicines Company, Five Sylvan Way, Suite
200, Parsippany, New Jersey 07054, Attention: Investor Relations, Telephone:
(973) 656-1616.

INDEX TO THE
CONSOLIDATED FINANCIAL STATEMENTS OF
THE MEDICINES COMPANY

PAGE
----

Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Redeemable Convertible Preferred
Stock and Stockholders' Equity (Deficit).................. F-5
Consolidated Statements of Cash Flows....................... F-7
Notes to Consolidated Financial Statements.................. F-8

F-1

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
The Medicines Company

We have audited the accompanying consolidated balance sheets of The
Medicines Company as of December 31, 2001 and 2002, and the related consolidated
statements of operations, redeemable convertible preferred stock and
stockholders' equity (deficit), and cash flows, for each of the three years in
the period ending December 31, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Medicines Company at December 31, 2001 and 2002, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States.

/s/ ERNST & YOUNG LLP

MetroPark, New Jersey
February 11, 2003

F-2

THE MEDICINES COMPANY

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
------------------------------
2001 2002
------------- -------------

ASSETS
Current assets:
Cash and cash equivalents................................. $ 53,884,376 $ 36,777,007
Available for sale securities............................. 125,000 6,731,728
Accrued interest receivable............................... 6,757 129,414
Accounts receivable, net of allowance of $0.05 million as
of December 31, 2001 and 2002.......................... 6,119,325 15,664,432
Inventories............................................... 16,610,928 14,178,660
Prepaid expenses and other current assets................. 550,564 660,720
------------- -------------
Total current assets................................... 77,296,950 74,141,961
Fixed assets, net........................................... 1,223,528 924,497
Other assets................................................ 153,076 233,854
------------- -------------
Total assets........................................... $ 78,673,554 $ 75,300,312
============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 8,805,476 $ 8,291,995
Accrued expenses.......................................... 8,747,114 11,678,078
------------- -------------
Total current liabilities.............................. 17,552,590 19,970,073
Commitments and contingencies............................... -- --
Deferred revenue............................................ -- 1,395,833
Stockholders' equity:
Preferred stock, $1.00 par value per share, 5,000,000
shares authorized; no shares issued and outstanding.... -- --
Common stock, $.001 par value per share, 75,000,000 shares
authorized at December 31, 2001 and December 31, 2002,
respectively; 34,606,582 and 39,894,285 issued and
outstanding at December 31, 2001 and December 31, 2002,
respectively........................................... 34,607 39,894
Additional paid-in capital................................ 321,041,704 354,239,193
Deferred compensation..................................... (8,593,773) (3,125,494)
Accumulated deficit....................................... (251,443,682) (297,274,830)
Accumulated other comprehensive income.................... 82,108 55,643
------------- -------------
Total stockholders' equity............................. 61,120,964 53,934,406
------------- -------------
Total liabilities and stockholders' equity............. $ 78,673,554 $ 75,300,312
------------- -------------

See accompanying notes.
F-3

THE MEDICINES COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31,
---------------------------------------------
2000 2001 2002
------------- ------------ ------------

Net revenue..................................... $ -- $ 14,247,724 $ 38,301,286
Operating expenses:
Cost of revenue............................... -- 2,110,425 10,284,033
Research and development...................... 39,572,297 32,767,394 37,951,458
Selling, general and administrative........... 15,033,585 36,566,761 36,807,679
------------- ------------ ------------
Total operating expenses................... 54,605,882 71,444,580 85,043,170
Loss from operations............................ (54,605,882) (57,196,856) (46,741,884)
Other income (expense):
Interest income............................... 2,704,126 3,163,208 943,583
Interest expense.............................. (19,390,414) -- (32,847)
Loss on sale of investment.................... -- (850,000) --
------------- ------------ ------------
Net loss........................................ (71,292,170) (54,883,648) (45,831,148)
Dividends and accretion to redemption value of
redeemable preferred stock.................... (30,342,988) -- --
------------- ------------ ------------
Net loss attributable to common stockholders.... $(101,635,158) $(54,883,648) $(45,831,148)
============= ============ ============
Basic and diluted net loss attributable to
common stockholders per common share.......... $ (8.43) $ (1.67) $ (1.23)
Unaudited pro forma basic and diluted net loss
attributable to common stockholders per common
share......................................... $ (2.10) $ (1.67) $ (1.23)
Shares used in computing net loss attributable
to common stockholders per common share:
Basic and diluted............................. 12,059,275 32,925,968 37,209,931
Unaudited pro forma basic and diluted......... 24,719,075 32,925,968 37,209,931

See accompanying notes.
F-4

THE MEDICINES COMPANY

CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

REDEEMABLE CONVERTIBLE
PREFERRED STOCK COMMON STOCK
--------------------------- -------------------- ADDITIONAL PAID-IN DEFERRED STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION
----------- ------------- ---------- ------- ------------------ --------------

Balance at December 31, 1999... 22,962,350 85,277,413 833,400 834 339,144 --
Repurchase of common stock... (22,205) (22)
Employee stock purchases..... 227,525 226 286,068
Issuance of redeemable
preferred stock............ 5,946,366 25,688,284
Accretion and dividend on
preferred stock............ 1,751,241 4,898,537
Beneficial conversion of
redeemable convertible
preferred stock............ 25,444,299
Issuance of warrants
associated with convertible
notes...................... 18,789,805
Issuance of common stock
through initial public
offering................... 6,900,000 6,900 101,343,162
Conversion of preferred stock
to common stock............ (30,659,957) (115,864,234) 22,381,735 22,382 115,841,732
Deferred compensation expense
associated with stock
options.................... 17,279,612 $(17,279,612)
Adjustments to deferred
compensation for
terminations............... (197,485) 197,485
Amortization of deferred
stock compensation......... 3,726,433
Net loss.....................
Currency translation
adjustment.................
Unrealized loss on marketable
securities.................
Comprehensive loss...........
----------- ------------- ---------- ------- ------------ ------------
Balance at December 31, 2000... -- -- 30,320,455 30,320 279,126,337 (13,355,694)
Repurchase of common stock... (11,239) (11) --
Employee stock purchases..... 297,366 298 743,147
Issuance of common stock
through private
placement.................. 4,000,000 4,000 41,798,975
Adjustments to deferred
compensation for
terminations............... (626,755) 626,755
Amortization of deferred
stock compensation......... 4,135,166
Net loss.....................

ACCUMULATED
COMPREHENSIVE
INCOME TOTAL STOCKHOLDERS'
ACCUMULATED DEFICIT (LOSS) EQUITY/(DEFICIT)
------------------- ------------- -------------------

Balance at December 31, 1999... (94,925,028) 27,395 (94,557,655)
Repurchase of common stock... (22)
Employee stock purchases..... 286,294
Issuance of redeemable
preferred stock............ --
Accretion and dividend on
preferred stock............ (4,898,537) (4,898,537)
Beneficial conversion of
redeemable convertible
preferred stock............ (25,444,299) --
Issuance of warrants
associated with convertible
notes...................... 18,789,805
Issuance of common stock
through initial public
offering................... 101,350,062
Conversion of preferred stock
to common stock............ 115,864,114
Deferred compensation expense
associated with stock
options.................... --
Adjustments to deferred
compensation for
terminations............... --
Amortization of deferred
stock compensation......... 3,726,433
Net loss..................... (71,292,170) (71,292,170)
Currency translation
adjustment................. 5,141 5,141
Unrealized loss on marketable
securities................. (34,482) (34,482)
------------
Comprehensive loss........... (71,321,511)
------------- -------- ------------
Balance at December 31, 2000... (196,560,034) (1,946) 69,238,983
Repurchase of common stock... (11)
Employee stock purchases..... 743,445
Issuance of common stock
through private
placement.................. 41,802,975
Adjustments to deferred
compensation for
terminations............... --
Amortization of deferred
stock compensation......... 4,135,166
Net loss..................... (54,883,648) (54,883,648)

F-5

Currency translation
adjustment.................
Reclassification adjustment
for realized loss on
available for sale
securities.................
Comprehensive loss...........
----------- ------------- ---------- ------- ------------ ------------
Balance at December 31, 2001... -- $ -- 34,606,582 $34,607 $321,041,704 $ (8,593,773)
Employee stock purchases..... 738,081 738 2,993,498
Issuance of common
stock--Nycomed purchase.... 79,428 79 999,921
Issuance of common
stock--through public
sale....................... 4,000,000 4,000 30,906,000
Issuance of common
stock--Warrant purchases... 470,194 470 (547)
Adjustments to deferred
compensation for
terminations............... (2,191,644) 2,191,644
Non-cash stock compensation--
terminations............... 490,261
Amortization of deferred
stock compensation......... 3,276,635
Net loss.....................
Currency translation
adjustment.................
Reclassification adjustment
for realized loss on
available for sale
securities.................
Comprehensive loss...........
----------- ------------- ---------- ------- ------------ ------------
Balance at December 31, 2002... -- $ -- 39,894,285 $39,894 $354,239,193 $ (3,125,494)
=========== ============= ========== ======= ============ ============

ACCUMULATED
COMPREHENSIVE
INCOME TOTAL STOCKHOLDERS'
ACCUMULATED DEFICIT (LOSS) EQUITY/(DEFICIT)
------------------- ------------- -------------------

Currency translation
adjustment................. 47,446 47,446
Reclassification adjustment
for realized loss on
available for sale
securities................. 36,608 36,608
------------
Comprehensive loss........... (54,799,594)
------------- -------- ------------
Balance at December 31, 2001... $(251,443,682) $ 82,108 $ 61,120,964
Employee stock purchases..... 2,994,236
Issuance of common
stock--Nycomed purchase.... 1,000,000
Issuance of common
stock--through public
sale....................... 30,910,000
Issuance of common
stock--Warrant purchases... (77)
Adjustments to deferred
compensation for
terminations............... --
Non-cash stock compensation--
terminations............... 490,261
Amortization of deferred
stock compensation......... 3,276,635
Net loss..................... (45,831,148) (45,831,148)
Currency translation
adjustment................. (42,240) (42,240)
Reclassification adjustment
for realized loss on
available for sale
securities................. 15,775 15,775
------------
Comprehensive loss........... (45,857,613)
------------- -------- ------------
Balance at December 31, 2002... $(297,274,830) $ 55,643 $ 53,934,406
============= ======== ============

See accompanying notes.

F-6

THE MEDICINES COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31,
------------------------------------------
2000 2001 2002
------------ ------------ ------------

Cash flows from operating activities:
Net loss............................................ $(71,292,170) $(54,883,648) $(45,831,148)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation........................................ 277,307 470,930 555,026
Amortization of premium on available for sale
securities....................................... -- -- 66,517
Amortization of discount on convertible notes....... 19,013,486 -- --
Non-cash stock compensation expense................. 3,726,433 4,135,166 3,766,895
Loss on sales and disposal of fixed assets.......... 14,631 2,113 1,079
Changes in operating assets and liabilities:
Accrued interest receivable...................... (1,337,703) 1,386,171 (122,657)
Accounts receivable.............................. -- (6,119,325) (9,545,107)
Inventory........................................ (1,963,491) (14,620,838) 2,405,669
Prepaid expenses and other current assets........ (312,027) (85,806) (108,340)
Other assets..................................... (82,391) 96,927 (80,778)
Accounts payable................................. (1,823,602) 2,819,943 (516,068)
Accrued expenses................................. 5,708,535 (377,245) 2,887,070
Deferred revenue................................. -- -- 1,395,833
------------ ------------ ------------
Net cash used in operating activities.......... (48,070,992) (67,175,612) (45,126,009)
Cash flows from investing activities:
Purchase of available for sale securities........... (51,098,901) (7,430,886) (6,782,470)
Maturities and sales of available for sale
securities....................................... 9,083,090 49,863,097 125,000
Purchase of fixed assets............................ (834,160) (735,571) (247,218)
------------ ------------ ------------
Net cash provided by (used in) investing
activities.................................. (42,849,971) 41,696,640 (6,904,688)
Cash flows from financing activities:
Proceeds from revolving line of credit borrowings... -- -- 10,000,000
Repayments of revolving line of credit borrowings... -- -- (10,000,000)
Proceeds from issuance of convertible notes and
warrants......................................... 13,348,779 -- --
Proceeds from issuances of preferred stock, net..... 6,095,338 -- --
Proceeds from issuances of common stock, net........ 101,636,334 42,546,409 34,904,155
Dividends paid in cash.............................. (118) -- --
------------ ------------ ------------
Net cash provided by financing activities...... 121,080,333 42,546,409 34,904,155
Effect of exchange rate changes on cash............... (280) 14,583 19,173
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents...... 30,159,090 17,082,020 (17,107,369)
Cash and cash equivalents at beginning of period...... 6,643,266 36,802,356 53,884,376
------------ ------------ ------------
Cash and cash equivalents at end of period............ $ 36,802,356 $ 53,884,376 $ 36,777,007
============ ============ ============
Non-cash transactions:
Dividends on preferred stock........................ $ 31,894,474 $ -- $ --
============ ============ ============
Supplemental disclosure of cash flow information:
Interest paid....................................... $ 255,781 $ -- $ 32,847
============ ============ ============
Taxes paid.......................................... $ -- $ 6,303 $ 35,069
============ ============ ============

See accompanying notes.
F-7

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002

1. NATURE OF BUSINESS

The Medicines Company (the "Company") was incorporated in Delaware on July
31, 1996. The Company is a specialty pharmaceutical company engaged in the
acquisition, development and commercialization of late-stage development drugs
or drugs approved for marketing. The U.S. Food and Drug Administration approved
Angiomax(R) (bivalirudin) for use as an anticoagulant in combination with
aspirin in patients with unstable angina undergoing coronary angioplasty in
December 2000, and the Company commenced sales of Angiomax in the first quarter
of 2001. The Company was considered to be a development-stage enterprise, as
defined in Statement of Financial Accounting Standards No. 7, "Accounting and
Reporting by Development-Stage Enterprises," through December 31, 2000. With the
commencement of sales in 2001, the Company is no longer considered to be a
development-stage enterprise.

2. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. The Company has no
unconsolidated subsidiaries.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

RECLASSIFICATION

Certain reclassifications have been made to prior years' information to
conform to the 2002 presentation.

RISKS AND UNCERTAINTIES

The Company is subject to risks common to companies in the pharmaceutical
industry including, but not limited to, uncertainties related to regulatory
approvals, dependence on key products, dependence on key customers and
suppliers, and protection of proprietary rights.

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration
of credit risk include cash, cash equivalents, available for sale securities and
accounts receivable. The Company believes it minimizes its exposure to potential
concentrations of credit risk by placing investments in high-quality financial
instruments with high quality institutions. At December 31, 2002, approximately
$31.2 million of the cash and cash equivalents balance was invested in a single
fund, the Munder Money Market Fund, a no-load money market fund.

The Company's products are sold primarily to a limited number of national
medical and pharmaceutical distributors and wholesalers with distribution
centers located throughout the United States. The Company performs ongoing
credit evaluations of its customers and generally does not require collateral.
The Company maintains reserves for potential credit losses and, during 2002,
such losses were

F-8

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

within the expectations of management. During 2001 and 2002, the Company's
revenues from three of its customers totaled approximately 94% of net revenues.
At December 31, 2001 and 2002, these same customers represented approximately
$5.9 million, or 97%, and $15.1 million, or 96%, respectively, of gross accounts
receivable.

CASH, CASH EQUIVALENTS AND AVAILABLE FOR SALE SECURITIES

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents at December 31, 2001 and 2002 consist of investments in money market
funds. These investments are carried at cost, which approximates fair value.

The Company considers securities with original maturities of greater than
three months to be available for sale securities. Securities under this
classification are recorded at fair market value and unrealized gains and losses
are recorded as a separate component of stockholders' equity. The cost of debt
securities in this category is adjusted for amortization of premium and
accretion of discount to maturity. The estimated fair value of the available for
sale securities is determined based on quoted market prices or rates for similar
instruments. At December 31, 2001, the Company held a certificate of deposit for
$125,000 with a one-year term that was pledged as a security deposit on its
facility lease in Parsippany, New Jersey. This certificate of deposit matured in
2002.

Available for sale securities consisted of investments in corporate bonds,
United States government agency notes and certificates of deposit with
maturities of less than one year and are summarized as follows:

UNREALIZED FAIR
2001 COST GAIN VALUE
---- ---------- ---------- --------

Certificate of Deposit............................ $ 125,000 $-- $125,000
---------- -- --------
TOTAL........................................ $ 125,000 $-- $125,000
========== == ========

UNREALIZED FAIR
2002 COST GAIN VALUE
---- ---------- ---------- ----------

Certificates of deposit......................... $1,499,944 $ -- $1,499,944
Corporate debt securities....................... 2,606,044 7,042 2,613,086
U.S. government agency notes.................... 2,609,965 8,733 2,618,698
---------- ------- ----------
TOTAL...................................... $6,715,953 $15,775 $6,731,728
========== ======= ==========

During the second quarter of 2001, the Company sold its $3.0 million
investment in Southern California Edison 5 7/8% bonds, which were originally due
on January 15, 2001, realizing a loss of $850,000 on the sale. There were also
maturities of available for sale securities during the year ended December 31,
2001, which are disclosed in the accompanying consolidated statements of cash
flows. There were no realized gains or losses in 2002.

REVENUE RECOGNITION

The Company sells its products primarily to wholesalers and distributors
who, in turn sell to hospitals. The Company recognizes revenue from product
sales in accordance with generally accepted accounting principles in the United
States including the guidance in Staff Accounting Bulletin 101. Revenue from
product sales is recognized when there is persuasive evidence of an arrangement,
delivery has occurred, the price is fixed and determinable, and collectibility
is reasonably assured. However because the Company's products are sold with
limited rights of return, the Company's recognition of revenue from product
sales is

F-9

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

also subject to the Statement of Financial Accounting Standards No. 48, or SFAS
48, "Revenue Recognition When Right of Return Exists." Under SFAS 48, revenue is
recognized when the price to the buyer is fixed, the buyer is obligated to pay
the Company and the obligation to pay is not contingent on resale of the
product, the buyer has economic substance apart from the Company, the Company
has no obligations to bring about sale of the product and the amount of returns
can be reasonably be estimated. The Company reserves for estimated returns at
the time of sale and revenues are reported net of such amounts.

The Company records allowances for product returns, rebates and discounts,
and reports revenue net of such allowances. The Company must make significant
judgments and estimates in determining the allowances. If actual results differ,
the Company will likely be required to make adjustments to these allowances in
the future:

-- The Company's customers have the right to return any unopened product
with less than six months to the labeled expiration date, provided
that the product is returned within 12 months of the labeled
expiration date. As a result, the Company must estimate the
likelihood that product sold to wholesalers might remain in their
inventory to within six months of expiration and determine if it will
be returned. The Company bases its estimates on information from
customers, historic patterns of returns, industry data and on the
expiration dates of product currently being shipped.

-- Certain hospitals purchasing the Company's products from wholesalers
have the right to receive a discounted price and a volume-based
rebate if they participate in a group purchasing organization that
has a contract with the Company. As a result, the Company must
estimate the likelihood that product sold to wholesalers might be
ultimately sold to a participating hospital. The Company bases its
estimates on information from customers, industry data, historic
patterns of discounts and customer rebate thresholds.

Revenue from collaborative agreements may include non-refundable fees or
milestone payments. These payments are recorded as deferred revenue until
contractual performance obligations have been satisfied, and they are recognized
ratably over the term of these agreements. When the period of deferral cannot be
specifically identified from the contract, the Company must estimate the period
based upon other critical factors contained within the contract. The Company
reviews these estimates, at least annually, which could result in a change in
the deferral period.

ADVERTISING COSTS

The Company expenses advertising costs as incurred. Advertising costs were
approximately $807,000, $1,258,000 and $837,000 for the years ended December 31,
2000, 2001 and 2002, respectively.

INVENTORIES

Inventory is recorded upon the transfer of title from our vendors.
Inventory is stated at the lower of cost or market value with cost determined
using a weighted average of costs. All costs associated with the manufacture of
Angiomax bulk drug product and finished product to which the title transferred
to us prior to FDA approval of Angiomax and of its original manufacturing
process were expensed as research and development. In December 2000, we received
FDA approval for Angiomax and its original manufacturing process. Any Angiomax
bulk drug product manufactured according to its original manufacturing process
to which we took title after FDA approval is recorded as inventory. Together
with UCB Bioproducts, the Company has developed, but not yet received FDA
approval of, a second generation chemical synthesis process, the Chemilog
process, for the manufacture of Angiomax bulk drug substance. All Angiomax bulk
drug product manufactured using the Chemilog process to which title has
transferred to the Company to

F-10

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

date has been expensed as research and development. The Company reviews the
inventory for slow moving or obsolete amounts based on expected revenues. If
actual revenues are less than expected, allowances for excess amounts may be
required in the future.

INVENTORIES 2001 2002
----------- ----------- -----------

Raw materials.............................................. $14,547,422 4,126,870
Work-in-progress........................................... 1,991,874 8,370,949
Finished Goods............................................. 71,632 1,680,841
----------- -----------
TOTAL................................................. $16,610,928 $14,178,660
=========== ===========

FIXED ASSETS

Fixed assets are stated at cost. Depreciation is provided using the
straight-line method based on estimated useful lives or, in the case of
leasehold improvements, over the lesser of the useful lives or the lease terms.

RESEARCH AND DEVELOPMENT

Expenditures for research and development costs are expensed as incurred.

STOCK-BASED COMPENSATION

Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation" encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has elected to account for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25").

The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
123 to stock-based employee compensation:

YEARS ENDED DECEMBER 31,
----------------------------------------
2000 2001 2002
------------ ----------- -----------

Net loss attributable to common
stockholders--As reported.................. $101,635,158 $54,883,648 $45,831,148
Deduct: Total stock-based compensation
expense determined under fair value based
method for all stock option awards and
discounts under the Employee Stock Purchase
Plan, net of amortization of deferred stock
compensation............................... 4,515,446 10,923,152 2,477,278
Net loss attributable to common
stockholders--Pro forma.................... $106,150,604 $65,806,800 $48,308,426
Net loss per share attributable to common
stockholders--As reported.................. $ (8.43) $ (1.67) $ (1.23)
Net loss per share attributable to common
stockholders--Pro forma.................... $ (8.80) $ (2.00) $ (1.30)

F-11

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions:

YEARS ENDED DECEMBER 31,
---------------------------------
2000 2001 2002
--------- --------- ---------

Expected dividend yield............................. 0% 0% 0%
Expected stock price volatility..................... 70% 96% 90%
Risk-free interest rate............................. 6.32% 4.0% 3.0%
Expected option term................................ 3.35 3.34 2.79
years years years

TRANSLATION OF FOREIGN CURRENCIES

The functional currencies of the Company's foreign branches and
subsidiaries are the local currencies: British pound sterling, Swiss franc and
New Zealand dollar. The Company translates its foreign operations using a
current exchange rate. In accordance with Statement of Financial Accounting
Standards No. 52, assets and liabilities are exchanged using the current
exchange rate as of the balance sheet date. Stockholders' equity is exchanged
using historical rates at the balance sheet date. Expenses and items of income
are exchanged using a weighted average exchange rate over the period ended on
the balance sheet date. Adjustments resulting from the translation of the
financial statements of the Company's foreign subsidiaries into U.S. dollars are
excluded from the determination of net loss and are accumulated in a separate
component of stockholders' equity. Foreign exchange transaction gains and losses
are included in the results of operations and are not material to the Company's
consolidated financial statements.

INCOME TAXES

Deferred tax assets and liabilities are determined based on differences
between financial reporting and income tax bases of assets and liabilities, as
well as net operating loss carryforwards, and are measured using the enacted tax
rates and laws in effect when the differences reverse. Deferred tax assets are
reduced by a valuation allowance to reflect the uncertainty associated with
ultimate realization.

COMPREHENSIVE INCOME (LOSS)

The Company reports comprehensive income (loss) and its components in
accordance with the provisions of SFAS No. 130, "Reporting Comprehensive
Income." Comprehensive income (loss) includes all changes in equity for
cumulative translations adjustments resulting from the consolidation of foreign
branches and subsidiaries' financial statements and unrealized gains and losses
on available for sale securities.

NET LOSS PER SHARE

Basic net loss per share is computed using the weighted average number of
shares of common stock outstanding during the period reduced, where applicable,
for outstanding, yet unvested, shares. Diluted net loss per share includes the
effect of stock options, warrants and redeemable convertible preferred stock and
convertible notes outstanding during the period, if dilutive. Since the Company
has a net loss for all periods presented, the effect of all potentially dilutive
securities is antidilutive. Accordingly, basic and diluted net loss per share
are the same.

UNAUDITED PRO FORMA NET LOSS PER SHARE

Unaudited pro forma net loss per share is computed using the weighted
average number of common shares outstanding, including the pro forma effects of
automatic conversion of all outstanding redeemable

F-12

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

convertible preferred stock and accrued dividends and convertible notes and
accrued interest through the balance sheet date into shares of the Company's
common stock (Common Stock) effective upon the closing of the Company's initial
public offering, as if such conversion had occurred at the date of original
issuance.

SEGMENTS

The Company manages its business and operations as one segment and is
focused on the acquisition, development and commercialization of late-stage
development drugs and drugs approved for marketing. The Company has license
rights to Angiomax(R) and has the option to license the rights to another
potential product, clevidipine. Revenues reported to date are derived primarily
from the sales of the Company's Angiomax(R) product.

3. THE COMPANY'S PLANS AND FINANCING

The Company has incurred substantial losses since inception. To date, the
Company has primarily funded its operations through the issuance of debt and
equity. The Company expects to continue to expend substantial amounts for
continued product research, development and commercialization activities for the
foreseeable future, and the Company plans to fund these expenditures by
increasing revenue or through debt or equity financing, if possible, and to
secure collaborative partnering arrangements that will provide available cash
funding for operations. Should revenue growth or additional debt or equity
financing or collaborative partnering arrangements be unavailable to the
Company, it will restrict certain of its planned activities and operations, as
necessary, to sustain operations and conserve cash resources.

4. FIXED ASSETS

Fixed assets consist of the following:

DECEMBER 31,
ESTIMATED --------------------------
LIFE (YEARS) 2001 2002
------------ ----------- -----------

Furniture, fixtures and equipment.......... 3 $ 675,482 $ 785,190
Computer hardware and software............. 3 1,314,358 1,443,076
Leasehold improvements..................... 5 250,585 269,448
----------- -----------
2,240,425 2,497,714
Less: Accumulated depreciation............. (1,016,897) (1,573,217)
----------- -----------
$ 1,223,528 $ 924,497
=========== ===========

Depreciation expense was approximately $277,000, $471,000 and $555,000 for
the years ended December 31, 2000, 2001 and 2002, respectively.

F-13

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. ACCRUED EXPENSES

Accrued expenses consist of the following at December 31:

2001 2002
---------- -----------

Compensation related....................................... $1,142,131 $ 2,812,737
Development services....................................... 3,311,060 3,118,093
Product returns, rebates and discounts..................... 772,641 2,906,778
Sales and marketing........................................ 2,202,632 651,375
Royalties and commissions.................................. 707,313 1,676,718
Legal, accounting and other................................ 611,337 512,377
---------- -----------
$8,747,114 $11,678,078
========== ===========

6. CONVERTIBLE NOTES AND COMMON STOCK PURCHASE WARRANTS

In October 1999, the Company issued $6,000,000 of 8% convertible notes
(October Notes) and 1,013,877 Common Stock purchase warrants (October Warrants)
to existing investors, raising proceeds of $6,000,000. The October Notes were
convertible into shares of stock of the Company upon a subsequent sale of stock
of the Company provided that such sale resulted in aggregate gross proceeds of
at least $6,000,000. Each October Warrant provides the holder with the right to
purchase one share of Common Stock at a price of $5.92 per share at any time
prior to October 19, 2004. The Company recorded $325,355 as the fair value of
the October Warrants using the Black-Scholes method and the estimated fair value
of the Common Stock on the date of the issuance of the October Warrants, and
$5,674,645 as the value of the October Notes on the issuance date. The discount
on the October Notes was amortized to interest expense over the expected term of
the October Notes to June 2000. Since the October Notes were issued in October
1999, the carrying amount at December 31, 1999 approximated their fair value at
December 31, 1999. Upon completion of the Company's sale of Series IV redeemable
convertible preferred stock (Series IV Redeemable Convertible Preferred Stock)
in May 2000, the principal and accrued interest on the October Notes were
converted into 1,393,909 shares of Series IV Redeemable Convertible Preferred
Stock. At December 31, 2002 there were 694,897 October Warrants outstanding.

In March 2000, the Company issued $13,348,779 of 8% Convertible Notes
(March Notes) and 2,255,687 Common Stock Purchase Warrants (March Warrants) to
current stockholders, raising proceeds of $13,348,779. The March Notes were
convertible into shares of Common Stock upon a subsequent private sale of Common
Stock, provided that such sale resulted in aggregate gross proceeds of at least
$6,000,000. Each March Warrant provides the holder with the right to purchase
one share of Common Stock of the Company at a price of $5.92 per share at any
time prior to March 2005. The Company recorded approximately $18,800,000 as the
value of the March Warrants using the Black-Scholes method and the estimated
fair value of the Common Stock on the date of the issuance of the March
Warrants. The discount on the March Notes was amortized over the expected term
of the Notes to June 2000. For the year ended December 31, 2000, amortization of
the discount was approximately $18,800,000 and is included with the interest
expense in the accompanying financial statements. Upon completion of the
Company's sale of Series IV Redeemable Convertible Preferred Stock in May 2000,
the principal and accrued interest on the March Notes were converted into
3,141,457 shares of Series IV Redeemable Convertible Preferred Stock. At
December 31, 2002 there were 1,679,078 March Warrants outstanding.

7. STOCKHOLDERS' EQUITY

On June 29, 2000, the Company's Board of Directors approved a reverse split
of .73 shares for every one share of Common Stock then outstanding. The reverse
stock split became effective on August 4, 2000.

F-14

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The accompanying financial statements and footnotes including all share and per
share amounts reflect the reverse stock split.

SERIES I, SERIES II, SERIES III AND SERIES IV REDEEMABLE CONVERTIBLE PREFERRED
STOCK

The Company had four series of redeemable convertible preferred stock. A
brief summary of the Series I, Series II, Series III (Series I Redeemable
Convertible Preferred Stock, Series II Redeemable Convertible Preferred Stock,
Series III Redeemable Convertible Preferred Stock, respectively) and Series IV
Redeemable Convertible Preferred Stock follows. At December 31, 2000, 2001 and
2002, there were no shares of any series of redeemable convertible preferred
stock outstanding.

In August 1998, the Company executed an agreement (Exchange Agreement)
under which 8,892,912 shares of Common Stock and 41,992 shares of Series A
redeemable preferred stock (Series A Redeemable Preferred Stock) were exchanged
for 2,506,000 shares of Series I Redeemable Convertible Preferred Stock and
10,565,714 shares of Series II Redeemable Convertible Preferred Stock. Holders
of Series A Redeemable Preferred Stock were entitled to receive preferential
cumulative annual dividends payable in additional shares of Series A Redeemable
Preferred Stock at the rate of 7% per annum of the stated value. Prior to the
Exchange Agreement, dividends earned from January 1, 1998 through the date of
the Exchange Agreement were paid to the holders of Series A Redeemable Preferred
Stock. During 1997, certain preferred shareholders waived their right to a
portion of earned dividends and the Company paid agreed-upon amounts through
December 31, 1997. To the extent that all or any part of the Series A Redeemable
Preferred Stock would have resulted in the issuance of a fractional share of the
Series A Redeemable Preferred Stock, the amount of such fraction, multiplied by
the stated value, was paid in cash.

On May 17, 2000, the Company issued 1,411,000 shares of Series IV
Redeemable Convertible Preferred Stock for net proceeds of $6,095,520. In
addition, on May 17, 2000, the October and March Notes and accrued interest were
converted into 4,535,366 shares of Series IV Redeemable Convertible Preferred
Stock. The Series IV Redeemable Convertible Preferred Stock carried terms and
conditions similar to the Series I, II, III Preferred Stock. The Series IV
Redeemable Convertible Preferred Stock was convertible into Common Stock at a
1-for-0.73 conversion rate and automatically converted upon the closing of the
Company's initial public offering (IPO). The Series IV Redeemable Convertible
Preferred Stock issued on May 17, 2000 contained a beneficial conversion feature
based on the estimated fair market value of common stock into which it is
convertible. In accordance with EITF 98-5, the total amount of such beneficial
conversion is approximately $25,450,000. The beneficial conversion is analogous
to a dividend and was recognized during 2000 when issued. Simultaneously with
the closing of the Company's IPO, 30,659,957 shares of the Series I, II, III and
IV Redeemable Convertible Preferred Stock then outstanding (including accrued
dividends for the period August 1, 2000 to August 11, 2000) were converted into
22,381,735 shares of Common Stock.

PREFERRED STOCK

Following the conversion of the Series I, Series II, Series III and Series
IV Redeemable Convertible Preferred Stock upon the closing of the IPO, there
were 5,000,000 shares of the Company's preferred stock (Preferred Stock)
authorized, none of which has been issued.

COMMON STOCK

Common stockholders are entitled to one vote per share and dividends when
declared by the Company's board of directors (Board of Directors), subject to
the preferential rights of any outstanding shares of Preferred Stock.

F-15

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In its IPO on August 11, 2000, the Company sold 6,000,000 shares of Common
Stock at a price of $16.00 per share. In addition, on September 8, 2000, the
underwriters of the IPO exercised their over-allotment option and purchased an
additional 900,000 shares of Common Stock at a price of $16.00 per share. The
Company received proceeds of approximately $101.4 million, net of underwriting
discounts and commissions, and expenses. Simultaneously with the closing of the
IPO, 30,659,957 shares of Series I, II, III and IV Redeemable Convertible
Preferred Stock then outstanding (including accrued dividends for the period
August 1, 2000 to August 11, 2000) were converted into 22,381,735 shares of
Common Stock.

In May 2001, the Company received $41.8 million from a private placement of
4,000,000 shares of Common Stock sold to both new and existing shareholders at a
price of $11.00 per share. The shares sold in the private placement were
subsequently registered for resale.

In March 2002, the Company received $1.0 million in proceeds from the sale
of shares of Common Stock to Nycomed at the then fair market price of $12.59 per
share at the time of purchase. In June 2002, the Company received $30.9 million
in proceeds from the sale of 4.0 million shares of Common Stock in a public
offering at a price of $8.20 per share.

During 1996, 1997 and 1998, certain employees of the Company purchased
335,800, 627,070 and 32,850 shares of Common Stock, respectively, for $0.001 per
share. These shares are subject to restriction and vesting agreements that limit
transferability and allow the Company to repurchase unvested shares at the
original purchase price. The shares vest ratably over a four-year period that
generally begins on each employee's hire date. During 2000, 2001 and 2002, the
Company repurchased 22,205, 11,239 and 177 shares, respectively, of unvested
Common Stock for $0.001 per share. There were no shares of unvested Common Stock
at December 31, 2002.

STOCK PLANS

In April 1998, the Company adopted the 1998 Stock Incentive Plan (the "1998
Plan"), which provides for the grant of stock options, restricted stock and
other stock-based awards to employees, directors and consultants. The Board of
Directors determines the term of each option, the option price, the number of
shares for which each option is granted and the rate at which each option is
exercisable. During 1999, the Board of Directors amended all outstanding grants
to allow holders the opportunity to exercise options prior to vesting. Exercised
options that are unvested are subject to repurchase by the Company at the
original exercise price. Options granted under the 1998 Plan generally vest in
increments over four years and have a ten year term.

In January 2000, the Board of Directors approved an amendment to the 1998
Plan to increase the number of shares available under the 1998 Plan to
1,448,259. In May 2000, the Board of Directors approved an amendment to the 1998
Plan to increase the number of shares available under the 1998 Plan to
4,368,259. In February 2002, the Board of Directors also adopted, subject to
shareholder approval which was received in May 2002, an increase in the number
of shares of common stock under the 1998 Plan to 6,118,259 shares.

The Board of Directors also approved the 2000 Employee Stock Purchase Plan
(the "2000 ESPP") which provides for the issuance of up to 255,500 shares of
Common Stock to participating employees and the 2000 Directors Stock Option Plan
which provides for the issuance of up to 250,000 shares of Common Stock to the
Company's outside directors. Both the 2000 ESPP and the 2000 Directors Stock
Option Plan have received stockholder approval.

In May 2001, the Board of Directors approved the 2001 Non-Officer,
Non-Director Employee Stock Incentive Plan (the "2001 Plan"), which provides for
the grant of nonstatutory stock options to employees, consultants and advisors,
of the Company and its subsidiaries. The 2001 Plan provides for the issuance of
up to 1,250,000 shares of stock. The Board of Directors administers the 2001
Plan, although it may
F-16

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

delegate its authority to one or more committees and, in limited circumstances,
to one or more of the executive officers.

Prior to the Company's IPO, the Board of Directors determined the fair
value of the Common Stock in its good faith judgment at each option grant date
for grants under the 1998 Plan considering a number of factors including the
financial and operating performance of the company, recent transactions in the
Common Stock and Preferred Stock, if any, the values of similarly situated
companies and the lack of marketability of Common Stock. Following the IPO, the
fair value is determined based on the traded value of Common Stock.

During the period January 1, 2000 to September 30, 2000, the Company issued
2,273,624 options at exercise prices below the estimated fair value of the
Common Stock as of the date of grant of such options based on the price of the
Common Stock in connection with the IPO. The total deferred compensation
associated with these options is approximately $17.3 million. Included in the
results of operations for the years ended December 31, 2000, 2001 and 2002 is
compensation expense of approximately $3.7 million, $4.1 million and $3.3
million, respectively, associated with such options. Total deferred compensation
is reduced when the associated options are cancelled prior to exercise. During
2000, 2001 and 2002, cancellation of options that had not been exercised
resulted in a reduction in total deferred compensation of approximately $0.2
million, $0.6 million and $2.2 million, respectively. In 2002, the Company
accelerated the vesting of stock options held by terminated employees in
connection with their termination agreements, which resulted in $0.5 million in
non-cash stock compensation expense. The amortization and non-cash compensation
expense is included in our operating expenses in the consolidated statements of
operations.

The Company has elected to follow APB 25 in accounting for its stock
options granted to employees because the alternative fair value accounting
provided for under SFAS 123, requires the use of option valuation models that
were not developed for use in valuing employee stock options. Because the
exercise price of the Company's stock options generally equals the market price
of the underlying stock on the date of grant, no compensation is recognized
under APB 25.

F-17

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

A summary of stock option activity under all the Company's stock option
plans are as follows:

WEIGHTED AVERAGE
EXERCISE PRICE PER
NUMBER OF SHARES SHARE
---------------- ------------------

Outstanding, December 31, 1999................ 768,966 $ 1.16
Granted....................................... 3,080,424 9.80
Exercised..................................... (227,523) 1.26
Canceled...................................... (406,713) 1.22
---------- ------
Outstanding, December 31, 2000................ 3,215,154 $ 9.43

Granted....................................... 2,090,000 11.25
Exercised..................................... (216,118) 2.45
Canceled...................................... (329,086) 14.94
---------- ------
Outstanding, December 31, 2001................ 4,759,950 $10.16

Granted....................................... 1,945,700 12.71
Exercised..................................... (708,723) 3.88
Canceled...................................... (1,158,270) 12.39
---------- ------
Outstanding, December 31, 2002................ 4,838,657 $11.57
========== ======
Available for future grant at December 31,
2002........................................ 1,625,377
==========

The weighted average per share fair value of options granted during 2000,
2001 and 2002 was $10.34, $7.17 and $6.95, respectively. There were no options
granted during 2001 and 2002 with an exercise price below the fair market value
of the underlying shares on the date of grant. The weighted average fair value
and exercise price of options granted during 2000 that were granted with
exercise prices below fair market value were $9.35 and $4.68, respectively. The
weighted average fair value and exercise price of options granted with exercise
prices equal to fair value were $13.19 and $24.96, respectively, during 2000,
$7.17 and $11.25, respectively, during 2001, and $6.95 and $12.71, respectively,
during 2002.

The following table summarizes information about stock options from all the
Company's stock option plans outstanding at December 31, 2002:

OPTIONS OUTSTANDING
----------------------------------------------------
WEIGHTED OPTIONS VESTED
AVERAGE ---------------------------------
RANGE OF NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING AT CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING AT EXERCISE PRICE
PER SHARE 12/31/02 (YEARS) PER SHARE 12/31/02 PER SHARE
--------------- -------------- ---------------- ---------------- -------------- ----------------

$0.69- $5.90 1,152,169 7.55 $ 4.24 721,210 $ 3.90
$5.92- $10.60 1,036,882 8.80 8.57 232,588 7.65
$10.76- $13.80 1,124,192 8.91 12.29 241,609 12.53
$14.88- $18.10 1,072,900 9.45 16.03 118,336 17.22
$21.50- $30.00 452,514 7.90 24.78 251,124 24.77
--------- ---- ------ --------- ------
4,838,657 8.59 $11.57 1,564,867 $10.15
========= ==== ====== ========= ======

F-18

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

COMMON STOCK RESERVED FOR FUTURE ISSUANCE

At December 31, 2002, there were 9,047,383 shares of Common Stock reserved
for future issuance under the 2000 ESPP, for conversion of the October Warrants
and March Warrants and for grants made under the 1998 Plan, the 2001 Plan and
the 2000 Directors Stock Option Plan.

8. NET LOSS AND UNAUDITED PRO FORMA NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted and
unaudited pro forma basic and diluted net loss per share for the respective
periods. The unaudited pro forma basic and diluted net loss per share for 2000
gives effect to the conversion of the Series I, II, III and IV Redeemable
Convertible Preferred Stock and the October Notes and March Notes and accrued
interest as if converted at the date of original issuance.

YEAR ENDED DECEMBER 31,
---------------------------------------------
2000 2001 2002
------------- ------------ ------------

BASIC AND DILUTED
Net loss............................... $ (71,292,170) $(54,883,648) $(45,831,148)
Dividends and accretion on redeemable
convertible preferred stock.......... (30,342,988) -- --
------------- ------------ ------------
Net loss attributable to common
stockholders......................... $(101,635,158) $(54,883,648) $(45,831,148)
============= ============ ============
Weighted average common shares
outstanding.......................... 12,225,537 32,987,766 37,223,342
Less: unvested restricted common shares
outstanding.......................... (166,262) (61,798) (13,411)
------------- ------------ ------------
Weighted average common shares used to
compute net loss per share........... 12,059,275 32,925,968 37,209,931
============= ============ ============
Basic and diluted net loss per share... $ (8.43) $ (1.67) $ (1.23)
============= ============ ============
UNAUDITED PRO FORMA BASIC AND DILUTED
Net loss............................... $ (71,292,170) $(54,883,648) $(45,831,148)
Interest expense on convertible
notes................................ 19,390,414 -- --
------------- ------------ ------------
Net loss used to compute pro forma net
loss per share....................... $ (51,901,756) $(54,883,648) $(45,831,148)
============= ============ ============
Weighted average common shares used to
compute net loss per share........... 12,059,275 32,925,968 37,209,931
Weighted average number of common
shares assuming the conversion of all
redeemable convertible preferred
stock and convertible notes and
accrued interest at the date of
original issuance.................... 12,659,800 -- --
------------- ------------ ------------
Weighted average common shares used to
compute pro forma net loss per
share................................ 24,719,075 32,925,968 37,209,931
============= ============ ============
Unaudited pro forma basic and diluted
pro forma net loss per share......... $ (2.10) $ (1.67) $ (1.23)
============= ============ ============

Options to purchase 3,215,154, 4,759,950 and 4,838,657 shares of Common
Stock have not been included in the computation of diluted net loss per share
and pro forma net loss per share for the years ended December 31, 2000, 2001 and
2002, respectively, as their effects would have been antidilutive. Warrants to
purchase 3,269,564, 3,156,073 and 2,373,975 shares of Common Stock were also
excluded

F-19

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

from the computation of diluted net loss per share and pro forma net loss per
share for the years ended December 31, 2000, 2001 and 2002, respectively, as
their effect would be antidilutive.

9. INCOME TAXES

The significant components of the Company's deferred tax assets are as
follows:

DECEMBER 31,
---------------------------
2001 2002
------------ ------------

Deferred tax assets:
Net operating loss carryforwards....................... $ 68,689,000 $ 86,128,000
Research and development credit........................ 5,062,000 7,556,000
Intangible assets...................................... 998,000 886,000
Other.................................................. 491,000 1,543,000
------------ ------------
75,240,000 96,113,000
Valuation allowance...................................... (75,240,000) (96,113,000)
------------ ------------
Net deferred tax assets.................................. $ -- $ --
============ ============

The Company has increased its valuation allowance by $20,873,000 in 2002 to
provide a full valuation allowance for deferred tax assets since the realization
of these future benefits is not considered more likely than not. The amount of
the deferred tax asset considered realizable is subject to change based on
estimates of future taxable income during the carryforward period. If the
Company achieves profitability, these deferred tax assets would be available to
offset future income taxes. The future utilization of net operating losses and
credits may be subject to limitation based upon changes in ownership under the
rules of the Internal Revenue Code. The Company has not yet determined the
effect of these rules on the utilization of its net operating loss and credit
carryforwards. The Company assesses the need for the valuation allowance at each
balance sheet date based on all available evidence.

At December 31, 2002, the Company had federal net operating loss
carryforwards available to reduce taxable income, and federal research and
development tax credit carryforwards available to reduce future tax liabilities,
which expire approximately as follows:

FEDERAL RESEARCH
FEDERAL NET AND DEVELOPMENT
OPERATING LOSS TAX CREDIT
YEAR OF EXPIRATION CARRYFORWARDS CARRYFORWARDS
--------------------------------------------------- -------------- ----------------

2011............................................... $ 929,000 $ 22,000
2012............................................... 15,260,000 527,000
2018............................................... 27,876,000 425,000
2019............................................... 33,800,000 1,000,000
2020............................................... 45,335,000 1,176,000
2021............................................... 49,700,000 1,000,000
2022............................................... 45,500,000 2,787,000
------------ ----------
$218,400,000 $6,937,000
============ ==========

For state tax purposes, net operating loss carryforwards of approximately
$196,000,000 expire in the years 2003 through 2010. State research and
development tax credit carryforwards are approximately $620,000.

F-20

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

10. LICENSE AGREEMENTS

ANGIOMAX(R)

In March 1997, the Company entered into an agreement with Biogen, Inc. for
the license of the anticoagulant pharmaceutical bivalirudin, which the Company
has developed as Angiomax. Under the terms of the agreement, the Company
acquired exclusive worldwide rights to the technology, patents, trademarks,
inventories and know-how related to Angiomax. In exchange for the license, the
Company paid $2.0 million on the closing date and is obligated to pay up to an
additional $8.0 million upon reaching certain Angiomax sales milestones, which
are the first commercial sales of Angiomax for the treatment of acute myocardial
infarction in the United States and Europe. In addition, the Company will pay
royalties on future sales of Angiomax and on any sublicense royalties on a
country-by-country basis earned until the later of (1) 12 years after the date
of the first commercial sale of the product in a country or (2) the date on
which the product or its manufacture, use or sale is no longer covered by a
valid claim of the licensed patent rights in such country. Under the terms of
the agreement, the royalty rate due to Biogen on sales increases with growth in
annual sales of Angiomax. The agreement also stipulates that the Company use
commercially reasonable efforts to meet certain milestones related to the
development and commercialization of Angiomax, including expending at least $20
million for certain development and commercialization activities, which the
Company met in 1998. The license and rights under the agreement remain in force
until the Company's obligation to pay royalties ceases. Either party may
terminate the agreement for material breach by the other party, if the material
breach is not cured within 90 days after written notice. In addition, the
Company may terminate the agreement for any reason upon 90 days prior written
notice. The Company recognized royalty expense under the agreement of $1.1
million in 2001, and $2.8 million in 2002 for Angiomax sales.

CLEVIDIPINE

In March 2002, the Company entered into a study and exclusive option
agreement with AstraZeneca PLC relating to the further study, licensing,
development and commercialization of the intravenous blood pressure control
pharmaceutical, clevidipine. Under the terms of the agreement, the Company
agreed to conduct a pilot study of clevidipine, which has begun. The agreement
provides that upon the conclusion of the pilot study within 15 months of the
date AstraZeneca provided samples of clevidipine to the Company, the Company may
acquire, and if the results of the pilot study meet or exceed a benchmark set
forth in the agreement AstraZeneca may require the Company to acquire, exclusive
worldwide rights (except for Japan) to the know-how, patents and trademarks
relating to clevidipine. If we do not complete the pilot study by the end of
such 15-month period, AstraZeneca may have the right to terminate the agreement.
If the Company licenses the product, it plans to develop clevidipine as a short
acting blood pressure control agent for use in hospital setting. In exchange for
the license, the Company will pay $1.0 million upon entering into the license
and up to an additional $5.0 million upon reaching certain regulatory
milestones. In addition, the Company will be obligated to pay royalties on a
country-by-country basis on future annual sales of clevidipine, and on any
sublicense royalties earned, until the later of (1) the duration of the licensed
patent rights which are necessary to manufacture, use or sell clevidipine in a
country or (2) ten years from our first commercial sale of clevidipine in such
country. The licenses and rights under the agreement remain in force until the
Company ceases selling clevidipine in any country or the agreement is otherwise
terminated. The Company may terminate the agreement upon 30 days written notice,
unless AstraZeneca, within 20 days of having received the Company's notice,
requests that the Company enter into good faith discussions to redress its
concerns. If the Company cannot reach a mutually agreeable solution with
AstraZeneca within three months of the commencement of such discussions, the
Company may then terminate the agreement upon 90 days written notice. Either
party may terminate the agreement for material breach upon 60 days prior

F-21

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

written notice, if the breach is not cured within such 60 days. The Company has
had made no payments to date under this agreement.

11. STRATEGIC ALLIANCES AND RELATED PARTIES

UCB

In December 1999, the Company entered into a commercial supply agreement
with UCB Bioproducts S.A. ("UCB") for the development and supply the Angiomax
bulk drug substance. Under the terms of the commercial supply agreement, UCB
completed development of a modified production process known as the "Chemilog"
process and filed an amendment in 2001 to its drug master file for regulatory
approval of the Chemilog process by the FDA. In addition, UCB manufactured two
validation batches of Angiomax bulk drug substance using the Chemilog process in
2001, with a third validation batch completed in January 2002. In addition, the
Company has agreed to purchase a substantial portion of its Angiomax bulk drug
product from UCB at agreed upon prices for a period of seven years from the date
of the first commercial sale of Angiomax produced using the Chemilog process.
Following the expiration of the agreement, or if the Company terminates the
agreement prior to its expiration, UCB will transfer the development technology
to the Company. If the Company engages a third party to manufacture Angiomax
using this technology, the Company will be obligated to pay UCB a royalty based
on the amount paid by the Company to the third-party manufacturer.

During 2000, 2001 and 2002 the Company recorded $14.6 million, $19.4
million and $9.7 million, respectively, in costs related to UCB's production of
Angiomax bulk drug substance and Angiomax related development activities, of
which $12.8 million, $4.8 million and $6.8 million were expensed as research and
development in 2000, 2001 and 2002, respectively, as FDA approval of Angiomax or
the related manufacturing processes had not been received. In addition, $1.5
million was also expensed in 2001 related to cancellation of a contract
commitment with UCB. The Company has committed to purchase $9.7 million of
additional Angiomax bulk drug substance produced by the Chemilog process in
2003.

PHARMABIO

In August 1996, the Company entered into a strategic alliance with one of
its stockholders, PharmaBio Development Inc. ("PharmaBio"), a wholly owned
subsidiary of Quintiles Transnational Corporation ("Quintiles"). Under the terms
of the strategic alliance agreement, PharmaBio and any of its affiliates who
work on the Company's projects will, at no cost to the Company, review and
evaluate, jointly with the Company, development programs designed by the Company
related to potential or actual product acquisitions. The purpose of this
collaboration is to optimize the duration, cost, specifications and quality
aspects of such programs. PharmaBio and its affiliates have also agreed to
perform other services with respect to the Company's products, including
clinical and non-clinical development services, project management, project
implementation, pharmacoeconomic services, regulatory affairs and post marketing
surveillance services and statistical programming, data processing and data
management services pursuant to work orders agreed to by the Company and
PharmaBio from time to time. Through December 31, 2002, the Company has entered
into approximately 46 work orders with PharmaBio and has paid PharmaBio a total
of $14.4 million. During 2000, 2001, and 2002, expenses incurred for such
services were approximately $2.3 million, $2.3 million, and $1.1 million
respectively, of which approximately $13,000 was recorded in accounts payable
and accrued expenses at December 31, 2002.

INNOVEX

In January 1997, the Company entered into a consulting agreement with
Innovex, Inc. ("Innovex"), a subsidiary of Quintiles, which was subsequently
superceded by a consulting agreement executed with Innovex in December 1998.
Pursuant to the terms of the agreement, Innovex provided the Company with

F-22

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

consulting services with respect to pharmaceutical marketing and sales. Since
December 1997, the Company has also entered into various clinical services
agreements with Innovex pursuant to which Innovex has provided project
management, clinical monitoring, site management, medical monitoring, regulatory
affairs, data management and quality assurance services with respect to clinical
trials of Angiomax. None of the clinical services agreements is currently
outstanding. Through December 31, 2001, the Company has paid Innovex $1.8
million under these agreements. The Company did not make any payments to Innovex
in 2002 under these agreements.

In December 2000, the Company signed a master services agreement and a work
order with Innovex under which Innovex agreed to provide contract sales,
marketing and commercialization services relating to Angiomax. Under the master
services agreement and the Angiomax work order, Innovex was to provide a sales
force of up to 52 representatives, a sales territory management system and
operational support for the launch of Angiomax. The Company provided the
marketing plan and marketing materials for the sales force and other sales and
marketing support and direction for the sales force. For Innovex services, the
Company agreed to pay a daily fee for each day worked by the members of the
Innovex sales force. The Company was also responsible for reimbursing Innovex
for expenses incurred in providing its services and for the incentive
compensation paid to the sales force. The Company had the right to terminate the
work order and the master services agreement at any time upon 90 days prior
written notice and could hire members of the sales force, potentially incurring
additional fees to Innovex. In June 2001, the Company notified Innovex of its
decision to terminate the agreement with Innovex, and in October, the Company
hired most of the Innovex sales representatives. Through December 31, 2002, the
Company has paid Innovex $7.0 million under the master services agreement and
work order.

During 2000, 2001 and 2002, total expenses incurred for services provided
by Innovex were approximately $1.7 million, $5.6 million and $0.0, respectively,
of which approximately $440,000, $275,000 and $0.0 were recorded in accounts
payable and accrued expenses at December 31, 2000, 2001 and 2002, respectively.

STACK PHARMACEUTICALS

In 2000, the Company entered into an agreement, with Stack Pharmaceuticals
Inc. (SPI), an entity controlled by David M. Stack, then one of the Company's
senior vice presidents. Pursuant to the terms of this agreement, SPI performed
infrastructure services for the Company, which included providing office
facilities, equipment and supplies, and such consulting, advisory and related
services for the Company as was agreed upon from time to time. For the
infrastructure services, the Company agreed to pay SPI a service fee of $20,100
per month. From January 2000 through March 2000, SPI provided the Company with
consulting services under a consulting agreement that expired on March 31, 2000.
In November 2001, the Company terminated its agreement with SPI when David M.
Stack became President and Chief Executive Officer of the Company. As part of
the termination agreement, the Company assumed SPI's facility lease in
Parsippany, New Jersey and acquired all its furniture and equipment for
approximately $70,000. Through December 31, 2001, the Company had paid SPI
$711,000 under these agreements. The Company did not make any payments to SPI in
2002.

F-23

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. COMMITMENTS AND CONTINGENCIES

The Company leases its facilities in Parsippany, New Jersey and Cambridge,
Massachusetts, and certain office furniture and equipment at those facilities
under operating leases. The leases for the Parsippany and Cambridge facilities
expire in January 2013 and August 2003, respectively.

Future annual minimum payments under all non-cancelable leases
--------------------------------------------------------------

2003......................................................... $ 808,000
2004......................................................... 526,000
2005......................................................... 492,000
2006......................................................... 495,000
2007......................................................... 503,000
Later years.................................................. 2,689,000
----------
TOTAL FUTURE ANNUAL MINIMUM PAYMENTS......................... $5,513,000
==========

Rent expense was approximately $504,000 $634,000 and $685,000 in 2000, 2001
and 2002, respectively.

In addition to amounts accrued or payable as of December 31, 2002, the
Company has commitments to make payments to UCB Bioproducts of a total of $9.7
million during 2003 for Angiomax bulk drug substance to be produced using the
Chemilog process. The Company also has $1.9 million in contractual commitments
for 2003 related to research and development activities.

The Company is involved in ordinary and routine matters and litigation
incidental to its business. There are no such matters pending that the Company
expects to be material in relation to its financial condition or results of
operations.

13. EMPLOYEE BENEFIT PLAN

The Company has an employee savings and retirement plan which is qualified
under Section 401(k) of the Internal Revenue Code. The Company's employees may
elect to reduce their current compensation up to the statutorily prescribed
limit and have the amount of such reduction contributed to the 401(k) plan. The
Company may make matching or additional contributions to the 401(k) plan in
amounts to be determined annually by the Board of Directors. The Company has not
made any matching or additional contributions to date.

F-24

THE MEDICINES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents selected quarterly financial data for the
years ended December 31, 2001 and 2002.

THREE MONTHS ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
2001 2001 2001 2001 2002 2002 2002 2002
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Net revenue................ $ 1,861 $ 2,048 $ 3,526 $ 6,813 $ 7,715 $ 7,156 $ 9,133 $14,297
Cost of sales.............. 332 319 565 894 1,085 1,647 2,227 5,324
Total operating expenses... 21,987 18,196 15,623 15,639 19,726 20,439 20,561 24,317
Net loss................... (19,056) (16,003) (11,309) (8,516) (11,641) (13,141) (11,212) (9,837)
Net loss attributable to
common stockholders...... (19,056) (16,003) (11,309) (8,516) (11,641) (13,141) (11,212) (9,837)
Basic and diluted net loss
attributable to common
stockholders per common
share.................... $ (0.63) $ (0.49) $ (0.33) $ (0.25) $ (0.34) $ (0.37) $ (0.29) $ (0.25)
Pro forma basic and diluted
net loss attributable to
common stockholders per
common share............. (0.63) (0.49) (0.33) (0.25) (0.34) (0.37) (0.29) (0.25)
Market Price
High..................... $ 20.48 $ 22.05 $ 22.20 $ 12.15 $ 14.81 $ 14.33 $ 12.50 $ 17.50
Low...................... $ 8.75 $ 9.10 $ 4.52 $ 4.81 $ 9.86 $ 7.40 $ 7.22 $ 9.45

F-25

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
Common Stock being registered. All amounts are estimated except the SEC
registration fee and the NASD filing fees.

AMOUNT
TO BE PAID
----------

SEC registration fee........................................ $ 7,060
Printing and mailing........................................ *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
NASD filing fee............................................. 9,227
Miscellaneous............................................... *
--------
Total.................................................. $350,000
========

---------------

* To be filed by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article SEVENTH of our Third Amended and Restated Certificate of
Incorporation, as amended to date (the "Charter") eliminates the personal
liability of directors to the fullest extent permitted by Section 102(b)(7) of
the Delaware General Corporation Law and provides that no director of our
company shall be personally liable for any monetary damages for any breach of
fiduciary duty as a director, except to the extent that the Delaware General
Corporation Law statute prohibits the elimination or limitation of liability of
directors for breach of fiduciary duty.

Article EIGHTH of our Charter provides that each of our directors and
officers (a) shall be indemnified by us against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement incurred in
connection with any litigation or other legal proceeding (other than an action
by or in the right of us) threatened or brought against him by virtue of the
fact that he is, or has agreed to serve as, a director or officer of our company
or is serving in the position of director, officer, partner, employee or trustee
of another corporation, partnership, joint venture trust or other enterprise on
our behalf, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, our best interests, and, with respect to any criminal
action or proceeding, he had no reasonable cause to believe his conduct was
unlawful and (b) shall be indemnified by us against all expenses (including
attorneys' fees) and amounts paid in settlement incurred in connection with any
action by or in the right of us brought against him by virtue of the fact that
he is, or has agreed to serve as, a director or officer of our company or is
serving in the position of director, officer, partner, employee or trustee of
another corporation, partnership, joint venture trust or other enterprise on our
behalf, if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, our best interests, except that no indemnification shall
be made with respect to any matter as to which such person shall have been
adjudged to be liable to us, unless a court determines that, despite such
adjudication but in view of all of the circumstances, he is entitled to
indemnification of such expenses. Notwithstanding the foregoing, to the extent
that a director or officer has been successful, on the merits or otherwise,
including, without limitation, the dismissal of an action without prejudice, he
is required to be indemnified by us against all expenses (including attorneys'
fees) incurred in connection therewith. Expenses shall be advanced to a director
or officer at his request, provided that he undertakes to repay the amount
advanced if it is ultimately determined that he is not entitled to
indemnification for such expenses.

II-1

Indemnification is required to be made unless we determine that the
applicable standard of conduct required for indemnification has not been met. In
the event of a determination by us that the director or officer did not meet the
applicable standard of conduct required for indemnification or if we fail to
make an indemnification payment within 60 days after such payment is claimed by
such person, such person is permitted to petition the court to make an
independent determination as to whether such person is entitled to
indemnification. As a condition precedent to the right of indemnification, the
director or officer must give us notice of the action for which indemnity is
sought and we have the right to participate in such action or assume the defense
thereof.

Article EIGHTH of our Charter further provides that the indemnification
provided therein is not exclusive, and provides that in the event that the
Delaware General Corporation Law statute is amended to expand the
indemnification permitted to our directors or officers we must indemnify those
persons to the full extent permitted by such law as so amended.

Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee, or agent
of the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
has no reasonable cause to believe his conduct was unlawful, except that, in the
case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.

We maintain a general liability insurance policy which covers certain
liabilities of directors and officers of our corporation arising out of claims
based on acts or omissions in their capacities as directors or officers.

In the underwriting agreement we will enter into in connection with the
sale of common stock being registered hereby, the underwriters will agree to
indemnify, under certain conditions, us, our directors, our officers and persons
who control us within the meaning of the Securities Act of 1933, as amended (the
"Act"), against certain liabilities.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the Charter. The Registrant is not aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification.

ITEM 16. EXHIBITS.

See the Exhibit Index on the page immediately preceding the exhibits for a
list of exhibits filed as part of this registration statement on Form S-3, which
Exhibit Index is incorporated herein by reference.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

Insofar as indemnification to liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation of the Registrant, the Underwriting Agreement, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is

II-2

against public policy as expressed in the Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered hereunder, the
Registrant will, unless in the opinion of counsel the matter has been settled by
the controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

II-3

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Parsippany, state of New Jersey, on March 5, 2003.

THE MEDICINES COMPANY

By: /s/ CLIVE A. MEANWELL
------------------------------------
Clive A. Meanwell
Executive Chairman

SIGNATURES AND POWER OF ATTORNEY

We, the undersigned directors and/or officers of The Medicines Company (the
"Company"), hereby severally constitute and appoint Clive A. Meanwell, David M.
Stack and Steven H. Koehler, and each of them singly, our true and lawful
attorneys, with full power to any of them, and to each of them singly, to sign
for us and in our names in the capacities indicated below the registration
statement on Form S-3 filed herewith, and any and all pre-effective and
post-effective amendments to said registration statement, and any registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, in connection with the registration under the Securities Act of 1933,
as amended, of equity securities of the Company, and to file or cause to be
filed the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as each of them might or could do in
person, and hereby ratifying and confirming all that said attorneys, and each of
them, or their substitute or substitutes, shall do or cause to be done by virtue
of this Power of Attorney.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated on February 28, 2003:

SIGNATURE TITLE(S)
--------- --------

/s/ CLIVE A. MEANWELL Executive Chairman and Chairman of the Board
-------------------------------------------- of Directors (Principal Executive Officer)
Clive A. Meanwell

/s/ DAVID M. STACK Chief Executive Officer, President and
-------------------------------------------- Director (Principal Executive Officer)
David M. Stack

/s/ STEVEN H. KOEHLER Chief Financial Officer (Principal Financial
-------------------------------------------- and Accounting Officer)
Steven H. Koehler

/s/ LEONARD BELL Director
--------------------------------------------
Leonard Bell

/s/ STEWART J. HEN Director
--------------------------------------------
Stewart J. Hen

II-4

SIGNATURE TITLE(S)
--------- --------

/s/ M. FAZLE HUSAIN Director
--------------------------------------------
M. Fazle Husain

/s/ T. SCOTT JOHNSON Director
--------------------------------------------
T. Scott Johnson

/s/ ARMIN M. KESSLER Director
--------------------------------------------
Armin M. Kessler

/s/ NICHOLAS J. LOWCOCK Director
--------------------------------------------
Nicholas J. Lowcock

/s/ JAMES E. THOMAS Director
--------------------------------------------
James E. Thomas

II-5

EXHIBIT INDEX

NUMBER DESCRIPTION
------ -----------

1.1** Form of Underwriting Agreement
3.1* Third Amended and Restated Certificate of Incorporation of
the registrant
3.2* Amended and Restated By-laws of the registrant
5.1** Opinion of Hale and Dorr LLP
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2** Consent of Hale and Dorr LLP (included in Exhibit 5.1)
24.1 Powers of Attorney (see page II-4 of this Registration
Statement)

------------
* Incorporated by reference from the exhibits to the registration statement on
Form S-1 (registration no. 333-37404).

** To be filed by amendment.

[THE MEDICINES COMPANY LOGO]