ITEM 1. BUSINESS
Summary
Transkaryotic Therapies Inc.
(“TKT” or the “Company”) is a biopharmaceutical company developing
protein- and cell-based therapeutics for the treatment of a wide range of human
diseases. During 2001, the Company
received its first product marketing approvals. TKT is building a broad and renewable product pipeline based on
three proprietary development platforms: Niche Protein® products,
Gene-Activated® proteins and Transkaryotic Therapy™ gene therapy.
Replagal™ (agalsidase alfa), the Company’s enzyme
replacement therapy for the long-term treatment of patients with Fabry disease,
was granted marketing authorization in the European Union in August 2001. TKT has
also received approval to market Replagal in The Czech Republic, Iceland,
Israel, New Zealand, Norway, and Switzerland. In September 2001, TKT launched Replagal in Europe, and the
Company recorded $3.5 million in product sales in 2001.
TKT has additional products
currently undergoing human clinical testing, including:
Niche Protein Products:
• Iduronate-2-sulfatase (“I2S”), an enzyme
replacement therapy for the long-term treatment of patients with Hunter
syndrome, is currently in a Phase I/II clinical trial.
Gene-Activated Protein Products:
• Dynepo™, a Gene-Activated erythropoietin for the
treatment of anemia related to chronic renal failure, has completed Phase III studies. In March 2002, the European Commission (the
“EC”) granted marketing approval of Dynepo in the European Union. TKT and its partner, Aventis Pharma
(“Aventis”), also are currently seeking marketing approval of Dynepo in the
United States. The launch of Dynepo has
not been planned due to ongoing litigation.
In addition, a Phase III clinical trial assessing Dynepo as a treatment
for anemia associated with cancer chemotherapy is ongoing.
Gene Therapy:
• Factor VIII Transkaryotic Therapy, a gene therapy
product to treat patients with hemophilia A, has completed a Phase I clinical
trial.
Technology Platforms
Niche
Protein Products
Certain genetic diseases are known to be caused by the
deficiency of a single, well-characterized protein. The patient’s inability to
produce sufficient amounts of the specified protein results in symptoms that can
be debilitating and, ultimately, life threatening. These diseases include lysosomal storage disorders such as Fabry
disease, Hunter syndrome, Gaucher disease, Hurler syndrome, Pompe disease, and
Tay-Sachs disease. Lysosomal storage
disorders result from an inherited inability to produce an enzyme responsible
for the breakdown of biomolecules such as fats and sugars. The build-up becomes toxic, resulting in
lysosomes that crowd out other parts of the cell, ultimately killing the cell
from within.
The most direct approach to treat these diseases is to
manufacture the missing or deficient protein and deliver it to the patient. No
effective treatment currently exists for most of these rare diseases. TKT’s Niche Protein product platform is
focused on developing enzyme replacement products to treat patients suffering
from certain of these diseases.
The Company’s product development strategy for its
Niche Protein product platform is to leverage the Company’s core competencies
in gene expression, cell culture, and protein design to create protein
replacement products to treat rare genetic diseases which are characterized by
the absence of certain metabolic enzymes.
Since the defects in many of the diseases which the Company intends to
address with its Niche Protein product platform are understood in depth,
product development pathways have the potential to be straightforward. In
addition to Replagal, the Company is developing several additional Niche Protein
products, including treatments for Hunter syndrome and Gaucher disease, with
the goal of reducing symptoms and potentially reversing progression of the
disease. TKT views its Niche Protein
product platform as an opportunity to develop and commercialize products on a
relatively cost-effective, lower risk basis.
Replagal for Fabry
Disease
TKT’s lead Niche Protein product is Replagal, an enzyme replacement therapy for the
long-term treatment of patients with Fabry disease. Fabry disease is an inherited lysosomal
storage disorder caused by the deficiency of the enzyme alpha-galactosidase A.
Patients with Fabry disease show diverse clinical manifestations beginning in
childhood. These manifestations include
severe pain and renal and cardiovascular complications. Affected individuals
have a mean age of death of appoximately 41 years. The Company believes that
there are approximately 5,000 patients worldwide.
Replagal was granted marketing
authorization in the fifteen countries of the European Union by the European
Commission in August 2001. TKT has also
received approval to market Replagal in The Czech Republic, Iceland, Israel,
New Zealand, Norway, and Switzerland.
As of March 31, 2001, the Company had established pricing and
reimbursement in substantially all countries in Europe in which Replagal has
been approved. The average price
established is approximately $165,000 per patient per year.
In September 2001, TKT launched
Replagal in Europe. The Company
recorded $3.5 million in Replagal sales in 2001.
TKT is conducting a number of
additional clinical trials of Replagal in a variety of patient populations,
including females and kidney transplant recipients. These studies are designed to provide further insight into
Replagal as a treatment for Fabry disease, to provide physicians with
experience with Replagal, and to provide patients with greater access to
treatment.
A competitive product for the
treatment of patients with Fabry disease, marketed by Genzyme Corporation
(“Genzyme”), was also granted marketing authorization in the European Union in
August 2001. Both Replagal and
Genzyme’s competing product were granted co-exclusive orphan drug status in the
European Union for up to 10 years.
During 2000, TKT submitted a
Biologics License Application (“BLA”) to the United States Food and Drug
Administration (“FDA”) seeking marketing authorization for Replagal in the
United States. In January 2001,
the FDA issued a complete review letter regarding the BLA for Replagal. The FDA
letter stated that the data that TKT had provided was not adequate for approval
of the BLA at that time and requested additional information. In response to this letter, TKT has
discussed the BLA with the FDA and has submitted additional data. TKT expects that after the FDA has reviewed
the data, it will either approve the BLA or decline to approve it. If it declines to approve the BLA, the FDA
may request additional information, possibly including data from additional
clinical trials.
Genzyme is seeking marketing authorization for its
competing product in the United States.
Both TKT and Genzyme have received orphan drug designation for their
respective products in the United States.
Whichever product is the first to receive FDA marketing approval would
likely receive orphan drug exclusivity for that product. Once a product receives orphan drug
exclusivity, the FDA may not approve any other applications to market the same
class of product for Fabry disease for a period of seven years, except in
limited circumstances.
TKT is involved in patent
litigation relating to Replagal brought by Genzyme and Mount Sinai School of
Medicine of New York University (“Mount Sinai”) in the United States District
Court for the District of Delaware (the “Delaware District Court”) regarding a
patent licensed by Genzyme from Mount Sinai.
In January 2002, the Delaware District Court dismissed this
litigation, granting TKT's motion for summary judgment of non-infringement and
denying Genzyme's motion for summary judgment of infringement. In March 2002, Genzyme appealed the ruling
of the Delaware District Court to the United States Court of Appeals for the
Federal Circuit (the “Federal Circuit”).
Iduronate-2-Sulfatase
for Hunter Syndrome
TKT’s second target in the Niche Protein product
platform is Hunter syndrome. Hunter
syndrome is an inherited lysosomal storage disorder caused by a deficiency of
the enzyme iduronate-2-sulfatase. As a
result of this deficiency, complex carbohydrates accumulate in cells of the
body, causing debilitating symptoms in the patient. Physical manifestations
include skeletal deformities, obstructive airway disease, cardiac failure and,
in the most severe cases, central nervous system involvement. Many affected patients die during
childhood. The Company believes that
I2S enzyme replacement therapy could result in an elimination of many of the
clinical manifestations associated with Hunter syndrome and an increased life
expectancy and quality of life. The
Company believes that there are approximately 5,000 patients worldwide.
In April 2001, TKT initiated
a 12 patient, double-blind, placebo-controlled, dose-escalating Phase I/II
clinical trial to assess the safety, pharmacodynamic and pharmacokinetic
profiles, and clinical activity of I2S.
In this study, patients receive I2S or placebo for six months. All patients have recently completed
treatment for the six month period and are now enrolled in an open label
maintenance study. Data from this study
are expected in the second quarter of 2002.
If the results are positive, TKT plans to initiate a Phase III pivotal
clinical trial following discussions with the FDA.
Other Niche Protein
Products
The Company is also developing products to treat
Gaucher disease, Morquio Syndrome, and a number of other lysosomal storage
disorders.
Gene-Activated
Protein Products
TKT’s gene activation technology is a proprietary
approach to the development and large scale production of therapeutic protein
products. It is based on the activation
of genes encoding therapeutic proteins in human cells, rather than the cloning
and transfer of these genes associated with conventional protein production
techniques. The Company believes this
technology could allow it to develop and commercialize a number of therapeutic
proteins, including potentially improved versions of currently-marketed
proteins and proteins that have no currently marketed counterparts.
Although conventional genetic engineering
techniques for recombinant protein
production are quite powerful, their use today faces certain commercial
barriers and technical limitations. The
primary barrier is that biotechnology companies have sought and obtained patent
protection covering many of the techniques used to produce commercially-marketed
proteins using conventional genetic engineering techniques. These patent rights have served as effective
barriers to entry, minimizing competition in the therapeutic proteins market. In addition, conventional genetic
engineering techniques for protein production may face technical limitations
arising from the need to first clone the gene of interest.
The Company believes that gene activation technology
may be used to express a wide variety of therapeutically valuable proteins at
levels suitable for large-scale manufacturing purposes. Since gene activation technology avoids many
of the technical limitations of conventional recombinant protein production
technology and does not rely on manipulation of cloned genes, the Company
believes that the gene activation technology is at least as efficient as, and
may be more cost-effective than, conventional genetic engineering techniques
for protein production.
Dynepo
for Anemia Related to Chronic Renal Failure
TKT’s lead Gene-Activated protein program is Dynepo, a
fully human erythropoietin, developed in collaboration with Aventis. Erythropoietin, a circulating protein
hormone that stimulates the differentiation of certain progenitor cells in the
bone marrow, is produced in the kidney when the body requires additional red
blood cells.
During 2000, Aventis submitted a
Marketing Authorization Application (“MAA”) to the European Agency for the
Evaluation of Medicinal Products (the “EMEA”) seeking marketing authorization
of Dynepo in the European Union for the treatment of anemia associated with
kidney disease. In March 2002, the
EC granted marketing approval of Dynepo in the European Union.
The launch of Dynepo in Europe
and the United State is the responsibility of Aventis. The launch of Dynepo has not been planned
due to the Company’s litigation with Amgen Inc. (“Amgen”) and
Kirin-Amgen, Inc. (“Kirin-Amgen”)
in the United States and the United Kingdom.
During 2000, Aventis submitted a
BLA to the FDA seeking marketing authorization for Dynepo in the United
States. The FDA did not accept this BLA
for filing, requesting that Aventis provide additional manufacturing data. Aventis is currently accumulating these data
and, when complete, the Company expects that Aventis will submit a new
BLA.
Aventis is conducting a Phase III clinical trial to assess Dynepo as a
treatment for anemia associated with cancer chemotherapy. If the data from this clinical trial are positive,
TKT expects Aventis will seek marketing authorization for Dynepo for this
indication in both Europe and the United States.
In addition, a Phase III clinical
trial assessing Dynepo as a treatment for anemia associated with cancer
chemotherapy is ongoing.
TKT and Aventis are involved in
patent litigation relating to Dynepo with Amgen in the United States and
with Kirin-Amgen in the United Kingdom.
In January 2001, the United States District Court for the District
of Massachusetts (the “Massachusetts District Court”) concluded that Dynepo
infringed 8 of the 18 claims of patents asserted by Amgen. TKT and Aventis have
filed an appeal of the decision with the Federal Circuit. Amgen has also
appealed this decision.
In April 2001, the High
Court of Justice in the United Kingdom ruled that Dynepo infringed one of four
claims of a patent asserted by Kirin-Amgen.
TKT and Aventis have filed an appeal of this decision. Kirin-Amgen has also appealed this decision.
TKT believes that TKT and Aventis
have strong grounds for both of these appeals.
Other Gene-Activated
Proteins
TKT believes that numerous development opportunities
exist for Gene-Activated proteins. In addition to erythropoietin, several other
Gene-Activated proteins are in various stages of development.
Gene
Therapy
Transkaryotic Therapy™, the Company’s approach to gene
therapy, is based on genetically modifying patients’ cells to produce and
deliver therapeutic proteins. The
Company believes it has developed the basic gene therapy technologies required
for treatment which is safe, cost-effective, and clinically superior to the
conventional delivery of proteins by injection.
TKT believes its gene therapy system is broadly
enabling and, accordingly, may be applicable to the treatment of a wide range
of human diseases. The diseases
targeted by TKT are characterized by significant unmet medical need, and the
clinical goals that must be achieved by its gene therapy products are
well-defined. For example, TKT believes
its gene therapy is well-suited to allow safe and long-term delivery of
therapeutic proteins for the treatment of chronic protein deficiency states,
including hemophilia, diabetes, and hypercholesterolemia.
There are a number of technical approaches to gene
therapy, but two basic distinctions can be used to characterize the field. The first distinction is viral versus
non-viral. Viral gene therapy
approaches use genetically modified viruses to introduce genes into human cells
by infection. Non-viral approaches use
noninfectious (chemical or physical) means to introduce the genes. The second distinction is in vivo
versus ex
vivo. In vivo gene therapies are
based on the administration of DNA-based drugs directly to the patient. Ex vivo gene therapies are based
on removing a small number of cells from a patient, introducing a gene into the
cells and implanting the engineered cells into the patient.
TKT’s enabling gene therapy technology platform is a
non-viral, ex
vivo system, which the Company believes is significantly different
from other approaches to gene therapy.
The Company believes that these differences will allow for physiologic
levels of protein expression in patients for extended periods, a goal that
historically has represented a major obstacle in alternative gene therapy
systems.
Transkaryotic Therapy takes advantage of the patient’s
natural ability to synthesize therapeutic proteins for extended periods. The potential benefits of Transkaryotic
Therapy include improved therapeutic outcome, the elimination of frequent
painful injections and patient compliance problems, a reduction of side effects
due to overdosing and underdosing of conventional proteins, and significant
reductions in cost. Accordingly, the
Company believes that its therapy may be less costly than therapy using
conventional protein pharmaceuticals.
The major alternative to TKT’s system is based on the
use of genetically-modified viruses to infect patients’ cells. The Company believes that such viral
approaches present a significant safety risk due to the possibility of causing
new viral infections in patients.
Accordingly, Transkaryotic Therapy does not use infectious agents such
as retroviruses, adenoviruses, or adeno-associated viruses to genetically
engineer the patient’s cells.
Factor
VIII Gene Therapy for Hemophilia A
TKT’s lead gene therapy program is for the treatment
of hemophilia A. Hemophilia A is caused
by a deficiency or defect in protein coagulation Factor VIII. Patients with the disease experience acute,
debilitating, and often life-threatening bleeding episodes. Depending on the severity of the disease,
bleeding may occur spontaneously or after minor trauma. Conventional treatment consists of
temporarily increasing the patient’s Factor VIII levels through infusions of
plasma-derived or recombinantly-produced Factor VIII. It is estimated that there are approximately 50,000 hemophilia A
patients worldwide.
TKT has completed a Phase I clinical trial of its
Factor VIII gene therapy product in twelve patients with severe hemophilia A
and the Company continues to monitor the patients. This is the first-ever clinical trial to evaluate a gene therapy
treatment for hemophilia A. On June 7,
2001, The New England Journal of Medicine published an article entitled Nonviral
Transfer of Gene Encoding Coagulation Factor VIII with Severe Hemophilia A, reporting
that data from this trial suggested that TKT’s product was safe and
well-tolerated. In addition,
investigators reported that four of six patients reported an increase in Factor
VIII activity correlated with a decrease in bleeding and/or a reduction in the
use of Factor VIII replacement therapy.
Furthermore, two patients had no spontaneous bleeds for approximately
one year after treatment.
TKT is currently designing a Phase II clinical trial
for its Factor VIII gene therapy product.
Collaborative Partners
Aventis Pharma
TKT entered into an agreement with Aventis in May
1994, focused on the development of Dynepo.
TKT has the potential to receive up to $48 million, consisting of
license fees, equity investments, milestone payments, and research funding, of
which $30 million had been received at December 31, 2001. The remaining payments are contingent upon
the achievement of certain regulatory and commercial milestones. TKT also is entitled to a low double-digit
royalty on net sales of Dynepo by Aventis.
Due to the uncertainty involving both the regulatory approval of Dynepo
and ongoing litigation, there can be no assurance that the Company will receive
the remaining milestone payments or earn royalties on product sales.
Under the license agreement, Aventis was granted
exclusive rights to make, use, and sell Dynepo. Aventis is responsible, at its own expense, for development,
manufacturing, and marketing activities for the product. The license agreement expires, on a country
by country basis, on the later of (i) 10 years after the first commercial sale
of the covered product in such country or (ii) the last to expire of the
patents licensed under such agreement with respect to such country, subject to
earlier termination by either party under specified circumstances, including a
material breach of the agreement by either party.
In addition, Aventis has assumed the cost of defense
of the patent litigation with Amgen and Kirin-Amgen. The Company is required to reimburse Aventis for its share of
litigation expenses, as defined, from future royalties, if any, otherwise
payable by Aventis as to the sale of Dynepo and in certain other circumstances.
At December 31, 2001, Aventis owned 2,187,408 shares
of the Company’s common stock.
Sumitomo
Pharmaceutical Co., Ltd.
In July 1998, the Company entered into an agreement
with Sumitomo Pharmaceutical Co., Ltd. (“Sumitomo”) to commercialize Replagal
in Japan and certain other Asian countries.
As of December 31, 2001, TKT has received $3 million from Sumitomo for
milestones related to this agreement.
Sumitomo will make additional payments to TKT, subject to the
achievement of milestones. Sumitomo is
responsible for development and commercialization of Replagal in its
territories. The distribution agreement
expires on a country-by-country basis under specified circumstances, including
a material breach of the agreement by the other party.
Genetics Institute, Inc.
In July 1993, TKT entered into an agreement with
Genetics Institute, Inc. (“GI”) relating to a joint development and marketing
program of TKT’s hemophilia A gene therapy product which utilizes GI’s
intellectual property related to the DNA sequence encoding Factor VIII .
Under the agreement, GI has granted TKT a
non-exclusive worldwide license under GI’s patents for use in certain non-viral
gene therapy applications. GI has
agreed to pay a portion of the clinical development costs of the product in the
United States, Canada, and the European Community. TKT retained exclusive manufacturing rights throughout the world
and exclusive marketing rights to all countries of the world, except those in
Europe. Subject to certain conditions,
GI received exclusive rights to market the product in Europe. The GI agreement terminates upon the
expiration date of the last to expire license granted pursuant to the
agreement.
Research and Development
For the years ended December 31, 2001, 2000 and 1999,
the Company spent approximately $65.9 million, $56.4 million, and $43.9
million, respectively, on research and development activities.
Sales and Marketing
The Company expects to market and sell many of its
products throughout the world by developing its own commercial
capabilities. In Japan, the Company
intends to seek marketing partners for the sale of its products.
In April 2000, the Company entered into an agreement
with stockholders of TKT Europe - 5S AB (“TKT Europe”) to establish the
Company’s European sales and marketing subsidiary. TKT Europe markets, sells and distributes Replagal throughout
Europe. TKT Europe generally sells
Replagal directly to physicians and hospitals.
As of December 31, 2001, TKT Europe employed approximately 20
people. To the extent other TKT
products receive marketing approval in Europe, the Company anticipates that TKT
Europe will also commercialize such products.
Prior to this agreement, the stockholders of TKT
Europe were neither employees nor affiliated parties of the Company. The stockholders are the principal managers
of TKT Europe and own a 20% interest in it, while the Company owns the
remaining 80% interest. The agreement
includes provisions entitling the Company to purchase the stockholders’
ownership interest in TKT Europe in August 2004, under a specified
formula. Should the Company not
exercise that right, the stockholders of TKT Europe can require the Company to
purchase the stockholders’ ownership interest sixty days thereafter. The buyout price, which is dependent upon
the profitability of TKT Europe, cannot be determined at this time, but is
expected to be significant.
In the United States, the Company is developing a
commercial infrastructure for the marketing and sale of its products. The Company has assembled a group of
executives with broad experience in marketing, sales, distribution, and
reimbursement of specialty biopharmaceutical products. The Company expects that it will expand its
infrastructure in the United States as its pipeline matures and products
receive marketing authorization.
Manufacturing
TKT currently uses, and expects to continue in the
future to use, internal manufacturing and contract manufacturing by third
parties to meet its production requirements for preclinical testing, clinical
trials, and commercial supply.
TKT has entered into contract manufacturing
arrangements with third parties for the production of Replagal for commercial
sale.
Under TKT’s collaboration with Aventis, Aventis is
required to manufacture Dynepo required for clinical trials and commercial
sale. TKT expects that in the future it
may employ third-party contract manufacturers for the production of other
Gene-Activated proteins for clinical development and commercial sale.
In January 2001, the Company purchased a manufacturing
facility for $8.8 million and leased an adjoining facility. The Company expects to make improvements to
these facilities, which could total approximately $20 million in 2002. The Company expects that these facilities
will be used to manufacture one or more of the proteins in its product
pipeline.
Patent Litigation
Replagal
Patent Litigation
TKT is involved in patent
litigation relating to Replagal brought by Genzyme and Mount Sinai in the
Delaware District Court regarding a patent licensed by Genzyme from Mount
Sinai. In January 2002, the
Delaware District Court dismissed this patent litigation, granting TKT's motion
for summary judgement of non-infringement and denying Gezyme's motion for
summary judgement of infringement. In
March 2002, Genzyme appealed the ruling of the Delaware District Court to the
Federal Circuit.
Dynepo
Patent Litigation
TKT and Aventis are involved in
patent litigation relating to Dynepo with Amgen in the United States and
with Kirin - Amgen in the United Kingdom. In January 2001, the Massachusetts District Court concluded
that Dynepo infringed 8 of the 18 claims of patents asserted by Amgen. TKT and
Aventis have filed an appeal of the decision with the Federal Circuit. Amgen has also appealed this decision.
In April 2001, the High
Court of Justice in the United Kingdom ruled that Dynepo infringed one of four
claims of a patent asserted by Kirin - Amgen. TKT and Aventis have filed an appeal of this decision. Kirin -
Amgen has also appealed this decision.
TKT believes that TKT and Aventis have strong grounds for
both of these appeals.
Gene
Therapy Patent Interference
In January 1996, the U.S. Patent and Trademark Office
(“PTO”) declared an interference regarding an issued patent with broad claims
to ex
vivo gene therapy. The
participants in the interference are TKT, Genetic Therapy, Inc., a wholly owned
subsidiary of Novartis AG (“GTI”), Syntex (USA), a wholly-owned subsidiary of
Roche Holdings, Inc. (“Syntex”), and Cell Genesys, Inc. (“Cell Genesys”).
TKT has reached settlements with GTI, Syntex and Cell
Genesys which, taken together, remove TKT from the interference. Under these settlements, GTI, Syntex and
Cell Genesys granted to TKT royalty-free non-exclusive licenses to practice
TKT’s patented methods of non-viral ex vivo gene therapy. The settlement involved no financial
commitments by TKT to the other parties.
It is not clear whether any broad claims to ex vivo gene therapy will
survive the interference, but TKT will have freedom to operate in this area
regardless of how the PTO eventually resolves the interference.
Patents,
Proprietary Rights, Trade Secrets, and Licenses
Patents
and Proprietary Issues
The Company believes that protection of the
proprietary nature of its products and technology is important to its
business. Accordingly, it has adopted
and plans to maintain a vigorous program to secure and maintain such
protection. The Company’s practice is
to file patent applications with respect to technology, inventions, and
improvements that are important to its business. The Company also relies upon trade secrets, unpatented know-how,
continuing technological innovation, and the pursuit of licensing opportunities
to develop and maintain its competitive position.
At December 31, 2001, the Company owned or licensed
more than 35 issued patents and had more than 40 pending patent applications in
the United States to protect its proprietary methods and processes. It also has filed corresponding foreign
patent applications for certain of these United States patent
applications. The issued United States
patents and patent applications include those relating to the Company's Niche
Protein platform, Gene Activation platform, and gene therapy platform. The United States patents owned or licensed
by TKT expire at various dates ranging from 2010 to 2019.
Intellectual
Property Relating to Competing Products
For many currently-marketed proteins, the product
manufactured using conventional genetic engineering techniques does not
represent the first time the protein was isolated and purified. As such, it was generally not possible to
obtain a broad composition of matter patent for many of the currently-marketed
proteins. In contrast, the isolated and purified DNA sequences encoding these
proteins, various vectors used to insert such DNA sequences into production
cell lines, cell lines modified by the insertion of such DNA sequences, and
corresponding methods (including methods of producing proteins using this
approach) led to issued patents in many cases.
TKT continues to believe that by completely avoiding the use of isolated
and purified DNA sequences encoding proteins of commercial interest, the
Company’s technology does not infringe claims based on isolated and purified
DNA sequences encoding such proteins.
Furthermore, the Company intends to avoid the use of technologies (such
as specific protein purification procedures) that are the subject of patents
that are not limited to protein products manufactured using conventional
genetic engineering techniques.
Trade
Secrets
To further protect its trade secrets and other
proprietary property, the Company requires all employees, Scientific Advisory
Board members, consultants, and collaborators having access to such proprietary
property to execute confidentiality and invention rights agreements before
beginning their relationship with the Company.
While such arrangements are intended to enable the Company to better
control the use and disclosure of its proprietary property and provide for the
Company’s ownership of proprietary technology developed on its behalf, they may
not provide meaningful protection for such property and technology in the event
of unauthorized use or disclosure, or in the event that such trade secrets or
other proprietary property are independently developed by a third party.
Licenses
The Company has entered into several royalty-bearing
licensing agreements under which it has acquired certain rights to use
proprietary genes and related technology in its non-viral gene therapy
products. In particular, the Company
has a non-exclusive worldwide license for certain non-viral gene therapy
applications from GI with respect to GI’s intellectual property related to the
DNA sequence encoding Factor VIII and a non-exclusive worldwide sublicense for
non-viral gene therapy applications from British Technology Group plc with
respect to its patented Factor IX gene.
In addition, the Company has an exclusive worldwide license to certain
pending and issued patents from Women’s and Children’s Hospital, North Adelaide,
Australia related to certain MPS diseases, including Hurler and Scheie
syndromes (MPS I), Hunter syndrome (MPS II), and Sanfilippo syndrome (MPS III).
Competition
The biotechnology industry is highly competitive and
characterized by rapid and significant technological change. The Company believes that the primary
competitive factors relating to the products that it is marketing and
developing include their safety and efficacy compared to competitive products,
and distribution channels, price, reimbursement, and health care management
services.
Niche
Protein Products
For many of the disease targets of the Company’s Niche
Protein product platform, there is currently no cure or effective
treatment. Treatments generally are
focused on the management of the disease’s symptoms. In general, the Company believes that these diseases represent
markets too small to attract the resources of larger pharmaceutical companies,
but may provide attractive commercial opportunities to smaller companies.
The Company believes that the
primary competition with respect to its Niche Protein product program is from
biotechnology and smaller pharmaceutical companies. Competitors include BioMarin Pharmaceutical Inc., Genzyme,
Oxford GlycoSciences plc, and Synpac Pharmaceuticals, Ltd. The markets for some of the potential Niche
Protein products are quite small. As a
result, if competitive products exist, the Company may not be able to
successfully commercialize its products.
Some jurisdictions, including Europe and the United
States, may designate drugs for relatively small patient populations as “orphan
drugs”. Generally, if a product which
has an orphan drug designation subsequently receives the first marketing
approval for the indication for which it has such designation, the product is
entitled to orphan drug exclusivity.
Orphan drug exclusivity means that applications to market the same
product for the same use may not be approved, except in very limited
circumstances, for a period of up to 10 years in Europe and for a period of
seven years in the United States.
For example, the Company competes
with Genzyme in regard to the sales and marketing of Replagal. Replagal has been granted marketing
authorization in nineteen countries. A
competitive product, marketed by Genzyme, has also been granted marketing
authorization in most of these countries.
Both Replagal and Genzyme’s product were granted co-exclusive orphan
drug status in the European Union for up to 10 years.
In the United States, both
TKT and Genzyme have received orphan drug designation for their respective
products to treat Fabry disease.
Whichever product is the first to receive FDA marketing approval would
likely receive orphan drug exclusivity for that product. Once a product receives orphan drug
exclusivity, the FDA may not approve any other applications to market the same
class of product for Fabry disease for a period of seven years, except in
limited circumstances.
Gene-Activated
Protein Products
In its Gene-Activated protein platform, TKT is
developing potentially improved versions of proteins that are currently
marketed and proteins that have no currently-marketed counterparts. For instance, in the case of Dynepo,
competing products are marketed by Amgen, Johnson & Johnson, F. Hoffmann-La
Roche Ltd. (Boehringer Mannheim GmbH), Sankyo Company Ltd., Chugai
Pharmaceutical Co., Ltd., and the pharmaceutical division of Kirin Brewery Co.,
Ltd. in Japan.
Many of the protein products against which the
Company’s Gene-Activated proteins would compete have well-known brand names,
have been promoted extensively and have achieved market acceptance by
third-party payors, hospitals, physicians, and patients. In addition, many of
the companies that produce these protein products have patents covering techniques
used to produce these products, which have served as effective barriers to
entry in the therapeutic proteins market. As with Amgen and its erythropoietin
product, these companies may seek to block TKT’s entry into the market by
asserting that the Company’s Gene-Activated proteins infringe their patents.
Many of these companies are also seeking to develop and commercialize new or
potentially improved versions of their proteins.
Gene
Therapy
The Company’s gene therapy system will have to compete
with other gene therapy systems, as well as with conventional methods of
treating the diseases and conditions targeted. Although no gene therapy product
is currently marketed, a number of companies, including major biotechnology and
pharmaceutical companies, as well as development stage companies, are actively
involved in this field.
European Union Government Regulation
In the European Union, TKT’s products are subject to
extensive regulation by the European Union and the individual member states of
the European Union. Preclinical testing
must be carried out in accordance with principles of good laboratory practice,
subject to inspections by national authorities and requirements for
certification of compliance in applications for approval to conduct clinical
trials and in marketing authorization applications. Clinical trials are subject to national regulation. At present, the rules are not harmonized,
but most member states require some form of notification or approval by
government authorities, review and approval by independent ethics committees
and other measures to protect the interests of human subjects. Clinical trials are also expected to be
carried out in compliance with detailed requirements for good clinical
practice. An European Union directive
scheduled to take effect in 2004 will impose harmonized requirements for
regulation of clinical trials, including special provisions for notification or
approval of trials relating to biotechnology products and inspections by
government authorities to insure compliance with good clinical practice.
Medicinal products intended for commercial
distribution in the European Union must be subject to a marketing
authorization. For new biotechnology
products, marketing authorization applications must be submitted to the
European Agency for the EMEA. They are
reviewed by scientific experts in the Committee for Proprietary Medicinal
Products (the “CPMP”), which issues an opinion that is referred to the Commission
of the European Communities for a final decision, taken in conjunction with
representatives of the member states.
Marketing authorization applications for new chemical entities that are
not biotechnology products and certain other high-technology products may be
submitted to the EMEA or to national authorities (most often by means of a
mutual recognition procedure that is intended to insure that marketing
authorizations granted by the member states are harmonized). Marketing authorization applications must be
supported by technical dossiers containing expert reports and detailed
information (including reports of preclinical studies and clinical trials)
demonstrating that the medicinal product will be safe, effective and of
satisfactory quality. In exceptional
circumstances, less-than-complete clinical data may be accepted (e.g., when the
authorities determine that it would be impractical or unethical to carry out
full-scale pivotal clinical trials).
The European Union is in the process of converting to the common
technical document, a standard dossier format that has been agreed between the
United States, Japan and the European Union.
The European Union marketing authorization review
process is time-consuming, often lasting 1-2 years or longer. The review process is suspended whenever the
applicant is requested to provide additional information; the applicant may be
required to withdraw the application and resubmit it at a later date if
additional tests are necessary to provide requested information. European Union and national procedures
ordinarily make provision for hearings and appeals, but in practice
determinations by the authorities on scientific and medical questions relating
to the authorization of medicinal products are often conclusive. Marketing authorizations may be granted
subject to special conditions, including requirements for post-marketing
studies, clinical trials, reports and restrictions on distribution (e.g.,
limitation to use by specialists or in hospital settings). Such requirements are frequently imposed
when a marketing authorization is granted in exceptional circumstances without
all of the clinical data that are normally required.
Establishments located within the European Union in
which medicinal products are manufactured must be authorized by national
authorities and inspected for compliance with good manufacturing practice. European Union authorities may also inspect
establishments in the United States or other non-European Union countries that
manufacture medicinal products for European Union markets. Each batch of a medicinal product that is
imported to the European Union must be tested for compliance with applicable
specifications and certified by a qualified person in the European Union. Although the United States and the European
Union have agreed in principle to mutual recognition of good manufacturing
practices inspections, the details have not been worked out in practice, and it
is uncertain when, or whether, actual mutual recognition will be achieved.
Advertising and promotion of medicinal products are
regulated by national authorities pursuant to broadly harmonized provisions in
European Union directives.
Interpretation and enforcement vary from country to country, but many
European Union member states impose strict requirements concerning inducements
and honoraria paid to physicians and other promotional activities. In many European Union member states,
competitors and other interested private parties may initiate suits to enforce
compliance with medicines advertising rules.
Prescription medicinal products may not be advertised to patients or the
general public in the European Union.
Some member states restrict or prohibit co-promotion of the same
medicinal product by different pharmaceutical companies.
European Union and national rules govern the
distribution of medicinal products by wholesalers and pharmacists. National rules and practices often may make
it necessary to appoint distributors or sell through wholesalers in each member
state.
Marketing authorization holders are required to
maintain systems for collecting and reporting information concerning suspected
adverse reactions (pharmacovigilance).
In response to pharmacovigilance reports, authorities may initiate
proceedings to revise the prescribing information for medicinal products or to
suspend or revoke marketing authorizations.
Procedural safeguards are often limited, and marketing authorizations
can be suspended with little or no advance notice.
Most European Union member states maintain public
health systems in which many medicinal products are paid for at least in part
by government authorities, insurers or other third parties. Nearly every member state has introduced one
or more systems to control the cost of medicines supplied under these
programs. Member states fix the prices
of medicinal products, impose reimbursement limits, establish positive or
negative formularies, encourage prescribing or dispensing of generic
substitutes for innovative products, and regulate the profitability of the
pharmaceutical industry. Wholesalers
(parallel traders) often purchase medicinal products in low-price member states
and sell them in higher-price member states, so that there is general downward
pressure on prices throughout the European Union.
European Union medicines laws establish certain
protections (in addition to patents) that are intended to encourage investment
in research and development of medicinal products. Innovative products are normally entitled to a period of “data
exclusivity,” during which marketing authorizations may not be granted for
generic versions that are not supported by full safety and efficacy data. Data exclusivity periods currently vary from
country to country for products authorized by the member states; for products
authorized by the European Union, there is a uniform ten-year data exclusivity
period. There are, however, many
unresolved questions concerning the scope and application of data exclusivity
periods, and there is normally no additional period of protection for new uses
of old medicinal products.
European Union law also includes special provisions
for “orphan medicines” that are intended to treat rare diseases or
conditions. Criteria for designation
are somewhat different from those in the United States. Orphan medicines are entitled to ten years
of market exclusivity (i.e., protection against approval of any “similar”
product, whether or not supported by full safety and efficacy data). This period may be reduced to six years if
the conditions that originally justified orphan designation change or the
sponsor makes excessive profits. Market
exclusivity may also be defeated if a subsequent product is shown to be clinically
superior, or if the sponsor cannot insure an adequate supply of the product.
Provisions for data and market exclusivity only
protect against the grant of marketing authorizations. Many European Union member states maintain
alternative procedures that permit commercial distribution of medicinal
products without marketing authorizations on a compassionate or “named-patient”
basis. Procedures differ from country
to country, but all member states forbid advertising of such products and some
countries prohibit or discourage named-patient distribution after a suitable
licensed product is on the market.
All member states maintain systems under which persons
claiming injuries due to medicinal products may seek damages. The European Union product liability
directive establishes general principles similar to the doctrine of strict
liability in United States law, under which the producer may be held liable for
damage caused by defective products.
Some member states have adopted a “development risk” defense, under
which liability may be avoided if the producer can demonstrate that the risk
could not have been discovered at the time the product was marketed. Some member states have established special
statutory or voluntary industry schemes to compensate persons injured by
medicinal products. In some member
states, persons who market medicinal products that are deemed to be unsafe may
also be held criminally liable.
United States Government Regulation
The testing, manufacturing, labeling, advertising,
promotion, export, and marketing, among other things, of TKT’s products are
extensively regulated by governmental authorities in the United States and
other countries. In the United States, the FDA regulates pharmaceutical
products under the Federal Food, Drug, and Cosmetic Act, and other laws,
including, in the case of biologics, the Public Health Service Act. TKT
believes that most of its products will be regulated by the FDA as biologics.
TKT cannot market a biologic until it has submitted a BLA to the FDA, and the
FDA has approved it. Both before and after approval is obtained, violations of
regulatory requirements may result in various adverse consequences, including
the FDA’s delay in approving or refusal to approve a product, suspension or withdrawal
of an approved product from the market, operating restrictions, and the
imposition of civil or criminal penalties.
The steps required before a product may be approved
for marketing in the United States generally include (i) preclinical laboratory
tests and animal tests, (ii) the submission to the FDA of an Investigational
New Drug Application (“IND”), for human clinical testing, which must become
effective before human clinical trials may begin, (iii) a series of clinical
trials to establish the safety and efficacy of the product, (iv) the submission
to the FDA of a BLA, (v) satisfactory completion of an FDA inspection of the
manufacturing facility or facilities at which the product is made to assess
compliance with cGMP, and (vi) FDA review and approval of the BLA.
Preclinical tests include laboratory evaluation of the
product, as well as animal studies to assess the potential safety and efficacy
of the product. The results of the preclinical tests, together with chemistry,
manufacturing, and control data, are submitted to the FDA as part of an IND,
which must become effective before human clinical trials may be commenced. The
IND will automatically become effective 30 days after its receipt by the FDA,
unless the FDA before that time raises concerns or questions about the conduct
of the trials as outlined in the IND. In such a case, the IND sponsor and the
FDA must resolve any outstanding concerns before clinical trials can proceed.
TKT cannot be sure that a submitted IND will become effective thereby allowing
initiation of a clinical trial for the product in question.
Clinical trials typically are conducted in three
sequential phases, but the phases may overlap or be combined, and certain
phases may be eliminated. In Phase I, the initial introduction of the drug into
human subjects, the drug is usually tested for safety (adverse effects), dosage
tolerance, and pharmacologic action. Phase II usually involves studies in a
limited patient population to (i) evaluate preliminarily the efficacy of the drug
for specific, targeted conditions, (ii) determine dosage tolerance and
appropriate dosage, and (iii) identify possible adverse effects and safety
risks. Phase III trials generally further evaluate clinical efficacy and test
further for safety within an expanded patient population. The Company or the
FDA may suspend clinical trials at any time on various grounds, including a
finding that the patients are being exposed to an unacceptable health risk.
The results of the preclinical and clinical studies,
together with other detailed information, including information on the
manufacture and composition of the product, are submitted to the FDA in the
form of a BLA requesting approval to market the product. If the BLA contains
all pertinent information and data, the FDA will formally accept the file for
review. The FDA may refuse to file the BLA if it does not contain all pertinent
information and data. In that case, the applicant may resubmit the BLA when it
contains the missing information and data. Before approving a BLA, the FDA will
inspect the facilities at which the product is manufactured, and will not
approve the product unless current Good Manufacturing Practices (“cGMP”)
compliance is satisfactory. The FDA may refuse to approve a BLA if applicable
regulatory criteria are not satisfied, require additional testing or
information, or require post-marketing testing and surveillance to monitor the
safety or efficacy of a product. The testing and approval process require
substantial time, effort, and financial resources, and TKT cannot be certain
that any of its products will be approved on a timely basis, if at all. Also,
new federal, state, or local government requirements may be established that
could delay or prevent regulatory approval of its products under development.
Once the FDA approves a product, TKT and any
third-party manufacturers are required to comply with a number of post-approval
requirements. For example, TKT will be required to report certain adverse
events to the FDA, and to comply with certain requirements concerning
advertising and promotional labeling of the products. Also, quality control and
manufacturing procedures must continue to conform to cGMP regulations after
approval, and the FDA periodically inspects manufacturing facilities to assess
compliance with cGMP. Accordingly, manufacturers must continue to expend time,
monies, and effort in the area of production and quality control to maintain
cGMP compliance. In addition, discovery of problems may result in restrictions
on a product, manufacturer, or BLA holder, including withdrawal of the product
from the market.
The FDA may grant orphan drug designation to drugs
intended to treat a “rare disease or condition” that affects fewer than 200,000
individuals in the United States. Orphan drug designation must be requested
before submitting a BLA. Orphan drug designation does not convey any advantage
in, or shorten the duration of, the regulatory review and approval process. If
a product which has an orphan drug designation subsequently receives the first
FDA approval for the indication for which it has such designation, the product
is entitled to orphan exclusivity, which means the FDA may not approve any
other application to market the same drug for the same use for a period of
seven years, except in limited circumstances, such as a showing of clinical
superiority to the product with orphan exclusivity. Also, competitors may
receive approval of other different drugs or biologics for the indications for
which the orphan product has exclusivity.
In addition to regulations in Europe and the United
States, TKT will be subject to a variety of foreign regulations governing
clinical trials and sales of TKT’s products, including Replagal. Whether or not
FDA approval has been obtained, approval of a product by the comparable
regulatory authorities of foreign countries must be obtained prior to the
commencement of marketing of the product in those countries. The approval
process varies from country to country and the time may be longer or shorter
than that required for FDA approval. For marketing outside the United States,
the Company also is subject to foreign regulatory requirements governing human
clinical trials and marketing approval for products. The requirements governing
the conduct of clinical trials, product licensing, pricing, and reimbursement
vary greatly from country to country.
In addition to regulations enforced by the FDA, TKT is
also subject to regulation under the Occupational Safety and Health Act, the
Toxic Substances Control Act, the Resource Conservation and Recovery Act, and
other present and potential future federal, state, or local regulations. TKT’s
research and development activities involve the controlled use of hazardous
materials, chemicals, biological materials, and various radioactive compounds.
Although TKT believes that its safety procedures for handling and disposing of
such materials comply with the standards prescribed by state and federal
regulations, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of such an accident,
TKT could be held liable for any damages that result and any such liability
could exceed TKT’s resources.
Employees
At December 31, 2001, the Company had 376 full-time
employees.
Trademarks
Gene-Activated®, Niche Protein®, and TKT® are
registered trademarks and Replagal™ and Transkaryotic Therapy™ are trademarks
of the Company. Dynepo™ is a trademark
of Aventis.
ITEM 2.
ITEM 2. PROPERTIES
At December 31, 2001, the Company owned and leased a
total of approximately 400,000
square feet of laboratory, office and manufacturing space in
Massachusetts. The Company believes
that its current facilities will be adequate to accommodate its needs for the
foreseeable future.
ITEM 3.
ITEM 3. LEGAL
PROCEEDINGS
The Company can provide no assurance as to the outcome
of any legal proceedings. A decision by a court in a manner adverse to the
Company could have a material adverse effect on the Company’s business,
financial condition, and results of operations.
Replagal
Patent Litigation
In July 2000, Genzyme and
Mount Sinai filed a patent infringement action against the Company in the
Delaware District Court.
In January 2002, the
Delaware District Court dismissed this patent litigation, granting TKT's motion
for summary judgment of non-infringement and denying Genzyme's motion for
summary judgment of infringement.
Genzyme sought monetary damages and injunctive relief. In March 2002, Genzyme appealed the ruling
of the Delaware District Court to the Federal Circuit.
Dynepo
Patent Litigation
In April 1997, Amgen commenced a patent infringement
action against the Company and Aventis in the Massachusetts District Court.
In January 2001, the
Massachusetts District Court concluded that Dynepo infringed 8 of the 18 claims
of patents asserted by Amgen. Amgen did not seek and was not awarded
monetary damages. TKT and Aventis have filed an appeal of the
decision with the Federal Circuit. Amgen has also appealed this decision.
In addition, in July 1999, Aventis and the Company
commenced legal proceedings in the U.K. against Kirin-Amgen, seeking a
declaration that a U.K. patent held by Kirin-Amgen will not be infringed by the
Company’s activities related to Dynepo and that certain claims of Kirin-Amgen’s
U.K. patent are invalid.
In April 2001, the High
Court of Justice in the United Kingdom ruled that Dynepo infringed one of four
claims of a patent asserted by Kirin-Amgen. TKT and Aventis have filed an
appeal of this decision. Kirin-Amgen has also appealed this decision.
TKT believes that TKT and Aventis
have strong grounds for both of these appeals.
Pursuant to an Amended and Restated License Agreement,
dated March 1995, by and between Aventis and the Company, Aventis has assumed
the legal costs of the Amgen and Kirin-Amgen litigation.
The Company will reimburse Aventis for the Company’s share of the
litigation expenses, as defined, from future royalties, if any, received from
the sale of Dynepo and in certain other circumstances.
Gene
Therapy Patent Interference
In January 1996, the PTO declared an interference
regarding an issued patent with broad claims to ex vivo gene therapy. The
participants in the interference are TKT, GTI, Syntex, and Cell Genesys.
TKT has reached settlements with GTI, Syntex and Cell
Genesys which, taken together, remove TKT from the interference. Under these settlements, GTI, Syntex and
Cell Genesys granted to TKT royalty-free non-exclusive licenses to practice
TKT’s patented methods of non-viral ex vivo gene therapy. The settlement involved no financial
commitments by TKT to the other parties.
It is not clear whether any broad claims to ex vivo gene therapy will
survive the interference, but TKT will have freedom to operate in this area
regardless of how the PTO eventually resolves the interference.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security
holders during the fourth quarter of the fiscal year covered by this report.
Executive Officers
The executive officers of the Company are as follows:
Each officer’s term of office extends until the first
meeting of the Board of Directors following the next annual meeting of
stockholders and until a successor is elected and qualified.
Richard F Selden, M.D., Ph.D., is the founder of
TKT. He has served as Chief Scientific
Officer, Chairman of the Scientific Advisory Board and a Director since the
Company’s inception in 1988 and as President and Chief Executive Officer since
June 1994. He received an A.B. in Biology from Harvard College, an A.M. in
Biology from the Harvard University Graduate School of Arts and Sciences, a
Ph.D. in Genetics from the Division of Medical Sciences at Harvard Medical
School and an M.D. from Harvard Medical School.
Michael J. Astrue has served as Senior Vice President,
Administration, General Counsel and Secretary since May 2000. From 1993 to 1999, he served as Vice
President, Secretary and General Counsel of Biogen, Inc., a biotechnology
company. Mr. Astrue holds a B.A. in
Philosophy and English from Yale University and a J.D. from Harvard Law School.
Renato Fuchs, Ph.D., joined the Company as Senior Vice
President, Manufacturing and Operations, in March 2002. Prior to joining TKT, Dr. Fuchs served at
Chiron Corporation from 1993 through February 2002, most recently as Senior
Vice President, BioPharmaceuticals. Dr.
Fuchs received a B.S. in Chemical Engineering from University of Valle and a
Ph.D. in Biochemical Engineering from the Massachusetts Institute of
Technology.
Daniel E. Geffken has served as Senior Vice President,
Finance, Chief Financial Officer and Treasurer of the Company since December
2000 and, from February 1997 to December 2000, he served as Vice President,
Finance, Chief Financial Officer and Treasurer. He received a B.S. in Economics from The Wharton School,
University of Pennsylvania and a M.B.A. from the Harvard Business School.
David D. Pendergast, Ph.D., has served as Senior Vice
President, Quality and Analytical Development since December 2001. Prior to joining TKT, Dr. Pendergast served
at Biogen from April 1996 through April 2001, most recently as Vice President,
Product Development and Quality Assurance.
Dr. Pendergast received a B.S. in Chemistry from Western Michigan
University and a Ph.D. in Pharmaceutics from the University of Wisconsin.
William H. Pursley has served as Senior Vice
President, Commercial Operations since April 1999. From April 1995 to April 1999, Mr. Pursley was Senior Vice
President, Commercial Development at BioTechnology General Corporation. He received a B.A. in Biology from the
University of Louisville.
Douglas A. Treco, Ph.D. has directed research at the
Company since its inception in 1988.
Since February 1997, he has served as Senior Vice President, Research
and Development. He received a B.S. in Biology and Chemistry from the
University of Delaware and a Ph.D. in Biochemistry and Molecular Biology from
the State University of New York, Stony Brook.
PART II
ITEM 5.
ITEM 5. MARKET
FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company was incorporated in Delaware in 1988 and
the Company’s Common Stock commenced trading on October 17, 1996 on The Nasdaq
National Market under the symbol “TKTX.”
As of March 1, 2002, there were 108 holders of record of the Company’s
Common Stock.
The following table sets forth for the fiscal periods
indicated the range of high and low closing prices for the Company’s Common
Stock on The Nasdaq National Market.
The Company has never declared or paid any cash
dividends on its capital stock. The
Company currently anticipates that it will retain all future earnings, if any,
to fund the development and growth of its business and does not anticipate
paying any cash dividends on its Common Stock in the foreseeable future.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data of
the Company for the five years ended December 31, 2001 are derived from the
consolidated financial statements of the Company. The information set forth below should be read in conjunction
with “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” included as Item 7
ITEM 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
TKT is a biopharmaceutical company developing protein-
and cell-based therapeutics for the treatment of a wide range of human
diseases. TKT is building a broad and
renewable product pipeline based on three proprietary development platforms:
Niche Protein products, Gene-Activated proteins and Transkaryotic Therapy gene
therapy.
During 2001, the Company received its first product
marketing approvals. In August 2001, Replagal (agalsidase alfa), the Company’s
enzyme replacement therapy for the long-term treatment of patients with Fabry
disease, was granted marketing authorization in the European Union. TKT also
received approval to market Replagal in six other countries. As of December 31, 2001, the Company had
recorded a total of $3,535,000 of product sales.
The Company has incurred substantial annual operating
losses since inception and expects that its research and development
expenditures will increase in future years as product development efforts
accelerate. Accordingly, the Company
expects to incur significant operating losses until substantial product sales are
generated. Until such time, the
Company is dependent upon product sales, existing cash resources, interest
income, external financing from equity offerings, debt financings and
collaborative research and development arrangements with corporate sponsors to
finance its operations. At December 31, 2001, the Company’s accumulated deficit
was $235,672,000.
TKT is subject to risks and uncertainties common to
companies in the biotechnology industry.
These risks and uncertainties are described below under the heading,
“Certain Factors That May Affect Future
Results.” The principal factors that
may affect the Company’s results of operations include Replagal product sales,
costs associated with the manufacture, marketing and sale of Replagal, expenses
related to the Company’s research and development efforts, the ability of the
Company to access capital markets, the timing of additional license fees and
milestone payments under existing collaborative research agreements and the
establishment of additional collaborative research agreements, if any.
Critical Accounting Policies
The Company’s significant accounting policies are more
fully described in the Notes to the Consolidated Financial Statements. Application of these policies is
particularly important to the portrayal of the Company’s financial condition
and results of operations. These
accounting policies require the Company to make subjective judgements in determining
estimates about the effect of matters that are inherently uncertain. The following accounting policies meet these
characteristics and are considered most significant:
Revenue
Recognition
The Company recognizes revenue from product sales when
there is a persuasive evidence that an arrangement exists, delivery has
occurred, the price is fixed and determinable, and collectibility is reasonably
assured. The Company recorded its first product sales from the sale of Replagal
in Europe 2001. In Europe and in some
countries outside of the United States, collectibility is reasonably assured
once reimbursement agreements and pricing arrangements are established, as
these agreements establish the governmental agency’s intent to pay. The
Company has only recorded revenues in those countries for which these
agreements have been established, thereby reasonably assuring collectibility.
Inventories
Inventories are stated at the lower of cost or market
with cost determined under the first-in, first-out method. Inventories are reviewed periodically for
slow-moving or obsolete status based on sales activity, both projected and
historical. Replagal produced before product approval in August 2001 was
expensed as a research and development cost.
If product sales differ from projections, inventory may not be fully
utilized and could be subject to impairment.
The following discussion of the financial condition
and results of operations of the Company should be read in conjunction with the
accompanying consolidated financial statements and the related footnotes
thereto.
Results of Operations
Years
Ended December 31, 2001, 2000 and 1999
During 2001, the Company recorded its first product
sales, which were from the sale of Replagal in Europe. Sales for the year totaled $3,535,000. The Company expects sales of Replagal to
increase significantly in 2002 and beyond, as additional patients begin
Replagal therapy, pricing and reimbursement are established, and marketing
authorizations are received in additional countries.
In 2001, cost of goods sold was $185,000. Costs
associated with inventory produced before marketing approval in 2001, some of
which was sold in 2001 and the balance of which will be sold in 2002, have been
previously recognized as a research and development expense. As a result, gross margins will not reflect
full production costs until some time in 2002.
The Company expects that its cost of goods sold for 2002 will be
approximately 25% of product sales. For
2003 and beyond, the Company expects to increase production to meet increasing
demand as the launch of Replagal accelerates, and that cost of goods sold, as a
percentage of product sales, will likely decline.
License and research revenues totaled $2,653,000,
$7,247,000 and $3,870,000 for the years ended December 31, 2001, 2000 and 1999,
respectively. All revenues were earned from collaborative agreements with
Aventis, GI and Sumitomo. Included in
the revenues for 2000 was a $3,500,000 milestone payment from Aventis relating
to the submission of a BLA to the FDA for the approval of Dynepo.
Research and development expenses totaled $65,921,000
in 2001, as compared to $56,440,000 in 2000 and $43,946,000 in 1999. The increase in 2001 of $9,481,000, or 17%,
and the increase in 2000 of $12,494,000, or 28%, were primarily due to
increases in external development services, principally clinical trial
expenditures including manufacturing costs and research and development
staffing, as the Company’s product development platforms continue to expand and
mature. In addition, the Company capitalized $7,332,000 of Replagal production
costs as inventory during 2001 that, prior to product approval in August 2001,
would have been classified as a research and development expense.
During 2002, costs relating to both preclinical and
clinical programs are expected to increase significantly as product development
activities are initiated or expanded. In addition to the three major programs
discussed below, the Company expects to advance several other preclinical
programs toward the IND stage in 2002. The largest component of increases in
2002 is expected to be costs related to building and operating its
manufacturing facilities for its preclinical and clinical candidates. In late 2002, the Company expects to occupy
a new headquarters and research and development facility, which will
significantly increase its occupancy costs in 2002 and beyond.
The Company’s three major research and development
programs, Replagal, I2S for the treatment of Hunter Syndrome and Factor VIII
gene therapy for the treatment of hemophilia A, represent the majority of its
research and development spending.
For 2001, 2000 and 1999, research and development
expenses for the Replagal program primarily included basic research, the costs of
clinical trials, manufacturing costs of clinical supplies and costs associated
with preparation of worldwide product marketing applications. In 2001, after receipt of its first product
marketing approval, the Company began to capitalize Replagal production costs
as inventory, reducing the amount classified as research and development
expense. The amount of future research
and development expenses associated with the Replagal program are not
reasonably certain as these costs are dependent principally upon the regulatory
process and information required by regulatory agencies, as well as the timing
of obtaining marketing authorization in the United States and other countries,
if granted. The expenses associated with
the development of Replagal are expected to decrease in 2002 and beyond as many
of the costs related to its development have previously been incurred.
The I2S program is currently in a
Phase I/II clinical trial.
Research and development expenses for the I2S program in 2001 include
costs associated with the Company’s Phase I/II clinical trial including the
manufacture of clinical supplies. In
2000 and 1999, research and development expenses included costs associated with
preclinical development and expenses related to the filing of an IND for the
program. Future research and
development costs for the I2S program are not reasonably certain because such
costs are dependent on a number of variables, including the cost, nature and
extent of additional clinical trials, uncertainties in the timing of the
regulatory process and information required by regulatory agencies, and the
costs associated with manufacture of I2S.
The Company expects that these costs will be significant and are likely
to increase each year until such time, if ever, as marketing approvals are
received, which the Company believes will not be earlier than 2004.
The Company’s gene therapy
product to deliver Factor VIII to patients with hemophilia A is currently in a
Phase I clinical trial. For 2001, 2000
and 1999, research and development expenses included the cost of the
Phase I clinical study, the related manufacture of clinical supplies and
additional basic research and process development expenses. The Company is currently designing a Phase
II study. Given the regulatory hurdles
likely to be encountered in the development and marketing approval of any gene
therapy product, the timing or cost associated with the project is not reasonably
certain. As no gene therapy product has
ever received marketing approval, the Company expects development costs will be
substantial.
Selling, general and administrative expenses were
$24,823,000 for the year ended December 31, 2001, compared with $15,755,000 and
$10,035,000 in 2000 and 1999, respectively.
The increase in 2001 of $9,068,000, or 58%, was principally due
to costs incurred in preparation of the launch of Replagal in Europe and other
countries and the creation of a global commercial infrastructure including
sales, marketing and distribution capabilities. Legal expenses, including those related to the Company’s
litigation with Genzyme, also represented a major component of the increase.
The increase in 2000 of $5,720,000, or 57%, was principally due to building a
sales and marketing infrastructure related to the commercialization of
Replagal. During 2002, selling, general
and administrative costs are expected to increase as worldwide
commercialization activities expand. In
addition, with the completion of the new facility discussed above, occupancy
costs will increase significantly in 2002 and beyond.
Net interest income was $11,274,000, $13,927,000 and
$5,655,000 for the years ended December 31, 2001, 2000 and 1999,
respectively. The average cash and
marketable securities balances were $261,940,000, $222,712,000 and $108,673,000
in 2001, 2000 and 1999, respectively.
The decrease in interest income in 2001 is due to lower rates of return
earned. The increase in interest income
in 2000 as compared to 1999 is due to both higher average investment balances
and higher rates of return earned.
In 1996, TKT made a
strategic equity investment of $300,000 in a European biotechnology company,
which was sold in 2001, resulting in a realized gain of $3,224,000.
The Company had a net loss of $70,243,000, $51,021,000
and $44,456,000 in 2001, 2000 and 1999, respectively. Basic and diluted net loss per share was $2.78 for the year ended
December 31, 2001, as compared to a basic and diluted net loss per share of
$2.25 for both 2000 and 1999. Basic net loss per share was equivalent to
diluted net loss per share for 2001, 2000 and 1999 because Common Stock
equivalent shares from stock options and Convertible Preferred Stock have been
excluded as their effect is anti-dilutive.
For the years ended December 31, 2001, 2000 and 1999
weighted average shares outstanding were 25,228,000, 22,675,000 and 19,763,000,
respectively. The increase in weighted average shares outstanding reflects the
sale of 7,785,000 shares of Common
Stock from the Company’s public equity offerings in 2001 and the issuance of 3,571,000 shares of Common Stock
in November 2001 upon the conversion of all outstanding shares of
Series A Convertible Preferred Stock (“Series A Preferred Stock”).
The increase in weighted average shares outstanding in 2000 reflects the
Company’s private placement of 3,300,000 shares of Common Stock in November
1999. At December 31, 2001, total
shares outstanding were 34,302,000.
Liquidity and Sources of Capital
Since its inception, the Company has financed its
operations through the sale of Common and Preferred Stock, borrowings under
debt agreements, revenues from collaborative agreements, and interest income.
The Company had cash, cash equivalents and marketable
securities totaling $399,754,000 at December 31, 2001, including net proceeds
of $255,219,000 from equity offerings in 2001 and restricted marketable
securities collateralizing letters of credit totaling $8,715,000. Cash equivalents and marketable securities
are invested in United States government and agency obligations and money
market funds.
Substantial additional funds may be required to
support the Company’s research and development programs, acquisition of
technologies, preclinical and clinical testing of its products, pursuit of
regulatory approvals, acquisition of capital equipment, expansion of laboratory
and office facilities, expansion of manufacturing capabilities, selling,
general and administrative expenses and the buyout of the minority interests in
TKT Europe, if applicable.
The Company expects that its existing capital
resources, together with cash from collaborative agreements, product sales, and
interest income, will be sufficient to fund its operations through at least
2004. The Company’s cash requirements
may vary depending on a number of factors, including Replagal product sales,
costs associated with the manufacture, marketing and sale of Replagal, expenses
related to the Company’s research and development efforts, the ability of the
Company to access capital markets, the timing of additional license fees and
milestone payments under existing collaborative research agreements and the
establishment of additional collaborative research agreements, if any. Lack of necessary funds may require the
Company to delay, scale back or eliminate some or all of its research and
product development programs or to license its potential products or
technologies to third parties.
Until such time, if any, as the Company’s operations
generate significant product sales, the Company will seek to fund operations
with cash resources, interest income, proceeds from equity offerings, and debt
financings, and funding from collaborative agreements.
The Company may pursue opportunities to obtain
additional financing in the future through equity financings, debt financings,
lease arrangements related to facilities and capital equipment, and
collaborative research agreements. The
source, timing and availability of any future financing will depend principally
upon equity and debt market conditions, interest rates and, more specifically,
on the Company’s continued progress in its exploratory, preclinical, and
clinical development programs, and the extent of its commercial success. There can be no assurance that such funds
will be available on favorable terms, if at all.
The following table
summarizes the Company’s significant contractual obligations at December 31,
2001:
In August 2000, the Company entered into a lease for a
new corporate headquarters and research and development facility in Cambridge,
Massachusetts. The Company expects to
spend approximately $30,000,000 for leasehold improvements and equipment
through December 2002 to outfit the building.
In January 2001, the Company purchased a manufacturing
facility for $8,800,000 and leased an adjoining facility. The Company expects
to make improvements to these facilities, which could total approximately
$20,000,000 in 2002. The Company
expects that these facilities will be used to manufacture one or more of the
proteins in its product pipeline. There
can be no guarantee that financing will be available on favorable terms, if at
all.
In April 2000, the Company entered into an agreement
with stockholders of TKT Europe to establish the Company’s European sales and
marketing subsidiary. Prior to this
agreement, these stockholders were neither employees nor affiliated parties of
the Company. These stockholders are the
principal managers of TKT Europe and own a 20% interest in it, while the
Company owns the remaining 80% interest.
The agreement includes provisions entitling the Company to purchase the
stockholders’ ownership interest in TKT Europe in August 2004, under a
specified formula. Should the Company
not exercise that right, the stockholders of TKT Europe can require the Company
to purchase its ownership interest sixty days thereafter. The buyout price, which is dependent upon
the profitability of TKT Europe, cannot be determined at this time, but is
expected to be significant.
In May 1994, the Company and Aventis entered into an
agreement to commercialize Dynepo™.
Under the terms of the agreement, Aventis is obligated to pay the
Company a total of $48,000,000 upon completion of all milestones and objectives
set forth in the agreement. As of
December 31, 2001, the Company had received $30,000,000. The remaining $18,000,000 in payments are
contingent upon Aventis’ achievement of certain regulatory and commercial
milestones. Aventis is responsible for the development, manufacturing and
marketing of Dynepo. The Company is
entitled to receive a low double-digit royalty based on net sales. Due to the
uncertainty involving both the regulatory approval of Dynepo and ongoing
litigation, there can be no assurance that the Company will receive the
remaining milestone payments or earn royalties on product sales.
At December 31, 2001, the Company had net operating
loss carryforwards of approximately $80,030,000, which expire at various times
through 2022. Due to the degree of
uncertainty related to the ultimate use of loss carryforwards and tax credits,
the Company has fully reserved against any potential tax benefit. The future utilization of net operating loss
carryforwards and tax credits may be subject to limitation under the changes in
stock ownership rules of the Internal Revenue Code. Because of this limitation, it is possible that taxable income in
future years, which would otherwise be offset by net operating losses, will not
be offset and, therefore, will be subject to tax.
The Company has been engaged in patent litigation with
Genzyme and Mount Sinai with respect to the development of Replagal and with
Amgen and Kirin-Amgen with respect to the development of Dynepo. Pursuant to the Amended and Restated License
Agreement, dated March 1995, by and between Aventis and the Company, Aventis
has assumed the legal cost of the Amgen and Kirin-Amgen litigation. The Company is required to reimburse Aventis
for the Company’s share of litigation expenses, as defined, from future
royalties, if any, received from the sale of Dynepo, and in certain other
circumstances.
The Company can provide no assurance as to the outcome
of these proceedings. A decision by a
court in any jurisdiction in a manner adverse to the Company would have a
material adverse effect on the Company’s business, financial condition, and the
results of operations.
Forward-Looking Statements
This annual report contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934 that involve risks and uncertainties, such as statements concerning:
• ongoing
litigation in which we are involved;
• our
efforts to obtain regulatory approval for our products;
• product
sales and margins on sales of our products;
• our
growth and future operating results;
• the
discovery and development of new products;
• our
products and technologies;
• our
collaborators;
• our
intellectual property; and
• our
manufacturing, marketing, sales, and distribution capabilities.
The Company may, in some cases, use words such as
“project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,”
“should,” “would,” “could,” “will,” or “may,” or other words that convey
uncertainty of future events or outcomes to identify these forward-looking
statements. There are a number of important factors that could cause actual
results to differ materially from the results anticipated by these forward-looking
statements. These important factors include those set forth in this annual report
under the caption “Certain Factors That May Affect Future Results”. These
factors and the other cautionary statements made in this annual report should
be read as being applicable to all related forward-looking statements
wherever they appear in this annual report. If one or more of these factors
materialize, or if any underlying assumptions prove incorrect, the Company’s
actual results, performance or achievements may vary materially from any future
results, performance or achievements expressed or implied by these forward-looking
statements. In addition, any forward-looking statements represent the Company’s
estimates only as of the date this annual report was filed with the Securities
and Exchange Commission and should not be relied upon as representing the
Company’s estimates as of any subsequent date.
While the Company may elect to update forward-looking statements at some
point in the future, the Company specifically disclaims any obligation to do
so, even if its estimates change.
Certain Factors That May Affect Future Results
The following important factors, among others, could
cause actual results to differ from those indicated by forward-looking
statements made in this annual report and
presented elsewhere by management from time to time.
Regulatory Risks
We may not be
able to obtain or maintain marketing approvals for our products.
We are not able to market any of
our products in Europe, the United States or in any other jurisdiction without
marketing approval from the EMEA, FDA or equivalent foreign regulatory agency.
The regulatory process to obtain market approval for a new drug or biologic
takes many years and requires the expenditure of substantial resources. We have
had only limited experience in preparing applications and obtaining regulatory
approvals.
Replagal was granted marketing
authoriation in the fifteen countries of the European Union by the European
Commission in August 2001. We have also received approval to market Replagal in
The Czech Republic, Iceland, Israel, New Zealand, Norway, and Switzerland.
In the United States, we
submitted a BLA to the FDA seeking marketing authorization for Replagal. In
January 2001, the FDA issued a complete review letter regarding the BLA
for Replagal. The FDA letter stated that the data that we had provided was not
adequate for approval of the BLA at that time and requested additional
information. In response to this letter, we have discussed the BLA with the FDA
and have submitted additional data. We expect that after the FDA has reviewed
the data, it will either approve the BLA or decline to approve it. If it
declines to approve the BLA, the FDA may request additional information,
possibly including data from additional clinical trials.
During 2000, Aventis submitted an
MAA to the EMEA seeking marketing authorization of Dynepo in the European Union
for the treatment of anemia associated with kidney disease. In March 2002,
the EC granted marketing approval of Dynepo in the European Union.
Also during 2000, Aventis
submitted a BLA to the FDA seeking marketing authorization for Dynepo in the
United States. The FDA did not accept this BLA for filing, requesting that
Aventis provide additional manufacturing data.
Aventis is currently accumulating these data and, when complete, we expect
that Aventis will submit a new BLA.
There can be no assurance as to
whether or when any of these applications for marketing authorization relating
to Replagal and Dynepo, or additional applications for marketing authorization
that we may make in the future as to these or other products, will be approved
by the relevant regulatory authorities.
If we fail to
comply with the extensive regulatory requirements to which our products are
subject, we could be subject to adverse consequences and penalties.
The testing, manufacturing,
labeling, advertising, promotion, export, and marketing, among other things, of
our products are subject to extensive regulation by governmental authorities in
Europe, the United States, and elsewhere throughout the world.
In general, there can be no
assurance that submission of materials requesting permission to conduct
clinical trials will result in authorization by the EMEA, the FDA or equivalent
foreign regulatory agency to commence clinical trials, or that once clinical
trials have begun, testing will be completed successfully within any specific
time period, if at all, with respect to any of our products. Once trials are
complete and an application for marketing approval has been submitted to the
relevant regulatory agency, the regulatory agency may deny the application if
applicable regulatory criteria are not satisfied, or may require additional
testing or information.
If regulatory approval of a
product is granted, such approval may be subject to limitations on the
indicated uses for which the product may be marketed or contain requirements
for costly post-marketing testing and surveillance to monitor the safety or
efficacy of the product. As to any product for which we obtain marketing
approval, the product, the facilities at which the product is manufactured, any
post-approval clinical data and our promotional activities will be subject to
continual review and periodic inspections by the EMEA, the FDA and other
regulatory agencies.
Both before and after approval is
obtained, violations of regulatory requirements may result in various adverse
consequences, including the regulatory agency’s delay in approving, or refusal
to approve a product, suspension or withdrawal of an approved product from the
market, operating restrictions, or the imposition of civil or criminal
penalties.
We may not be
able to obtain orphan drug exclusivity for our Niche Protein products and if
our competitors are able to obtain orphan drug exclusivity before us, we may be
precluded from marketing our Niche Protein products.
Some jurisdictions, including
Europe and the United States, may designate therapeutics for relatively small
patient populations as “orphan drugs”. Generally, if a product which has an
orphan drug designation subsequently receives the first marketing approval for
the indication for which it has such designation, the product is entitled to
orphan drug exclusivity. Orphan drug exclusivity means that applications to
market the same product for the same use may not be approved, except in very
limited circumstances, for a period of up to 10 years in Europe and for a
period of seven years in the United States. Obtaining orphan drug designations
and orphan drug exclusivity for our Niche Protein products may be critical to
our success in this area. Even if we obtain orphan drug exclusivity for any of
our potential products, we may not be able to maintain it. For example, if a
competitive product is shown to be clinically superior to our product, any
orphan drug exclusivity we have obtained may not apply to such competitive
product. Our competitors may also seek and obtain orphan drug exclusivity for
products competitive with our products before we obtain marketing approval.
Replagal was granted marketing
authorization in the fifteen countries of the European Union by the European
Commission in August 2001. A competitive product for the treatment of patients
with Fabry disease, marketed by Genzyme, was also granted marketing
authorization in the European Union. Both Replagal and Genzyme’s competing
product were granted co-exclusive orphan drug status in the European Union for
up to 10 years.
In the United States, both
TKT and Genzyme have received orphan drug designation for their respective
products. Whichever product is the
first to receive FDA marketing approval would likely receive orphan drug
exclusivity for that product. Once a
product receives orphan drug exclusivity, the FDA may not approve any other
applications to market the same class of product for Fabry disease for a period
of seven years, except in limited circumstances.
If our clinical
trials for a product are not successful, we may not be able to commercialize
that product.
In order to obtain regulatory
approvals for the commercial sale of our potential products, we and our
collaborators will be required to complete extensive clinical trials in humans
to demonstrate the safety and efficacy of our products. We may not be able to
obtain authority from the EMEA, the FDA or other equivalent foreign regulatory
agencies to commence or complete these clinical trials.
The results from preclinical
testing of a product that is under development may not be predictive of results
that will be obtained in human clinical trials. In addition, the results of
early human clinical trials may not be predictive of results that will be
obtained in larger scale, advanced stage clinical trials. Furthermore, we, one
of our collaborators, or a regulatory agency with jurisdiction over the trials,
may suspend clinical trials at any time if the subjects or patients
participating in such trials are being exposed to unacceptable health risks, or
for other reasons.
The rate of completion of
clinical trials is dependent in part upon the rate of enrollment of patients.
Patient accrual 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 study, the nature of the study, the existence of competitive
clinical trials, and the availability of alternative treatments. In particular,
the patient populations for some of our Niche Protein products is small. Delays
in planned patient enrollment may result in increased costs and prolonged
clinical development.
We and our collaborators may not
be able to successfully complete any clinical trial of a potential product
within any specified time period. In some cases, we may not be able to complete
the trial at all. Moreover, clinical trials may not show our potential product
to be both safe and efficacious. Thus, the EMEA, the FDA and other regulatory
authorities may not approve any of our potential products for any indication.
Because gene
therapy is a relatively new technology and gene therapy products have not been
extensively tested in humans, we may face delays and incur increased costs in
the regulatory process related to our gene therapy products.
We are developing gene therapy products.
Because gene therapy is a relatively new technology and products for gene
therapy have not been extensively tested in humans, the regulatory requirements
governing gene therapy products may be more uncertain than for other types of
products. This uncertainty may cause delays in the regulatory process relating
to our gene therapy products, including delays in our initiating clinical
trials of these products. This uncertainty may also increase the cost of
obtaining regulatory approvals of our gene therapy products.
Ethical and
social issues may cause regulatory authorities to increase the regulation of
gene therapy clinical trials.
Due to adverse events that have
occurred during some gene therapy clinical trials conducted by other
biotechnology and pharmaceutical companies and institutions, the Federal
government, the EMEA, the FDA, industry organizations, and institutions
conducting gene therapy clinical trials have grown increasingly concerned about
the safety of these clinical trials. An increased concern over gene therapy
trials generally may lead the EMEA, the FDA or other regulatory agencies to
impose further regulation on gene therapy clinical trials. If further
regulations are imposed on gene therapy research generally, the delays and
costs involved in complying with such regulations may impair our ability to
conduct gene therapy clinical trials in the future.
Patent Litigation and Intellectual Property Risks
We are a party
to litigation with Genzyme and Mount Sinai involving Replagal, which could
preclude us from manufacturing or selling Replagal.
Since July 2000, we
have been involved in patent litigation relating to Replagal brought by Genzyme
and Mount Sinai in the Delaware District Court regarding a patent licensed by
Genzyme from Mount Sinai. In January 2002, the Delaware District Court
dismissed this patent litigation, grant our motion for summary judgement of
non-infringement and denying Genzyme's motion for summary judgement of infringement. In March 2002, Genzyme appealed the ruling
of the Delaware District Court to the Federal Circuit. If Genzyme is successful in its appeal, the
Company may be precluded from marketing and selling Replagal. We can provide no assurance as to the outcome
of this litigation.
We are party to
litigation with Amgen and Kirin-Amgen involving Dynepo, which could
preclude us from manufacturing or selling Dynepo.
In April 1997, Amgen commenced a patent infringement
action against us and Aventis in the Massachusetts District Court. In
January 2001, the Massachusetts District Court concluded that Dynepo
infringed 8 of the 18 claims of patents asserted by Amgen. Amgen did not
seek and was not awarded monetary damages.
We and Aventis have filed an appeal of
the decision with the Federal Circuit. Amgen has also appealed this decision.
In addition, in July 1999, we and Aventis commenced
legal proceedings in the U.K. against Kirin-Amgen, seeking a declaration that a
U.K. patent held by Kirin-Amgen will not be infringed by our activities related
to Dynepo and that certain claims of Kirin-Amgen’s U.K. patent are
invalid. In April 2001, the High Court of Justice in the United Kingdom
ruled that Dynepo infringed one of four claims of a patent asserted by Kirin-Amgen.
We and Aventis have filed an appeal of this decision. Kirin-Amgen has also
appealed this decision.
We can provide no assurance as to the outcome of
either litigation. Unless we and
Aventis are successful in our appeal, we and Aventis will be precluded from
manufacturing and selling Dynepo in the relevant jurisdiction. In addition, the litigation is costly and we
are required to reimburse Aventis, which is paying the litigation expenses, for
our share of the expenses from future royalties and in certain other
circumstances.
We may become
involved in additional and expensive patent litigation or other proceedings.
The biotechnology industry has
been characterized by significant litigation and interference and other
proceedings regarding patents, patent applications, and other intellectual
property rights. We may become a party to additional patent litigation and
other proceedings with respect to our Niche Protein products, Gene-Activated
protein products, gene therapy technology, or other technology. Such litigation could result in liability for
damages, prevent our development and commercialization efforts, or divert
management, or other technology’s attention and resources.
An adverse outcome in any patent
litigation or other proceeding involving patents could subject us to
significant liabilities to third parties and require us to cease using the
technology or product that is at issue or to license the technology or product
from third parties. We may not be able to obtain any required licenses on commercially
acceptable terms or at all.
The cost to us of any patent
litigation or other proceeding, even if resolved in our favor, could be
substantial. Some of our competitors may be able to sustain these costs more
effectively than we can because of their substantially greater financial
resources. Uncertainties resulting from the initiation and continuation of
patent litigation or other proceedings could have a material adverse effect on
our ability to develop, manufacture, and market products, form strategic
alliances, and compete in the marketplace.
If we are
unable to obtain patent protection for our discoveries, the value of our
technology and products may be adversely affected.
Our success will depend in part
on our ability to obtain patent protection for our processes and products in
the United States and other countries. The patent situation in the field of
biotechnology generally is highly uncertain and involves complex legal,
scientific and factual questions. To date, no consistent policy has
emerged regarding the breadth of claims allowed in biotechnology patents. We may
not be issued patents relating to our technology. Even if issued, patents 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 are maintained in secrecy until patents
issue, third parties may have 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 may not hold proprietary
rights to certain product patents, process patents, and use patents related to
our products or their methods of manufacture. In some cases, these patents may
be owned or controlled by third parties. As a result, we may be required to
obtain licenses under third-party patents to market certain of our potential
products. If licenses are not available to us on acceptable terms, we may not
be able to market these products.
If we are
unable to protect the confidentiality of our proprietary information and
know-how, the value of our technology and products will be adversely affected.
We rely upon unpatented
proprietary technology, processes, and know-how. We seek to protect this
information in part by confidentiality agreements with our employees,
consultants, and other third-party contractors. These agreements may be
breached, and we may not have adequate remedies for any such breach. In
addition, our trade secrets may otherwise become known or be independently
developed by competitors.
If we fail to
comply with any of our obligations under any of the agreements under which we
license commercialization rights to products or technology from third parties,
we could lose license rights that are important to our business.
We are a party to a number of
patent licenses that are important to our business and expect to enter into
additional patent licenses in the future. These licenses impose various
commercialization, sublicensing, royalty, insurance, and other obligations on
us. If we fail to comply with these obligations, the licensor may have the
right to terminate the license and we may not be able to market products that were
covered by the license.
Business Risks
Our Revenue From Product Sales Is
Dependent on the Commercial Success of Replagal
During 2001, we received marketing authorizations for
our first product. Replagal was granted
marketing authorization in the European Union in August 2001. We have
also received approval to market Replagal in six other countries. We expect that Replagal will account for all
of our product sales through 2004, at the earliest. The commercial success of Replagal will depend on its acceptance
by physicians, patients and other key decision-makers for the treatment of
Fabry disease. If Replagal does not
generate significant product sales, TKT will be required to fund operations
with cash resources, interest income, proceeds from equity offerings and debt
financings and funding from collaborative agreements.
The market may
not be receptive to our products upon their introduction.
The commercial success of any of
our products for which we obtain marketing approval from the EMEA, the FDA, or
other regulatory authorities will depend upon their acceptance by patients, the
medical community and third-party payors as clinically effective, safe, and
cost-effective. It may be difficult for
us to achieve market acceptance of our products.
Other factors that we believe
will materially affect market acceptance of our products include:
• the
timing of the receipt of marketing approvals;
• the
countries in which such approvals are obtained; and
• the
safety, efficacy, convenience, and cost-effectiveness of the product as
compared to competitive products.
We have limited
experience and resources in manufacturing and will incur significant costs to
develop this experience or rely on third parties to manufacture our products on
our behalf.
We have limited manufacturing
experience and, in order to continue to develop products, apply for regulatory
approvals, and commercialize our products, we will need to develop, contract
for, or otherwise arrange for the necessary manufacturing capabilities. We currently use, and expect to
continue in the future to use, internal manufacturing and contract
manufacturing by third parties to meet our production requirements for
preclinical testing, clinical trials, and commercial supply.
To the extent that we are parties
to manufacturing arrangements with third parties, we will be dependent upon
these third parties to perform their obligations in a timely manner and in
accordance with applicable government regulations. There are a limited number
of such third-party manufacturers capable of manufacturing our protein products
with a limited amount of production capacity. As a result, we may experience
difficulty in obtaining adequate manufacturing capacity for our needs. If we
are unable to obtain or maintain contract manufacturing of these products, or
to do so on commercially reasonable terms, we may not be able to complete
development of these products or market them.
To the extent that we elect not to or cannot contract
for third-party manufacturing for any of our products, we will need to
manufacture these products in our own manufacturing facilities. We have limited
manufacturing experience. We are
investing, and may need in the future to invest, substantial additional funds
to build our own manufacturing facilities and need to recruit qualified
personnel in order to build or lease and operate any manufacturing facilities.
There can be no assurance that we will be able to successfully build or operate
our own facilities, that our facilities will comply with applicable regulations
or that our facilities will enable us to manufacture our products at a
commercially reasonable cost.
If we fail to
obtain an adequate level of reimbursement by third-party payors for our
products, we may not have commercially viable markets for our products.
In certain countries,
particularly the countries of the European Union, the pricing of prescription
pharmaceuticals and the level of reimbursement are subject to governmental
control. In the United States, the availability of reimbursement by
governmental and other third-party payors affects the market for any
pharmaceutical product. These third-party payors generally attempt to contain
or reduce the costs of health care by challenging the prices charged for
medical products and services.
We expect that the prices for
many of our products, when commercialized, including in particular, our Niche
Protein products, may be high compared to other pharmaceutical products. For example, as of March 31, 2002, we have
established pricing and reimbursement in substantially all countries in Europe
in which Replagal has been approved. The average price established is
approximately $165,000 per patient per year.
We have not established reimbursement
for Replagal in all of the countries in which it has been approved and may not
establish reimbursement in one or more of those countries at adequate levels or
at all. The price of our
products may make reimbursement more difficult to obtain, if it can be obtained
at all.
The Centers for Medicare and
Medicaid Services of the United States Department of Health and Human Services
has considered proposals from time to time to reduce the reimbursement rate
with respect to erythropoietin. If
Dynepo is approved and commercialized, adoption by the Centers for Medicare and
Medicaid Services of any such proposal might have an adverse effect on the
pricing of Dynepo.
We also may experience pricing
pressure with respect to Replagal and other products for which we may obtain
marketing approval due to the trend toward managed health care, the increasing
influence of health maintenance organizations and legislative proposals. We may
not be able to sell our products profitably if reimbursement is unavailable or
limited in scope or amount.
We face
significant competition, which may result in others discovering, developing or
commercializing products before or more successfully than we do.
The biotechnology industry is
highly competitive and characterized by rapid and significant technological
change. Our competitors include pharmaceutical companies, biotechnology firms,
universities, and other research institutions. Many of these competitors have
substantially greater financial and other resources than we do and are
conducting extensive research and development activities on technologies and
products similar to or competitive with ours.
We may be unable to develop
technologies and products that are more clinically efficacious or
cost-effective than products developed by our competitors. Even if we obtain
marketing approval for our product candidates, many of our competitors have
more extensive and established sales, marketing, and distribution capabilities
than we do. Litigation with third parties, including litigation with Amgen and
Genzyme, could delay our time to market or preclude us from reaching the market
for certain products and enable our competitors to more quickly and effectively
penetrate certain markets.
Niche Protein Products. For many of the disease targets of our
Niche Protein product platform, there is currently no cure or effective
treatment. Treatments generally are focused on the management of the disease’s
symptoms. In general, we believe that these diseases represent markets too
small to attract the resources of larger pharmaceutical companies, but may
provide attractive commercial opportunities to smaller companies.
We believe that the primary
competition with respect to our Niche Protein product program is from
biotechnology and smaller pharmaceutical companies. Competitors include BioMarin Pharmaceutical Inc., Genzyme,
Oxford GlycoSciences plc, and Synpac Pharmaceuticals, Ltd. The markets for
some of the potential Niche Protein products are quite small. As a result, if
competitive products exist, we may not be able to successfully commercialize
our products.
We believe that our primary
competition with respect to Replagal is Genzyme. Replagal was granted marketing
authorization in the fifteen countries of the European Union by the European
Commission in August 2001. A competitive product for the treatment of patients
with Fabry disease, marketed by Genzyme, was also granted marketing authorization
in the European Union. Both Replagal
and Genzyme’s competing product were granted co-exclusive orphan drug status in
the European Union for up to 10 years.
In the United States, both
we and Genzyme have received orphan drug designation for our respective
products. Whichever product is the
first to receive FDA marketing approval would likely receive orphan drug
exclusivity for that product. Once a
product receives orphan drug exclusivity, the FDA may not approve any other
applications to market the same class of product for Fabry disease for a period
of seven years, except in limited circumstances.
Gene-Activated Protein Products. In
our Gene-Activated protein program, we are developing potentially improved
versions of proteins that are currently marketed and proteins that have no
currently-marketed counterparts. For instance, in the case of Dynepo,
erythropoietin and competing products are marketed by Amgen, Johnson &
Johnson, F. Hoffmann-La Roche Ltd. (Boehringer Mannheim GmbH), Sankyo Company Ltd.,
Chugai Pharmaceutical Co., Ltd., and the pharmaceutical division of Kirin
Brewery Co., Ltd.
Many of the protein products against which our
Gene-Activated proteins would compete have well-known brand names, have been
promoted extensively and have achieved market acceptance by third-party payors,
hospitals, physicians, and patients. In addition, many of the companies that
produce these protein products have patents covering techniques used to produce
these products, which have served as effective barriers to entry in the
therapeutic proteins market. As with Amgen and its erythropoietin product,
these companies may seek to block our entry into the market by asserting that
our Gene-Activated proteins infringe their patents. Many of these companies are
also seeking to develop and commercialize new or potentially improved versions
of their proteins.
Gene Therapy. Our gene therapy system
will have to compete with other gene therapy systems, as well as with
conventional methods of treating the diseases and conditions targeted. Although
no gene therapy product is currently marketed in the United States, a number of
companies, including major biotechnology and pharmaceutical companies, as well
as development stage companies, are actively involved in this field.
Competition for
technical, commercial and administrative personnel is intense in our industry
and we may not be able to sustain our operations or grow if we are unable to
attract and retain key personnel.
Our success is highly dependent
on the retention of principal members of our technical, commercial, and
administrative staff. Furthermore, our future growth will require hiring a
significant number of qualified technical, commercial and administrative
personnel. Accordingly, recruiting and retaining such personnel in the future
will be critical to our success. There is intense competition from other
companies and research and academic institutions for qualified personnel in the
areas of our activities. If we are not able to continue to attract and retain,
on acceptable terms, the qualified personnel necessary for the continued
development of our business, we may not be able to sustain or grow our
operations.
We have limited
sales and marketing experience and capabilities and will need to develop this
expertise or depend on third parties to successfully sell and market our
products on our behalf.
We have limited sales and
marketing experience and capabilities. In order to market our products,
including Replagal, we will need to develop this experience and these
capabilities or rely upon third parties, such as our collaborators, to perform
these functions. If we rely on third parties to sell, market, or distribute our
products, our success will be dependent upon the efforts of these third parties
in performing these functions. In many instances, we may have little or no
control over the activities of these third parties in selling, marketing, and
distributing our products. If we choose to conduct these activities directly,
as we plan to do with respect to some of our potential products, we may not be
able to recruit and maintain an effective sales force.
We depend on
our collaborators to develop, conduct clinical trials, obtain regulatory
approvals for, and manufacture, market and sell certain products on our behalf
and none of their efforts may be scientifically or commercially successful.
We are parties to collaborative
agreements with third parties relating to certain of our principal products. We
are relying on Aventis to develop, conduct clinical trials, obtain regulatory
approvals for, and manufacture, market, and sell Dynepo in the United States
and Europe; Sumitomo to develop and commercialize Replagal for Fabry disease in
Japan and other Asian countries; and GI to co-develop and commercialize Factor
VIII gene therapy for hemophilia A in Europe. Our collaborators may not devote
the resources necessary or may otherwise be unable or unwilling to complete
development and commercialization of these potential products. Our existing
collaborations are subject to termination without cause on short notice under
specified circumstances.
Our existing collaborations and
any future collaborative arrangements with third parties may not be
scientifically or commercially successful. Factors that may affect the success
of our collaborations include the following:
• our
collaborators may be pursuing alternative technologies or developing
alternative products, either on their own or in collaboration with others, that
may be competitive with the product as to which they are collaborating with us
or which could affect our collaborative partners’ commitment to the
collaboration with us;
• reductions
in marketing or sales efforts or a discontinuation of marketing or sales of our
products by our collaborators would reduce our revenues, which will be based on
a percentage of net sales by the collaborator;
• our
collaborators may terminate their collaborations with us, which could make it
difficult for us to attract new collaborators or adversely affect the
perception of us in the business and financial communities; and
• our
collaborators may pursue higher priority programs or change the focus of their
development programs, which could affect the collaborator’s commitment to us.
We may be
exposed to product liability claims and may not be able to obtain adequate
product liability insurance.
Our business exposes us to the
risk of product liability claims that is inherent in the manufacturing,
testing, and marketing of human therapeutic products. Our clinical trial
liability insurance and product liability insurance are subject to deductibles
and coverage limitations. We may not be able to obtain additional insurance or
maintain insurance on acceptable terms or at all. Moreover, any insurance that
we do obtain may not provide adequate protection against potential liabilities.
If we are unable to obtain insurance at acceptable cost or otherwise protect
against potential product liability claims, we will be exposed to significant
liabilities, which may materially and adversely affect our business and
financial position. These liabilities could prevent or interfere with our
product commercialization efforts.
Financing Risks
We have not
been profitable and expect to continue to incur substantial losses.
We have experienced significant
operating losses since our inception in 1988. We expect that we will continue
to incur substantial losses and that, until we have substantial product sales,
our cumulative losses will increase as our research and development, sales and
marketing, and manufacturing efforts expand. We expect that the losses that we
incur will fluctuate from quarter to quarter and that these fluctuations may be
substantial. We recorded approximately
$3.5 million in product sales in 2001.
We may need
additional financing, which may be difficult to obtain.
We may require additional funds
to conduct research and development, including preclinical testing and clinical
trials of our potential products and to manufacture and market any products
that are approved for commercial sale. Our future capital requirements will
depend on many factors, including the following:
• the
timing, receipt, and amount of product sales;
• continued progress in our research
and development programs, as well as the magnitude of these programs;
• the
scope and results of our clinical trials;
• the
timing of, and the costs involved in, obtaining regulatory approvals;
• the
cost of manufacturing activities;
• the
cost of commercialization activities, including product marketing, sales and
distribution;
• the
cost of additional facilities requirements;
• the costs involved in preparing, filing,
prosecuting, maintaining, and enforcing patent claims and other patent-related
costs, including litigation costs and the results of such litigation;
• the
cost of obtaining and maintaining licenses to use patented technologies;
• our
ability to establish and maintain collaborative arrangements;
• the
cost of buying out the minority interest in TKT Europe, if applicable;
• the
timing, receipt, and amount of milestones, royalties and other payments from
collaborators; and
• other
working capital requirements.
We may seek additional funding
through collaborative arrangements and public or private financings. Additional
financing may not be available to us on acceptable terms, if at all.
If we raise additional funds by
issuing equity securities, further dilution to our then existing stockholders
will result. In addition, the terms of the financing may adversely affect the
holdings or the rights of such stockholders. If we are unable to obtain funding
on a timely basis, we may be required to significantly curtail one or more of
our research or development programs. We also could be required to seek funds
through arrangements with collaborators or others that may require us to
relinquish rights to certain of our technologies, product candidates, or products
which we would otherwise pursue on our own.
ITEM 7A.
ITEM 7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company maintains its
investment portfolio consistent with its Investment Policy, which has been
approved by the Board of Directors. The
Company’s investment portfolio consists of investments only in U.S. government
and agency obligations. The Company’s investments are also subject to interest
rate risk and will decrease in value if market interest rates increase. However, due to the relatively short
duration of the Company’s investments, interest rate risk is mitigated. The Company does not own derivative
financial instruments in its investment portfolio.
Accordingly, the Company does not believe that there
is any material market risk exposure with respect to derivative or other
financial instruments which would require disclosure under this item.
As of December 31, 2001,
the Company did not have any off-balance sheet arrangements.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial
statements and supplementary data are included as part of this Annual Report on
Form 10-K:
• Report
of Independent Auditors
• Consolidated
Balance Sheets as of December 31, 2001 and 2000
• Consolidated
Statements of Operations for the years ended
December 31, 2001, 2000
and 1999
• Consolidated
Statement of Stockholders’ Equity for the years ended
December 31, 2001, 2000
and 1999
• Consolidated
Statements of Cash Flows for the years ended
December 31, 2001, 2000
and 1999
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Transkaryotic Therapies, Inc.
We have audited the accompanying consolidated balance sheets of
Transkaryotic Therapies, Inc. (the “Company”) as of December 31, 2001 and 2000,
and the related consolidated statements of operations, stockholders’ equity,
and cash flows for each of the three years in the period ended December 31,
2001. 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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Transkaryotic Therapies, Inc. at December 31, 2001 and 2000, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
Boston,
Massachusetts
February 8, 2002
TRANSKARYOTIC THERAPIES,
INC.
CONSOLIDATED BALANCE
SHEETS
See accompanying
Notes to Consolidated Financial Statements.
TRANSKARYOTIC THERAPIES,
INC.
CONSOLIDATED STATEMENTS
OF OPERATIONS
See accompanying
Notes to Consolidated Financial Statements.
TRANSKARYOTIC THERAPIES,
INC.
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS’ EQUITY
See accompanying
Notes to Consolidated Financial Statements.
TRANSKARYOTIC
THERAPIES, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
See accompanying
Notes to Consolidated Financial Statements.
TRANSKARYOTIC
THERAPIES, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
See accompanying
Notes to Consolidated Financial Statements.
TRANSKARYOTIC THERAPIES,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
See accompanying
Notes to Consolidated Financial Statements.
TRANSKARYOTIC THERAPIES,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND BASIS
OF PRESENTATION
TKT is a biopharmaceutical company developing protein- and cell-based
therapeutics for the treatment of a wide range of human diseases. TKT is building a broad and renewable
product pipeline based on three proprietary development platforms: Niche
Protein products, Gene-Activated proteins and Transkaryotic Therapy gene
therapy.
During 2001, the Company received its first product marketing
approvals. In August 2001, the European
Commission granted marketing authorization in the European Union for Replagal,
the Company’s enzyme replacement therapy for the long-term treatment of
patients with Fabry disease. TKT also received approval to market Replagal in
six other countries.
TKT is subject to risks
and uncertainties common to companies in the biotechnology industry. The principal factors that may affect the
Company’s results of operations depend on, among other factors, Replagal
product sales, costs associated with the manufacture, marketing and sale of
Replagal, expenses related to the Company’s research and development efforts,
ability of the Company to access capital markets, the timing of additional license
fees and milestone payments under existing collaborative research agreements
and the establishment of additional collaborative research agreements, if any.
2. SIGNIFICANT ACCOUNTING
POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany transactions have
been eliminated.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company’s foreign subsidiaries are
measured using the local currency as the functional currency. Assets and
liabilities are translated at exchange rates in effect at the balance sheet
date. Income and expense accounts are translated at the average monthly
exchange rates during the year.
Resulting translation adjustments are recorded as a separate component
of accumulated other comprehensive income.
Foreign currency transaction gains and losses are included in the
Company’s operating expenses and are not material. Currently, the Company does not hedge its foreign currency
exposure.
All product sales were in Europe.
The Company invoices for product sales in the currency of the country
into which the product is sold.
Substantially all of the Company’s manufacturing costs are incurred in
the U.S. Therefore, any fluctuation in
the value of the payment currencies relative to the U.S. dollar will impact
gross margins since the Company’s manufacturing costs would remain the same
while its sales in terms of U.S. dollars would change. In 2001, these currency
fluctuations were immaterial.
COMPREHENSIVE LOSS
Comprehensive loss comprises net loss, unrealized gains and losses on
marketable securities, designated as available-for-sale, and cumulative foreign
currency translation adjustments. Unrealized gains of $575,000 and $568,000
were included in accumulated other comprehensive income at December 31, 2001
and 2000, respectively. Accumulated
other comprehensive income also included $72,000 and $108,000 of foreign currency
translation adjustments at December 31, 2001 and 2000, respectively.
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 amounts reported in the financial
statements and accompanying notes.
Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company recognizes product sales when there is persuasive evidence
that an arrangement exists, delivery has occurred, the price is fixed and
determinable, and collectibility is reasonably assured. Collectibility of
accounts receivable is dependent upon establishing reimbursement agreements and
pricing arrangements for Replagal in each country the product is sold. The Company has only recorded product sales
in those countries for which these agreements have been established.
The Company derives its license and research revenue primarily from
license fees and the achievement of certain milestones under collaborative
agreements. Revenue from license fees
is recorded once all significant obligations under the collaborative agreement
have been fulfilled by the Company.
Milestones are recorded when the Company has successfully completed the
substantive, at-risk performance objectives and obligations related to the
milestone.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as they are incurred. These costs comprise expenditures relating
to basic research, preclinical testing, clinical trials including clinical
related manufacturing, regulatory filings and development of large scale
manufacturing processes for the Company’s three product development platforms.
FINANCIAL INSTRUMENTS
Cash equivalents include funds held in investments with original
maturities of three months or less at the time of purchase. Marketable
securities consist of U.S. government and agency obligations. The fair values
of marketable securities are based on quoted market prices.
The Company determines the classification of cash equivalents and
marketable securities at the time of purchase and re-evaluates such designation
as of each balance sheet date. The Company has classified such holdings as
available-for-sale securities, which are carried at fair value, with unrealized
gains and losses reported as a separate component of accumulated other
comprehensive income (loss).
Financial instruments that potentially subject the Company to concentrations
of credit risk consist of temporary cash investments and marketable securities.
The Company maintains cash and cash equivalents with high credit-quality
financial institutions and limits the amount of credit exposure to any one
institution.
The Company’s credit exposure on its marketable securities is limited
by its investment only in U.S. government and agency obligations.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost
determined under the first-in, first-out method. Inventories are reviewed
periodically for slow-moving or obsolete status based on sales activity, both
historical and projected. Inventory produced before product approval in August
2001 was recognized as a research and development expense. As a result, cost of goods sold as a
percentage of sales in 2001 is not representative of future results.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated using the
straight-line method over estimated useful lives of the respective asset,
ranging from three to five years. Leasehold improvements are stated at cost and
are amortized using the straight-line method over the term of the lease or the
estimated useful life of the asset, whichever is shorter.
STOCK-BASED COMPENSATION
The Company accounts for qualified stock option grants in accordance
with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued
to Employees,” and related interpretations, and, accordingly, recognizes no
compensation expense for the issue thereof. For certain non-qualified stock
options granted, the Company recognizes as compensation expense the excess of
the fair value of the common stock issuable upon exercise over the aggregate
exercise price of such options. The compensation is amortized over the vesting
period of each option or the recipient’s term of employment, if shorter. The Company has adopted the disclosure-only
provisions of Statement of Financial Accounting Standard (“SFAS”) No. 123,
“Accounting for Stock-Based Compensation.”
INCOME TAXES
Deferred tax assets 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 that are expected to be in effect when the differences reverse.
Deferred tax assets are reduced by a valuation allowance to reflect the
uncertainty associated with their ultimate realization.
SEGMENT INFORMATION
SFAS No. 131, “Disclosures about Segments of an Enterprise and Related
Information,” establishes standards for reporting information on operating
segments in interim and annual financial statements. The Company operates in one segment as the Company’s chief operating
decision makers review the revenues and expenses of the Company on an aggregate
basis and manage the operations of the Company as a single operating segment.
During 2001, all product sales were in Europe. The Company’s investment in long-lived assets
in Europe is immaterial.
NET LOSS PER SHARE
The Company calculates net loss per share in accordance with SFAS No.
128, “Earnings Per Share,” and related interpretations. Basic earnings per share is computed using
the weighted average shares outstanding.
Basic net loss per share was equivalent to diluted net loss per share
for the years ended December 31, 2001, 2000 and 1999 because common equivalent
shares from convertible preferred stock and stock options have been excluded as
their effect is antidilutive.
3. TKT EUROPE - 5S AB
In April 2000, the Company entered into an agreement with stockholders
of TKT Europe to establish the Company’s European sales and marketing
subsidiary. Prior to this agreement,
these stockholders were neither employees nor affiliated parties of the
Company. These stockholders are the
principal managers of TKT Europe and own a 20% interest in it, while the
Company owns the remaining 80% interest.
The agreement includes provisions entitling the Company to purchase the
stockholders’ ownership interest in TKT Europe in August 2004, under a
specified formula. Should the Company
not exercise that right, the stockholders of TKT Europe can require the Company
to purchase the stockholders’ ownership interest sixty days thereafter. The buyout price, which is dependent upon
the profitability of TKT Europe, cannot be determined at this time, but is
expected to be significant. If such
buyout occurs, it will be accounted for using the purchase method of accounting
in accordance with SFAS No. 141, “Business Combinations.”
4. MARKETABLE SECURITIES
The following is a
summary of available-for-sale securities:
These securities
are classified in the accompanying balance sheets at December 31 as follows:
Marketable
securities held at December 31, 2001 all mature in less than one year.
5. INVENTORIES
Inventories consist of the following at December 31, 2001:
6. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
Depreciation and amortization expense on property and equipment was
$5,886,000, $2,411,000 and $1,983,000 in 2001, 2000 and 1999, respectively.
7. ACCRUED EXPENSES
Accrued expenses
consist of the following at December 31:
8. LONG-TERM DEBT
In December 1998, the Company obtained an unsecured term loan facility
for $14,000,000 to finance the capital costs and equipment related to leased
space. This loan and all interest due
thereon was repaid in full in October 2001.
For the year ended December 31, 2001, interest expense totaled
$544,000. For the years ended December
31, 2000 and 1999, interest of $1,042,000 and $410,000, respectively, was
capitalized in connection with construction in process. Interest paid on the loan facility was
$808,000, $836,000 and $352,000 for the years ended December 31, 2001, 2000 and
1999, respectively.
9. LETTERS OF CREDIT
As of December 31, 2001, the Company had outstanding letters of credit
primarily related to lease obligations, totaling $7,450,000. Marketable securities totaling $8,715,000
are restricted and serve as collateral for the letters of credit.
10. STOCKHOLDERS’ EQUITY
PREFERRED STOCK
The Company has 10,000,000 shares of preferred stock authorized, of
which 10,000 shares have been designated for Series A Preferred Stock and
1,000,000 shares have been designated for Series B Junior Participating
Preferred Stock (“Series B Preferred Stock”).
SERIES A CONVERTIBLE PREFERRED STOCK
In June 2000, the Company sold 10,000 shares of Series A Preferred
Stock at the then current market value to investment funds affiliated with E.
M. Warburg, Pincus & Co., L.L.C., which has representatives on the
Company’s Board of Directors. Net
proceeds to the Company were $99,797,000.
In November 2001, the Company issued 3,571,000 shares of Common Stock
upon the conversion of all of the outstanding Series A Preferred Stock.
COMMON STOCK OFFERINGS
In December 2001, the Company sold 5,220,000 shares of its Common Stock
resulting in net proceeds to the Company of approximately $159,058,000.
In June 2001, the Company sold 3,565,000 shares of its Common Stock
resulting in net proceeds to the Company of $96,161,000.
SHAREHOLDER RIGHTS
PLAN
In December 2000,
the Company adopted a shareholder rights plan.
The plan is intended to provide TKT shareholders with an opportunity to
realize the full value of their investment and to provide fair and equal
treatment for all shareholders in the event that an unsolicited attempt is made
to acquire TKT.
Under the plan, a dividend of one Preferred Stock purchase right was
declared for each share of Common Stock held of record as of the close of
business on December 26, 2000. One million shares of Preferred Stock have been
designated as Series B Preferred Stock and are reserved for issuance in
connection with the plan. Each right
entitles the holder to purchase from the Company one one-thousandth of a share
of Series B Preferred Stock. Initially the rights are not exercisable and will
automatically trade with the underlying shares of Common Stock. The rights will
not become exercisable unless a person acquires, or commences a tender offer to
acquire, beneficial ownership of 20% or more of the Company’s outstanding
Common Stock, subject to certain limited exceptions. If the rights become
exercisable, each right would initially entitle shareholders of TKT, other than
the acquiring person, to purchase one
one-thousandth of a share of Series B Preferred Stock at an initial exercise
price of $289. If a person acquires beneficial ownership of 20% or more of the
Company’s outstanding Common Stock, subject to certain limited exceptions, each
right, other than those owned by the acquiring person, would entitle its holder
to purchase shares of the Company’s Common Stock having a market value of two
times the exercise price of the right.
The rights may be redeemed by the Board in certain circumstances and
will expire in December 2010 unless extended.
STOCK COMPENSATION PLANS
The Company has
adopted several stock compensation plans, which provide for the issuance of
incentive and non-qualified stock options, stock appreciation rights,
restricted stock, long-term performance awards and stock grants to employees,
Directors and consultants of the Company at prices determined by the Board of
Directors. At December 31, 2001, approximately 5,833,000 shares of Common Stock
have been reserved for issuance under the plans. Stock options generally vest
ratably over periods of up to six years and are exercisable for ten years from
the date of grant.
Stock
option activity under the plans is as follows:
The exercise price and life information for significant option groups
outstanding at December 31, 2001 is as follows:
Pursuant to the requirements of SFAS No. 123, the following are the pro
forma net loss and net loss per share amounts for 2001, 2000 and 1999, as if
stock-based compensation had been determined based on the fair value at the
grant date for grants in 2001, 2000 and 1999, consistent with the provisions of
SFAS No. 123:
The fair value of options issued pursuant to the plans at the date of
grant were estimated using the Minimum Value method for options granted prior
to the initial public offering and the Black-Scholes model for options granted
subsequent to the initial public offering. The estimation of the fair value of
these options at the date of grant used the following assumptions:
The Company has never declared or paid dividends on any of its capital
stock and does not expect to do so in the foreseeable future.
The pro forma effects on 2001, 2000 and 1999 net loss and net loss per
share of expensing the estimated fair value of stock options issued are not
necessarily representative of the effects on reporting the results of
operations for future years as the periods presented include only six, five,
and four years, respectively, of option grants.
11. LICENSE AND RESEARCH
AGREEMENTS
The Company has a license agreement with Aventis for the development
and commercialization of Dynepo.
Pursuant to this agreement, the Company is entitled to receive
non-refundable licensing fees upon the successful completion of certain development
and marketing milestones by Aventis totaling $48,000,000, of which $30,000,000
has been received. In addition, Aventis
is required to pay royalties based on net product sales. Due to the uncertainty involving both the
regulatory approval of Dynepo and ongoing litigation, there can be no assurance
that the Company will receive the remaining milestone payments or earn
royalties on product sales.
There were no revenues earned from Aventis for the year ended December
31, 2001. For the years ended December
31, 2000 and 1999, license and research revenues earned from Aventis totaled
$3,500,000 and $3,531,000, respectively.
At December 31, 2001, Aventis owned 2,187,000 shares of the Company’s
Common Stock.
The Company entered into a license agreement with Sumitomo to
commercialize Replagal in Japan and certain other Asian countries. For the years ended December 31, 2001, 2000
and 1999, license and research revenues from Sumitomo totaled $1,705,000,
$1,051,000 and $339,000, respectively.
In 2001 and 2000, the Company also received license and research
revenue from GI, the Company’s collaborative partner for its hemophilia A gene
therapy program, in the amount of $948,000 and $2,696,000.
The Company licenses certain technology from various universities and
research organizations. Under the terms of these agreements, the Company is
required to make payments of nonrefundable license fees and royalties on future
sales of products employing the technology.
12. EMPLOYEE RETIREMENT PLANS
The Company maintains a qualified defined contribution 401(k) plan
covering substantially all employees of the Company. The Company matches 50% of
employee contributions in cash, up to 7% of compensation subject to statutory
limits. Employer contributions vest ratably over five years. The related
expense was $795,000, $471,000 and $310,000 in 2001, 2000 and 1999,
respectively.
In 2000, the Company established a non-qualified deferred compensation
plan, which permits certain management employees to annually elect to defer a
portion of their compensation on a pre-tax basis. This plan generally provides payments upon retirement, death or
termination of employment. The related
liability is included in accrued expenses and amounted to $861,000 and $347,000
at December 31, 2001 and 2000, respectively.
In April 2001, the Company funded these obligations through the
establishment of trust accounts on behalf of the employees participating in the
plan. The trust accounts are included
in other assets in the accompanying balance sheets and totaled $682,000 at
December 31, 2001. Total compensation
expense totaled $225,000 and $150,000 in 2001 and 2000, respectively.
13. GAIN ON SALE OF INVESTMENT
In 1996, TKT made a strategic equity investment of $300,000 in a
European biotechnology company. In 2001, TKT sold all its investment, resulting
in a realized gain of $3,224,000.
14. INCOME TAXES
At December 31, 2001, the Company had unused net operating loss
carryforwards of $80,030,000 and research and development tax credits of
$42,367,000, which expire through 2022.
Due to the degree of uncertainty related to the ultimate use of the loss
carryforwards and tax credits, the Company has fully reserved this tax benefit.
Additionally, the future utilization of the net operating loss carryforwards
and tax credits may be subject to limitations under the change in stock
ownership rules of the Internal Revenue Service.
Significant
components of the Company’s deferred tax assets at December 31 are as follows:
The valuation allowance increased by $38,719,000 during 2001 primarily
due to the increase in net operating loss carryforwards and tax credits.
The difference between the Company’s expected tax benefit, as computed
by applying the U.S. federal corporate tax rate of 34% to the loss before
provision for income taxes, and the actual tax is attributable to tax losses
and credits for which the Company has not recognized any tax benefit.
15. COMMITMENTS AND
CONTINGENCIES
In April 1997, Amgen commenced a patent infringement action against the
Company and Aventis in the Massachusetts District Court.
In January 2001, the Massachusetts District
Court concluded that Dynepo infringed 8 of the 18 claims of patents asserted by
Amgen. Amgen did not seek and was not awarded monetary damages. The
Company and Aventis have filed an appeal of the decision with the Federal
Circuit. Amgen has also appealed this decision.
In addition, in July
1999, Aventis and the Company commenced legal proceedings in the U.K. against
Kirin-Amgen, seeking a declaration that a U.K. patent held by Kirin-Amgen will
not be infringed by the Company’s activities related to Dynepo and that certain
claims of Kirin-Amgen’s U.K. patent are invalid.
In
April 2001, the High Court of Justice in the United Kingdom ruled that
Dynepo infringed one of four claims of a patent asserted by Kirin-Amgen. The
Company and Aventis have filed an appeal of this decision. Kirin-Amgen has also
appealed this decision.
The Company believes that it and Aventis have
strong grounds for both of these appeals.
Pursuant to an Amended and Restated License Agreement, dated March
1995, by and between Aventis and the Company, Aventis has assumed the legal
costs of the Amgen and Kirin-Amgen litigation.
The Company will reimburse Aventis for the Company’s share of the
litigation expenses, as defined, from future royalties, if any, received from the
sale of Dynepo and in certain other circumstances.
The Company has been involved in patent litigation
relating to Replagal brought by Genzyme and Mount Sinai in the Delaware
District Court regarding a patent licensed by Genzyme from Mount Sinai. In January 2002,
the Delaware District Court dismissed this patent litigation, granting the
Company's motion for summary judgment of non-infringement and denying Genzyme's
motion for summary judgment of infringement.
In March 2002, Genzyme appealed the ruling of the District Court to the
Federal Circuit.
The Company can provide no assurance as to the outcome
of these proceedings. A decision by a court in any jurisdiction in a manner
adverse to the Company could have a material adverse effect on the Company’s business,
financial condition, and results of operations.
The Company occupies facilities under operating leases
that expire at various dates through 2011, subject to renewal provisions. Future annual minimum payments under such
commitments are as follows:
Rent expense was $3,898,000, $2,537,000 and $1,962,000 in 2001, 2000
and 1999, respectively.
At December 31, 2001, the Company had committed to pay approximately
$21,420,000 to third parties for certain product development activities through
2004. The Company has the right to
terminate the agreements upon six months written notice.
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required
by this item is contained in part under the caption “Executive Officers of the
Company” in PART I hereof, and in the Company’s Proxy Statement for the
Company’s Annual Meeting of Stockholders to be held on June 6, 2002 (the “Proxy
Statement”) under the caption “Proposal 1 - Election of Directors” and is
incorporated herein by this reference.
ITEM 11.
ITEM 11. EXECUTIVE
COMPENSATION
The information required
by this item is contained under the caption “Executive Compensation” in the
Company’s Proxy Statement and is incorporated herein by this reference.
ITEM 12.
ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required
by this item is contained in the Company’s Proxy Statement under the caption
“Security Ownership of Certain Beneficial Owners and Management” and is
incorporated herein by this reference.
ITEM
13.
ITEM
13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The information required
by this item is contained in the Company’s Proxy Statement under the caption
“Certain Transactions” and is incorporated herein by this reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS,
FINANCIAL STATEMENT SCHEDULES,AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this
Form 10-K:
1. Financial
Statements.
The
following financial statements and supplementary data are included as part of
this Annual Report on Form 10-K:
• Report
of Independent Auditors
• Consolidated
Balance Sheets as of December 31, 2001 and 2000
• Consolidated
Statements of Operations for the years ended
December 31, 2001, 2000
and 1999
• Consolidated
Statement of Stockholders’ Equity for the years ended
December 31, 2001, 2000
and 1999
• Consolidated
Statements of Cash Flows for the years ended
December 31, 2001, 2000
and 1999
2. Financial
Statement Schedules.
The Company is not filing any financial statement schedules as part of
this Annual Report on Form 10-K because they are not applicable or the required
information is included in the financial statements or notes thereto.
3. Exhibits.
The Exhibits listed in the Exhibit Index immediately preceding such
Exhibits are filed as part of this Annual Report on Form 10-K, and such Exhibit
Index is incorporated herein by reference.
(b) Reports on Form 8-K:
Report on Form 8-K filed December 3, 2001, announcing
that the Honorable Gregory M. Sleet of the Delaware District Court has issued
an opinion from the “Markman hearing” favorably construing the claims in an
infringement suit Genzyme and Mount Sinai brought against the Company and that
the Company intends to move for summary judgment that Replagal does not
infringe the patent of Genzyme and Mount Sinai.
Report on Form 8-K filed December 12, 2001, announcing
that the CPMP of EMEA has issued a positive opinion recommending approval of
Dynepo.
Report on Form 8-K filed December 13, 2001, announcing
a public offering of 2,800,000 shares of its common stock at a price to the
public of $39.00 per share.
Report on Form 8-K filed December 18, 2001, announcing
that the Delaware District Court will dismiss the patent litigation Genzyme and
Mount Sinai brought against the Company.
Report on Form 8-K filed
December 18, 2001, announcing the completion of its previously announced
follow-on public offering, raising a total of $125,580,000 before underwriting
discounts and commissions.
Report on Form 8-K filed
December 21, 2001, announcing a public offering of 1,000,000 shares of its
common stock at a price to the public of $42.00 per share.
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant, in the capacities and on the dates
indicated.
Signature
Title
Date
/s/ Richard F Selden
President, Chief
Executive Officer and Director (Principal Executive Officer)
March 29, 2002
Richard F Selden
/s/ Daniel E. Geffken
Senior Vice President,
Finance and Chief Financial Officer
(Principal Accounting and Financial Officer)
March 29, 2002
Daniel E. Geffken
/s/ Rodman W. Moorhead,
III
Chairman of the Board
of Directors
March 29, 2002
Rodman W. Moorhead, III
/s/ Jonathan S. Leff
Director
March 29, 2002
Jonathan S. Leff
/s/ William R. Miller
Director
March 29, 2002
William R. Miller
/s/ Walter Gilbert
Director
March 29, 2002
Walter Gilbert
/s/ James E. Thomas
Director
March 29, 2002
James E. Thomas
/s/ Wayne P. Yetter
Director
March 29, 2002
Wayne P. Yetter
Exhibit Index
Exhibit
No.
Description
3.1
Amended and Restated Certificate of Incorporation of
the Registrant. (1)
3.2
Certificate of Amendment of Amended and Restated
Certificate of Incorporation of the Registrant, dated June 15, 2000. (2)
3.3
Certificate of Designation, Number, Voting Powers,
Preferences and Rights of Series A Convertible Preferred Stock of the
Registrant, dated June 9, 2000. (2)
3.4
Certificate of Designation of Series B Junior
Participating Preferred Stock of the Registrant, dated December 13, 2000. (3)
3.5
Amended and Restated By-Laws of the Registrant. (4)
3.6
Amendment No. 1 to Amended and Restated By-Laws. (2)
3.7
Amendment
No. 2 to Amended and Restated By-Laws. (3)
4.1
Rights Agreement dated December 13, 2000, between
Registrant and Equiserve Trust Company, N.A. (5)
10.1
Lease Agreement, dated January 1, 1994, for office
space at 195 Albany Street, Cambridge, Massachusetts, by and between the
Trust under the Will of Harry F. Stimpson and the Registrant. (6)
10.2
Sublease Agreement, dated April 7, 1992, for office
space located at 185 Albany Street, Cambridge, Massachusetts, by and between
the Massachusetts Institute of Technology and the Registrant. (6)
10.3
1993 Non-Employee Directors’ Stock Option Plan. (6)
(7)
10.4
1993 Long-Term Incentive Plan. (7) (8)
10.5
Form of Letter Agreement re: Confidentiality,
Inventions and Non-Disclosure. (6)
10.6
Form of Letter Agreement re: Restricted Stock. (6)
10.7
Form of Scientific Advisor Agreement. (6)
10.8
Employment Agreement, dated June 19, 1991, by and
between Dr. Richard F Selden and the Registrant. (6) (7)
10.9
Employment Agreement, dated July 26, 1991, by and
between Dr. Douglas A. Treco and the Registrant. (6) (7)
10.10
Agreement, dated September 1, 1991, by and between
Mr. William R. Miller and the Registrant. (6) (7)
10.11
Collaboration and License Agreement, dated July 22,
1993 and amended on May 30, 1996, by and between Genetics Institute, Inc. and
the Registrant. (5) (9)
10.12
Amended and Restated License Agreement, dated March
1, 1995, by and between Aventis S.A. and the Registrant. (6) (9)
10.13
Employment Agreement, dated February 20, 1997, by
and between Mr. Daniel E. Geffken and the Registrant. (7) (10)
10.14
Employment Agreement, dated April 12, 1999, by and
between Mr. William H. Pursley and the Registrant. (7) (11)
10.15
Common Stock Purchase Agreement by and between each
Purchaser of shares in the Registrant’s private placement of common stock in
November 1999 and the Registrant. (12)
10.16
Agreement, dated November 15, 1999, by and between
Mr. Wayne P. Yetter and the Registrant. (7)(12)
10.17
Registration Rights Agreement, dated June 9, 2000,
by and between certain holders of Series A Convertible Preferred Stock and
the Registrant. (13)
10.18
Agreement, dated April 20, 2000, by and between Dr.
Walter Gilbert and the Registrant. (7) (13)
10.19
Agreement, dated June 16, 2000, by and between Mr.
James E. Thomas and the Registrant. (7) (13)
10.20
Employment Agreement, dated May 18, 2000, by and
between Mr. Michael J. Astrue and the Registrant. (7) (13)
10.21
Lease Agreement, dated August 4, 2000, for new
corporate headquartersand research and development space in Cambridge,
Massachusetts, by and between the Massachusetts Institute of Technology and
the Registrant. (14)
10.22
Purchase and Sale and Assignment Agreement, dated
November 28, 2000, by and between Serono, Inc. and the Registrant. (3)
10.23
First Amendment to Purchase and Sale and Assignment
Agreement, dated February 8, 2001, by and between Serono, Inc. and the
Registrant. (3)
10.24
Lease Agreement, dated February 2001, by and between
Trinet Property Partners, L.P and the Registrant. (3)
10.25
Reimbursement Agreement, dated May 18, 2000, by and
between Mr. William H. Pursley and the Registrant. (3)
10.26
2001 Non-Officer Employee Stock Incentive Plan. (3)
10.27
2000 Nonqualified Deferred Compensation Plan. (3)
10.28
Stockholders’ Agreement, dated as of April 12, 2000,
by and among certain other stockholders in TKT Europe 5S AB, a corporation
organized under the laws of Sweden, and the Registrant. (15)
10.29
Employment Agreement, dated December 13, 2001 by and
between Dr. David D. Pendergast and the Registrant. (16)
10.30
Employment Agreement, dated March 18, 2002, by and
between Dr. Renato Fuchs and the Registrant. (16)
21.1
Subsidiaries of the Registrant.
23.1
Consent of Ernst & Young LLP.
25.1
Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of the Trustee under the Senior Indenture
will be incorporated herein by reference from a subsequent filing in
accordance with Section 305(b)(2) of the Trust Indenture Act of 1939. (17)
25.2
State of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of the Trustee under the Subordinated
Indenture will be incorporated herein by reference from a subsequent filing
in accordance with Section 305 (b)(2) of the Trust Indenture Act of
1939. (17)
FOOTNOTES
1.
Filed as an
exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 (File No. 0-21481) and incorporated herein by reference.
2.
Filed as an
exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000 (File No. 0-21481) and incorporated herein by reference.
3.
Filed as an
exhibit to this Annual Report on Form 10-K for the year ended December 31,
2000 (File No. 0-21481) and incorporated herein by reference.
4.
Filed as an
exhibit to the Company’s Annual Report on Form 10-K for the year ended
December 31, 1997 (File No. 0-21481) and incorporated herein by reference.
5.
Filed as an
exhibit to the Company’s Report on Form 8-K filed with the SEC on December
14, 2000 (File No. 0-21481) and incorporated herein by reference
6.
Filed as an
exhibit to the Company’s Registration Statement on Form S-1 (File No.
333-10845)and incorporated herein by reference.
7.
Management
contract or compensation plan or arrangement required to be filed as an
exhibit pursuant to Item 14(c) of Form 10-K.
8.
Filed as an
exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 (File No. 0-21481) and incorporated herein by reference.
9.
Confidential
treatment granted as to certain portions.
10.
Filed as an
exhibit to the Company’s Annual Report on Form 10-K for the year ended
December 31, 1996 (File No. 0-21481) and incorporated herein by reference.
11.
Filed as an
exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999 (File No. 0-21481) and incorporated herein by reference.
12.
Filed as an
exhibit to the Company’s Annual Report on Form 10-K for the year ended
December 31, 1999 (File No. 0-21481) and incorporated herein by reference.
13.
Filed as an
exhibit to the Company’s Quarterly Report on From 10-Q for the quarter ended
March 31, 2000 (File No. 0-21481) and incorporated herein by reference.
14.
Filed as an
exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000 (File No. 0-21481) and incorporated herein by reference.
15.
Filed as an
exhibit to the Company’s Report on Form 8-K filed with the SEC on June 15,
2001 (File No. 0-21481) and incorporated herein by reference.
16.
Filed as an
exhibit to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2001 (File No. 0-21481) and incorporated herein by reference.
17.
Filed as an
exhibit to the Company’s Registration Statement on Form S-3 filed with the
SEC on December 13, 2000 (File No. 333-51772) and incorporated herein by
reference.