10-Q
MEDICINES CO /DE filed this form 10-Q on 15 May 2002
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During the year ended December 31, 2000, we recorded deferred stock compensation
on the grant of stock options of approximately $17.3 million, representing the
difference between the exercise price of such options and the fair market value
of our common stock at the date of grant of such options. The exercise prices of
these options were below the estimated fair market value of our common stock as
of the date of grant based on the estimated price of our common stock in our
initial public offering. No additional deferred stock compensation was recorded
during the three months ended March 21, 2002 or during the full year 2001
because all grants of stock options during these periods were issued at the fair
market value on the date of grant.

We amortize deferred stock compensation over the respective vesting periods of
the individual stock options. We recorded amortization expense for deferred
stock compensation of approximately $985,000 and $1.1 million for the three
months ended March 31, 2002 and 2001, respectively. We expect to record
amortization expense for the deferred stock compensation as follows:
approximately $2.3 million for the remainder of 2002, approximately $2.9 million
in 2003 and approximately $1.0 million in 2004.

We have not generated taxable income to date. At December 31, 2001, net
operating losses available to offset future taxable income for federal income
tax purposes were approximately $173 million. If not utilized, federal net
operating loss carryforwards will expire at various dates beginning in 2011 and
ending 2021. We have not recognized the potential tax benefit of our net
operating losses in our statements of operations. The future utilization of our
net operating loss carryforwards may be limited pursuant to regulations
promulgated under the Internal Revenue Code of 1986, as amended.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

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

The SEC has indicated that critical accounting estimates and judgments are those
which are both important to the portrayal of the company's financial condition
and results and require management's most difficult, subjective or complex
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain.

Our significant accounting policies are more fully described in the Notes To
Unaudited Consolidated Financial Statements section of this Quarterly Report on
Form 10-Q and in Note 2 of the Company's Annual Report on Form 10-K for the year
ended December 31, 2001. Not all of these significant accounting policies,
however, require management to make difficult, complex or subjective judgments
or estimates. We believe that our accounting policies relating to revenue
recognition and inventory, as described under the caption "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Critical Accounting Policies" in our Form 10-K as of December 31, 2001, fit the
definition of "critical accounting estimates and judgments."

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