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GENOME THERAPEUTICS 2003 ANNUAL REPORT Introducing A GENOME A/R COVER 4/16/04 4:18 PM Page 1 GENOME THERAPEUTICS 2003 ANNUAL REPORT GENOME THERAPEUTICS GENOME THERAPEUTICS 100 BEAVER STREET WALTHAM, MA 02453 T: (781) 398-2300 F: (781) 893-9535 WWW.GENOMECORP.COM 2003 ANNUAL REPORT Introducing a promising new pipeline of anti-infectives GENOME A/R COVER 4/16/04 4:18 PM Page 2 ANNUAL MEETING TRANSFER AGENT The Annual Meeting of Shareholders will be held on April 13, 2004 Questions concerning taxpayer identification numbers, transfer at Ropes & Gray, One International Place, 100 Oliver Street, 36th procedures and other stock account matters should be addressed to: Floor, Boston, MA at 9:00 AM. EquiServe Trust Company N.A. P.O. Box 43010, Providence, RI 02940-3010 SEC FORM 10-K Website: www.equiserve.com Shareholders may obtain a copy of the Company’s Annual Report on Phone: 816-843-4299 form 10-K filed with the Securities and Exchange Commission, includ- ing the financial schedules, by visiting the investors section of www.genomecorp.com or by sending a written request to: GENERAL COUNSEL Investor Relations, Genome Therapeutics Corp., 100 Beaver Ropes & Gray Street, Waltham, MA 02453, investors@genomecorp.com. One International Place Boston, MA 02110 BOARD OF DIRECTORS David B. Singer This Annual Report may contain forward-looking statements made pur- Chairman, Genome Therapeutics suant to the safe harbor provisions of the Private Securities Former CEO and Chairman, Genesoft Pharmaceuticals Litigation Reform Act of 1995. Forward-looking statements repre- Luke B. Evnin, Ph.D. sent our management’s judgment regarding future events. Forward- General Partner, MPM Capital looking statements typically are identified by use of terms such as Vernon R. Loucks, Jr. “may,” “will,” “should,” “plan,” “expect,” “intend,” “anticipate,” Former CEO and Chairman, Baxter International “estimate,” and similar words, although some forward-looking statements are expressed differently. We do not plan to update Robert J. Hennessey Former CEO and Chairman, Genome Therapeutics these forward-looking statements. You should be aware that our actual results could differ materially from those contained in the for- PRODUCT PIPELINE Steven M. Rauscher ward-looking statements due to a number of risks affecting our busi- President and Chief Executive Officer, Genome Therapeutics ness. These factors include the risk that the two companies’ Preclinical Phase I Phase II Phase III FDA-Approved William S. Reardon businesses will not be integrated successfully and the significant costs Retired Partner, PricewaterhouseCoopers LLP related to the integration. In addition, our business is significantly FACTIVE ® Tablets Norbert G. Riedel, Ph.D. dependent upon our ability to launch the commercial sale of FACTIVE ® ABECB Chief Scientific Officer, Baxter International tablets, and, due to the limitations on our resources and experience FACTIVE ® Tablets William J. Rutter, Ph.D. in commercializing products; there can be no assurance that we will CAP Co-founder and former Chairman, Chiron be able to successfully launch FACTIVE ® tablets. Even if we succeed in launching FACTIVE ® tablets, the product may not gain market FACTIVE ® Tablets David K. Stone Acute Bacterial Sinusitis Managing Director, Flagship Ventures (OneLiberty, AGTC, NewcoGen) acceptance due to competition from competing products or unantic- ipated safety, efficacy, manufacturing or other regulatory issues. It is Ramoplanin also uncertain whether we will be able to expand the indications for VRE BSI Prevention SENIOR MANAGEMENT TEAM Steven M. Rauscher which FACTIVE ® tablets are approved as a result of, for example, fail- Ramoplanin President and Chief Executive Officer ures in future clinical trials or safety concerns. We continue to be sub- C. difficile-Associated Diarrhea ject to the risks related to our lead product candidate, Ramoplanin, Gary Patou, M.D. FACTIVE ® Intravenous Executive Vice President, Chief Medical Officer such as (i) our inability to obtain regulatory approval to commercial- Bacterial Infections ize Ramoplanin due to negative, inconclusive or insufficient clinical data Stephen Cohen and (ii) delays in the progress of our clinical trials for Ramoplanin, and Oral PDF Inhibitors Senior Vice President and Chief Financial Officer Respiratory Tract Infections increased cost, due to the pace of enrollment of patients in the trials Martin D. Williams or fluctuations in the infection rate of enrolled patients. We are also Senior Vice President, Corporate Development and Marketing For more information, please visit www.genomecorp.com. subject to risks related to our inability or the inability of our alliance Timothy S. Leach, M.D., M.P.H. partners to successfully develop and commercialize products based Vice President, Clinical and Medical Affairs on our discoveries. In addition, we are subject to the risk factors set Joseph A. Pane forth in Exhibit 99.1 to the Company’s Annual Report on Form 10-K Vice President, Human Resources Genome Therapeutics is a biopharmaceutical company committed to the clinical development and commer- for the year ended December 31, 2003 and those set forth in Christopher J.M. Taylor other filings that we may make with the Securities and Exchange cialization of important new therapeutics to fill unmet medical needs. Vice President, Corporate Communications Commission from time to time. The Company is preparing for a launch in the second half of 2004 of its lead product, Glenn S. Tillotson, F.R.S.M., F.C.C.P. ® FACTIVE® (gemifloxacin mesylate) tablets, recently approved by the FDA. In addition, the Company also Vice President, Scientific and Medical Relations FACTIVE tablets should only be used to treat infections that are proven or strongly suspected to be caused by bacteria. It does not has a novel antibiotic candidate, Ramoplanin, in a Phase II trial for the treatment of Clostridium difficile- CORPORATE HEADQUARTERS treat viral infections. For important information concerning the associated diarrhea and in Phase III development for the prevention of vancomycin-resistant Genome Therapeutics Corp. safety and use of FACTIVE ® tablets, including information on enterococci bloodstream infections. The Company’s preclinical programs include an oral peptide 100 Beaver Street adverse reactions, drug interactions, contraindications, warnings, Waltham, MA 02453 precautions and dosage and administration, please see the deformylase inhibitor series for the potential treatment of respiratory tract infections, as well as a Phone: 781-398-2300 package insert available at www.factive.com. FACTIVE ® intravenous formulation. Fax: 781-893-9535 Website: www.genomecorp.com GENOME A/R LETTER 4/16/04 3:31 PM Page 2 TO OUR SHAREHOLDERS, One of 21 new drugs approved by the Food and Drug Administration in 2003, FACTIVE® (gemifloxacin mesy- late) tablets, is the cornerstone of our product pipeline. As we focus on preparations for the commercial launch of FACTIVE tablets for its two approved indications later this year, we are pleased to provide this report of our progress and financial results for the past year. First, we are grateful for the overwhelming support and mandate shareholders gave management to pursue our merger with Genesoft Pharmaceuticals. Through the merger, which closed on February 6, 2004, we now have a robust pipeline in the anti-infective field. We also have significantly more capital than in the past, as we raised approximately $81 million in net proceeds through a common stock offering concurrent with the merger. Our financial results for 2003 reflected our commitment to growing into an operating company with our own products. We divested our service business and concluded early-stage research programs, while we expanded and strengthened our capabilities in clinical development and product commercialization. FACTIVE tablets, being readied for launch into the $3 billion fluoroquinolone market, are approved in the U.S. for treating community acquired pneumonia (CAP) of mild to moderate severity and acute bacterial exacerbations of chronic bronchitis (ABECB). FACTIVE tablets, administered once daily for short courses of therapy, were studied in 14 Phase III clinical trials and demonstrated strong in vitro and in vivo activity against serious respiratory pathogens. It is the only antibiotic approved for the treatment of multi-drug resistant Streptococcus pneumoniae. We encourage you to read more about the product in the attached Annual Report on Form 10-K, and for full prescribing information, please visit www.factive.com. Looking ahead, we plan to pursue expansion of the market opportunity for FACTIVE tablets by filing a New Drug Application in a third indication — acute bacterial sinusitis — and to initiate a Phase I trial of the FACTIVE intravenous formulation. In 2003, we expanded the clinical development program for our lead clinical candidate, Ramoplanin, by initiating a Phase II clinical trial of the novel antibiotic in a second indication: treatment of Clostridium difficile-associated diarrhea (CDAD). The Phase II trial is expected to be completed in the coming months GENOME A/R LETTER 4/16/04 3:31 PM Page 3 and, pending a successful outcome, we expect to commence the Phase III program for Ramoplanin in CDAD by the end of 2004. The FDA recently granted Fast Track status for the development of Ramoplanin to treat CDAD. Fast Track status is applied to products intended to treat serious or life-threatening conditions that demonstrate the potential to address unmet medical needs. The Phase III trial of Ramoplanin for the
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