The Medicines Company (MDCO)
Q3 2008 Earnings Call
October 22, 2008 08:30 am ET
Robyn Brown - VP of IR
Glenn Sblendorio - EVP and CFO
John Kelley - President and COO
Clive Meanwell - Chairman and CEO
Matt Duffy - BDR
Joseph Schwartz - Leerink Swann
Liana Moussatos - Pacific Growth Equities
Steve Harr - Morgan Stanley
Maged Shenouda - UBS
Jason Kantor - RBC Capital Markets
Biren Amin - The Stanford Group
Lucy Lu - Citi
Previous Statements by MDCO
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I will now turn the call over to Ms. Robyn Brown, Vice President of Investor Relations.
Thank you Lisa, and welcome everyone to The Medicines Company third quarter 2008 Earnings Call. I am Robyn Brown, Vice President of Investor Relations. This morning, I am joined by Glenn Sblendorio, our Executive Vice President and Chief Financial Officer, who will review our financial results and update our guidance for 2008; John Kelley, our President and Chief Operating Officer, who will provide an operating review and Clive Meanwell, our Chairman and Chief Executive Officer, who will moderate a Q&A session at the end of the call.
I would like to remind you that this conference call will contain forward-looking statements, which involve a number of risks and uncertainties. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are identified in the Company’s SEC filings including the 10-Q filed with the SEC on August 11, 2008, which is incorporated here and by reference.
I would also note that during the call, we may refer to non-GAAP measures, which exclude the impact of the Curacyte Discovery acquisition, stock-based compensation expense and the non-cash provision for income taxes and the impact of the Nycomed transaction. Please refer to the non-GAAP reconciliation tables in our press release and the 3Q’08 conference call summary fact sheet on our website.
Now, I’ll turn the call over to Glenn Sblendorio. Glenn?
Thank you, Robyn and good morning everyone. I will start this morning’s call with a review of the financial results for the third quarter, which includes the accounting treatment of our acquisition of Curacyte Discovery.
For the third quarter 2008 total worldwide net revenues were $88.1 million, compared to $62.2 million in the third quarter of 2007, an increase of 25.9 or 42%. US Angiomax net sales in the third quarter were $85 million, compared to $60.7 million in the third quarter 2007, an increase of $24.3 million or 40%. Approximately 60% of the increase year-over-year was due to additional sales volume and the remaining 40% related to price increases, which are supported by strong clinical and health economic data.
We are increasing our full year guidance for US Angiomax sales by $5 million to $325 million to $335 million up from $320 million to $330 million. International revenues increased $1.6 million to $3.1 million in the third quarter of 2008, compared to $1.5 million in the same quarter of 2007. During the third quarter we assumed responsibility for distribution in 18 of the 23 Nycomed territories. Transition of the remaining territories to Medco will be completed in the fourth quarter of this year.
On September 15, we launched Cleviprex and shipped initial gross wholesale orders that totaled approximately $10 million. We deferred revenue on these orders in the third quarter, and Cleviprex is a new product and we do not have enough history to estimate our gross to net adjustments or sales patterns. However, we reiterate our full year 2008 guidance for Cleviprex of $5 million to $10 million.
Total worldwide net revenues for the first nine months of 2008 were $254.3 million compared to $185.2 million in the first nine months of 2007, and increase of $69.1 million or 37%. There were no significant changes in inventory levels for Angiomax at the wholesalers, which remained within our targeted range of four to six weeks. Cost of revenue was 25% for the third quarter 2008, compared to 26% for the third quarter 2007. The positive change in cost of revenues is predominantly due to higher gross margin on international sales which we now recognize a 100% and continued favorability in our gross to net adjustments for Angiomax which were below 7% for the quarter.
During the quarter, we completed the acquisition and integration of Curacyte Discovery GmbH and the lead compound which is being developed for the prevention of surgical blood loss. The total cash paid for the acquisition was $23.7 million, which included that the purchase price of $22.9 million and other capitalized cost associated with the acquisition of approximately $800,000. $21.4 million of the purchase price was expenses in-process research and development during the quarter and the remaining purchase price was allocated to net tangible assets.
The after tax impact net of an $8.2 million tax benefit was a loss of $13.2 million or 25% per share in the quarter. R&D expense increased $25.4 million to $44.1 million, compared to $18.7 million in the third quarter of 2007. This was primarily due to the following; $21 million - $21.4 million related to in process R&D that I just spoke it for Curacyte. Increased cangrelor spending of $2.9 million as our two Phase III clinical trials CHAMPION PCI and PLATFORM continued and an increase of $1.5 million in connection with lifecycle initiatives and expanded business development efforts.