The Medicines Company (MDCO)
Q1 2008 Earnings Call Transcript
April 23, 2008 8:30 am ET
Robyn Brown – VP, IR
Glenn Sblendorio – EVP and CFO
Clive Meanwell – Chairman and CEO
John Kelley – President and COO
Liana Moussatos – Pacific Growth Equities
Matt Duffy – Black Diamond Research
Lucy Lu – Citigroup
Joseph Schwartz – Leerink Swann
Biren Amin – Stanford Group
Previous Statements by MDCO
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I will now turn the call over to Ms. Robyn Brown, Vice President of Investor Relations. Please go ahead, ma'am.
Thank you Jake and welcome everyone to The Medicines Company first quarter 2008 earnings conference call. I'm 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 the first quarter financial results. John Kelley, our President and Chief Operating Officer will provide an operations review. And Clive Meanwell, our Chairman and Chief Executive Officer will moderate a Q&A session at the end of the call.
I would like to remind that you 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-K filed with the SEC on February 29, 2008, which is incorporated herein by reference.
I would also note that during the call, we may refer to non-GAAP measures, which exclude stock-based compensation expense and the noncash provision for income taxes. Please refer to the non-GAAP reconciliation tables in our press release and the 1Q '08 conference call summary fact sheet on our Web site.
Now, I'll turn the call over to Glenn Sblendorio. Glenn?
Thank you Robin and good morning everyone. I will start this morning's call with a review of the financial results for the first quarter 2008, and then will turn the call over to John for an operational update. As we reported this morning, total net revenues for the first quarter of 2008 were $79.4 million compared to $66.6 million in the first quarter of 2007, an increase of $12.8 million or 19%.
U.S. Angiomax sales in the first quarter of 2008 were $76.9 million compared to $66.3 million in the first quarter of 2007, an increase of $10.6 million or 16%. International revenues totaled $2.5 million in the first quarter of 2008 compared to $300,000 in the second quarter of 2007. Approximately $1.3 million of the increase relates to our transition agreement with Nycomed, of which end user sales in the ex-Nycomed territories totaled approximately $2.9 million. There were also revenues of $1.2 million from the non-Nycomed territories.
Cost of revenue was 24% for the first quarter of 2008 compared to 27% for the first quarter of 2007. The change in cost of revenues is driven by the increase in revenue from our transition agreement with Nycomed and $1.4 million in credits due from our U.S. wholesalers in connection with our price increase announced in January 2008. The $1.4 million credit decreased our gross to net adjustment to 5% for the quarter.
Inventory at the wholesalers continues to remain within our targeted range of approximately four to six weeks. R&D spending was $18.7 million for the first quarter of 2008 continue to $19.5 million during the first quarter of 2007. The as-expected 4% decrease in R&D primarily related to decreased expenditures in connection with Angiomax and Cleviprex, offset by an increase in the ongoing Cangrelor clinical trial development program.
R&D investment in our pipeline products, Cangrelor and Cleviprex accounted for 74% of the total R&D spend, which reflects the continued shift in our R&D investments to our pipeline products. We also continue to increase our business development expenses in connection with our efforts to evaluate and acquire product opportunities that could expand our product portfolio. These costs are included in R&D.
SG&A spend for the first quarter of 2008 increased approximately 30% to $35.4 million for the first quarter of 2008 from $27.1 million for the same period in 2007. The increase in selling, general and administrative expenses of $8.2 million was primarily due to an increase in Cleviprex expenses of $3 million in preparation for the anticipated launch of the product and $3 million in costs associated with our European expansion. The remaining increase is due to stock-based compensation expense and other headcount related costs.
Total stock-based compensation expense was $4.6 million in the first quarter of 2008 compared to $3.5 million in the first quarter of 2007. Stock compensation expenses included in cost of revenue, R&D and SG&A at 3%, 15%, and 82% respectively in the first quarter.
Interest income for the first quarter of 2008 was $2.4 million compared to $2.6 million in the first quarter of 2007. The decrease in other income of approximately $0.2 million was primarily due to lower rates of return on our cash and available assets securities. The provision for income tax was $3.9 million based on pretax income of $8.7 million in the first quarter of 2008 as compared to $1.8 million provision for the first quarter of 2007. This resulted in an effective tax rate of 44% in the first quarter of 2008 and 37% in the first quarter of 2007. Of the $3.9 million income tax provision, $900,000 was cash and $3 million was noncash as we utilized our NOLs.