Add
MDCO to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| MDCO > SEC Filings for MDCO > Form 10-Q on 9-Nov-2009 | All Recent SEC Filings |
9-Nov-2009
Quarterly Report
Except for 2004 and 2006, we have incurred net losses on an annual basis
since our inception. As of September 30, 2009, we had an accumulated deficit of
approximately $270.7 million. We expect to make substantial expenditures to
further develop and commercialize our products, including costs and expenses
associated with clinical trials, regulatory approvals and commercialization.
Although we achieved profitability in 2004 and in 2006 and expect to be
profitable in 2009, we were not profitable in 2008 primarily as a result of the
costs incurred in connection with our acquisition of Curacyte Discovery in
August 2008 and were not profitable in 2007, primarily as a result of the costs
incurred in connection with the Nycomed transaction. We will likely need to
generate significantly greater revenue in future periods to achieve and maintain
profitability in light of our planned expenditures.
Distribution and Sales
We distribute Angiomax and Cleviprex in the United States through a sole
source distribution model. Under this model, we sell Angiomax and Cleviprex to
our sole source distributor, Integrated Commercialization Solutions, Inc., or
ICS, which then sells Angiomax and Cleviprex to a limited number of national
medical and pharmaceutical wholesalers with distribution centers located
throughout the United States and, in certain cases, directly to hospitals. Our
agreement with ICS, which we initially entered into in February 2007, provides
that ICS will be our exclusive distributor of Angiomax and Cleviprex in the
United States. Under the terms of this fee for service agreement, ICS assumes
all credit and inventory risks, is subject to our standard returns policy,
places order with us for sufficient quantities of Angiomax and Cleviprex to
maintain an appropriate level of inventory based on its customers' historical
purchase volumes and has sole responsibility for determining the prices at which
it sells Angiomax and Cleviprex, subject to specified limitations in the
agreement. The agreement terminates on February 28, 2010, but will automatically
renew for additional one-year periods unless either party gives notice at least
120 days prior to the automatic extension. We may also terminate the agreement
at any time and for any reason upon prior written notice to ICS and payment of a
termination fee of between $100,000 and $250,000. Outside the United States, we
sell Angiomax either directly to hospitals or to wholesalers or international
distributors, which then sell Angiomax to hospitals.
The reacquisition of all development, commercial and distribution rights for
Angiox from Nycomed in 2007 was our first step directly into international
markets and gives us a direct presence in European markets. In July 2007, we
entered into a series of agreements with Nycomed pursuant to which we terminated
the prior distribution agreement with Nycomed and re-acquired all development,
commercial and distribution rights for Angiox in the European Union (excluding
Spain, Portugal and Greece, which territories are served by a different
third-party distributor) and the former Soviet republics, which we refer to as
the Nycomed territory. Prior to entering into the 2007 Nycomed agreements,
Nycomed served as the exclusive distributor of Angiox in the Nycomed territory
pursuant to a sales, marketing and distribution agreement, dated March 25, 2002,
as amended. Pursuant to the 2007 Nycomed agreements, we and Nycomed agreed to
transition the Angiox rights held by Nycomed to us. Under these arrangements,
including a transitional distribution agreement, we assumed control of the
marketing of Angiox immediately and Nycomed provided, on a transitional basis,
sales operations services, until December 31, 2007 and product distribution
services until the second half of 2008. We assumed control of the distribution
of Angiox in the Nycomed territory during the second half of 2008.
Under the terms of the transitional distribution agreement with Nycomed, upon
the sale by Nycomed to third parties of vials of Angiox purchased by Nycomed
from us prior to July 1, 2007, which we refer to as existing inventory, Nycomed
agreed to pay us a specified percentage of Nycomed's net sales of Angiox, less
the amount previously paid by Nycomed to us for the existing inventory. Under
the transitional distribution agreement, upon the termination of the agreement,
Nycomed had the right to return any existing inventory for the price paid by
Nycomed to us for such inventory. We recorded a reserve of $3.0 million in the
fourth quarter of 2007 for the existing inventory at Nycomed which we did not
believe would be sold prior to the termination of the transitional distribution
agreement and would be subject to purchase in accordance with the agreement.
During 2008, we reduced the reserve by $2.2 million as Nycomed sold a portion of
its existing inventory during the year. Included within our accrual for product
return is a reserve of $0.8 million at December 31, 2008 for existing inventory
at Nycomed that Nycomed has the right to return at any time. In July 2009, we
reimbursed Nycomed $0.8 million for the final amount of inventory held by
Nycomed at December 31, 2008. The transitional distribution agreement terminated
on December 31, 2008.
We incurred total costs of $45.7 million in connection with the reacquisition
of the rights to develop, distribute and market Angiox in the Nycomed territory.
This total costs amount includes transaction fees of approximately $0.7 million
and agreed upon milestone payments of $20.0 million paid to Nycomed on July 2,
2007, $15.0 million paid to Nycomed on January 15, 2008 and $5.0 million paid to
Nycomed on July 8, 2008, as well as an additional $5.0 million paid to Nycomed
on July 8, 2008 in connection with our obtaining European Commission approval to
market Angiox for ACS in January 2008.
During the third quarter of 2007, we allocated $30.8 million of these costs
as expense attributable to the termination of the prior distribution agreement
with Nycomed and $14.9 million to intangible assets. The $30.8 million expense
was offset in part by the write-off of approximately $2.7 million of deferred
revenue, which amount represented the unamortized portion of deferred revenue
related to milestone payments received from Nycomed in 2004 and 2002. We
included such amounts in selling, general and administrative expense on the
consolidated statements of operations for the year ended December 31, 2007. We
allocated approximately $14.9 million of the costs associated with the
reacquisition of the rights to develop, distribute and market Angiox in the
European Union to intangible assets. We are amortizing these intangible assets
over the remaining patent life of Angiox, which expires in 2015. The period in
which amortization expense will be recorded reflects the pattern in which we
expect the economic benefits of the intangible assets to be consumed.
To support the marketing, sales and distribution efforts of Angiomax, we are
continuing to develop our business infrastructure outside the United States. We
initiated research to understand the PCI market, as well as the hypertension
market, on a global basis, including profiling hospitals and identifying key
opinion leaders. Since reacquiring these rights from Nycomed, we have formed
subsidiaries in the Netherlands, Switzerland, Germany, France, Italy, Sweden,
Poland, Denmark, Austria and Belgium, in addition to our pre-existing subsidiary
in the United Kingdom, in connection with the development of a business
infrastructure to conduct the international sales and marketing of Angiox. We
also obtained all the licenses and authorizations necessary to distribute the
product in the various countries in Europe, hired new personnel and entered into
third-party arrangements to provide services, such as importation, packaging,
quality control and distribution. We believe that by establishing operations in
Europe for Angiox, we will be positioned to commercialize our pipeline of
critical care product candidates, including Cleviprex, cangrelor, oritavancin
and CU2010, if and when they are approved.
Targanta Acquisition
In February 2009, we acquired Targanta Therapeutics Corporation, or Targanta.
Under the terms of our agreement with Targanta, we paid Targanta shareholders
$2.00 in cash at closing for each common share of Targanta common stock
tendered, or approximately $42.0 million in aggregate, and agreed to pay
contingent cash payments up to an additional $4.55 per share as described below:
• If we or a MDCO Affiliated Party (meaning an affiliate of ours, a successor
or assigns of ours, or a licensee or collaborator of ours) obtain approval
from the EMEA for a MAA for oritavancin for the treatment of cSSSI on or
before December 31, 2013, then former Targanta shareholders will be entitled
to receive a cash payment equal to (1) $1.00 per share if such approval is
granted on or before December 31, 2009, (2) $0.75 per share if such approval
is granted between January 1, 2010 and June 30, 2010, or (3) $0.50 per share
if such approval is granted between July 1, 2010 and December 31, 2013, a
payment of approximately $21.0 million in the aggregate, approximately
$15.8 million in the aggregate, or approximately $10.5 million in the
aggregate, respectively.
• If we or a MDCO Affiliated Party obtain final approval from the FDA for a NDA for oritavancin for the treatment of cSSSI (1) within 40 months after the date the first patient is enrolled in a Phase III clinical trial of cSSSI that is initiated by us or a MDCO Affiliated Party after the date of our merger agreement with Targanta and (2) on or before December 31, 2013, then former Targanta shareholders will be entitled to receive a cash payment equal to $0.50 per share, or approximately $10.5 million in the aggregate.
• If we obtain final FDA approval for an NDA for the use of oritavancin for
the treatment of cSSSI administered by a single dose intravenous infusion
(1) within 40 months after the date the first patient is enrolled in a Phase
III clinical trial of cSSSI that is initiated by us or a MDCO Affiliated
Party after the date of our merger agreement with Targanta and (2) on or
before December 31, 2013, then former Targanta shareholders will be entitled
to receive a cash payment equal to $0.70 per share, or approximately
$14.7 million in the aggregate. This payment may become payable
simultaneously with the payment described in the previous bullet above.
• If aggregate net sales of oritavancin in four consecutive calendar quarters ending on or before December 31, 2021 reach or exceed $400 million, then former Targanta shareholders will be entitled to receive a cash payment equal to $2.35 per share, or approximately $49.4 million in the aggregate.
We expect to complete the allocation of the purchase price within one year from the date of the acquisition.
As a result of our acquisition of Targanta, we are a party to an asset
purchase agreement with InterMune, Inc., or InterMune. Under the agreement, we
are obligated to use commercially reasonable efforts to develop oritavancin and
to make a $5.0 million cash payment to InterMune if and when we receive from the
FDA all approvals necessary for the commercial launch of oritavancin. We have no
other milestone or royalty obligations to InterMune in connection with
Targanta's December 2005 acquisition of the worldwide rights to oritavancin from
InterMune.
Curacyte Discovery Acquisition
In August 2008, we acquired Curacyte Discovery GmbH, or Curacyte Discovery, a
wholly owned subsidiary of Curacyte AG. Curacyte Discovery was primarily engaged
in the discovery and development of small molecule serine protease inhibitors
including CU2010. In connection with the acquisition, we paid Curacyte AG an
initial payment of €14.5 million (approximately $22.9 million) and agreed to pay
a contingent milestone payment of €10.5 million if we proceed with clinical
development of CU2010. In addition, our agreement with Curacyte AG provides for
possible future sales royalty payments and a commercial milestone payment.
The total cost of the acquisition was approximately $23.7 million, which
consisted of a purchase price of approximately $22.9 million and direct
acquisition costs of $0.8 million. Since the acquisition date, we have included
results of Curacyte Discovery's operations in our consolidated financial
statements. We allocated the purchase price to the estimated fair value of
assets acquired and liabilities assumed based on a third-party valuation and
management estimates. We allocated approximately $21.4 million of the purchase
price to in-process research and development, which we expensed upon completion
of the acquisition. We recorded this amount as research and development expenses
in our consolidated statements of operations for the three months ended
September 30, 2008. We allocated the remaining portion of the purchase price to
net tangible assets.
Licensing Arrangement with Eagle
In September 2009, we entered into a license agreement with Eagle pursuant to
which we acquired marketing rights in the United States and Canada to a
ready-to-use formulation of Argatroban. Eagle filed a NDA for this formulation
in 2008, which is currently under review by the FDA. Under the license agreement
with Eagle, we paid a $5.0 million technology license fee and agreed to purchase
$2.0 million of convertible preferred stock of Eagle in the fourth quarter of
2009. Under the license agreement, we also agreed to pay certain additional
approval and commercialization milestones and royalties. Eagle has agreed to
supply us with the ready-to-use product under a supply agreement we entered into
with it in September 2009.
Results of Operations
Three Months Ended September 30, 2009 and 2008
Net Revenue:
Net revenue increased 12% to $98.8 million for the three months ended
September 30, 2009 as compared to $88.1 million for the three months ended
September 30, 2008. The following table reflects the components of net revenue
for the three months ended September 30, 2009 and 2008:
Net Revenue
Three Months Ended September 30,
Change Change
2009 2008 $ %
(in thousands) (in thousands) (in thousands)
Net Revenue
Angiomax and Cleviprex
U.S net revenue $ 93,317 $ 84,979 $ 8,338 9.8 %
Angiomax
International net revenue 5,472 2,556 2,916 114.1 %
Revenue from collaborations, net - 591 (591 ) (100 )%
Total net revenue $ 98,789 $ 88,126 $ 10,663 12.1 %
|
Net revenue for the three months ended September 30, 2009 increased compared
to the three months ended September 30, 2008 primarily due to an increase in
U.S. sales of Angiomax and an increase in European sales of Angiox. Sales of
Angiomax in the United States increased $7.2 million, or 8.5%, primarily due to
increased demand by existing hospital customers, the addition of new hospital
customers and the price increase we implemented in May 2009. Of the 8.5%
increase in the U.S. sales in the three months ended September 30, 2009 compared
to the three months ended September 30, 2008, approximately 2.4% was related to
hospital demand by existing and new customers and approximately 6.2% was
attributable to the price increase. The increase in U.S. sales in the three
months ended September 30, 2009 also included $1.1 million of net revenue from
Cleviprex sales.
International net revenue increased $2.9 million, or 114%, during the three
months ended September 30, 2009 compared to the three months ended September 30,
2008 primarily as a result of the direct sales we made after assuming control of
the distribution of Angiox in the majority of the countries in the Nycomed
territory during the third quarter of 2008.
During the three months ended September 30, 2008, we recognized as revenue
from collaborations approximately $0.6 million of net revenue from sales made by
Nycomed of approximately $1.4 million under our transitional distribution
agreement with Nycomed. Under the terms of this transitional distribution
agreement, upon the sale by Nycomed to third parties of vials of Angiox, Nycomed
paid us a specified percentage of Nycomed's net sales of Angiox, less the amount
previously paid by Nycomed to us for the existing inventory. The transitional
distribution agreement terminated on December 31, 2008 and there are no
remaining obligations under such agreement for either party.
Cost of Revenue:
As shown in the table below, cost of revenue during the three months ended
September 30, 2009 was $28.3 million, or 29% of net revenue, compared to
$22.1 million, or 25% of net revenue, for the three months ended September 30,
2008. The increase in cost of revenues as a percentage of net revenue was driven
by a higher projected effective royalty rate for sales of Angiomax under our
license agreement with Biogen Idec. Cost of revenue consisted of expenses in
connection with the manufacture of Angiomax and Cleviprex sold, royalty expenses
under our agreements with Biogen Idec, Health Research Inc. and AstraZeneca and
the logistics costs of selling Angiomax and Cleviprex, such as distribution,
storage, and handling. Cost of revenue increased $6.2 million during the three
months ended September 30, 2009 compared to the three months ended September 30,
2008, primarily related to higher Angiomax sales and an increase in royalty
expense due to a higher projected effective royalty rate for sales of Angiomax
under our agreement with Biogen Idec.
Cost of Revenue
Three Months Ended September 30,
% of Total % of Total
2009 Cost 2008 Cost
(in thousands) (in thousands)
Cost of Revenue
Manufacturing $ 6,830 24 % $ 5,269 24 %
Royalty 18,755 66 % 13,747 62 %
Logistics 2,723 10 % 3,073 14 %
Total Cost of Revenue $ 28,308 100 % $ 22,089 100 %
|
Research and Development Expenses:
Research and development expenses decreased by 49% to $22.5 million for the
three months ended September 30, 2009, from $44.1 million for the three months
ended September 30, 2008. The decrease in research and development expenses
primarily reflects the inclusion in research and development expense in the
third quarter of 2008 of $21.4 million of acquisition related in-process
research and development in 2008 in connection with our acquisition of Curacyte
in August 2008, partially offset by a $5.0 million technology license fee paid
to Eagle in connection with the acquisition of the rights to a ready-to-use
formulation of Argatroban which was recorded in research and development expense
in the third quarter of 2009 and increased expenditures in the third quarter of
2009 in connection with the continued development efforts for Cleviprex and the
products acquired in the Curacyte Discovery and Targanta
acquisitions in August 2008 and February 2009, respectively. The results of
operations of Curacyte Discovery and Targanta are included within our
consolidated financial statements as of the dates of acquisition.
The following table identifies, for each of our major research and
development projects, our spending for the three months ended September 30, 2009
and 2008. Spending for past periods is not necessarily indicative of spending in
future periods.
Three Months Ended September 30,
% of % of
2009 Total R&D 2008 Total R&D
(in thousands) (in thousands)
Research and Development
Angiomax
Clinical trials $ 1,008 5 % $ 1,253 3 %
Manufacturing development 2,896 13 % 968 2 %
Administrative and headcount costs 926 4 % 1,035 2 %
Total Angiomax 4,830 22 % 3,256 7 %
Cleviprex
Clinical trials 563 3 % 925 2 %
Manufacturing development 744 3 % 322 1 %
Administrative and headcount costs 1,158 5 % 1,301 3 %
Total Cleviprex 2,465 11 % 2,548 6 %
Cangrelor
Clinical trials 2,796 12 % 10,907 25 %
Manufacturing development 512 2 % 623 1 %
Administrative and headcount costs 1,036 5 % 1,192 3 %
Total Cangrelor 4,344 19 % 12,722 29 %
. . .
|
|
|