The Medicines Company Q2 2008 Earnings Conference Call Transcript

Jul.23.08 | About: The Medicines (MDCO)

The Medicines Company (NASDAQ:MDCO)

Q2 2008 Earnings Call Transcript

July 23, 2008 8:30 am ET

Executives

Robyn Brown – VP, IR

Clive Meanwell – Chairman and CEO

Glenn Sblendorio – EVP and CFO

John Kelley – President and COO

Analysts

Maged Shenouda – UBS

Joseph Schwartz – Leerink Swann

Liana Moussatos – Pacific Growth Equities

Steve Harr – Morgan Stanley

Jason Kantor – RBC Capital Markets

Biren Amin – Stanford Group

Lucy Lu – Citigroup

Matt Duffy – BDR Research

Operator

We are about to begin. Hello, and welcome to the Medicines Company’s second quarter 2008 earnings call. My name is Dana, and I will be the operator for today’s conference. As a reminder, today’s call is being recorded and we will have a question-and-answer session immediately following the prepared remarks. I will now turn the call over to Ms. Robyn Brown, Vice President of Investor Relations.

Robyn Brown

Thank you, Dana, and welcome, everyone, to the Medicines Company’s second quarter 2008 earnings conference call. I am Robin 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 Kelly, our President and Chief Operating Officer, who will provide an operating review; and, Clive Meanwell, our Chairman and Chief Executive Officer, who will make some opening remarks, and then moderate a Q&A session at the end of the call.

I would like to remind you that this conference call would contain forward-looking statements, which involve a number of risks and uncertainties. Important 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 May 12th, 2008, which is incorporated here and by reference. I would also note that during the call, we may refer to non-GAAP measures, which includes stock-based compensation expense and the non-cash provision for income taxes. Please refer to the non-GAAP reconciliation tables in our press release and the 2Q ’08 conference call summary fact sheet on our Web site.

Now, I’ll turn the call over to Clive Meanwell.

Clive Meanwell

Thank you very much, Robin. Before we get on to the business results, we thought we would give you an update on the situation in Washington DC where, understandably, investors and analysts continue to show interest in legislation currently before the United States Senate concerning discretionary powers to the patent trademark, of which to consider Hatch-Waxman (inaudible) that are made outside the current 60-day deadline.

Our advocacy of this change in law is based on in-depth, scholarly, and pragmatic analysis of patent healthcare policies in the United States. Lawmakers have made these discussions seriously in both the House and the Senate in about three to four years, and good progress has been made.

The House Bill HR6344 was passed unanimously in late June. This is by part is in legislation that in various forms have been approved twice by the full House of Representatives, and once by the Senate Judiciary Committee. The subject matter was reviewed by Congressional Committee in September 2006. The Congressional (inaudible) on the potential impact on the US Treasury. The Congressional Record of Regular Order was, therefore, very strong. In essence, it would give the PTO authority to excuse and slightly late filings of applications of patents and restoration under the Hatch-Waxman Act.

The principal argument is well known by those in Washington DC who have taken the time to consider the legislation on its merits. Regarding (inaudible) policy, the existing deadline imposed is immensely disproportional to penalty for a minor filing error. Imagine if you lost the mortgage on your house for paying that’s one day late. The loss of up to five years of (inaudible) earned the patent protection of filings for even one day late seems similarly disproportioned. Furthermore, add the step with the discretion allowed by almost all other patent law provisions.

Regarding public health policy, the deadline provision can have terrible public health consequences as illustrated by Angiomax. Based on investments made by this firm as others for many years under the law, we are entitled to four and a half years of patent restoration. Reconsideration of the application was denied because it was filed a day late.

Angiomax has shown real promise when you use it beyond what FDA has approved so far, open heart surgery, the prevention of treatment of stroke, and the treatment for coronary artery disease, to name a few, but securing approval will take costly and time consuming trials, of course. If the patent expires, assuming pediatric extension, which we do anticipate in late 2010, rather 2015, new research simply can’t get done, not by us, the patent holder, or anyone else because investments could never be recouped, and certainly it wouldn’t be done by the generic industry.

This would be a huge loss to patients, particularly since Angiomax is a promising substitute for the standard blood thinner, Heparin, which -- as this year’s scam in China has shown with over 100 dead bodies in the highly problematic drug. Even when it’s made properly, it’s essentially is with significant risk of severe allergy.

The public health problem illustrated by Angiomax will be repeated with other drugs as well since its common to patent holders of these new uses of their drug if they were able to recoup the large investment needed for the research. Almost all of the today’s important new specialized drugs follow this step-wide path. In short, translating from cyclical patent terms has a large public healthcare cost.

Third, regarding technical and fiscal matters, the legislation makes the government hold and avenue the nation’s hospitals will spend considerable sums of money in the expanded new uses, which far outweigh the cost of deferring genetic entry until the perceived time that the current law allows for companies such us ourselves.

Finally, this has been the issue of retroactivity from some parties, but a careful review of the situation shows that this is not at law in the proposed legislation. There is extensive precedence showing it is perfectly appropriate and normal for Congress to pass legislation affecting pending cases, including those involving patent rights so long as Congress makes clear its intent to do so. Since the early 1980s, nearly every bill amending the patent law has been applied, at least in part, to pending applications or pending patents.

We’ll continue to have the care [ph] for this changing the law because we think it’s right and we think we’re making progress, and we’ll advise further, as we’ve said before, if our position changes.

Now, let’s get on with some business results.

Glenn Sblendorio

Thank you, Clive, and good morning, everyone. This morning, I’m very happy to report a strong quarter.

For the second quarter 2008, total worldwide net revenues were $86.7 million, compared to $56.4 million in the second quarter of 2007, an increase of $30.3 million or 54%. US Angiomax net sales in the second quarter were $84.5 million, compared to $55.2 million in the second quarter of 2007, an increase of $29.3 million or 53%. The increase year-over-year was due to volume, which accounted for 55%, and price increases, which is supported by strong clinical and health economic data, accounted for 45%.

As anticipated, international revenues will be steady as we build out our organization and transition away from Nycomed. As expected, international revenues totaled $2.2 million in the second quarter, compared to $1.2 million in the same quarter of 2007. Recorded $1.4 million of net revenue in accordance with our transition agreement with Nycomed, of which end user sales on Nycomed territories totaled $3.1 million. There are also revenues of approximately $800,000 for non-Nycomed territories.

We expect to begin the transition of distribution responsibilities from Nycomed in the third quarter. We anticipate the takeover distribution of Angiomax in up to 17 countries during the third quarter, and we’ll assume distribution in the remaining five countries by the end of the year.

Total worldwide net revenues for the first half of 2008 were $166.2 million, compared to $123 million in the first half of 2007, an increase of $43.2 million or 35%. US Angiomax sales were $151.4 million for the first half of 2008, compared to $121.5 million for the first half of 2007, an increase of $39.9 million or 33%. Approximate 30% of the increase related to volume, and 70% of the increase related to price, again, supported by strong clinical and health economic data.

There were no significant changes in inventory levels at the wholesalers, which will remain within our targeted range of approximately four to six weeks. Cost of revenue is 25% for the second quarter, compared to 27% under the second quarter of 2007. The change in cost of revenues is primarily due to a higher gross margin on international sales and continued favorability on our gross to net adjustments, which were below 7% for the quarter.

R&D spending increased 4.1 or 26% to $19.8 million, compared to $15.7 million during the second quarter of 2007 primarily due to three reasons. First, an increase of $2.7 million in Angiomax spending, which included the final $1.5 million milestone payment on the Horizon trials and $1.4 million for product life cycle development. Cangrelor spending increased by $1.1 million as our phase three clinical trial champion PCI in platform continue, and an increase of about $800,000 related to our ongoing business with (inaudible) to expand our product portfolio.

SG&A expenses for the second quarter was $38.8 million, compared to $26.8 million for the same quarter in 2007, an increase of $12 million or approximately 45%. The increase was driven by investments in three areas -- first, European expansion, including both people and the opening of Medicines Company offices in Germany, France, Italy, Switzerland as well as expanding our UK presence; second, Cleviprex pre-launch investments; and, third, headcount additions to expand our Medical Sciences, Sales Management, and Global Operations teams, including related stock-based compensation associated with new hires.

Moving on, stock-based compensation was $6.9 million in the quarter, compared to $3.7 in the second quarter of 2007, an increase of $3.2 million. The reason for the increase is headcount additions both in the US and Europe, and changes and certain assumptions used in calculating stock-based compensation expense. Stock-based compensation expense is included in cost of revenues, R&D, and SG&A at 3%, 17%, and 80% respectively, in the second quarter.

Interest income for the quarter was $1.8 million, compared to $2.7 million in the second quarter of 2007. The decrease of other income of $900,000 was primarily due to lower rates of return in the current period despite higher balances.

As of June 30, 2008, we had $238.1 million in cash and available for sales securities versus $216.5 million for the same period last year.

The provision for income tax was $4 million in the second quarter resulting in an effective tax rate of 49%, compared $659,000 in the second quarter of last year were at an effective rate of 45%. The increase in the effective tax rate over the quarter is driven by losses incurred in our international operation, for which we record no tax benefit. We expect our effective tax rate to continue to increase in the third and fourth quarters, and anticipate our full year 2008 effective tax rate to be at the upper end of our guidance of 50% to 55%. Of note, the $4 million income tax provision in this quarter, approximately $400,000 was cash and $3.6 million was non-cash as we continued to utilize both federal and state NOLs.

Moving on to net income and earnings per share, for the second quarter, we recorded GAAP net income of $4.1 million or $0.08 per share, as compared to $800,000 or $0.02 per share in the second quarter of 2007. Excluding stock-based compensation and non-cash income taxes are non-GAAP income for the second quarter of 2008 was $14.5 million or $0.28 per share. This compares to non-GAAP net income in the second quarter of 2007 of $5.1 million or $0.10 a share. For the first six months of 2008, we reported GAAP net income of $8.9 million or $0.17 per share, compared to $3.9 million or $0.07 per share for the same period in 2007. Excluding stock-based compensation and non-cash income taxes, non-GAAP net income for the first six months of 2008 was $26.9 million or $0.51 per share, compared to $13.3 million or $0.25 per share for the same period in 2007.

Lastly, we are updating certain full year guidance for 2008. Given the success of Angiomax in the first half of the year, we are increasing guidance for the US net revenue for Angiomax by $10 million to $330 million. As a result, we now expect full year 2008 total revenue in the range of $335 million to $355 million. I believe that is $345 million to $355 million. We expect SG&A expenses, including stock rates compensation, now to be in the range of $153 million to $159 million, which is approximately $7 million higher than our previous guidance. And finally, we expect total stock-based compensation expense to be $22 million to $24 million, which is $2 million higher than our previous guidance.

I would ask that you refer to the second quarter press release and fact sheet posted to our Web site that includes a table outlining previous guidance and updates discussed today. I would now like to turn the call over to John for the operational update.

John Kelley

Thanks Glenn, and good morning, everyone. Thanks for joining us this morning for this call. I am pleased to share with you this morning the results of a very strong quarter for the Medicines Company and Angiomax, which was fueled by continuing gains in marketshare, the PPI markets that have stabilized. I’d also like to update you on our progress towards building our global operations as well as providing you an update on our anticipate launch of Cleviprex, and the history of progress on Cangrelor.

Demand for Angiomax demonstrate a solid growth in Q2 as measured by boxes shipped to hospitals. Total boxes shipped were 15,155, a 10% increase over the previous quarter, and a 15% increase over the same quarter last year. Gross sales according to third party audits were $87.4 million in Q2 of 2008, a 15% increase over Q1 and a 34% increase over the same quarter last year. Year-to-date gross sales of Angiomax are $162.6 million, 21% higher than the same time frame last year.

Patient volumes in the PCA market has stabilized and are showing some signs of growth, while patient volumes year-to-date through April of 2008 are about 2% behind the same last year. Month-over-month of April this year versus last year showed the 6% increase. And if you look at the first four months of 2008 versus the last four months of 2007, we see a 7% increase.

Angiomax continues to increase market share across all markets, all segments of the markets. So this year, our patients undergoing a PCI in the three-month period ending in April of 2008 was 45%, compared to 41% for the same time last year. Now breaking that down by diagnosis, Angiomax share of stable angina is now 60%, up from 55% last year. Unstable angina is now at 51%, up from 45%. Non-STEMI now at 38%, increasing from 34%, and STEMI is 22%, up from 19%.

Our strategy has been and will continue to be increasing patient share especially in the higher risk patient population. The recent publication of the HORIZONS AMI trial results in the New England Journal of Medicine adds to the existing wealth of data that demonstrate the positive benefits of Angiomax in all cases of patients undergoing PCI, from stable angina to STEMI. Collectively, this wealth of data gives us the ability to continue to penetrate the PCI market in the United States. And we believe it will also be the data that will drive use to the Angiox in Europe.

Based on all of the positive trends that we have seen with Angiomax in the first half of 2008, as Glenn stated, we are raising our full year net sales guidance in the United States from $310 million to $320 million, but now $320 million to $330 million.

In Europe, we have made significant progress in establishing our organization outside the United States. We have recently announced that Glyn Parkin, previously a Senior Executive with Lilly, has joined the Medicines Company as the Senior Vice President of International Operations. Glyn is based in Europe and is responsible for overseeing the design and implementation of our global organization.

We’ve also added a number of key associates in each of the major markets, including marketing directors in the United Kingdom, France, Germany, and Italy. We have hired an EU Head of Clinical Finance Managers, and are in the process of staffing additional positions in that organization. We have extended an offer to an experienced Sales and Marketing leader to head our European sales organization, and we’ve hired sales managers in the United Kingdom and France, and we have lead on candidates, identify, and going through the process in Italy and Germany.

We are very encouraged by the level of talent we have been able to attract to these positions. To date, we have hired very experienced executives with relevant hospital experience from companies such as Lilly, (inaudible), AstraZeneca, Centocor, and others.

We also feel that we have made significant progress and established our relationships with key opinion leaders across Europe, not just as it relates to Angiox, but also for other products in our portfolio. We are in track to deliver sales within our US guidance for 2008 of $10 to $15 million.

Now, moving on to Cleviprex. We continue to prepare for the launch of this product in 2008, and we reiterate our previous guidance that we expect sales this year of $5 to $10 million. As you know, we previously agreed with the FDA to move the producer date from May to August to accommodate the mission and review of additional non-clinical data through the FDA as they had requested. That the mission was completed in May, and the FDA has indicated that we have adequately answered all of their questions.

In anticipation of the approval of Cleviprex, we have completed the scale up of our sales force, moving from 123 sales territories with sales managers and two directors, to now a 178 territories, 21 managers, and 3 directors. All of our new associates are currently in training, and along with our existing sales force, we will be ready for the launch of Cleviprex in the near future. We look forward to giving you an update on that very soon.

The Cangrelor phase three program continues to move forward with enrollment and CHAMPION PCI at approximately 6,600 patients, and CHAMPION platform at more than 2,900 patients. We are still planning for first half of 2009 for an NDA submission of Cangrelor.

In conclusion, the second quarter of 2008 and the first half of the year were very strong for the Medicines Company with continuing penetration into the PCI market with Angiomax based on outstanding data on the product and the execution of our strategy. We are making steady progress in building the organization outside of the US. And we are keenly awaiting the approval and launch of our second drug, Cleviprex.

Now, I’ll turn it back over to Clive.

Clive Meanwell

Well thanks very much, John and Glenn. Obviously, good results. Thank you for those, and an increasingly stable US market, I think things are very promising speaking on our strategy to diversify the number of sources of revenue we have, not only from the US, but Europe seeing precious market share growth across all segments, and certainly looking forward to some very positive new flow in the second half of the year, including the launch of a second part, and as they say, expansion of sources of revenue.

So with that summary, let’s then turn to questions, if we can.

Question-and-Answer Session

Operator

(Operator instructions) We’ll take our first question from Maged Shenouda from UBS.

Maged Shenouda – UBS

Hi, good morning and congratulations on a good quarter. I guess there’s been a lot of talk about M&A in the space recently, and I’m just wondering what your take of the current M&A environment is in small and mid caps. And do you feel that there’s -- there are assets out there that you’d be interested in right now. Do you feel that sort of -- that there’s a lot out in front of you that you’d be interested in?

Clive Meanwell

Thanks, Maged. This is Clive. Then maybe Glenn will chip in as well. Actually, our growth strategy beyond the existing products -- Angiomax, Cleviprex, and Cangrelor, would include the acquisition of new technologies of products in the future. We’ve been very focused on that. I think the key is to make sure that what we’re looking at fit, namely acute hospital care, global footprint, and emerging capability ex-US, and then of course, products, which provide tremendous value to payors. We think that it’s very important -- that like Angiomax, a drug, which is turned by health economics and is economically dominant that we can look for products, which really do an excellent job in improving patient truthful, efficiency, safety, and efficacy outcomes in the hospitals.

So with all that said, we have to match those sorts of attributes against the Company’s cost of capital, which marries [ph], of course, and including the -- impacted by our cash flow and impacted by the overall valuation we have, and (inaudible) capital fair price to make such transactions happen. So with all those things in mind, yes, we’ve looked at probably a couple of hundreds of opportunities in the last two years. We haven’t yet found something that we think is the ideal fit. We certainly don’t want to swarm the current strong position on assets that we think are dubious, but we are looking very hard and continue to look very hard.

I wouldn’t be surprised if we pull up some kind of licensing or M&A transaction in the future. I would say that it’s not in the Company’s current model to dramatically dilute shareholders based upon an acquisition at a time when we think our own valuation is substantially depressed as a result of overhangs from strategic matters such as patent. It would be a little unwise for us to use currency too aggressively at a time like this.

So with all the overhangs on the Company, these transactions become quite difficult, but not out of the question, but quite difficult. Small transactions that fit really well maybe quite interesting and quite appropriate.

Glenn, you want to add anything to that or do you want to just move on?

Glenn Sblendorio

I’m not sure I can add much to that, Maged. The only thing I will say more on the operational basis, we have built the group up in the US and in Europe. There’s two people in Europe now doing business development, and six years -- let’s say a diversified group that has medical expertise, clinical as well as the appropriate financial support.

So with the network of key opinion leaders, both here in the US and outside of the US, I think based on one of the comments I made about spending in business development and Clive reinforced that, we are very active. But we have to find the product or an opportunity that fits.

Clive Meanwell

There’s about 70 people on this call, we understand. So if you could keep the calls coming in with good ideas, we would appreciate it.

Operator

Okay. A question from Joseph Schwartz with Leerink Swann.

Joseph Schwartz – Leerink Swann

Hi, good morning and congratulations on all the progress. I was wondering if you could give us a better sense of some of the assumptions that go into your new guidance. Do you still assume that the anticoagulant market overall declines this year or maybe some growth? And what would that make up of price and volume be?

Clive Meanwell

We’ll let John answer that one.

John Kelley

Hi, thanks Clive, and thanks. Well, I think that we’re looking at the market as probably being flat for the year. Again, we’re seeing some signs just very briefly in April mostly that shows that there is above April of last year, but again, we recall that last April was the month, in which it took quite a drop based on the COURAGE trial.

So right now, certainly fine that it’s stable. I think each of the month and so far this year have been pretty consistent in terms of volume. So we think probably flat for the year. We have taken price increases last year. So in terms of the overall on price, I think you see that in the sales of the first half of this year where our dollars are up about 22% over where they were a year ago last year. And I’ll say a good portion of that is based on price increases with some volumes, but I think most encouraging was the growth that we see now going from first quarter to second quarter in terms of volume increases. So for the rest of this year, I think we’re looking at pretty decent volume growth and a stable market.

Clive Meanwell

Since (inaudible) in that consideration, Joseph, we do think about -- we’ve always been very careful to price this drug in a value bag for the customer. And with the continued release of strong data in the high risk patients, ACS obviously, and also acute myocardial infarction. But we do believe we still have space to work with price because we are producing about $800 of value every time -- over and above drug acquisition costs every time the drug is used. In an acute coronary syndrome patient, those data are shortly going to be published.

Secondly, in the acute (inaudible), obviously we have very strong data showing a mortality improvement of 30 days, and we’re looking forward to the one year data, which will probably be presented at the PCP of the HORIZONS trial.

All of these things I think support the fact that Angiomax is very fairly priced. In addition, a lot of results from studies from customers, performed independently by them, continue to show tremendous cost savings when they switch their practice to Angiomax across the board. So with all that in mind, I think the prices are source of growth in a very fair way working with our customers.

The second source of growth beyond volumes, as John (inaudible) is number of vials per patient. We think in acute patients, there is much less (inaudible) to use multiple vials of Angiomax if necessary. I think that’s the source of growth so that high risk patients may well deserve to be given two vials of Angiomax instead of one. So that may also change the case mix, if you like.

Operator

So next is Liana Moussatos with Pacific Growth Equities.

Liana Moussatos – Pacific Growth Equities

Hi. Can you talk a little bit more about when you’re expecting traction in Europe with all your efforts there?

Clive Meanwell

Yes. We generally guided that this year would be a year of allies, and of expanding, and listening to customers. We’ve done an awful lot of that. I think John mentioned, we’ve had seven major advisory Board meetings plus a company-wide advisory Board meeting this year where we’ve announced feedback from probably the top 60 or 70 opinion leaders in Europe. I think that universally, that interest level in Angiomax is very high. Their understanding of the data is not where we think it should be, and I think they acknowledge that, and we’re working with them since then, so a huge interest, but needing building.

And then in addition, of course, we needed to create the capabilities for drug distribution, invoicing, selling, medical marketing, and medical affairs. You heard from John that that’s going into place as planned this year so that we’ll be ready to start pushing very hard on growth in 2009, and we do still anticipate that and we do still anticipate that we can build the product to the levels we’ve given guidance before. And Glenn, if you can just remind us what we’ve given in term so European growth back for the first --

Glenn Sblendorio

Oh sure. Let me start with the expense line. We haven’t specifically broken out, but we expect it to be about $12 million in infrastructure this year in Europe, and that’s on track. And I think one of the pieces I covered in the detail was 3 million in this quarter. John talked about a lot of the key hires.

On the top line for sales this year, we guided $210 to $215 million in Angiomax sales, and that’s sales that we record. One comment I will make about the second quarter is we move away from Nycomed. The end user sales at the end of the second quarter was -- were about $3.1 million and we recorded $1.4 million in under the transition agreement, which really ended in terms of the inventory component on June 30th.

We were paying back Nycomed for both inventory in a fairly hefty distribution fee. So we recognize only about half of the end user sales, and that’s going to transition as I mentioned before over to us. Probably a majority of the accounts will come over or countries will come over in the third quarter, and we’ll finish the transition in the fourth quarter.

That’s supplemented by the people that we’re hiring. And as Clive said, I think we’re ready to go fourth quarter into the first quarter of next year.

Clive Meanwell

I’m having a sense of long range where I think we’ve occasionally mentioned what we hoped --

Glenn Sblendorio

Well, we did the Nycomed acquisition last year, and I guess this is reaffirming our position. We did talk about a long range number for Angiox of 90 to 110 in 2011. Also, we continue to remain very bullish on this product and this is the reason why we did the acquisition or the re-acquisition.

Clive Meanwell

Coming on (inaudible) at about European expansion I think might be important. I mean the first is to recall that we’re building the channels for multiple products. Clearly we expect to penetrate to the market in Europe as well with the results also of Cangrelor. So we have to build up a capability in Europe that can be as across that portfolio. And it’s also interesting that it’s a source of business development opportunities as well,

But above all, I think the key to Europe is the people and the relationships that we can establish. We’ve always been fortunate in the US, to hire people who are capable of building relationships with customers in all levels. I think the hiring of Glyn Parkin and a number of other people in Europe who are just outstanding professionals will make a huge difference to our ability to work in the European environment and understand it well. Even though, you can tell by the way I talk, I’m not from around here, managing Europe from Parsipanny in New Jersey is pretty tricky. And having great people on the ground makes enormous difference.

Operator

Let’s take our next question from Steve Harr with Morgan Stanley.

Steve Harr – Morgan Stanley

Just on the Cangrelor data, was it (inaudible), is it still regional, I think this data at ACC this year?

Clive Meanwell

That’s a good question, Steve. I think if Nip and Tuck, ACC, obviously, we would love that. I think we’ll be seeing 70% interim data this year, which is important for us. And then I think whether we get it to ACC or not will be -- is really on the (inaudible) at the moment.

I think the trial is important to the Company such that if we didn’t make ACC, but we’re forever facing this problem, and if you missed one of these peak meetings, what do you do? It seems to me if the data was material, we have to work with the investigators to find a way of releasing some sort of hotline numbers if we didn’t get it to ACC. The problem with getting it to ACC is we can put a place holder, late breaking news abstract in. I think we’ll probably be accepted, but in reality getting all the data cleaned up and ready for presentation maybe beyond us.

Operator

Let’s take our next question from Jason Kantor with RBC Capital Markets.

Jason Kantor – RBC Capital Markets

Hi. Thank you and congratulations on a really good quarter. I want to follow up on this ex-US want. I guess your long range 90 to 110 million in 2011, what kind of penetration into the various markets does that assume? And do you expect that you have the same issues in Europe as you did in the US that is certain hospitals or centers being very high adopters and others really not adopting the (inaudible).

Clive Meanwell

A couple of things, certainly I think -- we don’t have all the details of the forecasts in front of us so we’ll be fair on answering that as well as we could, but John, do you want to talk a bit about that.

John Kelley

Well, I think to get to the numbers that Glenn put out is actually -- I mean if you look at the size of the market in Europe, it actually -- the number of PCIs is not too dissimilar from the United States. So it wouldn’t take a huge market share to achieve $90 to $110 million in stocks. It’s probably something less than 10% at market share in the key markets. And then with regards to the hospitals, we’re going through the process. I mean we’ve identified all the capital heads in Europe, and we understand what hospitals are important, what hospitals have the highest volume and literally are, right now, a process of identifying exactly who the key influence centers are, who the key insinuators are, and building the organization around how do we get to them in the same fashion in which we did in the United States.

Operator

So our next is Biren Amin of Stanford Group.

Biren Amin – Stanford Group

Yes. Hi. Thanks for taking my question. Regarding the pediatric filing for Angiomax, can you just give us an update on timelines for filing and if you’ve compiled the data to support this filing?

Clive Meanwell

As I think we’ve said in the past, we did get a written request from the FDA for a pediatric trial. It was to be done in various combinations of neonates and infants. The last patients that was requested by the FDA and are enrolled in the trial, and so we are complete and we are in the process of compiling the data that they requested. And that submission will take place some time later this year. I don’t have any exact date, but it will be before the end of this year.

It does appear to us that the completion of the trial does comply with all the requests that FDA put into the formal request. So that’s excellent, and it should form the basis of the six-month exclusivity agreement. Of course, we won’t know until it’s granted, but I think beyond that, what’s very exciting about the data is that the children has been doing extremely well on the care, and the doctors were very impressed with the product that was used, predominantly the (inaudible) in children with congenital heart disease and deformities as well as those undergoing more routine caps.

So very exciting to see not only did we comply with the legal requirements or extension, but also that the pediatric community and the drug could be substantially more interesting than Heparin.

Operator

The next will be Lucy Lu with Citi.

Lucy Lu – Citigroup

Okay. Thank you. Assuming Cleviprex got the approval in your office, how long does it take in general to get it through PNT [ph] committee and also onto the formulary?

Clive Meanwell

I’m sorry. I didn’t hear the full question. The formulary adoption --

Lucy Lu – Citigroup

I’m just saying, assuming Cleviprex gets approval in August, how long does it take in general to get it through the TNT [ph] committee and also onto the formulary?

Glenn Sblendorio

Well I think that’s a different on a hospital by hospital basis where we’re -- some hospitals where they’ve already reviewed and are prepared to put the product on the formulary as soon as it’s available. In other cases, it’s going to have to go through a review. TNT [ph] committee generally meets on a scheduled basis so it would be up to our representatives to immediately get to those committees, get it scheduled for a review and move through the process. It could take us a while. It will take us a while to get it on every single formulary, but we anticipate that we’ll begin that process immediately.

Clive Meanwell

I think, historically, we found it took -- it took up to a year really to get to the hospitals once you get to Angiomax. I think most of these influence products into the hospital, likewise you can tell that it’s a long campaign.

Operator

(Operator instructions) We’ll go next to Matt Duffy with BDR Research.

Matt Duffy – BDR Research

Hi. Thanks for taking my call. Just wanted to ask you if you could just give us some idea of how you can position Cangrelor either -- assuming Angiomax is still in the market, and how you position it if it is not on the -- if Angiomax is diminished -- if the IP work hasn’t been successful? And just sort of how you -- how do you look at the overall product in those two different scenarios?

Clive Meanwell

Matt, it’s Clive. We start with the basic biology. WE know from published data from others and ourselves that the combination of the (inaudible) inhibitor with the PQY (inaudible) inhibitor appears to be synergistic from (inaudible) model. Certainly, in clinical results, which of course we have thousands of patients data logged. The combination of clopidogril with Angiomax seems to provide the best of all results in our high risk, and medium and low risk patients. So I think the combination is going to be a very important double actor. It doesn’t of course include the aspirin as well.

Now, with regard to what happens if there is generic competition in the market after -- starting in some time 20 -- late 2010, I think it’s unlikely that the Medicines Company is just going to fold up that tent and go away in this market. We fully intend to be highly competitive. The pride point for Angiomax by the time of launch in 2011 of any generics would still be quite high, we believe. And we believe that we can make the drug more efficient than anyone else, and no reason at all why we wouldn’t continue to compete in the marketplace against generic competition.

So we will be selling Angiomax, we believe, and we will be selling Cangrelor, if we’re lucky enough to get good trial results together. And we believe that combination will be one of the leading regimens used in the Cath Lab in the future. So I think no reason in this stage not -- to continue to be very aggressive in the way we co-position these two really good molecules.

Operator

We’ll go next to Maged Shenouda with UBS.

Maged Shenouda – UBS

Sure. Just a follow up on Cangrelor, can you outline the upcoming interim analysis for the CHAMPION trial? And I just have another follow up as well.

Clive Meanwell

Yes. The major interim analysis -- we had a couple of safety analysis already, and obviously the focus in those analyses has always been bleeding risks and I think the fact that the (inaudible) has given a degree in flag on both occasions. It’s quite encouraging, obviously important.

Going forward, both trials have a plan. Interim analysis at 70% of the recruitment. Obviously, they need 30-day follow up, and then some data clean up, and so on and so forth. So those analyses are going to start in the fourth quarter of this year. We should know something. Of course, the Company will be blinded to those analyses, and the study is not designed with an expectation of dramatic news on the interim analysis. If there was dramatic news, one way or another, obviously, that would be something that the Company would feel strongly would need to be claimed to investors. Whether it was extremely positive or negative, I think that’s something we’d have to describe.

If it’s neither those things, then obviously we’ll continue the progress of the trial, so recruiting as rampantly as possible to get the final results. The starting roles of 70% for both trials would require a fairly extraordinary level of efficacy and would require a fairly extraordinary level of failure. So the likelihood that the trials will be stopped as usual in interim analysis plans is quite low, but it could happen. So that’s the main turn right now.

There is also an adaptation mechanism for the trials, which has been agreed with the FDA, which I think is important that people understand that as extremely the other (inaudible) trial versus TRITON, there are some patients who particularly seem to benefit from this kind of platelet inhibition, notably people with who are (inaudible) positive and those who are diabetic did really well in the TRITON trial. And it may well be that -- under certain simulation circumstances, we can show that if there’s a particularly strong stable effects with those patients, then the trial can be adapted based with certain statistical shifts to focus on recruiting more of those patients going forward.

Now, in multiple simulations of the trial, we find that that kind of provision might kick in about one in six of the time that an interim analysis is done. So about 50 to 10 possibilities that we work out the trial based upon the current assumptions, and based upon simulation methodologies.

That’s about it. Obviously, these are all important risk mitigating factors, which I think added to the fact that the TRITON trial sends such a strong effectiveness signal for an oral agent that we’re fairly excited about the possibility of the drugs’ effects. But these are clinical trials after all, and we won’t know until we see the data.

Operator

Next is Steve Harr with Morgan Stanley.

Steve Harr – Morgan Stanley

I just wanted to get an idea, Clive, on what you think is the -- I don’t think it’s the right word -- strapped [ph] the date or -- a better way to go is, what’s the timeline that it will take for you to get to the US PTO with Angiomax assuming that Congress passes a law that allows you to re-apply for extension?

Clive Meanwell

Well I think that legislation is currently dropped. It’s the kind of laid out from the timeline. I mean quite honestly, I think I’d probably be sitting on the doorstep at 7 a.m. the next morning with my piece of my paper in my hand, maybe even have a tent and go camp out the night before.

I think we, honestly, haven’t thought a lot about the impact of the legislation and our preferred step would need to be to respond to a change in the law or any change in administrative process of the office. I think it would seem to me unlikely that we would miss the date kind of thing. Do you know what I mean? So I think it’s short term.

Now, of course, once you’re back in play, should you that lucky, then clearly the PTO would have a certain period of time, in which they had to consider whether to reconsider your application, and I believe that’s laid out in the legislation as well. I think it’s 60 days. And then beyond that, if they do decide they can reconsider, they would, I think, then likely turn back to their more normal pathway, which is -- it can take up to a year if we get the final confirmation.

So I don’t think we’re asking -- I don’t think there’s a law, I should say. It’s really up to the PTO to divert from their normal process, but obviously it’s been searching a decision point for them that they wouldn’t normally have faced, but that decision point is being inserted and it’s fairly short term, but I think we could respond to that.

Does that answer the question?

Operator

We’ll take our next question from Lucy Lu with Citi.

Lucy Lu – Citigroup

Hi. Can you hear me better?

Clive Meanwell

Yes. We can hear you fine.

Lucy Lu – Citigroup

Oh great! Thank you. Have you met the (inaudible) non-approval with the decision on Angiomax for ACS? And I was just curious, what is your next step there?

Clive Meanwell

We’ve had a series of phone calls with the FDA with a number of people, and I found them to be quite constructive in the sense of their willingness to talk and be engaged. We are developing a complete responses and non-approval letter. We would anticipate sending that in a meeting with the FDA in the fall to discuss exactly the right way forward.

As you would anticipate, we don’t agree with all the points of the FDA. Otherwise, we wouldn’t have submitted the application in the first place, and we believe that’s the way forward both in terms of discussions of label and in discussions of the actual patent, and the totality of the information on the products that’s available. So this is the next step. So we’re feeling pretty good about it.

Operator

The next, we have Maged Shenouda with UBS.

Maged Shenouda – UBS

Sure. Thanks for letting this follow up go through. Just one more question on the Angiomax. I’m sorry, the Cangrelor phase three trial, if you show non-inferiority to clopidogril, would -- what would the position of the product then be?

Clive Meanwell

Well, first of all I think the doctors would be okay with that, but I don’t think that the FDA would. The problem I think, Maged, is that that the data that supports pre-loading of Plavix as being highly effective is somewhat on the thin side. The most important trial is the CREDO trial when there was an 18% relative risk reduction in ischemic events with pre-loading Plavix.

Now, that wasn’t actually a statistically significant in CREDO. In some subgroups it was, but not in the overall trial. Therefore, I think the agency’s position and I think we share that view, is that Plavix hasn’t actually pre-proven, certainly in terms of the standard (inaudible) for non-inferiorities trials, I think, has not been proven to be effective, in the agency sense. Thus, is placebo as a pre-treatment. Therefore, if you’ve showed you’re equal to Plavix in the non-inferiority design, I don’t think it gives the FDA enough comfort in terms of approval. Therefore, we designed the trials to be superior to either placebo or superior to loaded Plavix.

Plavix being loaded, of course, more or less in a the last hour or two before Cath. So no inferiority here I don’t think will come into play, and we’ve had pretty direct discussions with the agency on that point. I think we’d agree.

Again, if that didn’t answer your question, follow up if you like.

Operator

There are no further questions in the queue at this time. I would now like to turn the conference back over to Clive Meanwell for any closing or additional remarks.

Clive Meanwell

Well, we’d like to thank everybody for your interest in the Medicines Company. We are very excited about our strategy and execution here both in the US and Europe, and looking forward to positive views following the second half of the year, and we’ll continue to update you on any important developments.

Thank you so much.

Operator

That does conclude today’s presentation. We thank you for your participation and you may now disconnect.

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