2.2.0.7 false Acquisition 0207 - Disclosure - Acquisition true false false false 1 USD false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 $ 2 Acquisition [Abstract] 0 mdco_AcquisitionAbstract mdco false na duration Acquisition. false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string Acquisition. false 3 Acquisition 1 us-gaap_BusinessCombinationDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0   <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>7. Acquisition</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <i>Targanta Therapeutics Corporation</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In February 2009, the Company acquired Targanta Therapeutics Corporation (Targanta), a biopharmaceutical company focused on developing and commercializing innovative antibiotics to treat serious infections in the hospital and other institutional settings. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Under the terms of the Company’s agreement with Targanta, it paid Targanta shareholders an aggregate of approximately $42.0 million at closing, and agreed to pay contingent cash payments up to an additional $90.4 million in the aggregate, as described below: </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="4%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Upon approval from the European Medicines Agency (EMA) for a Marketing Authorization Application (MAA) for oritavancin for the treatment of serious gram-positive bacterial infections, including acute bacterial skin and skin structure infections (ABSSSI) (which were formerly referred to as complicated skin and skin structure infections, or cSSSI) on or before December 31, 2013, approximately $10.5 million if such approval is granted between July 1, 2010 and December 31, 2013. As of September 30, 2010, the Company has not filed an application with the EMA for oritavancin for the treatment of ABSSSI.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="4%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Upon final approval from the FDA for a new drug application, or NDA, for oritavancin for the treatment of ABSSSI (1) within 40 months after the date the first patient is enrolled in a Phase 3 clinical trial of ABSSSI that is initiated by the Company and (2) on or before December 31, 2013, approximately $10.5 million in the aggregate.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="4%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>Upon final FDA approval for an NDA for the use of oritavancin for the treatment of ABSSSI administered by a single dose intravenous infusion (1) within 40 months after the date the first patient is enrolled in a Phase 3 clinical trial of ABSSSI that is initiated by the Company and (2) on or before December 31, 2013, approximately $14.7 million in the aggregate. This payment may become payable simultaneously with the payment described in the previous bullet above.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="4%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>If aggregate net sales of oritavancin in four consecutive calendar quarters ending on or before December 31, 2021 reach or exceed $400.0 million, approximately $49.4 million in the aggregate.</td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company expensed transaction costs as incurred, capitalized as an indefinite lived intangible asset the value of acquired in-process research and development and recorded contingent payments at their estimated fair value. The results of Targanta’s operations have been included in the Company’s consolidated financial statements since the acquisition date. The purchase price of approximately $64 million, which includes $42 million of cash paid upon acquisition and $23 million that represents the fair market value of the contingent purchase price on the date of acquisition, was allocated to the net tangible and intangible assets of Targanta based on their estimated fair values. Below is a summary which details the assets and liabilities acquired as a result of the acquisition: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td align="center" colspan="2" nowrap="nowrap" style="border-bottom: 1px solid #000000">(in thousands)</td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Acquired Assets: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Cash and cash equivalents </div></td> <td> </td> <td align="left">$</td> <td align="right">4,815</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Available for sale securities </div></td> <td> </td> <td> </td> <td align="right">397</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Prepaid expenses & other current assets </div></td> <td> </td> <td> </td> <td align="right">2,440</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Fixed assets, net </div></td> <td> </td> <td> </td> <td align="right">1,960</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">In-process research and development </div></td> <td> </td> <td> </td> <td align="right">69,500</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Goodwill </div></td> <td> </td> <td> </td> <td align="right">14,671</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Other assets </div></td> <td> </td> <td> </td> <td align="right">70</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:45px; text-indent:-15px">Total assets </div></td> <td> </td> <td> </td> <td align="right">93,853</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Liabilities Assumed: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Accounts payable </div></td> <td> </td> <td> </td> <td align="right">3,280</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Accrued expenses </div></td> <td> </td> <td> </td> <td align="right">6,976</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Contingent purchase price </div></td> <td> </td> <td> </td> <td align="right">23,181</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Deferred tax liability </div></td> <td> </td> <td> </td> <td align="right">17,877</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other liabilities </div></td> <td> </td> <td> </td> <td align="right">556</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:45px; text-indent:-15px">Total liabilities </div></td> <td> </td> <td> </td> <td align="right">51,870</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total cash purchase price paid upon acquisition </div></td> <td> </td> <td align="left">$</td> <td align="right">41,983</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The purchase price was allocated to the estimated fair value of assets acquired and liabilities assumed based on a valuation and management estimates. The Company recorded a deferred tax liability for the difference in basis of the identifiable intangible assets. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In determining the fair value of all of the Company’s in-process research and development projects related to oritavancin, the Company used the income approach, specifically a probability weighting to the estimated future net cash flows that are derived from projected sales revenues and estimated costs. These projections are based on factors such as relevant market size, patent protection, historical pricing of similar products and expected industry trends. This method requires a forecast of cash inflows, cash outflows, and pro forma charges for economic returns of and on tangible assets employed, including working capital, fixed assets and assembled workforce. Cash outflows include direct and indirect expenses for clinical trials, manufacturing, sales, marketing, general and administrative expenses and taxes. For purposes of these forecasts, the Company assumed that cash outflows for research and development, general administrative and marketing expenses from February 2009 and continuing through 2012 would not exceed $165 million. All internal and external research and development expenses are expensed as incurred. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company expects its oritavancin development efforts to have a material impact on its research and development expenses. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company defines an in-process research and development project by specific therapeutic treatment indication. At this time, the Company is pursuing four therapeutic treatment indications for oritavancin. After applying a risk adjusted discount rate of 13% to each project’s expected cash flow stream, the Company determined a preliminary value for each project as set forth below. In determining these values, the Company assumed that it would generate cash inflows from oritavancin for ABSSSI in 2012 and from the other projects thereafter. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="18%"> </td> <td width="70%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000">Project</td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(in thousands)</td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">ABSSSI </div></td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">54,000</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Bacteremia </div></td> <td> </td> <td> </td> <td> </td> <td align="right">5,900</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Anthrax </div></td> <td> </td> <td> </td> <td> </td> <td align="right">6,400</td> <td> </td> </tr> <tr valign="bottom"> <td nowrap="nowrap"> <div style="margin-left:15px; text-indent:-15px"><i>Clostridium difficile </i>infections </div></td> <td> </td> <td> </td> <td> </td> <td align="right">3,200</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Total </div></td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">69,500</td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company’s success in developing and obtaining marketing approval for oritavancin for ABSSSI and for any of the other indications is highly uncertain. Subject to the completion of ongoing discussions with the FDA, the Company expects to commence such a Phase 3 study of oritavancin in the fourth quarter of 2010. The Company cannot know or predict the nature, timing and estimated costs of the efforts necessary to complete the development of, or the period in which material net cash inflows are expected to commence from, oritavancin due to the numerous risks and uncertainties associated with developing and commercializing drugs. These risks and uncertainties, including their impact on the timing of completing clinical trial and development work and obtaining regulatory approval, would have a material impact on each project’s value. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     If the acquisition of Targanta had occurred as of January 1, 2009, the Company’s pro forma results for the three and nine months ended September 30, 2010 and 2009 would have been as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended September 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Nine Months Ended September 30,</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="14"><b>(in thousands, except per share amounts)</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net revenue </div></td> <td> </td> <td align="left">$</td> <td align="right">105,743</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">98,789</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">317,966</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">302,181</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Income (loss) from operations </div></td> <td> </td> <td> </td> <td align="right">21,711</td> <td> </td> <td> </td> <td> </td> <td align="right">659</td> <td> </td> <td> </td> <td> </td> <td align="right">48,615</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(10,995</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net income (loss) </div></td> <td> </td> <td> </td> <td align="right">21,205</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(3,197</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">46,063</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(13,851</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Basic and diluted loss per share: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Basic earnings (loss) per share </div></td> <td> </td> <td align="left">$</td> <td align="right">0.40</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(0.06</td> <td nowrap="nowrap">)</td> <td> </td> <td align="left">$</td> <td align="right">0.87</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(0.27</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Diluted earnings (loss) per share </div></td> <td> </td> <td align="left">$</td> <td align="right">0.40</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(0.06</td> <td nowrap="nowrap">)</td> <td> </td> <td align="left">$</td> <td align="right">0.87</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(0.27</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Weighted average number of common shares outstanding: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Basic </div></td> <td> </td> <td> </td> <td align="right">52,991</td> <td> </td> <td> </td> <td> </td> <td align="right">52,298</td> <td> </td> <td> </td> <td> </td> <td align="right">52,773</td> <td> </td> <td> </td> <td> </td> <td align="right">52,225</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Diluted </div></td> <td> </td> <td> </td> <td align="right">53,359</td> <td> </td> <td> </td> <td> </td> <td align="right">52,298</td> <td> </td> <td> </td> <td> </td> <td align="right">53,005</td> <td> </td> <td> </td> <td> </td> <td align="right">52,225</td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The above pro forma information was determined based on historical GAAP results adjusted for the elimination of interest foregone on net cash and cash equivalents used to pay the closing consideration and transaction related costs. Such amount was offset by the elimination of interest expense on third party debt that is assumed to be repaid in full prior to the completion of the acquisition. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>  <!-- Begin Block Tagged Note false false false us-types:textBlockItemType textblock Description of a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. This element may be used as a single block of text to encapsulate the entire disclosure (including data and tables) regarding business combinations, including leverage buyout transactions (as applicable). Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141 -Paragraph 51, 52 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 88-16 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141R -Paragraph 67-73 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141R -Paragraph F4 -Subparagraph e -Appendix F false 1 2 false UnKnown UnKnown UnKnown false true