Medicines Company has a market cap of $384.3 million; its shares were traded at around $7.25 with and P/S ratio of 0.95. MDCO is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:We expensed the transaction costs as incurred and capitalized the value of acquired in-process research and development as an indefinite lived intangible asset. We recorded contingent payments at their estimated fair value. We included the results of Targantas operations in our consolidated financial statements since the acquisition. 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.
Licensing Arrangement with Pfizer. In December 2009, we licensed exclusive worldwide rights to ApoA-1 Milano from Pfizer. Under the terms of the agreement, we paid Pfizer an up-front payment of $10.0 million and agreed to make additional payments upon the achievement of clinical, regulatory and sales milestones up to a total of $410 million. We also agreed to pay Pfizer single-digit royalty payments on worldwide net sales of ApoA-1 Milano. We also paid $7.5 million to third parties in connection with the license and agreed to make additional payments to them of up to $12.0 million in the aggregate upon the achievement of specified development milestones and continuing payments based on sales of ApoA-I Milano.
On January 7, 2010 and February 9, 2010, we commenced two separate workforce reductions to improve efficiencies and better align our costs and structure for the future. As a result of the first workforce reduction, we reduced our office-based personnel by 30 employees. The second workforce reduction resulted in a reduction of 42 primarily field-based employees. In the three months ended March 31, 2010, we recorded, in the aggregate, charges of $7.1 million associated with these workforce reductions. Substantially all of these charges are expected to represent cash expenditures. We expect to realize estimated annualized cost savings from the workforce reductions in the range of $14.5 to $16.5 million.
Net revenue during the three months ended March 31, 2010 increased $2.9 million compared to the three months ended March 31, 2009 primarily due to an increase in sales of Angiox in Europe and an increase in sales of Angiomax in the United States. Angiomax net sales were impacted by higher chargebacks related to the 340B Drug Pricing Program under the Public Health Services Act. U.S. sales also include net revenue of $0.8 million from sales of Cleviprex in the three months ended March 31, 2010 compared to $0.5 million in the three months ended March 31, 2009. The $0.8 million in sales of Cleviprex in the three months ended March 31, 2010 reflects an offset of $0.7 million due to returns related to the Cleviprex recall.
Cost of revenue increased $0.5 million during the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The increase in cost of revenue is primarily related to higher volume, an increase in royalty expense due to a higher effective royalty rate to Biogen Idec, and $0.5 million related to inventory write offs associated with the Cleviprex recall. These increases were partially offset by $0.9 million related to a reversal of certain charges originally recorded in the fourth quarter of 2009 in connection with production failures at the third-party manufacturer for Angiomax.
Research and development expenses decreased by 31% to $16.9 million for the three months ended March 31, 2010, compared to $24.4 million for the three months ended March 31, 2009. The decrease primarily reflects reduced clinical activity for cangrelor as the CHAMPION clinical trial program for cangrelor was ongoing in the first quarter of 2009 and we discontinued enrollment in May 2009. The decrease also reflects reduced regulatory and clinical activity for Cleviprex. These decreases were offset by an increase in costs incurred in preparation for Phase 3 trials for oritavancin and charges of approximately $1.7 million associated with our workforce reductions in the first quarter of 2010.
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