10-Q
MEDICINES CO /DE filed this form 10-Q on 9 Nov 2011
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For the three months ended September 30, 2011 and 2010, the Company recorded a $62.6 million net benefit and a $1.0 million provision for income taxes, respectively. During the third quarter of 2011, after considering both the positive and negative evidence, including the enactment of Leahy-Smith America Invents Act (see Part I, Item 2 of this quarterly report under the caption Overview - Angiomax Patent Litigation), the settlement of the Company's patent infringement litigation against Teva Pharmaceuticals USA, Inc. and its affiliates (Teva) (see Part I, Item 2 of this quarterly report under the caption Overview - Legal Settlements), continued U.S. taxable income, the launch of ready-to-use Argatroban and an increased ability to forecast future taxable income due to these legislative, business and legal developments, the Company concluded that it was more likely than not that substantially all of its deferred tax assets would be realizable in future periods. The Company reduced its valuation allowance against its deferred tax assets by $66.5 million and recorded a corresponding tax benefit. At September 30, 2011, the remaining valuation allowance is $4.2 million against $116.4 million of deferred tax assets. The income tax provision for the 2010 period reflected the utilization of U.S. net operating loss carryforwards against projected taxable income and a liability for alternative minimum tax. Both the 2011 and 2010 periods include a non-cash tax expense arising from purchase accounting for in-process research and development acquired in the Company's acquisition of Targanta Therapeutics Corporation (Targanta).

For the nine months ended September 30, 2011 and 2010, the Company recorded a $50.8 million benefit and a $2.6 million provision for income taxes, respectively. In addition to the $66.5 million reduction in the valuation allowance discussed above, the Company's income tax benefit for the nine months ended September 30, 2011 includes the effects of a one-time $2.5 million income tax benefit resulting from a prospective change in the New Jersey income tax law enacted in the second quarter of 2011and the tax impact of the settlement from the law firm Wilmer Cutler Pickering Hale and Dorr LLP (WilmerHale) (see note 12) as discrete events. The provision for income taxes is based on federal, state and foreign income taxes.

The Company continues to evaluate the realizability of its deferred tax assets and liabilities on a periodic basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits, the regulatory approval of products currently under development and the extension of the patent rights relating to Angiomax. Any changes to the valuation allowance or deferred tax assets in the future would impact the Company's income taxes.

7. Cash, Cash Equivalents and Available for Sale Securities

The Company considers all highly liquid investments purchased with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents included cash of $241.5 million and $114.1 million at September 30, 2011 and December 31, 2010, respectively. Cash and cash equivalents at September 30, 2011 and December 31, 2010 also included investments of $16.5 million and $12.2 million, respectively, in money market funds and commercial paper with original maturities of less than three months.

At September 30, 2011 and December 31, 2010, the Company held available for sale securities with a fair value totaling $49.7 million and $120.3 million, respectively. These available for sale securities included various U.S. government agency notes, U.S. treasury notes and corporate debt securities. At September 30, 2011, all of the $49.7 million of available for sale securities were due within one year. At December 31, 2010, approximately $115.2 million of available for sale securities were due within one year. The remaining $5.1 million were due within two years.

Available for sale securities, including carrying value and estimated fair values, are summarized as follows:

 
As of September 30, 2011
 
As of December 31, 2010
 
Cost
 
Fair Value
 
Carrying
Value
 
Unrealized
Gain
 
Cost
 
Fair Value
 
Carrying
Value
 
Unrealized
Gain
 
(in thousands)
U.S. government agency notes
$
14,917

 
$
14,919

 
$
14,919

 
$
2

 
$
55,222

 
$
55,222

 
$
55,222

 
$

U.S. treasury notes
3,054

 
3,056

 
3,056

 
2

 

 

 

 

Corporate debt securities
31,765

 
31,764

 
31,764

 
(1
)
 
65,055

 
65,058

 
65,058

 
3

Total
$
49,736

 
$
49,739

 
$
49,739

 
$
3

 
$
120,277

 
$
120,280

 
$
120,280

 
$
3


Restricted Cash

7