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The Medicines Co.’s (MDCO - Analyst Report) first-quarter earnings of 33 cents per share were slightly above the year-ago earnings of 31 cents per share. Including the impact of stock-based compensation expense, first-quarter 2014 earnings stood at 22 cents per share, below the year-earlier earnings of 24 cents. The Zacks Consensus Estimate for the first quarter of 2014 was a loss of 13 cents per share.

Including one-time items, the company reported a loss of 8 cents per share compared to the year-ago loss of 21 cents per share.

The company’s first quarter 2014 revenues rose 13.8% year over year to $177.2 million, missing the Zacks Consensus Estimate of $179 million.

The Quarter in Detail

Angiomax U.S. sales increased 11.3% to $146.2 million. Ex-U.S. sales of Angiomax were $9.5 million during the quarter.

Recothrom sales in the U.S. totaled $13.5 million. The Medicines Co. started selling Recothrom from Feb 2013 under its collaboration with Bristol-Myers Squibb (BMY - Analyst Report). Net U.S. sales of The Medicines Co.’s Ready-to-Use Argatroban, Cleviprex, Minocin IV and generic portfolio came in at $8.0 million in the first quarter of 2014.

While R&D spend declined 46.6% to $31 million, SG&A spend increased 11% to $60.7 million.

Announces Acquisition Agreement

Apart from announcing first quarter results, The Medicines Co. said that it has entered into an agreement to acquire privately-held Tenaxis Medical, Inc. The company will make an upfront payment of $58 million and will be liable to pay up to $112 million on the achievement of certain milestones.

With this acquisition, The Medicines Co. is looking to boost its surgical bleeding product portfolio which currently consists of Recothrom and Fibrocaps (currently under U.S. and EU review with a response in the U.S. expected by Jan 31, 2015). Tenaxis’ sole product is approved but not launched in the U.S. as a vascular sealant. It is also approved in the EU as a surgical sealant meant for cardiovascular, general, urological, and thoracic surgery.

The Medicines Co. could gain a leading position in the market based on Tenaxis’ products' ability to seal vascular structures in wet environments without some of the safety concerns associated with other sealants or biological glues. The company intends to increase its sales focus on surgical hemostasis in the U.S. and will cross train 100+ existing sales reps on its surgery and peri-operative care products like Recothrom and Tenaxis (once the deal goes through).

The Medicines Co. intends to enter the European market later this year and has plans to strike a partnership deal by mid-15 for one or more of its surgical hemostasis solutions in Asia-Pacific and Latin America.

Our Take

We are encouraged by The Medicines Co.’s efforts to diversify its portfolio and reduce its dependence on Angiomax. Although Angiomax continues to perform well, The Medicines Co. suffered a setback in late March when the U.S. District Court of Delaware issued a trial opinion that Hospira’s (HSP - Analyst Report) generic version of Angiomax does not infringe one of the patents. Angiomax is the company’s lead product, with U.S. sales accounting for almost 80% of total revenues in 2013. Needless to say, the earlier-than-expected entry of generics would be a major setback for the company.

Meanwhile, the company continues to progress with its pipeline and remains on track to launch Minocin IV in the U.S. for resistant infections due to acinetobacter (multi-drug resistant gram-negative bacteria that is a growing problem across the world) in the second half of 2014. A regulatory application for RPX-602, an improved formulation of Minocin IV, will also be submitted for FDA approval this year and EU approval next year.

The company has two important regulatory events coming up – a response from the FDA regarding the approval status of Cangrelor by Apr 30 and on Orbactiv (oritavancin) by Aug 6.

We expect investor focus to remain on these regulatory updates and the Angiomax situation. The Medicines Co. is a Zacks Rank #3 (Hold) stock. A better ranked stock in the biotech sector is Vertex Pharmaceuticals Incorporated (VRTX - Analyst Report), a Zacks Rank #1 (Strong Buy) stock.

Read the Full Research Report on HSP
Read the Full Research Report on VRTX
Read the Full Research Report on BMY
Read the Full Research Report on MDCO


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