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MDCO Tops Zacks Estimates

by Zacks Equity Research

July 29, 2010 | Comments : 0 Recommended this article: (0)

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The Medicines Co. (MDCO - Analyst Report) reported a second-quarter profit of 27 cents per share, including the impact of stock-based compensation expense. Second quarter profit was well above the Zacks Consensus Estimate of 23 cents and the year-ago earnings of 8 cents. Performance was boosted by higher revenues and lower operating expenses. The company completed its cost reduction program by cutting more than 100 jobs and expects to achieve annual savings in the range of $14.5 million–$16.5 million.
Meanwhile, revenues increased 5.7% to $110.1 million, $3 million above the Zacks Consensus Estimate. Angiomax continued to see strong demand during the quarter. While Angiomax sales in the US increased 5.7% to $104.4 million, sales in ex-US markets increased to $5.8 million. Strong growth in countries like Italy, France, Scandinavia, Benelux and the United Kingdom was offset by modest growth in Germany and lower sales in Canada. On a sequential basis, ex-US sales increased marginally.
Angiomax, acquired from Biogen Idec Inc. (BIIB - Analyst Report), is the lead product at The Medicines Company. Acquired in 1996, Angiomax is used as an anticoagulant in patients undergoing coronary angioplasty.
More than Angiomax’ performance, we are concerned about the potential loss of exclusivity later this year. The Medicines Co. is vigorously trying to get its Angiomax patent extended and has filed another lawsuit against the US Patent and Trademark Office (PTO), the US Food and Drug Administration (FDA) and the US Department of Health and Human Services.
With Angiomax accounting for almost 95% of total sales in 2009, the entry of a generic competition would be devastating for the company. Generic players Teva Pharmaceutical (TEVA - Analyst Report), APP Pharmaceuticals and Hospira (HSP - Analyst Report) are looking to sell generic versions of Angiomax.
Pipeline Update
The Medicines Company also provided an update on its pipeline candidates. The company said that it is on track to commence a new phase III study (Champion Phoenix) with Cangrelor in the third quarter. Meanwhile, the company is hoping to gain approval for the ready-to-use formulation of Argatroban soon.
The Medicines Company has also submitted a protocol with the FDA for a phase III study of oritavancin for the treatment of acute bacterial skin and skin structure infections (ABSSI). The company expects to finalize the protocol shortly and start enrolling patients for the study in the second half of the year.
As far as Cleviprex is concerned, the Medicines Company is yet to resume normal supply of the product. The company had initiated a voluntary product recall in December 2009 due to the presence of visible particulate matter in some vials. The Medicines Company is currently working on the supply situation. Cleviprex (clevidipine) is the only other marketed drug at The Medicines Company that received FDA approval in 2008. The drug is currently under regulatory review in other countries but approval is not expected prior to the resolution of the ongoing manufacturing issues.
Neutral on MDCO
We currently have a Neutral recommendation on The Medicines Company, which is supported by Zacks #3Rank (Hold). Our biggest concern with The Medicines Company is that lead product Angiomax will most likely lose patent exclusivity in the US later this year– the entry of generics would be devastating for the company.
Therefore, the onus is on management to acquire and develop the next generation of products to drive the top line. The Medicines Company has been very active on the deal-making front over the past few quarters. While the products acquired/in-licensed by the company are still in different stages of clinical development, the successful development and commercialization of these candidates would help sustain long-term growth.
Going forward, we expect investor focus to remain on the Angiomax patent situation, the Cleviprex supply situation and the future of Cangrelor and oritavancin.

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