Medicines Co. Profits Down

The Medicines Company (MDCO - Analyst Report) reported second-quarter earnings of 18 cents per share, including the impact of stock-based compensation expense. Second-quarter earnings were well below the year-ago earnings of 31 cents. The Zacks Consensus Estimate for the second quarter of 2011 was 20 cents.

Despite an increase in revenues, higher expenses led to the decline in earnings. Revenues, up 8.6% at $119.6 million, were just above the Zacks Consensus Estimate of $118 million.

The Quarter in Detail

Angiomax US sales increased 7% to $112 million during the second quarter. Ex-US sales increased 27% to $7.3 million.

The National Institute for Health and Clinical Excellence (NICE) in the UK recently announced that Angiox (ex-US trade name of Angiomax) is economically dominant (less costly and more effective than currently available therapies) for heart attack patients. This should help increase Angiox’ share in the UK market.

Moreover, Angiox ("Angiomax" trade name in Europe) has a Class I recommendation from the European Society of Cardiology for heart attack patients undergoing percutaneous coronary intervention (PCI).

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.

Meanwhile, Cleviprex (clevidipine) is the only other FDA-approved drug at The Medicines Company. The company had initiated a voluntary recall of Cleviprex in December 2009 due to the presence of visible particulate matter in some vials.

The Medicines Company has resumed shipping Cleviprex to select customers. The first phase involves shipment to 100 leading hospitals with the full re-launch scheduled to take place in the second half of 2011.

Going forward, The Medicines Company intends to focus on neuro critical care and surgical procedures in the cardiac area where blood pressure control is very critical. The company has also been working on a new formulation of Cleviprex and expects a regulatory update on the same in the third quarter of 2011.

R&D spend increased 28.9% to $26.5 million mainly due to ongoing phase III studies with two candidates -- Cangrelor and oritavancin. SG&A expenses increased 5.1% to $41.4 million.

Backs Guidance

The Medicines Company maintained its guidance for 2011. The company expects revenues to grow 6-9% in 2011.

Pipeline Update

The Medicines Company also provided an update on its pipeline candidates. The company continued enrolling patients for its phase III studies with Cangrelor and oritavancin. Results from the BRIDGE study being conducted with Cangrelor should be available by year end.

Oritavancin is in a phase III program, SOLO, for the treatment of acute bacterial skin and skin structure infections (ABSSI). Results will be out in 2012. Positive results would allow The Medicines Company to file for US approval in 2012.

Meanwhile, The Medicines Company is hoping to gain approval for its ready-to-use formulation of Argatroban in the third quarter of 2011.

The Medicines Company’s early-stage candidates include MDCO-216 and MDCO-2010. The company acquired worldwide rights to MDCO-216 from Pfizer (PFE - Analyst Report).

MDCO-216 is a naturally occurring variant of a protein that could be used to reverse the development of arterial plaque development and reduce the risk of heart problems in patients with acute coronary syndrome (ACS).

If developed successfully, MDCO-216 should fit well within The Medicines Company’s product portfolio. Phase I studies with the candidate are scheduled to commence later this year.

MDCO-2010, which became a part of The Medicines Company’s portfolio through its acquisition of Curacyte, is a small molecule serine protease inhibitor. The company presented data on the candidate from a study which evaluated its efficacy in preventing blood loss in cardiac surgery patients. Results showed clear cut reductions in bleeding.The company expects to commence additional studies later this year.

Neutral on The Medicines Company

The company received a major boost in 2010 regarding its Angiomax patent extension case. The US PTO extended the principal patent on Angiomax by a year to August 2011 and has been instructed to treat the patent extension application as having been filed on a timely basis.

Moreover, the US Government decided against appealing the Courts decision. These developments removed a significant overhang from the stock. We are also pleased to see that management is actively pursuing in-licensing deals and acquisitions to drive growth. We believe the positive news regarding Angiomax are already factored into the stock price and remain Neutral on the stock.