Earnings Miss for The Medicines Co

The Medicines Company (MDCO - Analyst Report) reported third-quarter earnings of 12 cents per share, including the impact of stock-based compensation expense. Third-quarter earnings were well below the year-ago earnings of 40 cents and the Zacks Consensus Estimate of 19 cents.

Despite an increase in revenues, higher expenses led to the decline in earnings. Revenues, up 14.2% at $120.8 million, were in line with the Zacks Consensus Estimate. Reported third quarter 2011 EPS increased to $1.34 from 40 cents in the year ago quarter.

The Quarter in Detail

Angiomax US sales increased 11% to $111.1 million during the third quarter. Ex-US sales increased 67% to $9.2 million. The National Institute for Health and Clinical Excellence (NICE) in the UK 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.

The Medicines Company launched two new products/formulations in the third quarter - the company launched a ready-to-use formulation of Agatroban as well as a new formulation of Cleviprex (clevidipine).

R&D spend increased 59.2% to $26.6 million. SG&A expenses increased 26.7% to $45.4 million. The company expects R&D spend to be about 20% of revenues in 2011.

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. Results from the BRIDGE study being conducted with Cangrelor should be out in early November.

The Medicines Company also expects to present data on Angiomax from the BRAVO program which is evaluating the use of Angiomax in structural heart disease.

Meanwhile, oritavancin is in a phase III program, SOLO, for the treatment of acute bacterial skin and skin structure infections (ABSSI).

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.

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 a phase IIb study with MDCO-2010 in the US in 2012.

Neutral on The Medicines Company

The Medicines Company received a major boost in 2010 regarding its Angiomax patent extension case. We were also pleased to hear about the company’s settlement of its patent infringement lawsuits against Teva (TEVA - Analyst Report) and its affiliate, Pliva Hrvatska. The companies were looking to gain approval for generic versions of Angiomax. The settlement agreement has removed a major overhang from the shares.