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The Medicines Company (MDCO - Analyst Report) reported second quarter earnings of 25 cents per share. Second quarter earnings were well above year-ago earnings of 21 cents per share. The Zacks Consensus Estimate for the second quarter earnings was 17 cents per share. Earnings were boosted by strong revenues.

Second quarter 2012 revenues came in at $135.7 million, up 13.5% and above the Zacks Consensus Estimate of $132 million. Angiomax’ strong performance led to the increase in revenues. The company said that sales in all three regions – the US, Europe and Asia-Pacific – exceeded its targets.

The Quarter in Detail

Angiomax US sales increased 8.2% to $121.2 million during the second quarter. Ex-US sales increased a sharp 63.6% to $11.9 million, mainly due to increasing sales in Europe, especially the UK, the Nordic region, Benelux, Italy and Russia.

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.

Argatroban and Cleviprex contributed the balance revenue for the company. The Medicines Company launched these products in the third quarter of 2011.

The Medicines Company also earned revenues of $2.5 million from its co-promotion agreement with AstraZeneca (AZN - Analyst Report) for Brilinta in the US. The company has a worldwide development and collaboration agreement with AstraZeneca for acute ischemic heart disease compounds including Brilinta, Angiomax and Cangrelor.

Research and development (R&D) spend increased 24.2% to $33.0 million. Selling, general and administrative (SG&A) expenses, however, decreased 2.3% to $40.5 million.

2012 Guidance

Apart from announcing second quarter results, The Medicines Company updated its guidance for 2012. The company raised its revenue growth guidance to 11%–12% from the old guidance of 9%–11% for 2012. The company also reminded that the third quarter is typically flat on a sequential basis.

Moreover, The Medicines Company expects R&D spend of around $59–$62 million during the rest of the year. The company explained that the increase in R&D spend for the second half of the year is mainly due to the advancement of studies with Cangrelor and oritavancin. The Medicines Company expects total R&D to be 20% of the total revenue this year.

Pipeline Update

The Medicines Company also provided an update on its pipeline candidates. The company plans to continue with the PHOENIX trial by enrolling around 10,900 patients. The company also expects to release results from this study by year end, a year ahead of previous expectations. If all goes well, the company will be launching the candidate a year earlier, anticipating peak sales revenues of $450 million (previously $400 million).

Meanwhile, oritavancin is in a phase III program, SOLO (SOLO-1 and SOLO-2), for the treatment of acute bacterial skin and skin structure infections (ABSSI). The Medicines Company has accelerated the SOLO-1 trial and expects to present results in the fourth quarter. If results are positive, the company intends to speed up the other study, SOLO-2, so that a new drug application (NDA) can be filed in mid-2013.

The Medicines Company intends to file MDCO-157 for approval using a Section 505(b) (2) NDA in 2013. Clinical studies are expected to commence later this summer. MDCO-157 is a Captisol-enabled intravenous (IV) formulation of clopidogrel (the active ingredient in Plavix). The company progressed steadily with the other phase II trial of MDCO-2010 during the reported quarter.

Our Recommendation

We currently have a Neutral recommendation on The Medicines Company, which carries a Zacks #3 Rank (short-term Hold rating). We are pleased to see the company’s progress with its pipeline. The AstraZeneca deal is another smart move by the company.

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