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The Medicines Company (MDCO - Analyst Report) recently announced that it has completed its acquisition of Incline Therapeutics, Inc., for an upfront fee of $185 million. 

In addition, The Medicines Company will shell out up to $205 million on the achievement of regulatory and commercial targets
 
With this acquisition, Ionsys (fentanyl iontophoretic transdermal system) has become a part of The Medicines Company’s pipeline. Ionsys is a compact, disposable, needleless patient-controlled analgesia (PCA) system which is being developed for the short-term management of acute postoperative pain in the hospital setting.
 
Incline is now a wholly owned subsidiary of The Medicines Company. The acquisition agreement was announced in Dec. 2012. The acquisition should strengthen The Medicines Company’s position as a leader in acute and intensive care medicine on a worldwide basis. 
 
We note that Ionsys was approved by the European and US regulatory agencies and subsequently launched in Europe. However, the system was recalled voluntarily in Europe due to device stability issues and was never launched in the US.
 
The Medicines Company is looking to re-submit the regulatory applications in the near term and maybe launch the product in the US in early 2014 and the EU in 2015. The Medicines Company is forecasting peak sales of $800 million for Ionsys.
 
With The Medicines Company planning to invest in manufacturing and technical development as well as regulatory requirements for Ionsys, the Incline Therapeutics acquisition is expected to be modestly dilutive in 2013.
 
Earlier, Cadence Pharmaceuticals, Inc. had expressed intent to acquire Incline but subsequently terminated the deal in Dec. 2012.  Cadence received approximately $13.1 million as termination fee and is entitled to receive approximately $1.5 million as milestone payments. 
 
We believe that Ionsys, once commercialized, will support long-term growth.  Right now, pharma stock Palatin Technologies Inc. (PTN - Snapshot Report) looks attractive with a Zacks Rank #1 (Strong Buy).

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