Back to Neutral for The Medicines Co. - Analyst Blog


We recently downgraded The Medicines Company ( MDCO ) to Neutral from Outperform with a price target of $25.00.

The company reported second quarter earnings of 38 cents per share, well above the year ago earnings of 18 cents. Lead product, Angiomax, continues to perform well. The settlement agreements with Teva ( TEVA ) and APP regarding Angiomax are also positive events.

Moreover, we are pleased to see management actively pursuing in-licensing deals and acquisitions to drive growth. The AstraZeneca ( AZN ) deal is a smart move by the company. The worldwide development and collaboration agreement with AstraZeneca for acute ischemic heart disease compounds including Brilinta, Angiomax and Cangrelor is a positive for The Medicines Company.

The Medicines Company's sales force is promoting AstraZeneca's anti-platelet treatment, Brilinta, which is already being promoted by AstraZeneca's sales force in the US.

The Medicines Company's strong presence in the hospital setting should help drive Brilinta sales. During the 4-year co-promotion period, The Medicines Company will receive $15 million per year for accomplishing pre-agreed commercialization activities.

The company could receive up to an additional $5 million per year on the achievement of performance thresholds. We are pleased with this deal, which should bring in additional revenues without the company being required to increase its sales force.

We are also pleased with the signing of the Gaining Antibiotic Incentives Now (GAIN) Act as it should ensure an additional five years of exclusivity for oritavancin.

While pleased with all these positive developments and the company's efforts to develop its pipeline, we were disappointed to hear about the discontinuation of the development of phase II candidate, MDCO-2010. Shares were down more than 5% on the news.

Earlier this month, The Medicines Company announced the discontinuation of an ongoing study being conducted with MDCO-2010. MDCO-2010 was being developed for the reduction of blood loss during surgery.

The company decided to discontinue the study voluntarily following the emergence of serious unexpected patient safety issues during the phase IIb dose-ranging study. Although the company is yet to establish a link between the cause of the safety issues and the candidate, the development of MDCO-2010 has been discontinued due to the evidence of risk to patients.

MDCO-2010 became a part of The Medicines Company's pipeline following its August 2008 acquisition of Curacyte Discovery GmbH. MDCO-2010 was considered to be a promising candidate given the positive phase IIa data reported by the company in October 2011. The discontinuation of the candidate is, therefore, disappointing.

The Medicines Company has important pipeline events lined up for later this year. We prefer to remain on the sidelines until we see data on oritavancin and Cangrelor, which should be out by year end. The Medicines Company carries a Zacks #3 Rank (short-term Hold rating).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AZN , GAIN , MDCO , TEVA

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