The Medicines Co. Strikes Two Deals - Analyst Blog

The Medicines Company ( MDCO ) recently signed two agreements in a bid to boost its top line. While one agreement relates to the in-licensing of a product, the other is an acquisition deal. Both deals will see the company making upfront payments totaling $300 million.

Under the first agreement, The Medicines Co. is collaborating with Bristol-Myers Squibb ( BMY ) for marketing Recothrom, an FDA approved recombinant thrombin used as a topical hemostat to control non-arterial bleeding during surgical procedures.

The Medicines Co. will make an upfront payment of $105 million plus an option fee of $10 million along with tiered royalties on product sales during the two-year collaboration period. Bristol-Myers will be responsible for manufacturing and supplying the product to The Medicines Co. The Medicines Co. has the option to acquire the Recothrom assets.

While Bristol-Myers expects the deal to be minimally earnings accretive in 2013 and 2014, The Medicines Co. expects the deal to be earnings accretive from 2013. Recothrom, which generated revenues of $65 million in 2011 and is expected to post sales of $70 million in the US alone in 2012, is available in the US and Canada. The Medicines Co. intends to seek approval in additional countries and expects US revenues to grow to $100 - $115 million in 2013.

Moving to the second agreement, The Medicines Co. announced its intention to acquire Incline Therapeutics, Inc., a hospital-focused specialty pharmaceutical company. With this acquisition, Ionsys (fentanyl iontophoretic transdermal system) will become a part of The Medicines Co.'s portfolio.

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.

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 Co. 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 Co. is forecasting peak sales of $800 million for Ionsys.

Both companies' boards have approved the deal under which The Medicines Co. will shell out $185 million upfront to be followed by additional payments of up to $205 million on the achievement of regulatory and commercial targets. With The Medicines Co. 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.

Our Take

We are positive on both deals - Recothrom and Ionsys are strategic fits for The Medicines Co.'s portfolio and should strengthen the company's perioperative surgical franchise. While Recothrom should drive near-term top-line growth, Ionsys, once commercialized, should support long-term growth. We currently have a Neutral recommendation on The Medicines Co., which carries a Zacks #4 Rank (Sell). However, other companies like Dyax Corp. ( DYAX ) carry a Zacks #1 Rank (Strong Buy).

BRISTOL-MYERS (BMY): Free Stock Analysis Report

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MEDICINES CO (MDCO): Free Stock Analysis Report

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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 Nasdaq, Inc.

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

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