The Medicines Company (MDCO) reported a third-quarter profit of 40 cents per share, including the impact of stock-based compensation expense. Third quarter profit was well above the Zacks Consensus Estimate of 24 cents and the year-ago loss of 6 cents. Performance was boosted by higher revenues and lower operating expenses.
Revenues, although up 6.9% at $105.7 million, fell short of the Zacks Consensus Estimate of $110 million.
The Quarter in Detail
Angiomax continued to see strong demand during the quarter. Angiomax sales in the US increased 9% to $100.2 million with Angiomax box sales increasing 14% from the year-ago period. EU sales increased 38% to $4 million mainly due to strong growth in countries like Italy, Switzerland, Spain, France, Scandinavia, and the United Kingdom. RoW sales, however, declined 42% to $1.5 million due to the buying pattern of the company’s Canadian distributor.
We note that ex-US sales declined marginally on a sequential basis. The Medicines Company is working on driving growth in ex-US markets by promoting data on the product. Moreover, Angiox (Angiomax’ trade name in Europe) has 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), is the lead product at The Medicines Company. Acquired in 1996, Angiomax is used as an anticoagulant in patients undergoing coronary angioplasty.
Adjusted R&D spend remained unchanged at $16.7 million. We expect R&D spend to increase from the fourth quarter as the company will be conducting two phase III programs and could make a milestone payment related to the development of MDCO-2010.
SG&A expenses declined 24.4% to $35.8 million. The lower spend was in-line with the company’s target of achieving annual savings in the range of $14.5 million – $16.5 million. The company has cut more than 150 jobs since the beginning of the year.
Pipeline Update
The Medicines Company also provided an update on its pipeline candidates. The company currently has three phase III candidates and two early-stage candidates in its pipeline. The company said that it is has commenced a new phase III study (Champion Phoenix) with Cangrelor in the third quarter.
Meanwhile, The Medicines Company is hoping to gain approval for the ready-to-use formulation of Argatroban soon. The Medicines Company has also submitted a protocol with the FDA for a phase III study of oritavancin for the treatment of acute bacterial skin and skin structure infections (ABSSI). The company expects to finalize the protocol shortly and start enrolling about 2,000 patients for two studies – SOLO 1 and SOLO 2.
As far as Cleviprex is concerned, the Medicines Company is yet to resume normal supply of the product. The company had initiated a voluntary product recall in December 2009 due to the presence of visible particulate matter in some vials. The Medicines Company is currently working on the supply situation.
Cleviprex (clevidipine) is the only other marketed drug at The Medicines Company that received FDA approval in 2008. The drug is currently under regulatory review in other countries but approval is not expected prior to the resolution of the ongoing manufacturing issues.
The Medicines Company’s early-stage candidates include MDCO-216 and MDCO-2010. The company acquired worldwide rights to MDCO-316 from Pfizer (PFE). 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.
A key preclinical toxicology study is scheduled to commence shortly with chemical trials slated to commence in 2011.
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 candidate recently completed a phase I study and is scheduled to move into a study in patients undergoing coronary artery bypass surgery (CABG) by year-end.
Our Take
We currently have an Outperform recommendation on The Medicines Company, which is supported by a Zacks #1 Rank (short-term “Strong Buy” rating). The company received a major boost in August regarding its Angiomax patent extension case. The US PTO has extended the principal patent on Angiomax by a year to August 2011 and has been instructed to treat the patent extension application as having been filed on a timely basis.
Moreover, the US government has decided against appealing the court’s decision. This removes a significant overhang from the stock and resulted in several analysts increasing their 2010 and 2011 estimates for the company. We are also pleased to see that management is actively pursuing in-licensing deals and acquisitions to drive growth.
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