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The Medicines Co. Loss Wider, to Divest Cardiovascular Drugs

The Medicines Company MDCO reported a loss of $1.13 per share (including the impact of share-based compensation expenses) in the first quarter of 2016, significantly wider than the Zacks Consensus Estimate of a loss of 85 cents and the year-ago loss of 12 cents per share.

First-quarter 2016 revenues plunged 54.3% year over year to $50.3 million. Revenues were however above the Zacks Consensus Estimate of $47.7 million. Net revenue for the first quarter of 2016 include royalty revenues of $18.9 million, derived from the gross profit of authorized generic sales of Angiomax by Novartis AG’s NVS generic arm, Sandoz, Inc.

The Quarter in Detail

Angiomax’s U.S. sales slumped 86.1% to $13.2 million, reflecting the loss of exclusivity in Jul 2015. Worldwide sales of Angiomax were also down 83.2% to $16.9 million during the reported quarter.

Sales of other products like Cleviprex, Argatroban, Minocin, Orbactiv, Ionsys and Kengreal recorded sales of $14.5 million in the first quarter of 2016 compared with $9.4 million in the year-ago period. Revenues from newly launched products (Kengreal, Cleviprex, Orbactiv, Minocin IV and Ionsys) increased 161% year over year to $10.9 million in the first quarter of 2016.

While adjusted research & development (R&D) expenses increased 39.5% to $32.5 million, adjusted selling, general and administrative (SG&A) spend inched up 0.2% to $77.9 million.

In a separate press release, The Medicines Co. announced that it has entered into a definitive agreement to divest its non-core cardiovascular products – Cleviprex, Kengreal and its rights to Argatroban – to an Italian healthcare company, Chiesi USA, Inc. and its parent company, Chiesi Farmaceutici S.p.A.

The total consideration of the transaction is up to $792 million. The structure of the transaction includes $260 million in cash upfront at closing, an estimated payment of $2 million for product inventory, up to $480 million in sales-based milestone payments and the assumption of up to $50 million in future milestone obligations due to third parties.

The transaction is expected to close early in the third quarter of 2016.

With this transaction, The Medicines Co. is looking to significantly strengthen its financial position and focus its efforts on the development of the pipeline. The company intends to reduce SG&A and related R&D expenses by an estimated $65 million to $80 million, respectively, along with simplification of operations.

We remind investors that earlier this year, the company divested its hemostasis portfolio, which included drugs such as Recothrom, PreveLeak and Raplixa, to Mallinckrodt plc MNK.

2016 Outlook Updated

The Medicines Co. provided an updated guidance for 2016. The company now expects net revenue in the range of $160–$170 million (old guidance: $190–$210 million).

While adjusted R&D expenditure is expected in the range of $128 million to $138 million (old guidance: 127 million to $137 million), adjusted SG&A expenditure is expected in the $247 million to $257 million band (old guidance: $263–$273 million).

Our Take

The Medicines Co.’s first-quarter results were mixed with the company posting a wider-than-expected loss and revenues surpassing expectations. Loss of exclusivity of Angiomax led to revenues declining year over year. Meanwhile, the company’s restructuring initiatives such as divestment of non-core assets, to boost shareholder value are quite encouraging. The company expects lot of development on the pipeline front, going ahead in 2016. Investor focus is expected to remain on updates from the company.

The Medicines Co. is a Zacks Rank #3 (Hold) stock. ANI Pharmaceuticals, Inc. ANIP is a better-ranked stock in the health care sector, sporting a Zacks Rank #1 (Strong Buy).

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NOVARTIS AG-ADR (NVS): Free Stock Analysis Report
 
MEDICINES CO (MDCO): Free Stock Analysis Report
 
MALLINCKRODT PL (MNK): Free Stock Analysis Report
 
ANI PHARMACEUT (ANIP): Free Stock Analysis Report
 
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