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Investment idea - The Medicines Company (MDCO)

The Medicines Company (NASDAQ: MDCO) provides medical solutions to improve health outcomes for patients in acute and intensive care hospitals worldwide. These solutions comprise medicines and knowledge that directly impact the survival and well-being of critically ill patients. Their 3 main market products in the U.S. are Angiomax® for Injection, Cleviprex® Injectable Emulsion and Argatroban Injection. Angiomax is a market leader in the United States as a blood thinner during angioplasty procedures. The important deal was closed on August 5, 2013: the Company acquired the entire interest of ProFibrix BV, a biotechnology company, after their announcement of positive results in the clinical trial of drug developed to aid in hemostasis during surgery. As a consequence of this, MDCO is planning to strengthen of their work with U.S. surgery centers, entry into the European market and potentially create the world’s first recombinant thrombin and recombinant fibrinogen combination products.

1st half 2013 financial results. The Medicines Co earned net revenue of $328,6mn (+25,3% y/y) for 6 months due to the increase in Angiomax US and international sales and Recothrom sales. Operating expenses grew greater by 39,7% y/y to $322,3mn, the most significant increase refers to cost if sales. As a result, net income for the 1st half 2013 dropped by 70,4% to $6,4mn while quarterly result was better (increase by 31,1% y/y/ to $29,2mn). Net income for 1h2013 included one-time costs of the amount of $40,6mn such as licensing costs of $25mn for a transaction with Alnylam on the PCSK9 RNAi hypercholesterolemia program, a restructuring charge of $6.4 million, $4.2 million of deal costs and an arbitration award in the amount of $5.0 million. Adjusted net income for the period increased by 64,5% to $47,2mn.

Over the coming few years the Medicines Co is planning to launch five highly innovative new products: Cangrelor, Oritavancin and IONSYS worldwide; Cleviprex and Recothrom in Europe and Asia. The Company noticed that their near term growth drivers significantly advanced in the 2nd quarter as they “reported positive Phase 3 results of the Oritavancin Phase 3 SOLO II trial, filed for US approval for Cangrelor, and completed clinical work toward filings for IONSYS”.

To sum up, the Company has an optimistic view at growing opportunities and future benefits from the developing products. We positive estimate the Company’s performance, however, investments in innovative pharmaceuticals are always connected with high level of risk.

Consensus target price – $40,31, upside risk at 24.09.13 – 24,6%, short-term goal - $34.