Loss Widens At Medicines Co.

The Medicines Company (MDCO: 7.31 +0.09 +1.25%) reported a fourth-quarter loss of $1.40 per
share and a full year loss of $1.38, including the impact of stock-based
compensation expense. Fourth quarter loss was wider than the year-ago loss
of 8 cents and the Zacks Consensus Estimate of a loss of 15 cents.

Although revenues increased, the company reported a wider loss due to the
ApoA-1 Milano deal, milestone payments, license payments, and other costs,
charges related to the Cleviprex recall and its decision to fully reserve
against its deferred tax assets.

Meanwhile, Angiomax sales helped increase fourth quarter revenues to
$102.1 million, up 8.7%. Full year revenues increased 16.1% to $404.2
million. Angiomax, the lead product of The Medicines Company that was
acquired from Biogen Idec, Inc. (BIIB: 56.61 +0.63 +1.13%) in 1996 is used as an anticoagulant
in patients undergoing coronary angioplasty.

The drug recorded fourth quarter sales growth of 9.6% to $96.3 million in
the US. We were pleased to see Angiomax revenues increase on a sequential
basis as well despite the tough economic environment which has led to
cost-cutting by hospitals. We believe that data supporting the
cost-effectiveness of Angiomax is helping the product gain share. However,
Angiomax sales in ex-US markets declined 7.1% to $5.2 million.

For the full year, Angiomax sales increased by 14.6% to $382.9 million in
the US. International markets also recorded growth with Angiomax sales
coming in at $18.3 million, up 34.6%.

Meanwhile, we remain disappointed with the performance of Cleviprex
(clevidipine), the only other marketed drug at The Medicines Company that
received US Food and Drug Administration (FDA) approval in 2008. Cleviprex
is an intravenous drug (calcium channel blocker) intended for the
short-term control of blood pressure in patients undergoing cardiac
surgery.

The drug recorded sales of $0.6 million, down from $1.1 million recorded
in the third quarter of 2009. Full year sales came in at $3 million.

The Medicines Company also announced that it is adopting steps to help
simplify its operating structure. The company has cut down 74 jobs – this
move is expected to generate cost savings of approximately $15.5 million
in 2010.

We were not surprised to see the company refraining from providing any
revenue guidance for 2010 given the generic risk being faced by Angiomax.
Angiomax will most likely lose patent exclusivity in the U.S. in September
2010 (including pediatric exclusivity) and the entry of generics would be
devastating for the company. Angiomax, The Medicines Company’s lead
product, accounted for about 98% of total revenues in 2009.

We currently have a Neutral recommendation on The Medicines Company. Our
biggest concern with the stock is the generic risk for Angiomax.
However, we are pleased to see that management is actively pursuing
in-licensing deals and acquisitions to make up for the loss of revenues
that will take place with the genericization of Angiomax.

While the products acquired/in-licensed by the company are still in
different stages of clinical development, the successful development and
commercialization of these candidates would help sustain long-term growth.