The Medicines Company’s MDCO shares fell 7.6% immediately after the company reported a loss of 78 cents per share in the second quarter of 2015, significantly wider than the Zacks Consensus Estimate of a loss of 20 cents. The Medicines Co. had reported earnings of 18 cents per share in the year-ago period. The wider-than-expected loss was primarily due to lower revenues.
Second-quarter 2015 revenues plunged 50.8% year over year to $90.5 million, way below the Zacks Consensus Estimate of $124 million.
The Quarter in Detail
Angiomax U.S. sales slumped 60.2% to $60.5 million. Global sales of Angiomax too were down 59.8% to $65.6 million during the reported quarter.
Recothrom sales totaled $15.9 million, down 2.5% from the year-ago period.
Sales of other products like Cleviprex, Argatroban, Minocin injection, Orbactiv and PreveLeak surged almost 105% from the year-ago period to $9 million.
While research & development (R&D) expenses decreased 5.9% to $30.9 million, adjusted selling, general and administrative (SG&A) spend increased 21.3% to $84.4 million.
With Hospira HSP launching its generic version of Angiomax in the U.S. and The Medicines Co. signing up with Novartis’ NVS generic arm, Sandoz, for an authorized generic version of Angiomax, the uncertainty surrounding Angiomax’s market exclusivity has been removed. As a result, The Medicines Co. is now focusing on the launch of its recently approved products including Kengreal (antiplatelet agent), Ionsys (acute postoperative pain), Orbactiv (infection) and a new formulation of Minocin IV (infection). The company is also looking to redeploy its commercial resources by reducing expenses related to Angiomax in different fields (R&D and promotional activities among others) except essential supply chain and other related activities.
The Medicines Co. has reduced its workforce by approximately 100 people from the beginning of the year and has redeployed Angiomax sales force to support the launch of Kengreal. The reorganization is expected to bring in annualized savings of $20–$25 million.
Meanwhile, The Medicines Co. is also exploring potential strategic partnership options through business development deals.
Gives Second Half 2015 Outlook
With Angiomax going generic, The Medicines Co. provided its guidance for the second half of 2015. The Medicines Co. expects revenues in the range of $115 million to $140 million. The Zacks Consensus Estimate for revenues currently stands at $551 million.
R&D expenditure is expected in the range of $78 million to $88 million. SG&A expenditure is expected in the range of $130 million to $140 million. While R&D expenses are expected to increase in the second half of 2015 from the first, the SG&A spend is projected to decline.
Our Take
The Medicines Co.’s second-quarter results were disappointing with the company posting a wider-than-expected loss and revenues falling significantly short of expectations. The company’s outlook for the second half of 2015 is discouraging as well.
However, we are encouraged by the company’s focus on the launch of its newly approved products. These drugs should help lessen the impact of the loss of Angiomax revenues. We expect investor focus to remain on the sales ramp of new products and business development deals.
The Medicines Co. currently carries a Zacks Rank #2 (Buy). Another favorably ranked stock in the health care sector is Actelion Ltd. ALIOF carrying a Zacks Rank #1 (Strong Buy).
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