Medicines Co (MDCO) saw their second quarter EPS plummet due to the impending arrival of the generic version of Angiomax as a result of the Fed Circuit of Appeals ruling against Medicines during the quarter. This court decision significantly hurt MDCO; hospital sales crashed as they waited for the cheaper generic version. Further, the company expects increased R&D costs as a result of the company turning their focus towards their drug pipeline. Management even went to the length to say they may need to raise cash to fund their top pipeline candidates. Also, any delays in their current pipeline would negatively impact future earnings. Due to these factors, Medicines is the Zacks Bear of the Day.
This Zacks Rank #5 (Strong Sell) company provides medicines for patients in acute and intensive care hospitals worldwide. The company markets Angiomax, an intravenous direct thrombin inhibitor used as an anticoagulant in combination with aspirin in patients with unstable angina undergoing percutaneous transluminal coronary angioplasty, and for use in patients undergoing percutaneous coronary intervention, and 9 other drugs. Further, the company has collaboration agreement with Alnylam Pharmaceuticals, Inc. to develop, manufacture, and commercialize ALN-PCSsc. The Medicines Company was founded in 1996 and is based in Parsippany, New Jersey.
In their most recent earnings report, it was very evident that the court ruling had a negative impact on the top line; Q2 revenues came in at $90 million, $34 million below the Zacks Consensus Revenue Estimate. Further, the company’s new product launches came in below expectations, and management believes that they might need to raise even more money to help these drugs along the pipeline. While Medicines has several big drugs around the corner, if anyone of them have difficulties it would increase costs, and reduce revenues.
Detailed Estimates Graph
As you can see in the Price and EPS Consensus graph below, expectations have significantly dropped after the recent earnings announcement.
Over the past 7 days estimates for Q3 15, Q4 15, FY 15 and FY 16 have all dropped significantly; Q3 15 fell from $0.28 to -$0.96, Q4 15 crashed from $0.21 to -$1.00, FY 15 plummeted from $0.32 to -$2.60, and FY 16 dropped from $0.52 to -$1.33.
Bottom Line
This Med-Biomed/Gene sector company is dealing with generic competition while attempting to move their drug pipeline forward. The reduction in revenues, and impending increased R&D costs have caused significant downgrades in earnings expectations out to 2016.
If you are inclined to invest in this sector, you would be best served to look at Gilead Sciences (GILD), Neogenomics Inc. (NEO), or Cytokinetcs Inc. (CYTK), all of which carry a Zacks Rank #1 (Strong Buy).
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