Zacks Investment Research



|The Medicines Company |(MDCO – NASDAQ) |$30.24 |

Note: FLASH REPORT; more details to come; changes are highlighted. Except where noted, and highlighted, no other sections of this report have been updated.

Reason for Report: Flash Update: 1Q18 Earnings Results

Previous Edition: 4Q17 Earnings Update

Flash Update

Medicines Company’s Q1 Loss Widens, Revenues Tank Y/Y

The Medicines Company incurred first-quarter 2018 loss of 76 cents per share, wider than the Zacks Consensus Estimate of a loss of 71 cents and the year-ago figure of a loss of 75 cents.

Quarterly revenues plunged 55.4% year over year to $7.8 million. Also, the top line missed the Zacks Consensus Estimate of $9 million. This downside in the quarter under review is mainly attributable to lower sales of the company’s marketed drug, Angiomax.

The Medicines Company’s adjusted research and development (R&D) expenses (excluding the impact of one-time items) increased 51% year over year to $39.1 million on higher spend in support of inclisiran.

Adjusted selling, general and administrative (SG&A) expenses (excluding the impact of one-time items) declined 41% to $21.4 million.

Details, other news update and broker comments will be provided in the next edition.

Portfolio Manager Executive Summary

The Medicines Company is a global biopharmaceutical company focused on the development and commercialization of hospital-based acute care drugs for cardiovascular indications, surgery and perioperative care and serious infectious diseases. Marketed products include Angiomax (anticoagulant in patients undergoing coronary angioplasty), Orbactiv (added through the Targanta acquisition in 2009) for the treatment of acute bacterial skin and skin structure infections (ABSSSIs)) and Ionsys (acute postoperative pain). However, Angiomax is facing generic competition in the United States.

Of all the 9 firms covering The Medicines Co., eight were positive on the stock with one giving a neutral rating and none rendering a negative rating on the stock.

Positive or an equivalent outlook (8/9 firms): The firms are bullish on the company’s pipeline progress and are also encouraged by the recent divestiture of its infectious disease business to Melinta as these proceeds along with restructuring should provide enough cash to develop The Medicines Company’s lead candidate, inclisiran, up to the NDA submission in 2019. The firms are also optimistic about the favorable data related to Inclisiran and initiation of the phase III study on the candidate.

Apr 6, 2018

Overview

Based in Parsippany, NJ, The Medicines Company is a global biopharmaceutical company focused on advancing the treatment of critical care patients through delivery of innovative and cost-effective medicines to the worldwide hospital marketplace. Marketed products include Angiomax (an anticoagulant in patients undergoing coronary angioplasty) and Ionsys (acute postoperative pain). Angiomax is however, facing generic competition in the United States.

The Medicines Co. is currently focusing on increasing shareholder value by divesting non-core assets. In February 2016, it divested the hemostasis portfolio including drugs like Recothrom, PreveLeak and Raplixa to Mallinckrodt.

In June 2016, the company had completed the divestiture of its non-core cardiovascular products — Cleviprex, Kengreal — and its rights to Argatroban. With this transaction, the company received $264 million in cash and expects to receive $480 million in future sales-based milestone payments. Moreover, in January 2018, the company completed the divestiture of its infectious disease business unit to Melinta Therapeutics.

The company’s website is .

The firms identified the following factors for evaluating the investment merits of The Medicines Co.:

|Key Positive Arguments |Key Negative Arguments |

|The Medicines Co. is actively pursuing acquisitions and in-licensing agreements|With Angiomax sales eroding due to the presence of generics, the company’s |

|to grow its pipeline. The company’s divestiture of its non-core assets should |ability to successfully develop and bring in new products to the market is |

|allow it to focus on key assets and bring in a non-dilutive source of funds as |important for growth. |

|well. | |

|The Medicines Co. has pipeline candidates, representing blockbuster potential. | |

|The signing of the Gaining Antibiotic Incentives Now (GAIN) Act is a major | |

|positive for Orbactiv, which has a Qualified Infectious Disease Product (QIDP) | |

|designation. This provided Orbactiv an additional five years of marketing | |

|exclusivity. | |

Note: The company’s fiscal year coincides with the calendar year.

Jan 16, 2018

Long-Term Growth

With The Medicines Co.’s flagship product Angiomax going generic, the company has entered a challenging period wherein driving top-line growth will become increasingly difficult.

The Medicines Co. has undertaken a restructuring program to boost shareholder value. In February 2016, the company divested its hemostasis portfolio, which included drugs such as Recothrom, PreveLeak and Raplixa, to Mallinckrodt. In June 2016, the company divested its non-core cardiovascular products, Cleviprex, Kengreal and their rights to Argatroban. Moreover, in January 2018, the company sold its infectious disease business unit to Melinta Therapeutics. With the divestment of non-core products, The Medicines Co. is focusing on developing pipeline candidates targeting its key focus areas, which should drive long-term growth.

In February 2015, the company acquired Annovation and added ABP-700 (sedative-hypnotic used to induce and maintain sedation for procedural care and general anesthesia for surgical care) to its portfolio.

This apart, the company has an interesting candidate, Inclisiran (formerly PCSK9si; hypercholesterolemia), in its pipeline, which is being developed under a collaboration agreement with Alnylam.

The company also has a portfolio of 10 generic drugs (acute care generic products), for which, it has non-exclusive marketing rights in the United States.

Other deals include the acquisitions of Germany-based Curacyte Discovery GmbH as well as Targanta Therapeutics.

Target Price/Valuation

|Rating Distribution |

|Positive |88.9%↑ |

|Neutral |11.1%↓ |

|Negative | 0.0% |

|Avg. Target Price |$51.50↓ |

|High |$85.00 |

|Low |$38.00 |

|No. of Brokers with target price/Total |10/9 |

Risks: Late-stage pipeline setbacks and slower-than-expected ramp up of new products. There are also clinical and regulatory risks for products that are in development.

Apr 6, 2018

Recent Events

Medicines Company Reports Q4 Loss, Revenues Slump Y/Y

The Medicines Company reported fourth-quarter 2017 loss of $2.19 per share, wider than the Zacks Consensus Estimate, which stood at a loss of $1.48.

However, excluding the impact of one-time and special items, adjusted loss per share came in at 61 cents, narrower than the year-ago loss of 78 cents.

Quarterly revenues plunged 50.6% year over year to $8.6 million. Also, the top line significantly missed the Zacks Consensus Estimate of $20 million. This downside in the reported quarter is mainly attributable to lower sales of the company’s marketed drug, Angiomax.

Quarter in Detail

Net revenues for the quarter included royalty revenues from the authorized generic sales of Angiomax by Novartis’ generic arm, Sandoz, apart from net product sales of the drug. Total Angiomax revenues slumped 55% to $4.1 million in the quarter under review on its loss of exclusivity and increased generic competition.

The Medicines Company’s adjusted research and development (R&D) expenses (excluding the impact of one-time items) increased 21% year over year to $33.6 million on higher spend in support of inclisiran.

Adjusted selling, general and administrative (SG&A) expenses (excluding the impact of one-time items) decreased 44% to $21 million.

2017 Results

Full-year sales dropped significantly to $44.8 million from $143.2 million a year ago. Sales substantially missed the Zacks Consensus Estimate of $80.1 million.

Full-year loss of $8.40 per share was narrower than the Zacks Consensus Estimate of a loss of $8.86. The company had reaped earnings of 28 cents in the previous year.

Revenues

The Medicines Company’s 4Q17 revenues plummeted 50% year over year to $8.6 million. This downside in the reported quarter is mainly attributable to lower sales of the company’s marketed drug, Angiomax, due to the loss of exclusivity and higher generic competition.

|Revenue ($ in million) |4Q16A |

|Copy Editor |Pramita Bose |

|Lead Analyst |Kinjel Shah |

|QCA |Kinjel Shah |

|Last Updated by | |

|Reason for Update |1Q18 Earnings Flash Update |

|Content Editor | |

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Apr 27, 2018

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