After Cangrelor, The Medicines Company Gets Priority Review for New Drug

It at first you don't succeed, try again. The saying certainly describes The Medicines Company (NASDAQ: MDCO  ) , as it regroups after the recent FDA advisory committee 2 to 7 vote against the approval of Cangrelor, used to prevent blood clots. The FDA is set to meet at the end of April, and while the committee's opinion can be disregarded, it appears unlikely that an approval will be granted. However, a new application for antibiotic drug oritavancin was given priority review status, with a decision expected by Aug. 6, 2014.

Cangrelor, if it's approved, faces stiff competition
The FDA committee recommended that numerous flaws found with Cangrelor's study be corrected before the drug is approved. Issues with the trial included its design, oversight, the data/safety monitoring board, and the ways in which efficacy and safety were counted. These issues have even led to a class action suit, where the company is being accused of making false and misleading statements about the Cangrelor trial. The Medicines Company shares have decreased 22% since January and, in light of recent events, I would not recommend the stock for investors with a low risk tolerance.

The company, which serves about 3,000 acute and intensive care hospitals, has four drugs on the market. If approved, late-stage drugs Cangrelor and oritavancin would join top seller Angiomax, along with Recothrom, Argatroban, and Cleviprix. The current product line contributed to a 16% rise in net revenue in the fourth quarter of 2013, while EPS for the period was down to $0.02 versus $0.38 for the same period in 2012.

Adding new drugs to its product line can help The Medicines Company boost its revenue, which appear to be rising at a much slower pace than its operating expenses.. If the unlikely approval of Cangrelor goes through, the drug will face stiff competition from other anticoagulants in the market, like Bristol-Myers Squibb's (NYSE: BMY  ) Plavix and AstraZeneca's (NYSE: AZN  ) Brilinta, as well as generics.

Bristol-Myers Squibb's cardiovascular segment is facing headwinds from generic competition, which is impacting sales of Plavix and its other cardiovascular therapies. To offset decreasing revenues, the company is seeking approval in the U.S. and Europe for additional indications of its heart defect drug Eliquis. Despite decreasing sales of Plavix, the company's deep pipeline helped propel growth during the fourth quarter of 2013 – skin cancer drug Yervoy, diabetes drug Onglyza/Kombiglyze, leukemia drug Sprycel and arthritis drug Orencia all had double-digit increases in sales.

AstraZeneca's Brilinta/Brilique product showed the second highest growth in revenues within the company's cardiovascular segment. Global sales of the drug during the fourth quarter were $92 million, up from $75 million in the third quarter of 2013. Brilinta does not have generic competition, and marketing exclusivity is set to expire in July 2016. During fiscal 2013, growth in Brilinta, the diabetes and respiratory segments, emerging markets, and Japan delivered $1.2 billion in revenue. Unfortunately the growth in these areas was offset by a reduction in revenues of $2.2 billion due to patent expirations.

What are the benefits of oritavancin versus the competition?
Oritavancin is an antibiotic currently in phase 3 testing and is meant for use in the prevention of skin infections in hospitals. It kills gram-positive bacteria, such as MRSA, and helps to prevent infections in hospital patients with open wounds and weak immune systems. Clinical trial data shows that oritavancin's effectiveness is similar to vancomycin across several types of bacteria. 

Vancomycin, which has been used in hospitals for years and for the same purpose, has drawbacks. Treatment, which is administered via catheter, can take several days and usually requires a hospital stay. Dosing of oritavancin is much simpler – it is administered once via catheter and the catheter is removed. In addition to vancomycin, the company can expect competition from others skin infection therapies that are also in late-stage trials.

My Foolish conclusion
While the vote by the FDA advisory committee against approving Cangrelor was a setback for The Medicines Company, it may find success with oritavancin. Craig Rubens, MD, commented on MedPageToday that obtaining FDA approval for drugs that treat skin infections seemed to be easier when compared to drugs prescribed for other indications . The drug's single dose treatment and its potential cost savings can be two attractive selling points for health care providers.

The Medicines Company forecasts that oritavancin should have peak sales of more than $400 million. An approval of the drug in August could boost the company's shares, currently trading at 16 times 2014 earnings. The company is busy growing its pipeline and at least four new products are expected between 2014 and 2018. Investors are encouraged to watch this stock for now, since the company has missed market EPS estimates in the past three quarters. 

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