Medicines Stopping the Bleeding

When the CEO of a drugmaker states that the market for its top drug "sucks," you know market conditions are rough. During its third-quarter conference call last week, that's exactly how The Medicines Company (Nasdaq: MDCO  ) described the sales environment for its lead drug, Angiomax.

Angiomax is used as an anticoagulant, helping to prevent blood clots during angioplasty surgery for patients with clogged arteries. It is also Medicines' only marketed drug, and it's being sold as a treatment for a surgery that some medical-device makers like Boston Scientific (NYSE: BSX  ) have estimated declined by 10% in procedural volume earlier in the year. Yeah, not the greatest market there.

Even with the declining volume of angioplasties in the U.S., sales of Angiomax were up nearly 9% in the U.S. year over year. This sales growth was artificially boosted, though, by hospitals stocking up on the drug ahead of a planned price increase in the quarter. Ignoring the effects of stock options and one-time items -- like its payment to former partner Nycomed to reacquire the European rights to Angiomax -- Medicines' net income was less than half that recorded in its year-ago quarter, down to $6.3 million or $0.12 a share.  

Most drugmakers would prefer to have a niche drug in a growing market, rather than a leading drug in a shrinking market. Angiomax currently falls into the latter category, given its use in approximately 42% of coronary angioplasty surgeries.

In September, though, Medicines filed a supplemental New Drug Application to expand the use of Angiomax to patients with acute coronary syndromes. That's a much bigger market, currently served by drugs like Bristol-Myers Squibb's (NYSE: BMY  ) Plavix.

In conjunction with the possible Angiomax label expansion, and the launch of another new product next year, Medicines will be expanding its sales force. With positive operating cash flow of $11.3 million in the first half of the year, no debt, and a history of product acquisitions, perhaps a purchase of an existing and complementary hospital sales force for $250 million or so might be in order for Medicines.

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