Sometimes a cursory look at a company's earnings press release doesn't reveal how truly bad or good the quarterly results are. Biopharmaceutical companies with approved and marketed products early in their launch often appear more overvalued than they really are, especially when compared to some older biotechs that have been growing earnings primarily through share buybacks or cost-cutting maneuvers.

The Medicines Company (NASDAQ:MDCO) isn't exactly one of the former, since its lead product, an anticoagulant named Angiomax, has been approved since late 2000. But it does share many of these same characteristics; Angiomax was being tested in multiple clinical trials, and it's currently under regulatory review, awaiting possible approval for additional indications.

TMC's third-quarter results released today show that Angiomax sales have finally started to pick up again after several quarters of declines due to a change in wholesaler inventory-stocking levels.


Y-O-Y Growth

Gross Margins

Q4 06**




Q3 06




Q2 06




Q1 06


(20%) ***


Q4 05


(21%) ***


*in millions
**company estimates
***due to wholesaler inventory reductions

Even with sales, general, and administrative expenses and R&D costs so high as a proportion of sales, operating margins were a respectable 15%. Based on strong Angiomax sales, earnings came in at $10.7 million ($0.21 a share) for the quarter. That's a $17 million reversal from TMC's year-ago loss of $6 million.

TMC raised its level of expected earnings to between $14 million and $16 million for 2006, and narrowed its revenue guidance for all of 2006 to the "high end of" $205 million to $212 million. That would represent annualized growth of around 40% from 2005's $150 million in sales.

If TMC's drug pipeline disappeared all of a sudden, and a large chunk of its expected $63 million to $65 million in expenditures on research and development were then erased, future earnings would easily top $1 a share. Therefore, at today's share price, investors are almost getting the upside associated with TMC's developmental drug pipeline for free, when combined with the sales growth and expanded opportunities available with Angiomax. That should be a hard deal to pass up for patient investors.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.