Medicines Co. May Have Lost a Vital Organ

Medicines Co.(MDCO Quote) is going to find growth in scarce supply now that the company shut down two late-stage studies of its anti-clotting drug cangrelor.

The Parsippany, N.J.-based drugmaker was counting on cangrelor receiving regulatory approval and coming to market in late 2010. Perfect timing, because that's when Medicine's current top-selling drug, Angiomax, loses patent protection and is hit with generic competition.

Wednesday's failure of the two phase III studies of cangrelor means the drug will not be approved as planned, if ever. So now, Medicines has little or nothing to make up for a looming shortfall in Angiomax sales.

Angiomax, a blood-thinning drug used by doctors when installing stents or performing angioplasty, is expected to post U.S. sales of around $400 million this year and grow to about $420 million in 2010, according to various analyst models. But after that Angiomax sales are forecast to fall off the proverbial generic cliff, slumping to around $200 million in 2011.

The steep revenue drop is reflected in consensus earnings estimates for Medicines, which stand at 25 cents a share this year, 89 cents a share in 2010, and 37 cents a share in 2011, according to Thomson Reuters.

With the stock falling Wednesday 32.6% to $7.51, Medicines is trading at what looks to be a very reasonable, even not cheap, price-to-earnings ratio of around 8.

Yet it's the lack of earnings growth post-2010 that has investors worried.

Medicines Co. is attempting to stave off generic Angiomax by lobbying Congress to pass a bill that would give the company additional years of brand-name exclusivity. This extraordinary legislative step is required because a company lawyer missed a key filing deadline for the Angiomax patent extension with the U.S. patent office.