Medicines Company Leaves Sour Taste - TheStreet

Medicines Company Leaves Sour Taste

The company loses a key patent battle. Meanwhile, issues loom with its pipeline.
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Shares of

Medicines Company

(MDCO) - Get Report

fell sharply Friday after the U.S. Patent and Trademark Office issued a final ruling that the patent extension for the company's blood thinner Angiomax would not be granted.

Earlier in the year, I

argued that Medicines had little chance of achieving the extension and the stock would decline as a result. Shares recently were down $2.27, or 8.9%, to $23.30, on nearly five times their average daily volume.

A brief recap: In 2001, Medicines was a day late in filing the extension on its Angiomax patent, which is set to expire in March 2010. The company argued that the date the patent went into effect was incorrect, but the USPTO repeatedly shot down that line of reasoning.

Medicines tried to lobby Congress to get the law changed. That effort failed as well. Of course, now that the USPTO has again refused to change its stance, the company will try again. This time, though, it will likely be quite difficult to push a bill that benefits just one company through a Democratic Congress. Additionally, one of the key sponsors of the last bill, Congressman Marty Meehan, will retire at the end of the current session.

Medicines' only other course of action is to take the issue to the courts. After many attempts at getting the USPTO to reverse their ruling, "They don't get another bite of the apple," says USPTO spokesman Richard Maulsby.

Former bull Biren Amin of Stanford Financial downgraded the stock to hold from buy Friday on the news. "The company faces an earnings shortfall in 2011 if they don't get the patent extension through," the analyst says. "It creates uncertainty as to whether you want to own the stock ahead of that event."

Nevertheless, he still believes there are attractive assets in the pipeline and calls $21 to $22 a fair price for the stock.

Pipeline Questions

Though Amin's optimistic, I'm not entirely confident about one of the agents in Medicines' pipeline. Cleviprex, a hypertension drug, is currently in phase III trials. When compared with market leader Cardene IV, made by

PDL Biopharma

(PDLI) - Get Report

, Cleviprex had an inferior safety profile. Among 381 patients in the study, those taking Cleviprex had double the rate of heart attack than patients who were on Cardene, as well as higher rates of death and renal dysfunction. On the flip side, patients on Cleviprex had roughly half the incidents of stroke.

Cardene's patent expires in 2009, which means that even if Cleviprex wins approval, it will compete not only with Cardene but with generic drugs as well.

Medicines also is enrolling patients in a phase III study for the anticoagulant Cangrelor. There are some safety concerns here as well. In earlier studies, Cangrelor produced more incidents of major bleeding, death and heart attack when compared with placebo and abciximab. While the small number of patients in the study may not lead to a statistically significant conclusion, it does generate a yellow flag and is something to keep an eye on.

Considering that it's unlikely to get the patent extension through the courts or Congress and there are some questions about its pipeline, long investors should take their medicine and move on. Despite the hemorrhaging of the stock Friday, there may still be some bleeding left to go.

In keeping with TSC's editorial policy, Lichtenfeld doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships.

Marc Lichtenfeld was previously an analyst at Avalon Research Group and The Weiss Group and a trader at Carlin Equities. He holds NASD 86, 87, 7 and 63 licenses. His prior journalism experience includes being a reporter/anchor for On24 in San Francisco and a managing editor of InvestorsObserver, a personal finance Web site. He is a graduate of the State University of New York at Albany. He appreciates your feedback;

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