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Smith & Wesson Misfires; Medicines Co. Surges

Smith & Wesson fell in extended trades on a disappointing outlook, while Medicines Co. rose on a positive development in a patent dispute related to its main product.



) -- Shares of gun maker

Smith & Wesson Holding Corp.


were markedly lower in afterhours trading on Thursday after the company gave a disappointing outlook for the October quarter.

Springfield, Mass.-based Smith & Wesson said it now expects breakeven results for its fiscal second quarter ending in October as it lowers production levels in response to a decline in orders.

"We believe that firearm distributors and dealers have recently taken steps to lower their own inventories," said William Spengler, the company's CFO in a statement. "We expect to see them begin to re-stock in the second half of the fiscal year. In the interim, we are limiting production during the second quarter."

The stock was last quoted at $3.52 in extended trading, according to

, down 11.1% from a close at $3.96 in regular session. Volume exceeded 150,000, which compares to the issue's trailing three-month daily average of around 900,000. The shares are down 5.6% so far in 2010, based on the regular session close.

The forecast for a breakeven second quarter on sales ranging from $97 million to $102 million compares unfavorably to the current average estimate of eight analysts polled by

Thomson Reuters

for a profit of 11 cents a share on sales of $115.5 million.

Also in focus after the closing bell was

The Medicines Co.

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, which was adding 3% to $13.55 on volume of 61,000. Shares of the Parsippany, N.J.-based drug developer leapt more than 12% in the regular session to $13.17 with volume of 4.7 million running far ahead the typical churn of around 900,000.

Duane Nash, the analyst covering Medicines Co. at Wedbush Morgan, attributed the jump in regular trades Thursday to a positive development in the company's efforts to maintain patent exclusivity on its most successful product, the anti-coagulant Angiomax, and the company confirmed this after the closing bell, issuing a press release saying the U.S. solictor general had opted to not appeal a summary judgment awarded in Medicines Co.'s favor on August 3 in its case against the U.S. Patent and Trademark Office.

Nash explained that Medicines Co. originally missed a deadline to file for an extension of its patent on Angiomax by a single day, and has since been battling with the Patent Office to get the extension, or else Angiomax, whose original patent expired in March, would have been opened up to generics this month. If the company succeeds in getting its extension, it would maintain exclusivity on Angiomax into 2015.

The court's original ruling, which ordered the Patent Office to consider Medicines Co.'s patent term extension application "timely filed," was a surprise, according to Nash, who said Thursday's news was another positive for the company; although he didn't think the battle was over quite yet.

"This is not over just yet," said Nash, who has a neutral rating on the stock, in a phone interview with


. "But things have moved decidedly in favor of Medicines Co. The original decision by the court was controversial, and I think there's a good chance they

the Patent Office would have won the appeal."

Medicines Co. said in its press release that a hearing on a motion filed by generic drug maker

APP Pharmaceuticals

to intervene in the case would be held tomorrow.

Regardless of what happens with APP Pharmaceuticals on Friday, Nash believes Medicines Co. will need to develop another viable drug if it's going to get on solid ground, as Angiomax is responsible for virtually all of the company's revenue.

"While Angiomax is a great product, even with it going full steam, they've been challenged to stay profitable," he said.

Medicines Co. reported its second-quarter results on July 28, posting an adjusted profit of $15.4 million, or 29 cents a share, on revenue of $110.2 million. U.S. sales of Angiomax totaled $104.4 million in the three-month period.


Written by Michael Baron in New York.

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Michael Baron


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