There's a good chance investors in The Medicines Co. ( MDCO) will be left with a bad taste in their mouths after what could be a difficult 2007. Consider the peculiar goings-on lately. Shares of Medicines got whacked on Jan. 16 after the company announced a 6 million-share offering and raised its expense guidance. Counting the additional 900,000 shares that the underwriters would have been allowed to purchase, Medicines' share count was set to increase 14%. At the same time, the company predicted that this year's research and development costs would be $77 million to $81 million vs. the consensus target of $74 million. Sales, general and administrative expenses are likely to be $88 million to $92 million, again ahead of expectations, which had been $87 million. Following the announcements, Morgan Stanley's Steven Harr slashed his earnings-per-share projection to 51 cents from 86 cents, which was the average estimate. (Morgan Stanley doesn't have an investment banking relationship with Medicines.)
Fast forward eight days, when the company issued a mysterious press release. Management said it was canceling the stock offering because of "some administrative activity" that may occur in the near future. One analyst, who requested anonymity because he hadn't been cleared to discuss the issue, expects the developments to be negative. "The one thing these companies want is cash," he said. "If they're close to getting it, they're not going to give it up." However, another sell-sider, who also didn't want his name used, believes it will turn out to be essentially neutral. "My sense is that the lawyers were simply erring on the side of caution," he said.