Oppenheimer Raises Its Prognosis For The Medicines Company

The Medicines Company MDCO announced Wednesday an agreement to sell its infectious disease business unit to Melinta Therapeutics, Inc. MLNT for $270 million upfront. 

As part of the deal, Medicines Company would receive royalty payments of 5-25 percent on worldwide net sales of Vabomere, Orbactiv and Minocin.

The company said it plans to narrow its focus to inclisiran, transitioning to a pure-play R&D biotech company in the process. 

The Analyst

Oppenheimer analyst Jay Olson reviewed the development and upgraded his rating on the shares of Medicines Company from Perform to Outperform, with a 12-to-18-month price target of $50.

The Thesis

With the proposed sale, Medicines Company was able to generate non-dilutive funding for inclisiran development, Olson said in a Wednesday note. (See Olson's track record here.)

Inclisiran is an experimental cholestrol drug. 

The proceeds from the sale along with restructuring will provide enough cash to develop inclisiran up to NDA submission, planned for 2019, and no equity issuance is warranted at this time, Olson said.

"We believe PCSK9 market dynamics should improve with label inclusion of CV outcomes data creating potentially positive impact on guidelines and reimbursement," Olson said of the inclisiran opportunity. Inclisiran is well-differentiated and may enter a very different PCSK9 market by 2020, the analyst said. 

The Price Action

Medicines Company shares have been on a secular decline since early April, having lost about 11 percent year-to-date.

At the time of writing, the shares were rallying 2.77 percent to $31.

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Photo courtesy of The Medicines Co.