Shares of Medicines Company (MDCO) 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.
..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) , 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[ReoPro]. 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. <<
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