The Medicines Company

01/15/2015 7:00 am EST


Jay Silverman

Analyst, Medical Technology Stock Letter

Despite a few bumps early in the year, our more conservative Top Pick is a biotech firm that is paving the way for an exciting 2015, suggests Jay Silverman, editor of The Medical Technology Stock Letter.

We remain steadfast in our opinion that The Medicines Company (MDCO) owns a valuable number of assets with significant value that is not reflected in the company's stock price.

With a rapidly growing product line and R&D pipeline of roughly ten new products, MDCO's platforms in a) cardiovascular disease (CV); b) pre- and post-surgical products; and c) serious infectious disease is creating a hospital-based acute care powerhouse.

Trading at a market cap of approximately $1.8 billion or just 2.4x 2014E revenues, MDCO appears very undervalued to us, entirely due to the overhang of patent challenges for its Angiomax drug.

Over time, we expect that will change. In the current biotech boom, it is difficult to find a stock with such positive fundamentals trading at such a discount.

Meanwhile, we expect near-term approvals/launches of Cangrelor, a platelet inhibitor; an important IV version of Minocin for gram-negative infections; Orbactiv, a single dose antibiotic that saves time and costs; IonSys, a next generation opiod; and a full line of hemostasis products, each with noted advantages to control bleeding before, during, after surgery.

Future blockbusters include Carbavance, a multi-drug resistant antibiotic that received major fast track from FDA; ApoA1-Milano, a novel target for cholesterol transport; ALN-PCSK9sc, a major new LDL cholesterol lowering agent; and ABP-700, a next generation surgical anesthesia.

Overall, this pipeline is quite valuable and will, in our view, most certainly be reflected in MDCO shares soon. Based upon the expected catalysts listed above, 2015 will be a transformative year.

As a reminder, MDCO trades at less than 2.4x total 2014 revenues ($750 million est.); incredibly inexpensive using most valuation methodologies.

If MDCO had been a biotech IPO last year with just 2-4 of the future blockbusters as the entire company, we strongly believe the stock would be higher than it is today. It appears that undervalued to us. MDCO is a Buy under 42 with Target Price of 60.

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