Top Picks 2016: The Medicines Company

01/28/2016 7:00 am EST


Jay Silverman

Analyst, Medical Technology Stock Letter

Jay Silverman, editor of The Medical Technology Stock Letter, believes his Top Pick from 2015—which rose 37% over the past year—remains well situated to qualify as one of his favorite for the new year.

The Medicines Co. (MDCO) had a highly successful 2015; in my view, the upcoming year will include updates on at least four future growth drivers and further execution of the strategic plan put in place towards the end of the year.

With the cardiovascular drug MDCO-216 about to gain visibility, now three potential blockbuster compounds including '216, ALN-PCS (cholesterol reduction), and ABP-7000 (surgical anesthetic) resulted in positive first-look (i.e., Phase I/II) clinical trials.

The best-in-class PCSK-9 inhibitor under development, ALN-PCS can significantly lower cholesterol levels and hold them down for six months.

Hence, the drug may be dosed only twice a year, way less than the 24x in the AMGN Repatha and REGN/SNY Praluent labels. ABP-7000 can become next propofol, the most widely short-term procedural anesthetic.

The novel antibiotic—carbavance—is the fourth unique MDCO asset with sizable commercial potential. Two Phase III trials are finishing up and data is due in 2016.

MDCO ended 2015 on an all time high fundamentally, but in our view the momentum continues to accelerate.

In late-December, MDCO announced the first step in its strategy to focus on high value assets, selling its hemostatis product line to Mallinckrodt for up to $400 million to bolster balance sheet.

With a risk-adjusted diversified pipeline entering late-stage clinical trials, led by a highly experience management team, in our view, 2016 will continue to unlock The Medicine Company's value.

When biotech stocks reach a major inflection point as MDCO did in 2015, outperformance often lasts several years. Still trading well below our conservative NPV, MDCO is a buy under $50 with a target price of $75.

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