The Medicines Company: Still a Top Pick

05/09/2017 2:50 am EST

Focus: HEALTHCARE

Jay Silverman

Analyst, Medical Technology Stock Letter

In our annual Top Picks feature, Jay Silverman chose The Medicines Co. (MDCO) as his favorite idea for 2017. With the stock is up 48%, the analyst with The Medical Technology Stock Letter reiterates his buy rating.

We've long recommended MDCO due to its development efforts with a next-generation drug called inclisiran, used to target LDL cholesterol in a wide variety of patients with cardiovascular disease.

Inclisiran has several game changing advantages over the first-generation antibodies, which lead to more efficient, consistent and predictable efficacy.

Most important, inclisiran may be administered as little as once every 4 or 6 months, 2-3 shots per year compared with 24 shots for the antibodies.

The FDA path is now clear after the end of a Phase Meeting and  Phase III LDL trial is going begin mid-year to the second half of the year.

MDCO announced that the primary endpoint of the Phase III registrational trial will be LDL-C levels. This is a major positive that significantly reduces the risk and increases the value of Inclisiran.

While MDCO has publicly stated it is in discussions with several potential partners, the certainty regarding inclisiran’s clinical and regulatory path forward, in our view, will further increase the suitors’ interest as the positive FDA guidance eliminates a partner’s risk and time needed to design a large scale program.

MDCO may be a small company, its management is from Big Pharm and has performed many successful cardiovascular studies over the past 3 decade.

There is no doubt that having a positive FDA outcome with an easier endpoint and faster route to market and lower costs raises the value substantially. Whether a partner moves now or later does not really matter, in our view, someone eventually will.

The result of the End-of-Phase II meeting for Inclisiran is a best-case scenario for MDCO. It significantly lowers the time to market, the cost of Phase III/IV program and therefore, the risk profile of the drug and the company.

The value proposition of a low-cost, 2x/year cholesterol shot certainly has blockbuster potential. Once the M&A activity for biotech resumes, the overflowing cash on Big Pharma/Big Bio balance sheets is likely to find its way to MDCO, too.

In the meantime, the drug’s clinical and regulatory path is clearer than ever. The stock is a buy under $50 with a $75 price target.

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