MDCO – The Medicines Company’s Cangrelor Turned Down By FDA Panel – While we are obviously disappointed with today’s vote (7-2 against approval), the FDA briefing documents from Monday morning predicted a negative outcome. Furthermore, the share price, in our view, has already discounted much of this bad news. While cangrelor was an important but not a critical piece of the MDCO puzzle, at least 5 more products will receive FDA approval and/or global introductions this year and next, plus the long-term pipeline is expanding. The stock will likely open down, as cangrelor is officially removed from financial models. PDUFA date is April 30, but formal rejection is very likely. However, once the initial selling pressure abates, in our view, we expect the stock to recover as bargain hunters take advantage of the sell-off and the stock has declined from a high of 41 to its close of 33 before today – on the expectations of a negative outcome. In our view, cangrelor was worth no more than 10-15% of the value of MDCO – yet the stock has already pulled back more than 20% from its high just a month ago. The company has a busy 2014 in front of it with numerous positive catalysts on multiple new products, beginning with the Q4:13 earnings call next week (2/29) and an investor/analyst meeting for acute cardiovascular care at the company’s headquarters on March 7. With the transformation well underway away from Angiomax, despite the cangrelor disappointment, in our view, tomorrow’s open will represent an excellent level for initiating new positions and adding to existing ones.
MDCO is a BUY under 42 with a TARGET PRICE of 60.