Medicines Company Braces For 2015 With Alnylam PCSK9 Deal

| About: The Medicines (MDCO)

The Medicines Company (NASDAQ:MDCO) has been busy preparing for the possibility that its top-seller, Angiomax, could go generic in 2015. The cardiovascular specialist has placed a $25m bet on Alnylam’s (NASDAQ:ALNY) phase I hyperlipidaemia project, ALN-PCS, an RNA interference agent attacking an as-yet unproven target in cholesterol metabolism.

The focus of the Medicines Company appears to be turning now from the courtroom to its clinical and business development arms. The Alnylam deal follows on from the takeout of Incline Therapeutics and two positive phase III readouts, all of which took place in December and January, a sign that the New Jersey group is looking for new sources of growth rather than protecting its sole franchise.

Investors were not particularly impressed by the announcement. Shares of both groups were down 1% in early trading this morning, with the Medicines Company at $30.21 and Alnylam standing at $24. Massachusetts-based Alnylam has been on a good run, having risen 49% in a three-month period that included a $174m share offering; the Medicines Company has also risen significantly lately on the back of positive pipeline news.

Looking Ahead

The Medicines Company has removed some of the threat to Angiomax, its sole source of revenue, by coming to an agreement with both Teva Pharmaceutical Industries (NYSE:TEVA) and Fresenius (NYSE:FMS) to put off entry until 2019 (Value returns to The Medicines Company with court decision, August 4, 2010). However, cases are still ongoing with Hospira (NYSE:HSP), Mylan (NASDAQ:MYL), Dr. Reddy’s Laboratories (NYSE:RDY) and Sun Pharmaceutical Industries, meaning that the threat has not been removed.

Thus, making hay while the sun shines could be the best policy for the group, devoting some of the healthy Angiomax revenues to R&D. The company had spent $100m on R&D in the nine months ended September 30, 2012, roughly a quarter of its net revenue for the time period.

As it stands, our consensus forecasts that sales of Angiomax, an anticoagulant used for patients undergoing angioplasty, will rise from $574m this year to $677m in 2018, indicating that analysts assume that no erosion will occur as a result of generic entry in 2015. It would take only one adverse court decision to change that picture.

The good news for the Medicines Company is that its pipeline has performed well of late. With the blood-thinner cangrelor and antibiotic oritavancin reporting positive data in December and January, the group inched ever closer to unlocking two revenue streams projected to be worth a combined $287m in 2018 (Cangrelor trial success quickens pulses of Medicines Company investors, January 9, 2013). The purchase of Incline Therapeutics brought on board post-surgical pain-reliever Ionsys, forecast to be worth an additional $125m in sales in 2018.

New Kid In Town

Alnylam’s ALN-PCS targets proprotein convertase subtilisin/kexin type 9 (PCSK9), an enzyme that otherwise binds with low-density lipoprotein cholesterol (LDL-C) receptors, inhibiting their ability to metabolise the so-called "bad cholesterol." The leading therapeutics focusing on the pathway are monoclonal antibodies, binding with PCSK 9 before they can suppress lipid metabolism.

ALN-PCS takes a different approach, modulating the gene that codes for the production of PCSK9. It remains well behind the antibodies, which have been led by Sanofi (NYSE:SNY) and Regeneron Pharmaceuticals’ (NASDAQ:REGN) REGN727/SAR236553, the first in phase III, along with Amgen’s (NASDAQ:AMGN) AMG145 and Pfizer’s (NYSE:PFE) RN316, nearing initiation of pivotal development (AHA – PCSK9 inhibitors continue to impress, November 7, 2012).

Given the efficacy and safety record of statins, these drugs are thought to address particularly high-risk patients, either statin-intolerant patients, those who do not get to goal or those with a history of heart disease.

An additional $180m in milestones will be available to Alnylam under the agreement.

While big pharma is clearly interested in this pathway, it has yet to be proven whether modulating the activity of PCSK9 will be effective and safe at addressing the target population. In addition, while interest in RNA-interference therapeutics remains high, the approach has not produced the results that lend themselves to a good deal of confidence.

Thus, while this deal is clearly in the Medicines Company’s sweet spot, it will be some time before it will be clear whether it is a winning bet.