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Disclaimer: This blog is an expression of my opinion on a particular company or matter. I am not a financial advisor or professional analyst. This is not a solicitation to trade any security. Although I rely on company approved public documents and make all reasonable efforts to confirm the... More
  • Medicure: Buried Alive 6 comments
    Oct 6, 2009 11:00 AM | about stocks: MDCO, SGP, JNJ, MRK
    On Monday, Feb 25th 2008 Medicure, (TSX:MPH; OTC:MCUJ), a Canadian pharmaceutical company traded on TSX and OTC, had a heart attack. That day, its stock price dropped from about 90 cents to 25 cents after announcing negative results from its pivotal phase 3 trial of MC-1. Medicure had invested heavily in the MEND-CABG II clinical trial of 3,000 patients to demonstrate a benefit of MC-1 in the incidence of cardiovascular death or nonfatal myocardial infarction up to 30 days following coronary artery bypass graft (CABG) surgery. Because the trial did not meet its primary endpoints, the company did not submit an application for MC-1 marketing approval to the FDA. After this “heart attack”, Medicure was effectively pronounced dead: The stock price floundered into oblivion, it was delisted from AMEX to the OTC where it continued to whither on low volume. The funeral was planned for Medicure when its stock price eventually fell well to less than a penny during the market downturn last fall. Medicure seemed to buried and forgotten on the Pink Sheets. But don’t be fooled- despite the fact that its stock price is well below that of many bankrupt companies (“Q” stocks), Medicure is not dead, and was in fact buried alive and is digging itself out of the grave. Medicure is in fact generating significant revenue, continues to find new life for MC-1, and even is runing clinical trials for its main clinical candidate Tardoxal. Medicure is indeed quite alive and active, as a fully SEC reporting company, who has sufficient promise to turn into a profitable, growing pharmaceutical company in the near future.  
    Medicure has a growing revenue base from its core commercial business of selling Aggrastat (tirofiban), a GP IIb/IIIa inhibitor (anti-coagulant). Aggrastat is sold by Merck (NYSE:MRK) outside of the US, and Medicure bought exclusive rights to sell Aggrastat in the US from MGI Pharmaceuticals in 2006. In this short time, Medicure has been quite successful in capturing a market share for this drug. US revenue from sales of Aggrastat grew for the fifth consecutive quarter, and year to date revenues are over triple the revenue seen in the previous year. Medicure shows continued improvements to their sales and marketing organization, and they are betting that the lower cost of Aggrastat compared to its competitors, Reopro [(abciximab); Johnson and Johnson (NYSE:JNJ)], Angiomax [(bivalirudin);The Medicines Co (NASDAQ:MDCO))], and Integrelin [(eptifibatide); Schering-Plough (SGP)] will drive sales. Aggrastat is half the price of these drugs, and has been shown repeatedly to be as effective as these drugs.  Medicure is betting (rightfully so, I believe) that healthcare reforms and the current economic downturn will increase Aggrastat sales.  This gives sufficient reason to believe that Aggrastat sales and its share of the US $450 million market for this drug will continue to grow at its current pace. This alone would turn Medicure profitable.
                However, beyond this, Medicure is seeking new indications for Aggrastat to increase its market share. In September 2008, Medicure announced the results of their “3T/2R Study” which demonstrated that Aggrastat significantly lowers the incidence of heart attack after elective coronary angioplasty in coronary artery disease patients who have shown poor response to standard oral antiplatelet agents, aspirin and clopidogrel.The study, which involved a high dose bolus administration of Aggrastat in patients undergoing angioplasty and/or Percutaneous Coronary Intervention (NYSE:PCI) in patients who do not properly respond to standard oral antiplatelet agents. Although the study's dosing and patient population is outside of the current indicated use of Aggrastat, the results supports the further investigation of the use of Aggrastat in this manner. I would expect to hear about a phase III trial investigating this use in the near future.
                In addition to their bread-and-butter sales of Aggrastat, Medicure is currently running phase II trials for Tardoxal to meet the unmet need of treating tardive dyskenisia (NYSE:TD), a common side effect of antipsychotic medications which are used to treat schizophrenia and schizoaffective disorders. Approximately 4 million people in the United States receive antipsychotic drugs of which approximately 5 to 20% have TD. Medicure received approval to run a Phase II clinical study of Tardoxal in Canada.
    This 12-week study period will evaluate the safety and efficacy of Tardoxal and assess the beneficial effect of Tardoxal on the reduction of expressed symptoms of TD. The study will enroll approximately 140 patients. The trial began enrollment in March 2009 and has a planned interim analysis in early to mid 2010.
    In addition to all this, Medicure continues to seek a partner for its cardiovascular franchise to support clinical trials and assist with the commercialization of a new indication for MC-1. Medicure is currently planning a phase II study for MC-1 in lipid lowering during metabolic syndrome. Metabolic syndrome is a name for a group of symptoms that occur together to promote the development of coronary artery disease, stroke, and type 2 diabetes. If you keep up with the news, you know that the represents an incredible potential multibillion dollar market in our aging population, where the incidence of all these diseases are increasing and is considered a major health care crisis. If Medicure could gain even a small percentage of this massive market with MC-1, it would be a boon to the company’s revenue. Finally, according to Medicure, they continue to hold discussions with potential partners with the intent to secure a formal partnership agreement for and its other pipeline compound, MC-45308, an anti-thrombotic.
    There is no question that Medicure has a lot going for it. The big question is: Can Medicure meet their goals to sell enough Aggrastat to become profitable? Can Medicure gain FDA approval for new indications for Aggrastat, Tardoxal, MC-1, or MC-45308 in time before they run out of cash? With any biotech company, the key issues are always pipeline development and cash burn. Medicure is no different. However, a look at the balance sheet suggests that they can see these promising drugs through phase III to possibly gain FDA approval. As with most small pharmaceutical companies, Medicure has substantial debt, and they are currently operating at a loss.   But it is not all doom and gloom: According to the latest 10Q Medicure had over $4MM in cash, $1.5MM in accounts receivable from its Aggrastat sales. Even though this is not enough cash to keep them around for long at their current burn rate, they continue to generate significant cash flow from Aggrastat sales. They have revenue of about $6MM annually from Aggrastat sales, increasing nearly 300% since last year, including a 100% increase from last quarter. With the weaker dollar this quarter, Aggrastat revenues should get an added boost. Continued increases in Aggrastat sales as they have already shown would lead them to profitability in a very short amount of time.
    So Medicure seems to show promise in obtaining a net positive cash flow in the near future. But how does it manage its debt load? During its “heart attack” in March 2008, the Company announced a corporate restructuring which included a significant reduction in number of staff and in resources allocated to certain programs. Since then, Medicure has been successful in reducing its ongoing cash requirements through implementation of a restructuring plan. Part of this plan was to defer principle payments on its $25MM of outstanding long term loan facility from Birmingham associates, which were related to the costs of Aggrastat licensing and MC-1 trials. Under the terms of the agreement, Birmingham will receive a payment based on a percentage of Aggrastat net sales until 2020. In November 2008 they also repaid $12MM of other outstanding debt from Merrill Lynch. Medicure continues to deal with its immediate debt burden by deferring payments with its lenders until the end of this year. To meet short term demands, Medicure announced a plan to raise up to $3.0 million to improve its financial position through a private placement of common shares. 
    In contrast to last quarter, Medicure says that based on their current operating plan, they estimate its existing working capital is sufficient to meet the cash requirements to fund the Company’s currently planned operating expenses, capital requirements, working capital requirements and long-term debt this quarter.   With increasing Aggrastat revenues and continued competent management of their debt, there is good reason to believe that Medicure will continue on next quarter and well beyond; continuing long enough to become profitable. Although MCUJ share price is clearly beaten down to bankruptcy levels, any number of announcements would give the share price a healthy boost: A continued increased Aggrastat revenues, profitability, a partnership for MC-1 or MC-45308; clinical developments in Tardoxal, or even a capital raise, to name a few. Given the absurdly low price per share and unjustifiably low market capitalization of $5MM for MCUJ, I think it is worth the risk to see them through it. There are many biotech companies, in worse financial shape with less promise than MCUJ, that have market capitalizations 20 times that of MCUJ. In contrast to other biotech companies, Medicure generates significant revenue, shows the promise of profitability in the short term, with clinical expansion in the medium term.  I give MCUJ a very strong (but very speculative) buy. MCUJ has tremendous potential to pay off in many multiples of ten over the current share price in the coming months and years.  If you are comfortable with this level of risk, I think you will be repaid in more than sufficient reward. Visit www.medicure.com/ yourself and see the extremely strong signs of recovery now, and the brightness on the horizon for Medicure.

    NOVEMBER UPDATE:

    Medicure's third quarter results showed relatively flat sales of Aggrastat.  The loss for the quarter decreased their cash position to below $1 million.  With their inability to pay interest on their debt to Birmingham Associates, I fear forebearance is in the near future followed by bankruptcy.  With no shareholder equity, I would not anticipate shareholders to receive any benefit from bankruptcy.  As such, I have eliminated my position in MCUJ. 


    Disclosure: I do not hold a position in MCUJ.  I do not have positions in any other of the companies mentioned.

    Disclaimer: This blog is an expression of my opinion on a particlular company or matter. I am not a financial advisor or professional analyst.  This is not a solicitation to trade any security.  Although I rely on company approved public documents and make all reasonable efforts to confirm the accuracy of my statements, the comments made in my articles should be considered only as opinion and should not be considered as current or as absolute fact.  All investors are strongly encouraged to not rely entirely on any single opinion and perform their own due dilgence when investing.  Investing in equities includes considerable risk, and investors should be prepared for the risk of capital loss. 
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Comments (6)
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  • American C.
    , contributor
    Comments (12) | Send Message
     
    You need to write more articles. It is nice to read information on a company that actually helps an investor. I was reading an article on one of my investments and came across yours. I read both of your articles and I will be following you.

     

    Thank you
    7 Oct 2009, 03:42 AM Reply Like
  • Viking99969
    , contributor
    Comments (17) | Send Message
     
    from Viking: thanks for a very complete overview but a couple of slight corrections re: Aggrastat if I might?
    1) Merck sold the Ex-US Aggrastat commercial rights to privately-held Iroko Pharma of Philadelphia approx. 20 months ago. Rumor has it that Iroko has done very well in markets outside of the core Europe base and is growing sales at a very brisk rate. Hard to know actuals when sales partners like Chiesi for Europe are all privately held.
    2) Aggrastat (a "GPIIb/IIIa") has had the most studies published in the last 3 yrs compared to competitors and there is a very complete meta-analysis of Aggrastat studies just published in the EHJ.

     

    Like the 1st "commenter," thank you for sharing an insightful commentary!
    7 Oct 2009, 12:29 PM Reply Like
  • Joseph Krueger
    , contributor
    Comments (283) | Send Message
     
    Author’s reply » Thanks for the very valuable nformation and correction about Merck- I missed that and I will correct that. It reassuring that Iroko has also shown fast growth in Aggrastat sales in the EU as Medicure has here in the US.
    I will research further into the Aggrastat comparison studies and update the blog with any relevant info- thanks for the tip. This would certainly drive Aggrastat sales also if improved efficacy could be a claim. One of the main drivers I feel will be the cost, as I mentioned. In the EU, with their nationalized health care system, cost may be an important factor in choosing Aggrastat over competitors. Certainly with the likely changes to made to the US health care system, this would also be a determining factor in choosing Aggrastat over competitors. A doubling in Aggrastat sales would make MCUJ profitable- and given the growth we have seen in the last 2 years and the above mentioned factors, that is certainly possible in my opinion.

     

    On Oct 07 12:29 PM Viking99969 wrote:

     

    > from Viking: thanks for a very complete overview but a couple of
    > slight corrections re: Aggrastat if I might?
    > 1) Merck sold the Ex-US Aggrastat commercial rights to privately-held
    > Iroko Pharma of Philadelphia approx. 20 months ago. Rumor has it
    > that Iroko has done very well in markets outside of the core Europe
    > base and is growing sales at a very brisk rate. Hard to know actuals
    > when sales partners like Chiesi for Europe are all privately held.
    >
    > 2) Aggrastat (a "GPIIb/IIIa") has had the most studies published
    > in the last 3 yrs compared to competitors and there is a very complete
    > meta-analysis of Aggrastat studies just published in the EHJ.
    >
    > Like the 1st "commenter," thank you for sharing an insightful commentary!
    7 Oct 2009, 01:44 PM Reply Like
  • Go MDUJ
    , contributor
    Comments (3) | Send Message
     
    Thanks for the insightly. Did you read the financial 1st quarter release today? Not as bad as I expected. we should see .15 range soon!

     

    Good luck!
    14 Oct 2009, 11:20 PM Reply Like
  • Joseph Krueger
    , contributor
    Comments (283) | Send Message
     
    Author’s reply » I did read the 10Q. Their cash position is about where I expected, but I was dissapointed that we did not see more agressive growth in Aggrastat sales. They also have not restructured the payment due in November, and that is still hanging over their head. They still need to raise more cash to continue. I was hoping an impressive boost in Aggrastat sales would give them a PPS boost and give them the ability to raise more capital. Most likely they will gain another extention...but we really need more Aggrasat sales to give them positive cash flow.

     

    On Oct 14 11:20 PM Go MDUJ wrote:

     

    > Thanks for the insightly. Did you read the financial 1st quarter
    > release today? Not as bad as I expected. we should see .15 range
    > soon!
    >
    > Good luck!
    15 Oct 2009, 08:58 PM Reply Like
  • Go MDUJ
    , contributor
    Comments (3) | Send Message
     
    Ouch! Thanks for the insight Joe!! Unfortunately I loaded 180,000 shares at average price of .0387

     

    Hope this works!

     

    I'm likely MSBT as well, didn't get as much shares as I wished, Bummer!!!!!!!!!

     

    I still think MCUJ is a big sleeper. News released and it has not hit yahoo. Once it hits yahoo and momentum gettings only, we could easily see .15. Hope they get throw the big hurcle of financing.

     

    Risk to reward is amazing on this one. have a great weekend!!!!!!

     

    On Oct 15 08:58 PM Jospeh Krueger wrote:

     

    > I did read the 10Q. Their cash position is about where I expected,
    > but I was dissapointed that we did not see more agressive growth
    > in Aggrastat sales. They also have not restructured the payment due
    > in November, and that is still hanging over their head. They still
    > need to raise more cash to continue. I was hoping an impressive boost
    > in Aggrastat sales would give them a PPS boost and give them the
    > ability to raise more capital. Most likely they will gain another
    > extention...but we really need more Aggrasat sales to give them positive
    > cash flow.
    16 Oct 2009, 04:31 PM Reply Like
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