Things are looking up for The Medicines Company (TMC) once more. Shares in the New Jersey group gained 17% last week to $17.37 following a patent litigation settlement with Teva, which sees the Israeli generics firm hold back the launch of its generic version of the anticoagulant Angiomax until June 2019.
Given that Angiomax accounts for all of TMC’s revenues the outcome of patent litigation against four remaining challengers and a pending decision by the US PTO to extend the drug’s core patent to December 2014 continue to be volatile events for the company. While the prospect of staving off all generics until 2019 would be a major coup and could push TMC’s share price towards a two-year high of $22 (see analysis below), investors may prefer to see TMC use its burgeoning cash pile to pep up a pipeline which remains committed to a couple of questionable products with chequered development histories.
TMC has been on the back foot in trying to defend its patent protection for Angiomax since the US PTO ruled that the company’s application to extend the drug’s main patent by five years landed on the regulator’s desk a day late and was therefore invalid.
After a long legal battle the company finally won the argument last year, that its patent term extension application had indeed been filed on time (Value returns to The Medicines Company with court decision, August 4, 2010).
As it stands the US PTO has temporarily extended Angiomax’s main ‘404 patent until August 13, 2012, but is expected to soon grant full extension until December 15, 2014. Having also studied Angiomax in the paediatric setting, the patent will be extended by six months to June 2015.
With the market working on the assumption that generics enter the fray in mid-2015, news that Teva will hold back for another four years was a nice surprise. TMC has two further patents (‘727 and ‘343) filed on Angiomax in the FDA’s Orange Book which do not expire until 2028 - Teva’s acceptance that its generic version would infringe these patents, which cover a more consistent and improved version of the product, offer hope that other generic challengers may have to settle as well.
APP Pharmaceuticals, Hospira, Mylan and Dr. Reddy's Laboratories are also challenging the validity of the ‘727 and ‘343 patents. The table below, using EvaluatePharma’s NPV Analyzer, shows how much TMC stands to gain should the best case scenario play out that all generics are barred until June 2019.
|Angiomax NPV model|
|US patent expiry (incl. 6-month paediatric extension)||13-Feb-13||30-Jun-19|
|Peak sales WW||$582m||$616m||+$34m|
|NPV (after tax)||$823m||$1.07bn||+29%|
|NPV per share||$15.24||$19.71||+$4.47|
|Share price date||07-Oct-11|
Peak sales of the product could exceed $600m, generating almost an extra $250m in cashflow for TMC, potentially adding 25% to the company’s valuation.
While this would undoubtedly be hugely significant, perhaps the bigger question is what TMC does with the extra cash.
Beyond Angiomax TMC also sells Cleviprex, an injectable anti-hypertension agent, but sales of the product remain negligible due to recalls of substantial amounts of the drug in the last two years because of manufacturing issues. Assuming these issues are resolved – TMC launched a new emulsion formulation last week – analysts have pegged modest sales of $37m by 2016.
As for the late stage pipeline, TMC is pushing on with the development of cangrelor, a platelet aggregation inhibitor in the same class as AstraZeneca’s Brilinta, and glycopeptides antibiotic oritavancin.
Licensed from Astra in 2003, TMC had to ditch a pivotal 15,000 patient trial programme for cangrelor in 2009 as the drug failed to show any advantage over gold standard antiplatelet drug Plavix (The Medicines Company's pain is Astra's gain, May 13, 2009).
However, TMC continues to see potential in cangrelor, particularly as an agent which can be used in patients that have to stop taking Plavix ten days prior to cardiac surgery due to its short half-life. Results from a phase II/III study called Bridge should be available by the end of the year, while a redesigned phase III, aptly named Phoenix, is ongoing and could enrol another 15,000 patients, although interim data is not expected for another 12 months.
As for oritavancin, TMC acquired the product through its slightly bizarre purchase of Targanta Therapeutics in early 2009, soon after the FDA had rejected the product to treat serious gram-positive skin and skin structure infections (Medicines Company scoops up drowning Targanta, January 14, 2009).
Late last year, TMC finally started two phase III trials with oritavancin, enrolling 1,000 patients in each, with initial results also unlikely until the second half of next year.
Best use of cash?
TMC is currently spending about $100m on R&D, 60% of which is dedicated to cangrelor and oritavancin, according to TMC’s latest quarterly report.
Meanwhile, the company is pulling in decent profits to add to a cash pile which stood at $284m at the end of June. Although the potential of cangrelor and oritavancin is clear, the key caveat here is ‘potential’, given the big clinical and regulatory challenges both products still face. Indeed, even the most bullish of analysts do not ascribe any tangible value to these products at this stage.
As such, with the outlook for Angiomax’s market exclusivity continuing to improve, the time may be right for TMC to get some insurance against cangrelor and oritavancin failing again by striking some canny deals to broaden its late stage pipeline.