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Medicines Company to Sell Infectious Disease Unit to Melinta

Zacks

The Medicines Company MDCO announced that it has entered into a definitive agreement with antibiotics company, Melinta Therapeutics, Inc. MLNT, for selling its infectious disease business unit for an upfront payment of $270 million. The agreement will grant Melinta worldwide rights of Orbactiv, Minocin and recently launched Vabomere.

The Medicines Company plans to focus on developing its pivotal pipeline candidate — inclisiran — for treating hypercholesterolemia.

The Medicines Company’s shares have fallen 11.1% so far this year, underperforming the industry’s rise of 1.3% in that period.


Per the cash and stock deal, Melinta will pay $215 million in cash, including $165 million at the time of the closing of the deal, and $55 million in common stock.

The Medicine Company will receive royalties in the range of 5%-25% on Vabomere U.S. sales, 5%-15% on U.S. sales of Minocin & Orbactiv, and 15% on international sales of all the drugs.

The Medicine Company plans to focus on the development of inclisiran, which is currently being evaluated in a phase III study for the treatment of hypercholesterolemia. The company has burnt significant cash this year. This deal will help the company to recoup a major portion of it. Moreover, the cash will help to continue the inclisiran study till its anticipated completion in 2019.

The deal is expected to close in the first quarter of 2018.

Meanwhile, the company, as part of its earlier announced restructuring program, will cut its headcount by 60. This will also reduce its annual operating expenses.

Zacks Rank & Stocks to Consider

The Medicines Company carries a Zacks Rank #3 (Hold).

A couple of better-ranked stocks in the pharma sector include Ligand Pharmaceuticals Inc. LGND and ACADIA Pharmaceuticals Inc. ACAD. Both stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ligand’s earnings estimates were increased from $2.96 to $2.97 for 2017 and increased from $3.68 to $3.70 over the last 60 days. The company delivered a positive earnings surprise in two of the trailing four quarters with an average beat of 8.22%. The company’s shares have returned 28.8% so far this year.

ACADIA’s loss estimates narrowed from $2.53 to $2.42 for 2017 and from $1.82 to $1.62 over the last 30 days. The company came up with a positive earnings surprise in three of the trailing four quarters with an average beat of 9.95%.

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