This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

January 28, 2010 - The Medicines Co. (MDCO-NASDAQ) operates as a global pharmaceutical company with a focus on advancing the treatment of critical care patients. The company markets Angiomax for use in patients undergoing coronary angioplasty; and Cleviprex, an injectable emulsion for the reduction of blood pressure.

The company's developing products also include CU2010, which is in phase I clinical trial that acts as a serine protease inhibitor for the reduction of blood loss during surgery; and ApoA-I Milano, a phase I clinical trial product for the reversal of atherosclerotic plaque development and reduction of the risk of coronary events in patients with ACS. The company sells products through sales representatives and managers. The Medicines Company was founded in 1996 and is based in Parsippany, New Jersey.

The last three years (2007-2009) were tough on MDCO. It lost money each year, first 35 cents, then 16 cents, and in 2009, it finished with a loss of $1.46. The stock price went from $28 in the middle of 2008 to a low of $6.10 by 2009. Then things changed. Sales moved higher. So did earnings.

Earnings for 2010 should finish at a very positive $1.11 (consensus from 8 analysts) with a range of 94 cents to $1.25. For 2011, they see $1.18 with a range of 66 cents to $1.95. A good example of the turnaround in earnings is the third and projected fourth quarter of last year. In the third period, earnings were a positive 40 cents a share, compared to a negative 6 cents in the third period of 2009. The last quarter of 2010 should show a positive 8 cents, well above the same quarter of 2009 when earnings were a negative $1.40.

Not all of that earnings gain came from better sales. In the third quarter, the company cut back on research and development, saving some expenses. For the quarter, the company had weaker sales in its Angiox product internationally but its core product, Angiomax, an intravenous anticogulant used in coronary angioplasy and other intravenous procedures, improved sales by 9% in the U.S. because of a 14% increase in volume but with lower pricing. Expect lower prices to continue as the company is in the 340B Drug Pricing Program that gives reduced pricing to qualified institutions.

Watch for margins to decrease as R&D spending ramps, particularly for Phase III trials of two new drugs, Cangrelor and Oritavancin (see above for applications). Another concern: MDCO's drug Cleviprex had to be taken off the market due to quality control concerns at the manufacturing plant.

Previously, there had been a patent dispute over Angiomax, but that's been resolved. The stock jumped on the news. Management can now focus on new drugs. The Phase III trials of Congrelor have begun. It will be three years long and have about 11,000 patients. The cost should be close to $80 million. The other Phase III drug is Oritavancin which has FDA approval for a Special Protocol Assessment. It will have 2 Phase III trials and total cost will be close to $60 million.

More numbers: Price to sales ratio is 1.98. Price to book is 2.81. Book value is $5.55. Operating margin for the last 12 months was 6.71%. Profit margin was negative 6.53%. Return on equity was negative 9.05%. Return on assets was 4.22%. There's $227.45 million in cash or $4.26 a share. There is no debt. Current ratio is 3.85. Beta is .60. In the last 52 weeks, the stock is up 85.39%. There are 53.39 million shares outstanding with a Float of 36.52 million. Insiders own 13.16% of the stock. Institutions have 88.90% of the Float. There is no dividend.

Aggressive investors looking for a good turnaround story will like this one. With the patent dispute over, sales increasing, and new drugs in the pipeline, MDCO has a lot of good going for it. Watch out for pricing pressure, though, because there's no sign that its core drug will be able to raise prices as long as the company's involved in the special Drug Pricing Program.

- Company Web site: www.themedicinescompany.com

- Ted Allrich