Medicines Co. Shares Soared: What You Need to Know

Before you go, we thought you'd like these...
Before you go close icon

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: On a miserable day for so many stocks, shares of Medicines Co. (NAS: MDCO) bucked the trend and soared Monday, rising 12% on the strength of a patent-litigation settlement with Teva Pharmaceuticals (NAS: TEVA) .

So what: Teva had challenged Medicines' patent on Angiomax, you see, and wanted to market a generic version of the anticoagulant. Seeing as Medicines derives 94% of its U.S. revenues from the drug, that would have posed a bit of a problem for Medicines. But in resolving the litigation, Medicines managed to convince Teva to hold off on marketing its generic alternative until June 2019 -- delaying its day of reckoning by nearly a decade.

Now what: I explained back in May why I thought Medicines' stock offered a good bargain for speculative investors. I must admit, though, that when I see analysts today suggesting the stock is headed for long-term declines in earnings -- on the order of 9% per year for the next five years -- I'm hesitant to re-up on that recommendation. Although Medicines' stock still looks tempting at less than 8 times trailing earnings, if I owned it today I'd be sorely tempted to cash in on the stock's sudden surge and find something with a little more growth potential ahead of it.

Want to learn more about Medicines Co.?Add it to your Fool Watchlist.

At the time this article was published Fool contributorRich Smithdoes not own (or short) shares of any company named above. The Motley Fool owns, andMotley Fool newsletter serviceshave recommended buying, shares of Teva Pharmaceutical Industries. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners