Billionaire Steve Cohen Bought This Drug Manufacturer

SAC CAPITAL ADVISORSAccording to a filing with the SEC, Steve Cohen’s SAC Capital Advisors had acquired a total of 2.7 million shares of The Medicines Company (NASDAQ:MDCO) giving it 5.0% of the shares outstanding (and thus triggering the filing of the 13G). SAC’s 13F filing for the third quarter of the year shows that it owned 1.6 million shares at the end of September, which had been a massive increase from the beginning of July, so Cohen and his team have been building this position for months. Find more stock picks from SAC Capital Advisors. The Medicines Company is a $1.1 billion market cap pharmaceutical company which markets an anticoagulant and a blood pressure drug, as well as having several products in development.

Fellow billionaire David Shaw’s D.E. Shaw cut its stake in The Medicines Company during the third quarter but still closed September with 3.9 million shares in its portfolio (see what stocks D.E. Shaw is buying instead). Ridgeback Capital, a healthcare-focused hedge fund which is managed by SAC alum Wayne Holman, initiated a position of 1.1 million shares over the course of the quarter and this made the stock the largest holding in its 13F portfolio. Research more stocks that Ridgeback has been buying.

Revenue was up slightly in the third quarter of 2012 compared to the same period a year ago, bringing operating income higher (a pattern which appears to have been the case in the first half of the year as well). The Medicines Company has significantly increased its investments in R&D. While net income has been down, this is primarily because it recognized substantial income tax benefits in 2011. The company was cash flow positive in the first nine months of 2012, and had over $500 million in cash, cash equivalents, and marketable securities on its balance sheet following the issue of some senior notes.

At its current market cap the company trades at 23 times trailing earnings, implying that investors expect earnings to grow in the future. We can’t really evaluate the chances that The Medicine Company’s products in development will be successful, either medically or commercially, but we’d note that the forward P/E is only 16. This indicates that Wall Street analysts at least believe that the business will perform well over the next year, though we wouldn’t be too dependent on The Medicine Company matching their earnings targets.

Some other pharmaceutical companies which have similar market caps and can also point to profitability in the last few quarters are Warner Chilcott Plc (NASDAQ:WCRX), United Therapeutics Corporation (NASDAQ:UTHR), Cubist Pharmaceuticals Inc (NASDAQ:CBST), and Pharamcyclics, Inc. (NASDAQ:PCYC). Of these peers, Warner Chilcott and United Therapeutics look like the best value on a P/E basis: they trade at 8 and 10 times their respective trailing earnings. Warner Chilcott has also been experiencing higher earnings than a year ago, though its revenue is down, and while again we don’t have much expertise on its product offerings it could be a prospect for a healthcare stock. United Therapeutics reported 20% revenue growth last quarter versus a year earlier, though earnings were down. Its cheap pricing gives it some potential as a value stock.

Pharmacyclics has seen its stock rise over 300% in the last year, and its business has been performing strongly as well, but the trailing P/E multiple of 38 suggests that the market is banking heavily on seeing continued improvement. An investor would have to look carefully at the company before picking it. Cubist is an interesting case: on the one hand, it trades at 20 times earnings and recent growth has been good; on the other hand, its net income is actually expected to fall next year and 18% of the shares outstanding are held short. We would advise avoiding that stock as well.

Compare to these peers, The Medicine Company seems moderately well priced assuming that it hits analyst expectations for 2013. However, we’d suggest at least checking out Warner Chilcott and United Therapeutics instead to learn more about why they trade at such low earnings multiples.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!