The Medicines Company (MDCO), AstraZeneca plc (ADR) (AZN): A Small-Cap Pharmaceutical Company With 2014 in Its Sights

The company has facilities primarily located in Sweden, the United Kingdom and in the United States. With a total cost of around $1.4 billion, the company has relocated 2,500 jobs as part of a restructuring strategy. The effort is set to improve the company’s annual benefits by $190 million and equip the company with state-of- the-art technology.

AstraZeneca and Bristol-Myers have dividend yields of 7.5 % and 3.4%, respectively, whereas The Medicines does not pay a dividend. The opportunity that awaits investors is the moment FDA grants approval of the four drugs that are pending approval for The Medicines. The year 2014 might take this company to new heights if everything does fall in place.

As per reports, the consensus EPS forecast for December 2014 is at $0.94. For December 2016, the EPS forecast is at $5.56. To foresee the future of any pharmaceutical company, inventory plays a key role. The Medicines’ inventory was up by 10.4% and revenue dropped by 2.3% this year. Ideally, when inventory increases, revenue should increase.

For The Medicines, this would suggest that the company does foresee increased in demand in the near future. Inventory divergence is something the company has always adhered to. The Medicines’ inventory growth has always outpaced its revenue growth, hence recent results would suggest a positive inventory divergence.

Verdict

The Medicines invested a majority of its capital in partnership deals over the past year. Strategies that involve partnering with bigger companies do suggest that The Medicines would rather pair up with successful companies than compete head to head. These factors suggest that The Medicines is aiming at growth via an improved drug portfolio.

Positive inventory divergence over the past quarters coupled with partnership deals and pending FDA approvals do suggest a potential major boost to the company’s performance in the coming year. It would be safe to say that this stock is worth buying right now. Expect announcements with regards to an improved portfolio as that seems to be the company’s priority.

Ashley Sales has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Ashley is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article A Small-Cap Pharmaceutical Company With 2014 in Its Sights originally appeared on Fool.com is written by Ashley Sales.

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