prjj^ov=
? Millennium provided Q4 financial results today posting higher total revenues
that were partially offset by higher expenses. Earnings of ($0.07) were slightly
better than our ($0.08) estimate.
? While the results were uneventful, we expect that Millennium will continue its
cost cutting efforts, driving the company to achieve non-GAAP profitability by
year-end. We model $0.01 in 2006 increasing to $0.18 in 2007.
? On the call, the company announced that it has discontinued development of
MLN2704 due to a narrow therapeutic window and noted that MLN1202 has
failed development in rheumatoid arthritis. This further calls into question
Millennium drug development capabilities.
? We remain cautious on the stock in the face of upcoming Revlimid's launch in
multiple myeloma in mid-year. In addition, we remain concerned that the
Velcade guidance of $225M-$250M is optimistic.
lmfkflk=
Millennium provided Q4 results this morning after its pre-announcement on January 19th
(see our note, Q4 Biotech Preview- AWeek Quarter Setting Stage for 2006, and our note
earlier today Millennium Reports In-Line Q4). For the quarter, pro-forma EPS was ($0.07)
versus our ($0.08) and consensus ($0.07).While total revenues were robust at $122 million
(versus our $106 million) due to revenues under strategic alliances, higher expenses
particularly R&D ($88 million versus our $72 million). While cost savings in R&D began in
Q4, these were not fully implemented during the quarter. Instead, SG&A savings have been
noted thus far.
Company management also gave an update of pipeline progress. In accordance with
commitments to reduce R&D spending, development of MLN2704 has been discontinued
for the treatment of prostate cancer due to a narrow therapeutic window. We have had low
expectations for this program. However, we were more disappointed that MLN1202 has
failed for the treatment of rheumatoid arthritis. This calls into question the likelihood of
success in the remaining inflammatory indications including atherosclerosis, scleroderma
and multiple sclerosis.
We remain concerned about the outlook in the second half of the year as the expected
approval of Revlimid for the treatment of multiple myeloma (MM) approaches in June 30th.
Due to scarce positive catalysts in 2006, and increasing Velcade competition, we reiterate
our cautious view.
jfibpqlkbp=
Event Timing
Phase II SWOG NSCLC data H1:06
Phase II follicular NHL data H1:06
Phase II final relapsed MCL data H1:06
Initiate Phase I MLN3701 study in RA H1:06
Initiate Phase IIa MLN1202 study in scleroderma H1:06
Initiate Phase I/II 2nd line NSCLC Velcade/pemetrexed study H1:06
Phase II MLN1202 atherosclerosis data H1:06
Phase IV EVEREST data H2:06
Phase III Velcade front line data H2:06
Initiate Phase I MLN0415 study H2:06
Initiate Phase II MLN3897 study in RA H2:06
File sNDA for Velcade in MCL H2:06
Initiate Phase III follicular relapsed NHL study H2:06
Phase II MLN1202 MS data Late '06/Early '07
jfiibkkfrj=me^oj^`brqf`^ip=nr^oqboiv=mCi=
1Q05A 2Q05A 3Q05A 4Q05A 1Q06E 2Q06E 3Q06E 4Q06E
Strategic alliance revenue 36.1 19.1 105.2 44.2 17.5 17.5 37.5 17.5
Total Integrilin Sales 71.4 78.2 75.0 0.0 0.0 0.0 0.0 0.0
Product Sales (Integrilin) 42.8 47.7 33.0 0.0 0.0 0.0 0.0 0.0
Velcade Sales 44.8 43.9 50.9 52.4 56.7 61.0 52.8 53.3
Royalty revenues 0.0 0.0 12.5 25.7 34.1 35.3 35.3 36.6
Total Revenues 123.7 110.6 201.7 122.3 108.3 113.8 125.6 107.4
R&D 86.2 86.9 80.6 88.5 67.0 62.0 58.0 55.0
SG&A 51.6 52.1 40.6 36.3 41.0 40.0 39.5 38.0
COGS 14.6 16.7 89.0 21.0 15.7 16.5 18.2 15.6
Stock options expense 0.0 0.0 0.0 0.0 11.3 11.3 11.3 11.3
Amort. intangible assets 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5
Total Expenses 160.9 164.2 218.8 154.3 143.5 138.3 135.5 128.3
Loss from operations (37.2) (53.5) (17.1) (32.0) (35.1) (24.4) (9.9) (20.9)
Interest income, net 1.9 12.4 2.1 2.3 4.1 3.9 3.8 3.7
Restructuring charge (1.1) (3.0) (58.8) (14.2) (10.0) (8.5) (5.5) (4.0)
Profit Split to MLNM from Campath JV - - - - - - - -
GAAP Net Income/(Loss) (36.4) (44.1) (73.8) (43.9) (41.1) (29.1) (11.6) (21.2)
Pro forma net income/(Loss) (26.8) (32.6) (6.5) (21.2) (11.3) (0.8) 13.7 2.6
GAAP EPS ($0.12) ($0.14) ($0.24) ($0.14) ($0.13) ($0.09) ($0.04) ($0.07)
Pro Forma EPS ($0.09) ($0.11) ($0.02) ($0.07) ($0.04) ($0.00) $0.04 $0.01
Fully diluted shares outstanding 306.6 307.6 308.8 310.1 311.0 311.9 312.7 313.6
Source: Citigroup Investment Research and Company Reports
jfiibkkfrj=me^oj^`brqf`^ip=^kkr^i=mCi=
2004A 2005A 2006E 2007E 2008E 2009E CAGR
Strategic alliance revenue 98.9 204.5 90.0 70.0 40.0 40.0 -23%
Total Integrilin Sales 301.4 224.6 0.0 0.0 0.0 0.0 0%
Product Sales (Integrilin) 206.3 123.5 0.0 0.0 0.0 0.0 0%
Velcade Sales 143.1 191.2 223.8 279.0 337.0 389.8 37%
Royalty revenues 0.0 38.2 141.3 173.6 145.3 149.7 0%
Total Revenues 448.2 558.3 455.1 522.6 522.3 579.5 12%
R&D 402.6 342.2 242.0 250.0 250.0 250.0 -11%
SG&A 196.6 180.6 158.5 155.0 155.0 155.0 -2%
COGS 70.3 141.3 66.0 78.4 45.0 35.0 -9%
Stock options expense 0.0 0.0 45.0 22.8 26.2 30.1
Amort. intangible assets 33.5 34.0 34.0 34.0 34.0 34.0
Total Expenses 703.0 698.1 545.5 540.2 510.2 504.1 -7%
Loss from operations (254.8) (139.8) (90.4) (17.5) 12.1 75.4
Interest income, net 0.5 18.7 15.5 18.7 23.5 27.6 16%
Restructuring charge (38.0) (77.1) (28.0) - - -
Profit Split to MLNM from Campath JV 40.0 - - - - -
Tax rate 0% 9% 9%
Taxes 0.0 3.0 8.8
GAAP Net Income/(Loss) ($252.3) ($198.2) ($102.9) $1.2 $32.7 $94.2
Pro forma net income/(Loss) ($180.8) ($87.2) $4.1 $58.0 $90.6 $155.8
GAAP EPS ($0.83) ($0.64) ($0.33) $0.00 $0.10 $0.29
Pro Forma EPS ($0.59) ($0.28) $0.01 $0.18 $0.28 $0.48
Fully taxed, diluted pro forma EPS $0.26 $0.42
Fully diluted shares outstanding 304.8 308.3 312.3 315.4 318.6 321.8
Source: Citigroup Investment Research and Company Reports |
