Millennium Pharmaceuticals, Inc. (MLNM) Message Board

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Biotech / Medical : Millennium Pharmaceuticals, Inc. (MLNM)

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From: tom pope	4/17/2008 10:56:01 AM
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Interesting twist for conspiracy theorists - Merrill Lawsuit: if Velcade growing why sell now? ?? Shareholder suit asks: Why sell just as Velcade picks up? A lawsuit has been filed in Massachusetts state court seeking to stop Takeda’s acquisition of Millennium for $25 per share. The complaint essentially asks: if Velcade sales are rising and expected to grow substantially, why sell the company now? It may not derail the acquisition which has a $247mn breakup fee but we think it is an interesting question. Questions timing of 1Q Velcade sales with Buyout release The lawsuit, which is seeking class certification, points out that the announcement of the buyout preceded the announcement of 1Q08 Velcade sales of $83.5mn, topping our estimate of $80mn and consensus of $77mn. The suit claims that MLNM stock could have moved up on the announcement of the higher Velcade sales and that management could demand a higher price from Takeda or some other company. The complaint states: “The defendants timed the announcement of the Buyout so that the rise in Millennium’s share price due to the takeover announcement would mask the inevitable rise due to the positive news about Velcade.” Stock range bound for 5 yrs, was a breakout possible? MLNM stock last saw $20 back in 2003 and has been range bound ever since. For a company with only one product (which did not require a primary care sales force), we have long viewed the 1000-person headcount and R&D spending as excessive and real challenges to bottom-line growth. Millennium spent more on R&D in ’07 ($282mn) than it booked in Velcade U.S. sales ($265mn) and we estimated hypothetical fair value at ~$16 per share. But if Velcade sales continued to track higher than expected and if the company reduced headcount and R&D expenses, we could make a case for hypothetical valuation near $20 next year. Those are big “ifs” and may or may not be a reason to sell the company at $25 per share now. Not expecting higher bids Regardless of whether MLNM stock would have risen on the Velcade sales announcement, the announced $25 per share was still a 53% premium, even higher than the 46% premium paid by Celgene for Pharmion. We would be surprised by any higher offers.

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