CC 8:30 tomorrow. Forbes' take adds color:
>>Forbes take adds color:
Millennium's Push Toward Profit
Matthew Herper, 04.28.04, 4:10 PM ET
NEW YORK - Millennium Pharmaceuticals has easily eclipsed the genomics companies that were once its peers. Firms like Human Genome Sciences and Vertex trade at a fraction of its $5 billion market value. Now, the question is whether the company can spin breakthrough cancer drug Velcade into a chance at the biotech big time.
Just yesterday, Velcade was approved by the European Union, good news for both Millennium (nasdaq: MLNM - news - people ) and Johnson & Johnson (nyse: JNJ - news - people ), which will sell the drug in the European Union. Today, Millennium posted a first-quarter loss that was considerably slimmer than forecast by Wall Street analysts. But cost-cutting played a major role and sales came in below expectations--even for Velcade, which nonetheless has become one of the most successful cancer drugs ever launched. Millennium continues to forecast profitability in 2006.
Cambridge, Mass.-based Millennium posted a first quarter loss of $40.6 million, or 13 cents per share, significantly narrower than the $137.9 million loss for the year-ago quarter. Excluding a restructuring charge and amortization due to an acquisition, the current loss was $20.6 million, or 7 cents per share, a whopping 65% less than analysts reporting to First Call were expecting. Results were helped by a $40 million payment, thanks to Campath, a cancer drug sold by ILEX Oncology (nasdaq: ILEX - news - people ), hitting a sales milestone. Sales for the quarter came in at $92.6 million, up 13% but far short of the $107 million Wall Street had estimated.
Velcade sales came in at $29.6 billion, short of the $34 million consensus. Revenue from Integrilin, used to prevent blood clots during heart procedures, came in at $47.8 million, 3% less than Michael King of Banc of America Securities expected. Millennium says sales for the drug, co-marketed with Schering-Plough (nyse: SGP - news - people ), were hurt because wholesalers had extra inventory to sell to hospitals. Demand from the hospitals, Millennium says, was up 10%.
In an interview before earnings were released, King said he was worried about Velcade's slow ramp-up. "That's the key to the whole story," King said, "and I'm frankly annoyed that it's not rolling out faster. Sales have been basically the same for three months." King has rated the stock as one of his top picks. Banc of America has done investment and other banking for Millennium.
Marsha Fanucci, Millennium's vice president of finance and corporate strategy, says that Velcade is doing great. "The sales could not be more in line with what we're expecting for this product," she says. Cancer drugs, she says, tend to follow a particular pattern. Their uptake is rocketlike, as patients with no alternative try the medicine. Once that population has been worked through, sales plateau.
Millennium points out that Velcade represents one of the biggest cancer product launches ever, with sales of $100 million in less than a year. That puts it in a class with such well-known cancer drugs as Pfizer's (nyse: PFE - news - people ) Camptosar, Genentech's (nyse: DNA - news - people ) Herceptin and Novartis' (nyse: NVS - news - people ) Gleevec.
But analysts like King had been hoping doctors might prescribe Velcade for diseases such as lymphoma, where it is not specifically approved but appears to be effective. According to Fanucci, this doesn't seem to be happening. Aligning Millennium's internal expectations and those of Wall Street is difficult, she says.
Already, analysts are looking ahead to data on using Velcade in combination with Aventis' (nyse: AVE - news - people ) Taxotere to treat lung cancer. Millennium will present those data in June at the annual meeting of the American Society for Clinical Oncology. In a research note today, James Reddoch at Friedman, Billings, Ramsey downgraded Millennium to "market perform," partly because he thinks success in the lung cancer arena is priced into the stock. Apparently, convincing investors of Millennium's upside isn't going to get any easier.<<
Cheers, Tuck |
