gs: MLNM (IL/N): Revised 2004 est. by $0.01.
Maintain 2005 and 2006 ests.
52-Week Range US$20-10
YTD Price Change -9.31%
Market Cap US$3.4bn
Current Yield —
Long Term Growth Rate
EPS Growth Estimate NA
Fiscal Year (ending in Dec)
2003 2004E 2005E
US$-0.82 US$-0.56 US$-0.37
— NM NM
— NM NM
Quarterly Earnings Per Share (US$)
-0.34
-0.07
-0.10
-0.30
-0.07
-0.07
-0.18
-0.25E
Mar Jun Sep Dec Mar Jun Sep Dec
2003 Fiscal Year 2004 Fiscal Year
Yesterday, MLNM reviewed 2004 performance, provided guidance for 2005 and
reiterated the goal of breaking even in 2006. We believe the break-even goal is
challenging. Sustainable growth beyond 2006 will depend on expansion of indications for
Velcade & Integrilin, approval of some of the current drug candidates, continued cost
control and revenues from corporate partnerships. Despite the broad platform and growing
pipeline, we maintain our In-Line rating while awaiting data on the next wave of
candidates. Risks are slower sales, failure in development and higher expenses. Our
coverage view is Neutral.
1. REVISED 2004 LOSS ESTIMATE. MAINTAIN 2005 AND 2006 ESTIMATES
Based on management's preliminary report of 2004 financials yesterday, we have revised
our Q4/04 and 2004 full year loss estimate by $0.02 and $0.01 for the worse to $0.25 and
$0.56, respectively. Our revision was mainly due to an increase of Q4/04 Velcade sales
by $1MM to $41MM, and of expenses by $4MM. Our forecast for end-user Integrilin
sales remains $75MM in the U.S.
We have also fined tuned our 2005 model mainly by increasing domestic Velcade sales by $15MM
to $186MM (+30% y/y) assuming FDA approval of second line multiple myeloma in Q2/05,
strategic alliance revenues by $2MM to $97MM to reflect additional outlicensing activities, and
expenses by $20MM to $607MM. Our domestic Integrilin sales are unchanged at $317MM (+5%
y/y). The net impact was neutral to our 2005 loss estimate of $0.37.
For 2006, we have maintained our loss estimate of $0.06. However, our Velcade sales were
adjusted upwards by $24MM to $225MM (+21% over 2005) and expenses were raised by $20MM
to $554MM. The forecast for Integrilin sales in the U.S. stays at $338MM (+7%).
2. MILESTONES in 2004/05
* Additional Phase IV data from CRUSADE registry on Integrilin for acute coronary syndrome(Q4/04)
- Initiate Phase IV trial (EVEREST) of Velcade in retreatment of multiple myeloma(H1/05)
- FDA approval of Velcade in second line multiple myeloma
(Q2/05)
* Phase IIIb data from PROTECT trial of Integrilin in high risk angioplasty (Q4/04)
- Phase IIIb REMOVE data of Integrilin with heparin in low risk PCI
(H1/05)
* Initiate Phase III VISTA trial of Velcade in
front-line multiple myeloma
(Q1/05)
- Initiate two Phase III European trials of Velcade on front-line multiple myeloma *Initiate Phase IV EVENT registry of Integrilin in drug-coated stenting (Q4/04)
-Initiate Phase III trial of MLN-2704 in prostate cancer (2005)
- Phase II data of Velcade in first line
non-small cell lung cancer (H1/05)
- Phase II data of Velcade in second line non-small cell lung
cancer (H1/05)
- Phase II interim data for Velcade monotherapy in mantle cell lymphoma (Q2/05)
- Phase II interim data on Velcade in combination with Rituxan for low- grade follicular/marginal
zone lymphoma (Q2/05)
- Phase IIa data on MLN-1202 in rheumatoid arthritis (H1/05)
- Phase IIbtrial on MLN-1202 in rheumatoid arthritis (H1/05)
- Initiate phase II trial of MLN-1202 in relapsing
remitting multiple sclerosis (H1/05)
- Initiate phase II trial of MLN-1202 in scleroderma (H1/05)
- Initiate phase II trial of MLN-1202 in secondary atherosclerosis (H1/05)
- Phase II data on hMLN-2704 in prostate cancer (Q2/05)
- Initiate Phase II trial of Velcade in bronchoalveolar
carcinoma (BAC) (H1/05)
- Initiate Phase II trial of Velcade in BAC-like adenocarcinoma (H1/05)
- Initiate Phase II trial of MLN-3897 in rheumatoid arthritis (2005) - Initiate Phase II trial of
MLN-3897 in multiple sclerosis and/or psoriasis (2005)
- Phase I/II data of Velcade in prostate and
ovarian cancers (H1/05)
- Phase I data on MLN-3897 in rheumatoid arthritis (H1/05) - Initiate
Phase I trial on MLN-3701 in cancer (2005)
- Initiate Phase I trial on MLN-8054 in cancer (2005)
- Initiate Phase I trial of MLN-3907 in rheumatoid arthritis (H1/05)
Source: Company data, Goldman Sachs Research estimates.
3. VELCADE MOVING "UPSTREAM" TO EARLIER USE IN MULTIPLE MYELOMA. A
major growth driver for Velcade in multiple myeloma (MuM) is moving usage to earlier stages of
therapy through label expansion into the first and second line settings. The company has started the
VISTA Phase III trial in first line MuM patients who are not transplant candidates. Patients will
receive chemotherapy (melphalan + prednisone) with or without Velcade. Prior front line studies of
Velcade in combination with chemotherapy have demonstrated promising response rates. If
successful, the VISTA trial could support approval of Velcade in the first line setting, we believe.
In H1/05 Millennium will initiate two additional Phase III trials in first line MuM patients.
In September 2004, Millennium filed an FDA application for Velcade in second line multiple
myeloma based on data from the Phase III APEX trial. We expect FDA approval of second line use
by 2Q/05. Earlier therapy can boost the sales potential of Velcade to $500 MM from $300 MM.
In addition to earlier use, the Velcade market opportunity could be expanded through repeat use in
patients undergoing multiple courses of Velcade therapy. In H1/05, Millennium expects to initiate
the EVEREST trial to retreat Velcade responders. To date, Velcade resistance has not been
reported, supporting the potential for retreatment regimens.
Velcade is currently approved for the treatment of MuM patients who have failed at least two prior
therapies (i.e., third line use). Market share for Velcade is greatest in third-or-greater line use
(40%-50%) with smaller market shares in second line (20%-30%) and front line (2%-4%)
indications. Of the 45,000 MuM patients in the US, approximately 50%, 25% and 25% receive
first, second, and third line therapies, respectively.
4. LYMPHOMA AND LUNG CANCER COULD RAISE VELCADE POTENTIAL BY
$300-$500MM
Velcade is being explored in solid tumors and lymphoma. Approval of Velcade for these
indications could add $300-500 MM to raise the market potential to $0.6- 1.0B.
There are about 300,000 non-Hodgkin's Lymphoma (NHL) patients in the U.S., of which
approximately 8,000 patients have mantle cell lymphoma (MCL) and 100,000 have
follicular/marginal zone NHL. Millennium is conducting a Phase II trial of Velcade monotherapy
for MCL. A Phase II trial of Velcade plus Rituxan in follicular/marginal zone lymphoma is also
ongoing. Interim data from both trials are expected at ASCO in May 2005. If the MCL data are
positive, they may be sufficient to support an FDA application. A 'go, no go' decision point for
Phase III trials on follicular/marginal zone NHL is planned for H1/05.
In second line non-small cell lung cancer (NSCLC), Millennium decided to not move ahead with a
Phase III trial using the Velcade/Taxotere combination in the doses tested in the Phase II trial. Data
from the Phase II trial will be released at ASCO in May, 2005. Preliminary Phase II data were
presented in June, 2004 demonstrating a 10% partial response rate with Velcade monotherapy and
a 16% partial response rate for Velcade plus Taxotere. Historical response rates for second line
NSCLC have been 5-10%, with similar rates for newer single agent therapies, such as Iressa and
Tarceva. Millennium is conducting additional Phase II trials of Velcade in the second line setting,
both as monotherapy and in combination (e.g., with Alimta, EGFr blockers and Taxotere at a
different dose than that used in the Phase II study mentioned above). In front line NSCLC,
Millennium is investigating Velcade in combination with various therapies. Data are expected in
mid-2005 from a Phase II trial sponsored by the SouthWestern Oncology Group of Velcade in
combination with gemcitabine and caraboplatin.
In H1/05, Millennium will initiate a Phase II open/label, monotherapy trial of Velcade in patients
with bronchioloalveolar carcinoma (BAC) or BAC-like adenocarcinoma who have relapsed or
progressed after therapy with EGF blockers. Of the 160,000 patients with NSCLC in the U.S., 6%
have BAC and 14% have BAC- like adenocarcinoma.
Outside of NHL and lung cancer, the company is conducting Phase I/II trials in prostate and
ovarian cancers. Previous trials of Velcade in colorectal and breast cancers have not resulted in
improved response rates.
5. EARLY ACUTE CORONARY SYNDROME REMAINS KEY TO INTEGRILIN GROWTH
The major growth area for Integrilin is in early acute coronary syndrome (early ACS).
Millennium's strategy in early ACS involves: (1) physician education on the importance of early
and aggressive treatment; (2) ongoing enrollment of the early ACS trial; an
d (3) continued support of the CRUSADE quality improvement initiative. CRUSADE has enrolled
over 120,000 patients and has led to an increase of Integrilin use in participating hospitals from
30% to 42% from 2003 to 2004.
In the PCI (percutaneous coronary intervention) setting, Millennium intends to grow Integrilin
sales on the heels of presenting data from the PROTECT and CLEAR trials (see below).
Presentation of data from the EVENT registry (Integrilin used in combination with drug-eluting
stents), expected in 2005, should also support growth in the PCI setting.
**Background on Integrilin**
Integrilin is a GP IIb/IIIa inhibitor indicated for the treatment of patients with acute coronary
syndrome (ACS; i.e., recent cardiac chest pain) and for patients undergoing percutaneous coronary
intervention (PCI; i.e., balloon angioplasty and stenting of the coronary arteries). The overall
market for IIb/IIIa inhibitors is slowing partly due to the use of drug coated stents, slow adoption
outside of catheterization labs, and competition from Angiomax (thrombin inhibitor).
Of the approximately 750,000 PCI patients in the U.S., 250,000 are untreated, 335,000 receive
Integrilin, and 165,000 are treated with other GP IIb/IIIa inhibitors, giving Integrilin a 67% patient
share of the PCI market. There are about 900,000 high risk early ACS patients in the U.S., 200,000
are treated with GP IIb/IIIa inhibitors and the rest are not treated. Integrilin has 85% patient share.
With such high market shares, the growth opportunity of Integrilin lies mostly with increasing the
number of treated patients, particularly in ACS. Millennium is concentrating its Integrilin
development efforts here. In September 2003, the company hired an additional 80 sales
representatives to promote the benefits of better compliance with AHA/ACC guidelines on the
early use of IIb/IIIa inhibitors in ACS. Millennium initiated the EARLY ACS trial in Q2/04. The
trial will enroll 10,500 high risk ACS patients who will be treated with Integrilin in combination
with new therapies, such as drug eluting stents and low molecular weight heparin.
At the recent American Heart Association (AHA) meeting in November 2004, Millennium
presented data from two Phase IV trials. The CLEAR Platelets trial randomized 121 low-moderate
risk patients undergoing elective stenting procedures to a standard (300mg) or high (600mg) dose
of Plavix +/- Integrilin. All patients received aspirin and heparin. Patients receiving Plavix plus
Integrilin had lower platelet reactivity and release of cardiac markers than patients receiving Plavix
alone. Release of cardiac markers can be a sign of damage to the heart muscle.
The second Phase IV trial PROTECT showed mixed results. The trial randomized 857 high-risk
patients to (1) Angiomax monotherapy (2) low molecular weight heparin (enoXaparin) plus
Integrilin or (3) heparin plus Integrilin. On the primary endpoint of coronary flow reserve
(epicardial blood flow), Angiomax was statistically better than Integrilin. However, Integrilin was
better on the secondary endpoints of myocardial perfusion, duration of ischemia, markers for
cardiac damage (CK-MB and troponin), and composite endpoints of death/heart attacks/recurrent
ischemia, or death/heart attacks. Major bleeding was observed in none of the patients receiving
Integrilin plus heparin nor Angiomax. However, 1.5% of the patients treated with Integrilin plus
Enoxaparin had major bleeding. Minor bleeding occurred in 2.5% of the pooled Integrilin groups
and 0.4% with Angiomax.
I, Maykin Ho, Ph.D., hereby cert |
