MGI Pharm Dn 11%; Generics,Medicare Cited For Rev Warning
DOW JONES NEWSWIRES
January 11, 2005 3:54 p.m.
By Deborah Finestone Of DOW JONES NEWSWIRES
NEW YORK -- MGI Pharma Inc. (MOGN) shares fell 11% Tuesday after the company said its revenue this year will come in slightly below what Wall Street expects and after Merrill Lynch & Co. downgraded its rating on the company's stock.
Merrill Lynch cut the stock's rating to neutral from buy, citing lower Medicare reimbursements in 2005 and generic competition.
"Given the lower likelihood of upside to estimates, we believe investors should wait on the sidelines to monitor the effects of reimbursement changes being implemented in 2005," analyst Eric Ende wrote in a research note.
MGI said late Monday it expects revenue in 2005 of $285 million, slightly lower than the mean analyst forecast of $286.2 million, according to Thomson First Call.
The biopharmaceutical company said it expects $260 million in sales of its Aloxi injection to prevent chemotherapy-induced nausea and vomiting. Sales of the injection are expected to range from $155 million to $160 million in 2004.
Ende said the reimbursement in 2005 will give less of an economic incentive for physicians and hospitals to use Aloxi.
At the same time, he expects declining sales of Salagen, the company's dry-mouth treatment, as a generic version approved in November hits the market.
"Generic competition could cut sales by as much as 70% to 75% during its first couple years on the market," Ende said.
At the same time, the company is likely to increase its research and development spending to sustain its growth rate, he said.
Ende lowered his earning estimates and now expects the company to earn 84 cents a share in 2005 and 71 cents a share in 2006.
Analysts on average expect MGI to earn 77 cents a share in 2005 and $1.13 a share in 2006.
MGI will report its fourth-quarter and full-year financial results on Feb. 9.
Merrill Lynch maintains an investment-banking relationship with MGI.
Shares recently traded at $24.08, down $2.83, on volume of 4.4. million. The average daily volume is 798,000 shares. |
