GS: MLNM (IL/N): Velcade approved in 2nd line
multiple myeloma, as expected. Maintain
estimates
52-Week Range US$19-8
YTD Price Change -29.98%
Market Cap US$2.6bn
MLNM received full FDA approval for Velcade in 2nd line multiple myeloma (MM), in
line w/ expectations. As this event was generally anticipated, we do not expect significant
share price upside on the news. However, the expanded label should double the number of
eligible patients but significant off-label use may limit the increase in sales. We have
previously incorporated the approval in our model, therefore, we maintain our 2005-07
Velcade forecasts of $187MM, $226MM & $253MM. Our EPS estimates are ($0.37),
($0.06) & $0.05, respectively. MLNM?s intrinsic value approximates $7.50/sh. Therefore,
there should be limited downside at the current share price. Share appreciation should be
driven mainly by success in clinical development. We maintain our In-Line rating while
awaiting clinical results. Risks are slower sales, failure in development & higher
expenses. Our coverage view is Neutral.
Upcoming milestones include Phase II data of Velcade in NHL & lung cancer (H1/05),
PII data on MLN-1202 in RA (2005) & MLN-2704 in prostate cancer (H1/05).
1. VELCADE GAINS FULL APPROVAL IN RELAPSED MULTIPLE MYELOMA AS
EXPECTED. MAINTAIN ESTIMATES.
On 3/25/05, MLNM announced that the FDA granted full approval of Velcade for therapy of
patients with multiple myeloma (MM), including patients who failed one prior treatment (i.e.,
second line use). Both the timing and indication are consistent with our expectations. The approval
was based on positive data from the Phase III APEX study that compared therapy with Velcade to
high-dose dexamethasone. Final data from the APEX trial, presented in December 2004,
demonstrated that treatment with Velcade was better than dexamethasone based on time to disease
progression, response rate and overall survival. As a reminder, MLNM submitted the application
for Velcade in 2nd line MM on 9/28/04 and Priority Review status (6 month FDA review time) was
granted in December, 2004.
Velcade had previously been granted accelerated approval for MM patients who had failed at least
two prior treatment regimens (i.e., 3rd-line-or-greater use). Therefore, the latest approval will
facilitate use of Velcade in all relapsed MM patients.
We maintain our estimates for U.S. sales of Velcade in 2005-07 of $187MM, $226M and
$253MM, respectively, as these projections already assumed approval in the 2nd line setting in
H1/05. We also maintain our estimates for strategic alliance revenues in 2005-07 of $97MM,
$94MM and $68MM, respectively. We maintain our per share loss estimates in 2005 and 2006 of
($0.37) and ($0.06) and our 2007 EPS estimate of $0.05.
2. EXPANDED LABEL OF VELCADE SHOULD DRIVE GROWTH, DESPITE POTENTIAL
ENTRY OF COMPETITIVE PRODUCTS
A major growth driver for Velcade in multiple myeloma is moving usage to earlier stages of
therapy (i.e., 3rd line --> 2nd line --> 1st line use). With the recent approval in 2nd line therapy,
reimbursement, marketing support, and sales growth in this indication should improve. Of the
45,000 multiple myeloma patients in the US, approximately 50%, 25% and 25% receive first,
second, and third line therapies, respectively. Therefore, expanding the Velcade product label to
include 2nd line patients, effectively doubles the addressable market from about 11,000 to
approximately 22,000 patients. However, we note that there has been significant off-label use of
Velcade in earlier stage patients, which will probably limit the revenue upside from the latest
approval. In Q4/04, market share of Velcade was greatest in third-or-greater line use (40%- 50%)
with smaller market shares in second line (20%-30%) and front line (2%-4%) indications. Earlier
therapy can boost the sales potential of Velcade to $500 MM from $300 MM, we believe.
On March 7, 2005, Celgene announced that Revlimid was effective in prolonging time to disease
progression in relapsed or refractory MM. Celgene is submitting an FDA application on Revlimid
for myelodysplastic syndrome (MDS) and plans to file the data on MM. If Revlimid is approved for
MDS, there could be off-label use in MM. We believe therapies for MM will be used on a
rotational basis and maybe in combination with each other, thereby reducing the impact from new
entrants.
3. APPROVAL OF 1ST LINE USE IS THE NEXT ?FRONTIER? FOR VELCADE IN
MULTIPLE MYELOMA
MLNM has started the VISTA Phase III trial in first line multiple myeloma 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. The primary endpoints are time to disease progression and survival. If
successful, the VISTA trial could support approval of Velcade in the first line setting. In H1/05,
Millennium will initiate two additional European Phase III trials in first line multiple myeloma
patients. The company is pursuing a compendia listing of Velcade for 1st line multiple myeloma.
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.
4. LYMPHOMA AND LUNG CANCER COULD BOOST 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
in 2nd line MCL (Rituxan plus chemotherapy is the standard of care for 1st line therapy). A Phase
II trial of Velcade plus Rituxan in 2nd line 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. Millennium is working to support the
compendia listing of Velcade for MCL and potentially for follicular/marginal zone NHL in 2005.
In second line non-small cell lung cancer (NSCLC), Millennium decided to not proceed with a
Phase III trial using the Velcade/Taxotere combination in the doses tested in the Phase II study.
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. Considering the side effects of peripheral neuropathy and myelosuppression, Velcade
monotherapy may not have significant advantages over existing agents. 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 for 1st
line use sponsored by the SouthWestern Oncology Group of Velcade in combination with
gemcitabine and carboplatin.
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.
I, Maykin Ho, Ph.D., here |
