Q1 Earnings Preview:
by: mr_nose_hair 04/18/05 09:48 pm
Msg: 60400 of 60400
[Copied from the Y! board]
SB/Yaron Werber, MD
MILLENNIUM PHARMACEUTICALS (MLNM) – HOLD/SPECULATIVE (2S) Reporting on Thursday, April 28th. Earnings call 8:3-AM EST, dial-in 212-231-6049.
We are projecting EPS of ($0.03) for Q1 and ($0.32) for FY 2005 versus consensus estimates of ($0.09) and ($0.35), respectively. This compares to Q4:04 EPS of ($0.28) and ($0.07) in Q1:05.
Millennium’s near-term value drivers continue to be Velcade sales and prospects to achieve non-GAAP breakeven during 2006. In early 2004, Velcade sales benefited from release of positive Phase III results in the APEX study demonstrating an improvement in overall survival in second-line multiple myeloma. This data boosted sales from $30 million in Q1:04 to $35 million in the second quarter.
During the fourth quarter of 2004, Millennium recorded a $1.5 million reduction of reserves for Velcade returns. This is noteworthy since no prior material revisions have occurred in the past. Millennium has noted that these reductions were appropriate since the reserve reductions have been overly aggressive in the past.
Taking this reduction into account, Millennium’s net Velcade sales of $40.8 million (+8% q/q) for the fourth quarter boosted the actual organic sales of $39.3 million (+4% q/q), thereby enhancing what would have appeared to be a relatively flat comparison with the third quarter’s sales of $37.7 million.
In the first quarter of 2005, we expect Velcade sales of $43 million, in line with consensus (+5% q/q but +9% q/q in the absence of reserve reduction). While Velcade sales are on track to meet our estimate, we are concerned that consensus estimates of $192 million for FY2005 sales is too optimistic given that competitor Celgene expects to open an expanded access program for Revlimid in multiple myeloma. We forecast $188 million in sales in 2005. More so, we caution that Revlimid could prove to be a tough competitor to Velcade due to convenience of oral dosing and superior safety profile.
As a result, we believe that Street consensus estimates for Velcade are too high in 2006 and Millennium could fall short of achieving its goal of pro forma breakeven during 2006. Instead, we model that Millennium will reach this goal in 2007 only after substantial cost-reductions are instituted.
Also during the first quarter, we model that U.S. Integrilin revenues will reach $75 million, $3 million below consensus but project that Millennium will record co-promotion revenues of $53 million in-line with consensus.
Importantly, during the first quarter, Millennium will record $40 million in milestone payments from GlaxoSmithKline ($20 million) relating to Integrilin rights in Europe and Johnson & Johnson ($20 million) in-line with its agreement for development of Velcade. These milestone payments will make the quarterly loss in the first quarter lower than that in proceeding quarters.
In our view, Millennium’s fundamentals are less promising than those of many other midcap biotech stocks. We reiterate our cautious stance on the stock especially since Velcade is facing competitive threats coupled with need for significant expense reductions to reach profitability.
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