Thanks, Erik, here's the full item for those who are interested. The analysis sounds almost gloomy.
MGI Pharma (MOGN, C-1-9, $22.94)
Our price target of $32 is based on a P/E multiple of 34x (PEG ratio of 0.95x our
projected 5-year growth rate of 34%) off our new 2006E fully taxed EPS of $1.01.
Our target PEG ratio of 0.95x, a 33% discount to the group, reflects higher risk
associated with achieving our higher 5-year growth rate, which assumes approval
and launch of Dacogen, Saforis and Zyc101a. MOGN faces several key risks in
reaching our price objective. First, the competitive landscape for Aloxi sales is
evolving and Aloxi may not maintain or increase market share or revenues. In the
hospital setting, generic antiemetics, such as generic Zofran, are expected to
launch in 2006 and may temper Aloxi market share growth. Aloxi pricing has
declined due to recently signed new contracts resulting in bulk discounted
purchases as well as the company providing discount to first time buyers. Pricing
is expected to continue to decline through the middle of 2005, but may not recover
if the competitive landscape does not support price increases. In addition, the
company may provide payment term incentives to purchasers, which may lead to
increasing DSOs and may require additional allowances for bad-debt expense
and/or negatively impact cash flow if customers fail to pay in a timely fashion.
Key near-term risks for the pipeline include failure of Dacogen to receive FDA
marketing approval. While Dacogen met one of its two co-primary endpoints in
the Phase III study of MDS, FDA may not agree with the company’s data analysis
and may not grant approval. In addition, the FDA may decide that further trials are
necessary prior to granting approval. Further, there is risk in that SuperGen ran the
clinical trial program possibly leading to potential questions regarding the quality
of the data. However, MOGN independently reviewed the data and is handling
the FDA filing and submission. We believe that MOGN managing the FDA filing
process is favorable, in that SuperGen previously had an unfavorable result at the
FDA with an different product. Should Dacogen receive approval, physicians may
prefer currently marketed drugs over Dacogen, and sales may never gain traction. |
