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Biotech / Medical : MGI Pharma MOGN New patents, anti cancer
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From: tom pope6/21/2006 9:24:58 AM
   of 1826
 
Merrill:

Greater confidence in Aloxi
Higher Medicare reimbursement rates for Aloxi, which were just released by CMS,
should result in higher contract pricing of $4-5 per dose in the clinic/doc setting
starting in 3Q06. Coupled with a higher price in the hospital setting of $7, we
have greater confidence that peak Aloxi sales will surpass $300 MM. Thus, we
have increased our target to $25 from $22. We believe the potentially adverse
impact of generic Zofran is well known by the market and expect Dacogen for
MDS to surprise to the upside. Maintain BUY.
Aloxi’s price increase by $4-5
The 3Q06 average selling price (ASP) for Aloxi was released today by Medicare.
The ASP was higher than 2Q06, reversing a two quarter trend of lower ASPs.
Aloxi’s reimbursement rate measured by ASP+6% increased by ~$8 per dose
($184.37 vs. $176.77), providing greater pricing flexibility. Thus, we believe MGI can
increase its average contract price for clinics/docs to $134-135 from $130 per dose.
Raising target to $25:
We are maintaining our 2006 Aloxi sales estimate of $280 MM but we now have
greater confidence in the projection and believe that peak sales of $300 MM are
more achievable. To reflect greater confidence in our peak Aloxi estimate, we
raised our target to $25 from $22.
Generic Zofran well known
The likely launch of generic Zofran by the end of ’06 could act as an overhang for
the stock. But, we believe the potential negative impact to Aloxi sales in 1H07
due to generic Zofran’s temporary higher profitability for physicians will be limited
and is already well known by investors.
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