MGI Pharma MOGN New patents, anti cancer Message Board

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Biotech / Medical : MGI Pharma MOGN New patents, anti cancer

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From: tom pope	7/26/2006 10:23:12 AM
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Merrill: Weakness is an opportunity to BUY At its analyst day yesterday, MOGN highlighted its pipeline and clarified Aloxi guidance given on its 2Q06 earnings call. We believe investors may be overestimating the adverse impact generic Zofran will have on Aloxi sales. Thus, we would use recent share price weakness to BUY MOGN as we believe the stock is undervalued and should recover if Aloxi sales beat management’s conservative guidance, Dacogen sales beat expectations, and Saforis is approved for oral mucositis. Private Payers Key to Generic Impact Generic Zofran’s negative effect depends on how quickly private payers adjust reimbursement rates to eliminate the profit motive to switch. In 1Q07, when generic Zofran is likely to have the largest negative impact, we estimate Zofran will provide docs with $64 more profit in the Medicare market vs. Aloxi and $43 more profit in the private pay market. But, private payers are likely to adjust reimbursement rates quickly, at which point we expect Aloxi will become $73 more profitable in the private pay segment. Because private payers represent 60% of the market, we expect Aloxi will become $18 more profitable in the first quarter after private payers adapt with Aloxi eventually becoming $57 more profitable. Thus, by YE07, we expect Aloxi to re-capture and grow share beyond prior levels. Stock Inexpensive & Could Work Sooner Than Expected We estimate MOGN is worth $25 & believe the stock may work sooner than expected. Investors may be overly negative about Aloxi sales, but we believe the drug could beat expectations. Also, we believe if Dacogen surprises to the upside and Saforis is approved in Oct. then the stock could rise.

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