A Second Look: Millennium Pharma Slips
The Associated Press
NEW YORK — Analysts were skeptical Wednesday about the projected benefits of Millennium Pharmaceuticals Inc.'s $515 million cash offer for Canadian drug maker AnorMed Inc., which trumped a $380 million hostile bid submitted nearly a month ago by Genzyme Corp.
Shares of Millennium fell 23 cents, or 2.3 percent, to close at $9.92 on the Nasdaq on above-average volume. AnorMed shares dropped 15 cents, or 1.2 percent, to end at $12.59 on nearly four times their average volume on the Nasdaq, having risen 28 percent on Tuesday after the offer was announced.
JMP Securities analyst Charles C. Duncan downgraded Millennium to "Market Underperform" from "Market Perform," citing the hefty purchase price.
"While we do believe the company did (and still does) need to bolster its product pipeline, we question the valuation of the transaction, the clinical risk and strategic fit of AnorMed's lead product candidate, Mozobil, for stem cell transplantation. The deal raises prospects for future dilution to bolster the balance sheet," Duncan said in a note.
Other analysts agreed that Millennium needs to get a product on the market besides its cancer treatment Velcade, but many said the proposed deal to get Mozobil would stretch the company's resources too thin.
Baird's Christopher J. Raymond, Merrill Lynch's Thomas McGahren and Piper Jaffray's Rachel L. McMinn, who all give the company a neutral-grade rating, doubted the transaction would add to earnings by 2008 or 2009 as suggested by Millennium.
The analysts also agreed that the purchase price will eat up the company's cash all at once and put it in a bind if financing was needed in the future. Estimates of Mozobil's peak sales after a projected 2008 approval range from $100 million to $200 million per year.
Mozobil, which is in late-stage clinical development, is designed to draw stem cells out of bone marrow into the bloodstream so they can be collected and used to rebuild the patient's own immunity following cancer treatments.
Friedman, Billings, Ramsey's Jim Reddoch, who rates the company "Underperform," was pessimistic about Mozobil altogether and called the drug's U.S. sales potential "limited."
Shares of Genzyme rose $1.78, or 2.7 percent, to finish at $67.78 on the Nasdaq. |
